R&R Insurance Blog

Quite often, I’ll get questions from employers wondering what impact the ACA will have on worker’s compensation. A recent study by the Worker’s Compensation Research Institute (WCRI) helps shed some light on what employers can expect. It’s not encouraging news.

According to the recent WCRI study, hundreds of millions of dollars in insurance claims nationally could shift from health insurers to worker’s compensation carriers.

The concept is simple. The Affordable Care Act encourages health providers to form Accountable Care Organizations that shift payment from a traditional fee-for-service model to capitated or pre-paid health insurance. As you know through experience, most worker’s compensation treatment is based on fee-for-service.

The study suggests that providers may, in some cases, have a financial incentive to categorize an injury as being work-related. In States like Wisconsin and Pennsylvania where a large percentage of workers are enrolled in capitated health plans, this case shifting could be significant.

For more information on the report, click here.

If you would like assistance with evaluating your current worker’s compensation policies and procedures to see if there are ways to strength your program, please contact me.

The workers compensation act in Wisconsin changes every two years through an “advisory council” process. The Worker’s Compensation Advisory Council, made up of five management representatives and five labor representatives, is charged with exchanging proposals and negotiating an agreed bill that goes off to the legislature for consideration. Typically, this agreed bill makes it through the legislature without much friction. But that's not always the case.

As we are nearing the end of this biennial cycle, it’s important that you understand the proposals that are being considered by the Worker’s Compensation Advisory Council as many could have a direct impact on what you pay for worker’s compensation insurance in the future. Here’s a brief summary of the key proposals:

LABOR PROPOSALS

• Rate Increases and Indexing: Labor is looking for sizable increases in payments made for injuries that involve permanent partial and permanent total disability.
• Continuation of Healthcare Contributions: For those employers who offer health insurance, labor is looking to require that you continue to make those employer contributions to the health plan for as long as the injured worker is in that disability state. That would be for an unlimited time and it would be regardless of whether you had terminated the employee for cause or they quit for any reason.
• Vocational Rehabilitation Exceptional: This would allow employees who are being retrained as a result of a workplace injury to collect full indemnity benefits while in school AND collect wages at another employer for up to 20 hours without an offset of indemnity benefits.

MANAGEMENT PROPOSALS

• Statute of Limitations Reduction: Currently, an employee has 12 years to pursue a worker’s compensation claim against their employer. Management is looking to reduce that to 3 years.
• Eliminate Statutory Permanent Partial Disability Ratings: Currently, there are certain surgical procedures that result in permanency ratings that automatically start at a minimum level, regardless of the outcome of the procedure. With advancements in medical procedures and technology, the management representatives would like to see these minimums removed.
• Controls on RX’s Dispensed at a Doctor’s Office: Some doctors are dispensing prescriptions to injured workers at their offices and charging insurance carriers 3-4 times the cost of the drugs. Management is asking to implement some controls on the cost and length of time a physician can dispense meds from their office.
• Medical Cost Containment: Most states in the U.S. have instituted aggressive cost containment measures to better control the cost of treatment for work related injuries. Wisconsin lacks that type of control and the cost of medical treatment is sometimes 2-3 times more expensive for work related procedures as compared to those covered under a health plan. Management is also asking for the ability to direct where an injured worker can get treated.

No doubt that many of these proposals, if they become part of a bill that gets passed by the legislature, will have an impact on the cost of your insurance going forward.

For additional insight on how any of these might impact the cost of your worker’s compensation insurance, please contact me.

Are you curious on how your experience modification factor (“ex-mod” as it is referred to in the industry) compares with other Community Action Agencies in Wisconsin? Before we get to that comparison, let’s take a step back to be sure we have a basic understanding of the experience modification factor.

Each year, about 3-4 months prior to your worker’s compensation insurance renewal, your Community Action Agency is provided with the experience modification factor that is calculated by the Wisconsin Worker’s Compensation Rating Bureau. That ex mod is based on three years of your prior loss information and simply put; it’s a reflection of how well your organization is controlling the frequency and severity of workplace injuries. It’s somewhat of a scorecard. In fact, in the for-profit world, many general contractors will only work with sub-contractors who have ex-mods at or below 1.0.

If your Agency is “average”, your experience mod is a 1.0. If you have more losses than expected for the work that you do, you will have a “debit mod” and pay more for your premium. If you have less than expected losses for the work that you do, then you will have a “credit mod” and you will pay less, thereby freeing up additional funds for vital community programs.

What I found in my analysis of the ex-mod data is that only four of the Agencies in Wisconsin have ex-mods under 1.0. And in most of instances, the ex-mods are just slightly under the benchmark. The remaining Agencies have mods over 1.0 and are paying from 5% to 39% more for their work comp insurance. Whether your ex-mod is over or under 1.0, I am confident that every Agency has the ability to reduce their ex-mod from its current value. And what programs could you fund if you were able to reduce those costs?

Click here to view the summary.

If you have an interest in learning how low your ex-mod can actually go, or would like to discuss potential policies and procedures that you could implement in the short term that would have the most impact on driving down your specific ex-mod, please contact me.