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

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municipal workers compensation fund inc
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
evolution of workers comp
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
evolution of workers comp1
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
evolution of workers comp2
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
evolution of workers comp3
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
the workers comp claims process
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
the workers comp claims process1
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
the workers comp claims process2
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
the workers comp process
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
the workers comp process1
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.
the workers comp process2
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.


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.

the workers comp process3
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
    • 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

the workers comp process timeline of events
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.
the workers comp process4
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.
the workers comp process5
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
the workers comp cost containment
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
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)
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
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
workers comp premiums
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
the workers comp billing process
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
the workers comp costs
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
the workers comp costs severe disabilities
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
severe disabilities cont
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
the workers comp costs1
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
the workers comp costs2
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
the workers comp costs3
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
the workers comp costs4
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
the workers comp costs5
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
the workers comp containing costs
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
the workers comp containing costs1
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
the workers comp containing costs2
The Workers Comp Containing Costs
  • Indirect costs
    • Loss in work productivity
    • Work replacement
    • Cross training of employees
    • Administration’s time spent due to absence
the workers comp containing costs3
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
the workers comp containing costs4
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
the workers comp containing costs5
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)
the workers comp containing costs6
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
the workers comp containing costs7
The Workers Comp Containing Costs
  • Safety Controls
  • Engineering controls
  • Work practice controls
  • Administrative controls
  • Personal protective equipment
the workers comp containing costs8
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

Thank You.