Column: Workers' Comp

The Outlook for Alternatives

By: | November 3, 2014 • 3 min read

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

“Disruptive innovation” may be unfolding in workers’ comp as some large employers and service providers push for more states to allow opting-out of traditional mandates for addressing worker injuries. Clayton M. Christensen, a Harvard Business School professor and disruptive-innovation expert, writes and talks about forces that positively transform markets, industries or products. The innovations typically simplify purchasing or reduce costs.


Examples of disruptive innovation that Christensen has cited include the rise of retailers like Wal-Mart. It transformed from its original five-and-dime store roots by expanding its product line to more profitable items such as clothing.

The innovation disrupted, or shifted, the way many people now buy garments. As a result, far fewer traditional department stores exist across the country today.
Now Wal-Mart and other retailers are backing an organization called the Association for Responsible Alternatives to Workers’ Compensation. ARAWC will lobby states to allow employers to adopt alternative options for delivering medical and wage replacement benefits to injured workers.

There are two existing models ARAWC can point to in its lobbying efforts. One exists in Texas, which has allowed employers to entirely opt out of its workers’ comp system since that system was created.

The other is Oklahoma, which only last year enacted a law allowing employers to adopt an alternative to the state’s traditional benefits delivery system, but only if they provide equivalent benefits.

ARAWC’s executive director, Richard Evans, expects other states will adopt an approach similar to Oklahoma’s rather than follow Texas. I can see how that would be an easier sell to lawmakers than a Texas-type option that allows employers greater freedom, but in turn allows injured employees to sue their employers.

Oklahoma remains experimental, in my mind, however. In late September, the Oklahoma Insurance Department said that only nine employers had qualified to provide an alternative “Oklahoma Option.” What their experience will be remains to be seen.

Bill Minick, president of Dallas-based consulting firm PartnerSource and a major proponent of alternative options, disagrees with my description of Oklahoma’s alternative as “experimental.”

Minick says employers have seen positive results in both Oklahoma and Texas despite significant differences between the alternative models in each state.

Yet I still have several questions that will only be answered with time.

For instance, now that workers’ comp rates appear to be falling in Oklahoma and dropping across other states, will more employers disrupt their current arrangements to adopt an alternative option? Or, as often happens when insurance pricing drops, will many employers remain content with the status quo?
ARAWC says its goals are long term. So perhaps current insurance pricing won’t matter. But ARAWC’s success does remain to be seen.


That is why I say disruptive innovation may be unfolding. While I think ARAWC’s effort may help drive changes in workers’ comp arrangements across more states, it’s not certain yet, but that’s how disruptive innovation often occurs.

The theory’s observers say disruptive innovation often begins in niche areas and can appear unattractive or even inconsequential before driving major changes.

It doesn’t happen overnight.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]