Understanding Your Workers’ Compensation Program

1. Understanding Your Workers’ Compensation Program Jason Humphries Loss Control

2. Municipal Workers Compensation Fund, Inc. • Created in 1976 • Second Oldest Municipal Fund in the U.S. • Private Carrier Abandonment • MWCF is Owned by the Participating Members • The Board is Comprised of Elected Municipal Officials • Non-Profit

3. Evolution of Workers Comp • Industrial revolution migrated workers from the fields to the factories • Only recourse was to sue for unsafe work conditions (Jury Trial) • Workers were unlikely to win because: • Juries were mainly made up of business owners • Any “contributory negligence” = no win

4. Evolution of Workers Comp • Employees began sitting on the jury venires • Employees started rendering verdicts against the employers • Employers needed to cap the escalating costs • The employers and the unions agreed to a workers compensation act (early 1900): • Worker’s would be paid for time off work • Worker’s medical bills would be paid • Contributory negligence was abolished • Controversies would be tried non-jury

5. Evolution of Workers Comp • In return for these benefits: • Workers could not sue for unsafe working conditions • Employer retained the right to pick the doctor • Income benefit based on 66 2/3 of the employee’s average weekly wage (AWW): • It is assumed that 1/3 of salary is paid in taxes • The income benefit is non-taxable

6. Evolution of Workers Comp • Death Benefits: • Widow receives 66 2/3 of average weekly wage (AWW) for a maximum of 500 weeks unless the widow: • Dies • Remarries

7. The Workers Comp Claims Process • The work related injury occurs (event date) • Employee reports incident to employer • Employee has 90 days to report incident • No medical bills incurred prior to reporting are covered • Employer completes the First Report of Injury • Employer reports the incident to MWCF • Either faxes in report 205-824-0240 Or calls 24 hour reporting hotline 1-866-840-0210 • Recommended to report incident to Fund – 5 Days

8. The Workers Comp Claims Process • Employer starts investigation into cause of incident to determine facts • MWCF receives the First Report of Injury • Opens a claims file • Assigns an Adjuster • Forwards First Report to Adjuster

10. The Workers Comp Claims Process • Three point contact by adjuster: • Contacts employer • Relays the above information to employer • Contacts “Gate Keeper” Doctor • Confirms the injuries • Contacts employee • Confirms they are off work if a Lost Time claim • Adjuster starts a 2 week running diary • Administration of claim • Medical payments, drug payments, rehab etc • Cost Containment Phase

11. The Workers Comp Process • Definitions: • DOI = Date of Injury • LT = Lost Time • When more than 3 days off work needed to heal • TTD = Temporary Total Disability • The temporary wages paid during time off (66 2/3) • PLUS any medical bills (statutory coverage) • MMI = Maximum Medical Improvement • The doctor deems your as well as your going to get • No further improvement is ever expected

12. The Workers Comp Process • Definitions: • RTW = Return to work • The employer can accommodate the employee’s restrictions and provide some form of job to the employee (can be temporary or permanent) • AWW = 52 Week Average Weekly Wage • The employee’s gross salary for 52 weeks prior to the injury is added and then divided by 52 to derive the average weekly wage.

13. The Workers Comp Process • Doctor’s Physical Impairment Rating (RTW) • The doctor’s impairment rating is a percentage of impairment to the body as a whole. This percentage indicates the amount of the body that is not functional after the injury. Example: The employee has a back injury that requires surgery. He reaches maximum medical improvement (MMI) and the doctor gives him an impairment rating of 5% to the body as a whole which means that the employee has lost 5% functional movement.

