Joint Chapter Meeting 3.10.2011

1. Joint Chapter Meeting3.10.2011 Joint Chapter Meeting3.10.2011

2. Agenda • 8:45 – 9:15     Registration & Coffee Service • 9:15 – 9:30     Welcome, Introductions, WA PRIMA’s Treasurer’s Report  • 9:30 – 10:30   Hot Topics and Legislative Issues Impacting the Public and Private Sector  • Moderator:  Jeff Hollingsworth, Risk Manager Port of Seattle • PRIMA Speaker: Candice Bock, Legislative and Policy Advocate, State and Federal Relations Association of Washington Cities • RIMS Speaker:  Darrell Brown, ARM, Senior Vice President and the National Workers’ Compensation Practice Leader at Sedgwick Claims Management Service, Inc. • 10:30 – 10:45    Break  • 10:45 – 12:00    Utilizing Benchmarks, Metrics and Analytics to Manage Risks  • Moderator/Speaker:  Keith M. Higdon - Senior Vice President, Sedgwick Claims Management Services, Inc. • PRIMA Speakers:  • Drew Zavatsky, State of Washington Office of Financial Management, Loss Prevention Program Coordinator • Jeff Hollingsworth, Port of Seattle Risk Manager • RIMS Speakers:  • Keith M. Higdon - Senior Vice President, Sedgwick Claims Management Services, Inc. • Katrina A. Zitnik, Director of Workers’ Compensation, Costco    Wholesale • 12:00 – 1:00      Lunch

3. Hot Topics and Legislative Issues Impacting the Public and Private SectorCandace Bock | Darrell Brown Hot Topics and Legislative Issues Impacting the Public and Private SectorCandace Bock | Darrell Brown

4. Association of Washington Cities Tort Reform Legislation • SHB 1719 - limiting liability for employers for unauthorized passengers in employer vehicle • HB 1681 – limiting liability respondent superior • HB 1679 – limiting liability for offender supervision • SSB 5605 – limiting liability for governments • Investigation of child abuse or neglect • Offender supervision • Joint and several

5. Association of Washington Cities Personnel Legislation • SSB 5354/SHB 1445 – expanding presumptive disease designation for police and fire • HB 1444 – continuing death benefits upon remarriage • SB 5160/HB 1450 – Increasing the death benefit for public employees • HB 1487 – Workers Compensation Retro Programs

6. Association of Washington Cities Public Records • SHB 1899 and SSB 5685 – No daily penalty option for Public Records Act violations • SSB 5098 – Exempts personal information for participants in community programs (e.g., kids in parks & rec) • SB 5022 -- Clarifies one year statute of limitations • SB 5693 – Metadata fix. Defines “copy.” • SSB 5025 – No penalties for inmates unless agency acted in bad faith

7. Association of Washington Cities Other Liability Issues • HB 1559 – limiting liability for design professionals • SB 5310 – False Claims Act • SB 5387/HB 1670 – regulation of government risk pools

8. Medicare Reporting and 2011 LegislationDarrell Brown Medicare Reporting and 2011 LegislationDarrell Brown

9. Medicare Reporting- What happens now that reporting has started? • Claim files • Queries • Stability of website • Working with CMS/COBC

10. What we should continue to think about? • Workers’ Compensation ORM Clean Up of 2010 • Future Medical States • Increased MSP Recovery Efforts • Delayed Liability Reporting • MARC 2011 Legislation • Penalties

11. 2011 Legislative Activity – Other States • National – HR 623 • Illinois – SB 1349 • Oklahoma – HB 1286 • Kansas – HB 2134 • Georgia – SB 7 • Maryland – HB 889 / SB 413 • Missouri – HB 162 • Montana – HB 334, SB 243, HB 71

12. Utilizing Benchmarks, Metrics and Analytics to Manage RisksKeith Higdon | Jeff Hollingsworth Katrina Zitnik | Drew Zavatsky Utilizing Benchmarks, Metrics and Analytics to Manage RisksKeith Higdon | Jeff Hollingsworth | Katrina Zitnik | Drew Zavatsky

13. Benchmarking • Definition of a benchmark - a standard of excellence, achievement, etc., against which similar things must be measured or judged. –www.Dictionary.com (http://dictionary.reference.com/browse/benchmarking) • Two types of commonly benchmarks • Past performance – GOAL oriented • External data sources such as industry and other peer definitions – OPPORTUNITY/EXPLANATION oriented

14. Benchmarking to Past Performance – Program Evaluation

15. Benchmarking to External Data Sources – Peer Comparison • Generally a starting point, NOT an end point • What is the driver? • Industry issue • State issue • Program issue • What is a peer? Items to consider • Industry classification • Operating divisions • Employee size • Exposure distribution • Data Sources • Third-party organizations • Third-party administrators/Carriers

16. Benchmarking Challenges • Data challenges • Internal – what, where, and how? • External – what is the correct comparison? • Point-in-time versus trending • Variability of averages • Trends • Outliers

