R&R Insurance Blog

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.

There are various reasons as to why a business may try changing their Work Comp policy effective date: matching your Work Comp policy to your fiscal year or Package policy, request by new ownership, or you’re trying to get out of the Pool. Before you start down this road, you should first be looking at the financial impact of making this change.

It’s never as easy as it seems! We worked with a client who changed their effective date in order to make issuing certificates of insurance easier. This ultimately cost them $100,000!

A regular timeline has the Wisconsin Workers Compensation Rating Bureau (WCRB) using 36 months of data to determine an experience MOD rate. However, when changing your policy effective date, the WCRB is able to use up to 45 months of data. Say you have had a year or two with costly claims, they will hang on longer due to this process. Remember: the higher the MOD, the more expensive the premium.

It must be noted: an Anniversary Rating Date (ARD) would not allow you to take advantage of a rate or rule change.
Say after looking at business analyses, claims review, and the financial impact of changing the Work Comp effective date, you determine this is the best scenario for your business. Once you begin the process of changing your Work Comp effective date, it will take five years to get back to a regular rating cycle. Not only is this a time consuming process, it could be a very costly process.

The R&R Resource Center works with businesses every day to proactively manage claims, ensure correct analyses are being performed on Work Comp insurance, and educate the pro’s and con’s of changing effective dates. The processes in place help ensure accurate data which ultimately saves you money. Contact us today for a review of your current Risk Management Program.

Fully understanding your organization’s Work Comp Experience Mod and OSHA DART Rate will not only help you achieve your desired outcomes for employee safety, but will also give you a point of reference for benchmarking against others in your industry. In addition, knowing your DART rate will help you prepare for a potential site visit from OSHA.

However, in order to better understand these you two variables, you need to first recognize the difference between the two. The following is a breakdown of their differences:

EXPERIENCE MOD

The Work Comp Experience Mod is a numerical expression of a company's accident and injury record compared with the average for the firm's industry. An organization’s e-mod is calculated using payroll and loss data for the oldest three of the last four years.

An experience mod of 1.0 means a company has an average safety record, while an experience mod of 0.80 means a company has a good safety record that merits a 20 percent discount. An experience mod of 1.20 means the firm's accident rate is above the industry norm and raises a company's costs by 20 percent.

DART RATE

OSHA’s DART Rate, which is an acronym for Days Away or Restricted Time, is a measure of accident severity. It counts the number of cases in the calendar year in which a company had an employee away from work due to an injury or who was working under restrictions due to a work injury.

As you can see from the breakdown above, the common denominator between these two variables is eliminating lost time injuries. R&R Insurance has multiple resources available for helping you understand as well as achieve your desired outcomes for both your Experience Mod and DART Rate. Contact a knowledge broker for additional information.

Take control of the health and productivity of your employees - and increase profit. WellCompForLife is R&R Insurance Services’ total solutions approach to that will provide your company with the tools to increase the life span and productivity of your employees - and ultimately your bottom line!

The top three driving trends impacting an employer’s bottom line are Obesity, Workplace Injuries and the Aging Workforce.

Addressing These 3 Corporate Burdens to Increase Your Profit

1. Obesity - Yes, That Means Lose The Weight
Findings show that obese workers were more likely to report occupational injuries, with a great frequency of strains and sprains, along with falls and overexertion injuries. Consider these statistics: A comparison of obese employees to normal weight employees: 50% more workers’ compensation claims, 13x more lost work days, 7x higher medical costs, 11x indemnity claim costs. And this is just the workers compensation part. The negative effects of obese employees on your health insurance costs are overwhelming. Diabetes, heart disease, chronic pain - can all be attributed in part to being overweight. That means you have to do something about it - employee wellness programs, fitness, healthy eating, lifestyle changes for your employees and their families.