14. The Workers Comp Process • A Vocational Rating – This is a percentage of all jobs available in America that the employee can no longer perform after his injury. It is based on: • Loss of access to jobs • Loss of earnings potential • It also takes into account such factors as age and education • THIS IS A VERY SUBJECTIVE PROCESS • Lump sum payment is calculated using: Value = AWW x 662/3 x Voc Rating x 300 AWW – average weekly wage prior to injury 300 – statutory coverage in number of weeks

15. The Workers Comp Process(Timeline of Events) • DOI – Employee is injured • L.T. – Employee is injured badly enough to remain out of work for more than three days. Now considered a lost time claim. • Dr. determines employee to be T.T.D., P.P.D., or allows the employee to return to work with modified work restrictions.

16. The Workers Comp. Process • Employee reaches M.M.I. • If employee can R.T.W. Dr. gives employee an impairment rating. If employee cannot return to work (due to employer’s inability to accommodate or Dr.’s determination) Dr. gives employee a vocational disability rating.

17. The Workers Comp Process • Claim Settlement Value • Return to Work (RTW) – The employer can provide the employee with a job. The Claim Settlement Value is based upon a formula that includes the doctor’s physical impairment rating only – Low Settlement Value • No Return to Work – The employer cannot provide the employee with a job. The claim settlement value is based upon a formula that utilizes a vocational disability rating i.e. not the doctor’s impairment rating – High Settlement Value

18. The Workers Comp Cost Containment • Create the “Cost Containment Box” • Cornerstone is the Medical Protocol • Gatekeeper Doctor is assigned by employer • Any Doctor the Gatekeeper refers to is automatically approved • Creates the need to have referral list already completed: • Orthopedic Specialist • Neurologist • ER must only refer back to the Gatekeeper • All Doctors used are predetermined and we stay within the “box” – known results

19. MANAGEMENT MEDICAL PROTOCOL • Management Medical Protocol – Refer to Handout • This document is for management only • Employer/Doctor designation is a key right under the Statute (¶ II) • Eliminates multiple drug prescriptions – Drug Addiction i.e. one doctor in charge of drugs (¶ IV, E) • Eliminates plaintiff attorney’s trick of utilizing ER doctor to refer to attorney-friendly doctor (¶ IV, C&D)

20. EMERGENCY ROOM PROTOCOL • Emergency Room Protocol – Refer to Handout • This document on file with the emergency room • The ER knows to refer only to the “Gate Keeper” doctor • Eliminates employee’s ability to manipulate ER doctor referral to personal physician

21. EMPLOYEE DOWNLINE SHEET • Employee Downline Sheet – Refer to Handout • Communicates the process to the employee • Instructs employee to report injury • Designates primary physician (Gatekeeper) • Designates emergency room • Recommended to be put in all pre-employment applications/Personnel files

22. Workers Comp Premiums • Classifying employees: • NCCI produces a nationally standard Scopes Manual • Contains all job classifications • Contains rates for each classification • Actuaries then calculate a Loss Cost Multiplier: • The Loss Cost Multiplier changes the rate based on nationwide industry losses for each class • MWCF Board approves these rates • These rates are submitted to DIR for final approval

23. The Workers Comp Billing Process • DIR approved rates then multiplied by Estimated Payroll for each class • Produces the Manual Premium for each class • Total Manual Premium adjusted by: • Experience Modification Factor • Takes entities own losses into account • Exp Mod above 1.0 = increases the premium • Exp Mod below 1.0 = decreases the premium • Special MWCF discount programs

24. The Workers Comp Costs • What is driving national industry costs: • Litigation and disputed cases • 25% or less of claims involve severe disability • These claims account for the vast majority of costs and litigation • Medical Costs • Federal Statutes and Acts • The Reinsurance Cost After 9/11

25. The Workers Comp Costs(Severe Disabilities) • Permanent Partial Disability (PPD) is a major cost driver and litigated condition: • PPD is the doctor’s rating given to an employee that is utilized to determine a settlement value • In most states PPDs represent the largest share of losses

26. Severe Disabilities Cont. • PPD costs account for 60% of all benefit costs according to national industry standards • On average each case costs approx $49,000 according to national industry standards • P.P.D. settlement values based on Dr. impairment ratings