17. Data Lifecycle

18. Data Set 1 Shows a Reduction in the Average - Data Set 2 Shows an Increase in the Average $25,000 $20,000 $15,000 Dataset 1 Dataset 2 $10,000 $5,000 $0 Period 1 Period 2 Period 3 Data Set 1 Shows an Increase in the Average - Data Set 2 is a More Flat Average $20,000 $15,000 Dataset 1 $10,000 Dataset 2 $5,000 $0 Period 1 Period 2 Period 3 Case for Trending

19. TPA Example • Database records • Workers’ compensation = 14.6 million • Liability (all lines) = 6.6 million • Disability = 3.0 million • Economics of 2008 • Decline in volumes in some industries and lines • Increases in severity in key areas of others • Outcome • Validated single client experience • Identified intervention opportunities • Regional • Client specific

21. Commissioners King County Voters CEO Aviation Seaport RealEstate Capital Development

22. Shilshole Bay Marina Fishermen’s Terminal Sea-Tacoma Airport Grain Terminal

23. Benchmarking Challenges • When to Benchmark? • What Metrics To Use? • Create your own metric and then benchmark? • Use a “standard” benchmark and match data • How to Collect the Data? • Ask the Right Questions • Insurance Surveys • Who To Benchmark Against? • Yourself year to year • “Like” organizations • Validation of Results? • What Do You Do with the Results?

24. Cost of Risk Benchmark

25. Cost of Risk DeconstructPer $1000 Revenue

26. RIMS Benchmark COR Per $1000 of Revenue • 2009 All Industry = $10.35 (Reference RIMS) • Under $ 1 Billion Revenues = $14.86 • Greater $ 1 Billion Revenues = $5.24 • $250 Million to $500 Million = $12.59 • 2009 Government/Non-Profit (Ranked 7th) • $10.64 (Largest Drop in 2009 of 29%) • Port of Seattle • Total = $12.52 (2009) and $10.18 (2010) • Aviation = $9.44 (2009) and $8.64 (2010)

27. Internal BudgetMetrics

28. Year to Year Benchmark

30. Injury Rates 1996 - 2009 Port Commission Resolution 3213 Zero (0) Accident Goals 1996 Safety Evaluation Process 1st Safety Leader Kickoff SafetyLeaders Team Spirit & Wellness National Average

31. Benchmarking Takeaways • Know your data, your sources, and validate. • Know your peers at PRIMA, RIMS, etc • Know where to pull data from your company • Be very careful with insurance surveys • Use indicators to tie metrics that matter to your Sr./Executive Management team • Change your metrics to reflect your operations

33. Company Profile • 3rd Largest Retailer in US • 7th Largest Retailer in World • $139M avg. sales/Warehouse • 425 Locations with 110K EE in US • 33M Households with 61M Members • $79 Billion in Sales

34. Partners SCMS is TPA Bunch is medical management and bill review Aetna is PBM Pre Care for onsite PT in WA, OR, NY, NJ, and IL WorkCare for II Line Kaiser is in MPN in CA WC Program Overview • Self insured in all states • 9 Corporate Staff • Part of HR – report to AVP of benefits • About 8,500 claims/year • 35% in CA = $12k/claim • 65% in AOS = $10K/claim • Ultimate Costs = about $90M/year

35. Benchmarking – Past PerformanceGoal Oriented • Challenges: • Consistency & Predictability • Manage each policy year to hit the loss pick • About $265M in outstanding reserves • Understand the costs by state • 36 states to choose from • Determine appropriate program design • Ideas/Suppliers/Solutions • Practical for location • Measure results • ROI

36. Goal/Results Oriented Ultimate Loss Cost by policy year Quarterly analysis Set each policy year budget Determine focus years State specific loss rates Determine focus states Reports Track paid/incurred Track payments by pay code by state Know status at the end of each 4 week period Past Performance

37. California AOS Actual vs. PredictedAs of FY11 P5

38. State Specific Loss RatesAs of FY10 P12 3 Year Average

39. BenchmarkingExternal Data Sources • Opportunity/Explanation Oriented • Networking with peers • Comparative Studies • AON – compares ultimate outcomes • SCMS or Bunch BOB • Average costs • Similar employers/exposures • WCRI • State System Studies

41. Washington State Risk Management Two major initiatives: • Administer the State Insurance Liability Fund (self-insurance) • Administer the State Loss Prevention Program Major Risk: No sovereign immunity!

42. Washington State Risk Management –the impact of liability

43. Washington State Risk Management Available data: • Tort claims database (payouts) • Loss prevention review law (serious incidents)

44. Washington State Risk Management Loss Prevention Drill-down

45. Washington State Risk Management Loss Prevention Lessons Applied

46. Washington State Risk Management The Real Answer

47. Joint Chapter Meeting3.10.2011 Thank You | Questions?