2. Reduce Workplace Injuries: Reduce the injuries to reduce the work comp claims!

• Slip-and-fall injury prevention: ensure a safe working environment by maintaining parking lots and sidewalks; encourage employees to wear appropriate footwear for wet or slippery conditions. Make sure you have handrails at all stairwells and inclines/declines - special attention to this for your aging workforce.
• Ensure employees can meet the physical requirements of the job: consider a post-offer, pre-employment physical for new employees – be sure the physician covers medical history as it may reveal something not seen during the physical (the cost of the test would pay for itself when preventing a back or shoulder claim!) Pay special attention to your aging workforce for their physical requirements.
• Ergonomics enhancement: ask employees for suggestions on how their job can be tweaked to avoid fatigue or soreness; consider job rotation for repetitive tasks (also promotes cross-training!)
• Wellness programs to aid injury prevention: help prevent strains, sprains, and falls by improving flexibility, strength, and balance. Great examples is starting a flex and stretch program, cover part of a gym membership, or hold exercise classes like yoga, Pilates, or Tai Chi.Also, having a structured return-to-work program has several benefits, the most important of which is the reduction of lost-time (lost-time has 3 times greater impact on your workers compensation premium dollars than a no-lost-time claim).

There are literally dozens of ways to increase safety and reduce injuries at your place of work. If they aren't apparent to you, bring a knowledgebroker in - we'll take a look around and give you some pointers.

3. Address the Aging Workforce
Experts predict that by the year 2020, 25% of the US workforce will be 55 years or older. Couple this statistic with the fact that most people are working past the traditional retirement age of 65 and organizations need to pay special attention to this sector of the workforce.

On average, older workers are injured less frequently than younger workers. However when older workers are injured, it will be more severe and have a longer recovery time. See Preventing Injuries in an Aging Workplace.

R&R Insurance has found that if businesses address the health of their employees, reduce their number of injuries and keep a close eye on ways to accommodate the aging workforce, you will see a significant positive effect on your bottom line! WellCompForLife processes will increase the health and longevity of your employees and their families giving you a lot more control over your health and work comp insurance costs, all while improving the productivity of their employees. This is control business owners don't realize they have. At R&R Insurance, we call this program WellCompForLife!

Join the WellCompForLife discussion on LinkedIn!

For more information about WellCompForLife, contact a knowledgebroker today!

Wisconsin statutes allow sole proprietors, partners or members to elect to cover themselves by a workers compensation policy. Officers of corporations (with fewer than 10 stockholders) are automatically included for coverage, but up to 2 officers may exclude themselves from coverage.

Before you decide to exclude yourself from workers compensation benefits, it is a good idea to check your health insurance and disability insurance policies to be sure a work-related exclusion does not exist. Policies are not uniform in how this language reads. Insurance policies will commonly exclude any loss that’s covered by workers compensation. Some will state that the exclusion does not apply if workers compensation is “available” or “payable” to you.

Workers compensation benefits not only pay for medical expenses but also income replacement in the event you are unable to return to work either on a short-term or long-term basis. Those excluding themselves from workers compensation may want to consider disability insurance in addition to health insurance to address both aspects of work-related injuries.

It is important to address this question with your health and/or disability insurance provider so any gaps in coverage may be addressed in advance. Once you are excluded (or have not elected to be covered) from the workers compensation policy, work-related injuries and illnesses will not be covered. It’s important to know how your health or disability policy will respond to a work-related incident.

Please contact your R&R Knowledge Broker if you have any questions or would like to discuss further.

Under the Wisconsin Workers' Compensation Act, there are nine criteria that must be met for a subcontractor to truly be considered an independent contractor for the purpose of workers’ compensation.

Contrary to popular belief, it can be difficult for a subcontractor to meet all nine of these criteria. Unless your subcontractor has their own workers’ compensation policy; you may have an exposure you did not foresee. Potentially, you may have a work comp claim for someone who you do not consider to be your employee.

The criteria are as follows:

1) Does the subcontractor maintain a separate business?

2) Do they have a separate FEIN from the IRS? Or have they filed business or self-employed income tax returns with the IRS for work or services in the previous year?

3) Do they operate under specific contracts? Meaning do they have a contract for services stating what service is to be performed, and for what amount of money?

4) Are they responsible for operating expenses under the contract?

5) Are they responsible for satisfactory completion of the work under the contract?

6) Are they paid per contract, per job, or by commission or competitive bid?

7) Are they subject to profit and loss under the contract?

8) Do they have recurring business liabilities and obligations?

9) Are they in a position to succeed or fail if business expense exceeds income?

As you can see, all of these can be broadly interpreted. There are published court cases that go both ways on whether a business meets the criteria for independent contractor status. These often hinge on one or two small facts about the relationship between the employer and subcontractor.