27. The Workers Comp Costs • Ten Reasons Why Attorneys are retained: • Claim denial • Claimant profiling • Little or no contact by employer or insurance company • Overbearing or intrusive contact by employer • Positive contact is important • Unpaid bills and unreimbursed prescription fees • Attorney advertising and solicitation • Outside influences or third party advice • Friends, family, med providers and attorneys

28. The Workers Comp Costs • Lack of modified duty • Employee feels harassed upon RTW • Employee / Employer dissatisfaction • Low morale / low morals • Loss of health insurance or other benefits • Accidents that should have not occurred in the first place • Employers must take an active role in preventing accidents

29. The Workers Comp Costs • Medical care: • WC is a medically driven system • “Medically driven” means med info guides all the key decisions • All reasonable and necessary med care is covered • Four elements of med cost inflation: • Doctors delivering more units of treatment or more expensive treatment • Injured workers more resistant to RTW • Employers maybe procrastinating at RTW • Plaintiff attorneys attempting to obtain more favorable impairment ratings through more Doctors visits

30. The Workers Comp Costs • Prescription drug cost increases: • Costs of drugs are rising nationally • 1997 – 6.5% of total WC costs nationally • 2001 – 9.6% of total WC costs nationally • 2006 expected to be almost 13% nationally • Utilization rising • Greater availability • Aggressive marketing • Aging workforce • Increased access through insurance

31. The Workers Comp Costs • Prescription drug cost increases: • Availability of newer high priced drugs • Vioxx and Celebrex • Drugs without generic equivalent account for 56% of WC pharmaceutical costs • In 2001 brand name drugs cost 107% more than generics • MWCF Solution – Prescription card program that automatically reduces costs below the national level and the state fee schedule

32. The Workers Comp Containing Costs • How do we contain these costs? • Using negotiation to control costs (AlaMed) • Purchasing power (AlaMed) • Fee schedules (AlaMed) • Implementing safety controls

33. The Workers Comp Containing Costs • Nationally direct costs • Annual WC losses reach $50 billion • L.T., medicals, legal, and benefits comprise only 28% of total costs of a disability • Remaining 72% represent indirect costs

34. The Workers Comp Containing Costs • Indirect costs • Loss in work productivity • Work replacement • Cross training of employees • Administration’s time spent due to absence

35. The Workers Comp Containing Costs • Early 80s view of RTW • “whole man, no man” • WC meltdown of 80s changed this view • 1980’s – 60% of benefit dollars were for medical treatment • 1990’s – 60% of benefit dollars are for indemnity and only 40% is for medical treatment due to AlaMed and State Fee Schedule • 2000’s – 70% Medical and only 30% indemnity

36. The Workers Comp Containing Costs • Developing RTW programs • Primary function - to provide “temporary” accommodation • Must adhere to doctor’s restrictions • Transitional Light Duty program (See Handout) • Time limited to a set time period or reaching maximum medical improvement • Avoids ADA and wrongful termination issues • MWCF pays differential

37. The Workers Comp Containing Costs • RTW or not? • Whole man no man no longer seen as good business strategy • Deters “system abusers” • Gain work productivity during recovery period • Settlement value based on doctor’s medical rating (low) versus vocational rating (high)

38. The Workers Comp Containing Costs • Based on recent national studies: • Employees that are satisfied with their employers response to injury returned to work 50% faster • Many organizations that have RTW programs have experienced 25-50% cost reductions

39. The Workers Comp Containing Costs • Safety Controls • Engineering controls • Work practice controls • Administrative controls • Personal protective equipment

40. The Workers Comp Containing Costs • Steps of action • Start NOW • Assign a safety coordinator • Learn current safety program • Make safety a top priority • Identify hazards • Choose and implement strategies • Establish training programs for each department • Record implementation and effectiveness of strategies • Establish continual hazard controls • Accident Investigation

41. Questions? Thank You.