Keep in my mind that the subcontractor must meet ALL nine of these criteria to be considered an independent contractor for work comp purposes. If they do not meet all of them, courts will generally look somewhere else for coverage for this person. If as a business owner you are directing the work, you may be found to be acting as the employer, and thus be on the hook for a worker’s compensation claim.

The Department of Workforce Development has stated that a person is NOT an independent contractor for workers’ compensation purposes just because they say so, or because the contractor over them says so, or even if other government regulators say so. The Department looks at whether all nine of the criteria mentioned above are met.

The best course of action is to insist that all subcontractors maintain their own workers compensation insurance policy, and ask for proof of that via a certificate of insurance. Contact your knowledge broker for additional information.

In an article by SFM (full article), the New England Healthcare Institute reports the national overuse of hospital emergency rooms results in $38 billion in annual wasteful spending. And that an estimated 56% of ER visits could be avoided! Not only is it costing the individual more money, but it is also costing the employer more money in terms of their health benefits and/or work comp costs.

Aside from the dollar figures associated with visiting an ER instead of primary care provider, the quality of care varies as well. An ER is equipped for the doctor to do the initial triage treatment and delegate any follow-up care. There tends to be lack of long-term treatment for the patient. Which could ultimately cost more money for additional treatments if a long-term treatment plan is not discussed at time of injury.

However if a patient is able to visit their primary care provider, an urgent care facility, or a specialty clinic, it typically has a more ideal outcome as the individual is treated by a specialist who is able to guide the treatment. Ultimately, staying out of the ER when possible will lead to better medical outcomes, less frustration, and reduced costs.

WellCompForLife can reduce costs for your health benefits AND work comp to positively impact your bottom line.

This is an unpublished case from District IV of the Wisconsin Court of Appeals filed on 5/22/14.

ISSUE: Was the lawyer in the course and scope of his employment when he was on a trip to a motorcycle rally with a client?

ANSWER: Not in this case – work comp benefits denied.

FACTS:
Westerhof was an attorney and shareholder in the law firm of DeWitt, Ross & Stevens. In an effort to market himself he joined a poker group which included small business owners and a real estate appraiser, S. Franken. The law firm would reimburse Westerhof for expenses involving this poker group from time-to-time.

Westerhof handled a small claims action for Franken which involved a cabin Franken owned near Wisconsin Rapids. Westerhof filed an answer to the complaint of Franken’s behalf, and also moved to void an insurance release.

A few months later, Westerhof asked Franken if he could go with Franken and his wife to a Harley-Davidson Rally in Tomahawk. There is some inconsistent testimony on whether the three of them had originally planned to take some pictures of the cabin on the way up to the Rally. Regardless, the plan changed due to a delay in their departure from Madison, and they did not stop at the cabin. Nevertheless, Westerhof testified that he considered the excursion to be a business trip.

Somewhere near Wausau, Westerhof lost control of the motorcycle and was severely injured.

Westerhof sought worker’s compensation benefits claiming that the injury arose out of his employment because at the time he was “rainmaking” or “networking” on behalf of the firm.

The Administrative Law Judge and the Labor and Industry Review Commission (LIRC) denied Westerhof’s claim. Westerhof appealed to the circuit court which affirmed LIRC’s decision.

The Court of Appeals affirmed the lower court’s decision and ruled that in this set of facts, Westerhof was not in the course and scope of his employment. Westerhof did not initiate the event to entertain a client. Rather he was a guest on a personal trip initiated by Franken.

The court stated that even if the poker games could be considered client entertainment or business-related networking, it does not follow that every trip or activity that Westerhof and Franken undertook together was client entertainment or business-related networking.

COMMENTS:
The case is available if you want to read it. It reviews prior cases where work comp benefits were awarded, and then distinguishes this case from those.

This material is for informational purposes only and not for the purpose of providing legal advice. R&R Insurance Services, Inc. is not a law firm. You should contact your attorney to obtain advice with respect to any issue or problem specific to your business.

Residing in every WASB members’ offices is a pot of gold. Okay, it’s not really gold, and it’s not in a pot. But it is real money, and can pay dividends for many years. Many districts and CESAs believe the cost of their workers’ compensation insurance has no relationship to behavior, the cost is set by the state, and only the size of the district (i.e., total payroll) changes the cost. None of that is true.

Cause and Effect
Districts that R&R Insurance has worked with are educating administrators, buildings and grounds, food service personnel, coaches, and teachers on how workers’ compensation insurance works. Part of the education process is understanding the elements that contribute to the cost of workers’ compensation insurance:

• Workers’ compensation losses: (also referred to as claims) these are incidents resulting in an insurance company paying medical expenses on behalf of, or indemnity (income-replacement) benefits to, employees injured on the job.
• Medical-only claims: workers’ compensation claims that contemplate seeking medical treatment and being absent from work for not more than three days.
• Lost-time claims: workers’ compensation claims where an injured employee is absent from work for a period of four or more days as a result of the injury or disease.
• Rates by duties: (also referred to as classification codes) these are amounts charged employers by insurance companies per $100 of payroll for employees engaged in certain job functions. For example, class code 8868 is applied to professors, administrators, and teachers, etc.
• Experience modification factor: In trainings, districts should learn how each of these elements impacts their workers’ compensation premium. Through this educational process, employees quickly see how their actions impact the cost of the district’s workers’ compensation insurance.

“One for Three”
The slogan, “One for Three” has a special, but not favorable, meaning relative to a district’s experience modification factor. It refers to the fact that any workers’ compensation claim that flows into the pipeline of information used to calculate your experience modification factor remains in the formula for three years. Claims drive up your experience modification factor and workers’ compensation insurance premium — for three years!

In calculating an experience modification factor, the Wisconsin Compensation Rating Bureau develops expected losses (from workers’ compensation claims) for different types of jobs. Examples showing expected workers’ compensation losses for teachers and other employees versus actual losses incurred are available for local districts.

It has been interesting — and financially meaningful for districts and CESAs — to observe that understanding how workers’ compensation losses impact premiums creates an awareness of the effect of unsafe work practices. With more information, district personnel often change their behavior and a team mind-set between schools can develop. We have stories of custodians telling each other not to lift heavy items without help. During a staff workshop, a teacher volunteered to hang up a chart and grabbed a chair to stand. In unison, the rest of the participants shouted, “Don’t! Get a ladder!” The participants knew that a fall from the chair could likely impact their experience modification factor.

The Next Phase — Training and Committees
Following education regarding how a district’s experience modification factor is calculated, job-specific safety training should be held. Buildings and grounds training involves hazard recognition, ladder safety, and proper lifting and driver safety. Food service training involves slip and fall hazard recognition, proper footwear, handling sharp instruments, proper lifting and hygiene. Administrator and teacher training focuses on driver safety, proper lifting techniques, ladder safety and hazard recognition. Training is then done with group tabletop exercises, presentations by safety professionals, and via computer-based training.

In addition to training, districts should establish safety committees and bring parties together from individual schools and disciplines to focus on employee and student safety issues. Some districts successful in holding down their workers’ compensation costs have used staff from one school to visit other schools within the district, providing a fresh set of eyes to look for potential loss exposure. When districts share safety committee meeting results with member schools, oftentimes, there are positive safety results.

Successful districts have created a culture where safety is emphasized; a culture that tells employees and students their well-being and health is of paramount concern, and it offers the additional benefit of favorably impacting a district’s bottom line through fewer, and less expensive, workers’ compensation claims.

Examples of Success in Two Districts

SCHOOL DISTRICT #1 had consistently bad losses. No one in the district was truly paying attention to the problem. Their experience modification factor increased for several years in a row. When the administrators realized how much money could be saved regarding workers’ compensation costs, they implemented educational pro- grams. The district saved $54,000 in premium each year by lowering their experience modification factor.

SCHOOL DISTRICT #2 identified a job type within the district that was generating most of their losses. The district focused on the troubled area and let the employees know that the cost from their depar tment was a problem. They used various methods to change behavior, which resulted in increased safety awareness and a $10,745 annual savings. This savings was 17 percent of the workers’ compensation premium.

Hattendorf is a practice leader with R&R Insurance School Practice Group. You can contact him at Bill.Hattendorf@rrins.com or 262-953-7128.

Article as seen in the September 2013 issue of "Wisconsin School News"