Workmans Comp Group Presentation

Workman’s Workman’s CompensationCompensation

Presenters:Presenters: 1. Phyllis Wallace, 2. Michelle Butler, 1. Phyllis Wallace, 2. Michelle Butler,

3. Alan Theodore, 4. Janel 3. Alan Theodore, 4. Janel McCormack & 5. Kim MurakamiMcCormack & 5. Kim Murakami

Workers Compensation Workers Compensation OverviewOverview

What Is Workers CompensationWhat Is Workers Compensation

The nations oldest mandated social insurance program The nations oldest mandated social insurance program adopted in the 1920’s by most states, including Californiaadopted in the 1920’s by most states, including California

Benefit covers any injury or illness if it is job relatedBenefit covers any injury or illness if it is job related

Four types of benefits [medical, disability, death, Four types of benefits [medical, disability, death, rehabilitative]rehabilitative]

The system is based on a “trade off” between employers The system is based on a “trade off” between employers and employeesand employees

Phyllis Wallace 1


Sources Of Workers Compensation Sources Of Workers Compensation Insurance CoverageInsurance Coverage

Private carrier, state fund or self-funding Private carrier, state fund or self-funding

PremiumsPremiums

Phyllis Wallace 2


Controlling Workers Compensation Controlling Workers Compensation CostsCosts

Costs usually represent 2% to 10% of payrollCosts usually represent 2% to 10% of payroll

Contributors to increases [higher medical Contributors to increases [higher medical expenses, litigation, fraud] expenses, litigation, fraud]

Keys to cost reduction[ return-to-work plans, safety Keys to cost reduction[ return-to-work plans, safety meetings, HR continually monitor their efforts] meetings, HR continually monitor their efforts]

Phyllis Wallace 3


Workers Compensation Issues and Workers Compensation Issues and AbusesAbuses

Misclassification of workers by employers Misclassification of workers by employers [independent contractors][independent contractors]

Misclassification of workers by temp help & Misclassification of workers by temp help & leasing agenciesleasing agencies

Manipulation of ratesManipulation of rates

Phyllis Wallace 4


Future Trends Future Trends

ObesityObesity

Aging workforceAging workforce

Distracted drivingDistracted driving

Emotional impairmentEmotional impairment

Telecommuting by employeesTelecommuting by employees

Phyllis Wallace 5

Workman's Compensation Workman's Compensation FraudFraud

The presumption during the 80s and 90s The presumption during the 80s and 90s was that claimant (employee) fraud was was that claimant (employee) fraud was the issue to increases in Workman's the issue to increases in Workman's Comp. This speculation is what triggered Comp. This speculation is what triggered in depth employee claims investigations. in depth employee claims investigations. The results of those investigation and The results of those investigation and today’s reality is that the real drain is due today’s reality is that the real drain is due to Employer and Provider fraud.to Employer and Provider fraud.

“ “ In terms of dollar cost, there’s no In terms of dollar cost, there’s no questionquestion

that employer fraud today cost more that employer fraud today cost more dollars to carriers and to the industry dollars to carriers and to the industry

than employee fraudthan employee fraud11””-Richard Schultz, spokesman for State -Richard Schultz, spokesman for State

Compensation Insurance FundCompensation Insurance Fund Michelle Butler 1

Recognizing the Real FraudRecognizing the Real Fraud

“I will not stand for scam artist taking advantage of the system”-Steve Poinzer, Insurance Commissioner

Employer Fraud

•Underreporting payroll

•Declaring independent contractors

•Misclassifying workers

•Misrepresenting claims experience

•Underestimated employment projections

Michelle Butler 2

Managed Care IssuesManaged Care Issues

Medical Provider Fraud Medical Provider Fraud Creative billingCreative billing Self-referralsSelf-referrals Up codingUp coding UnbundlingUnbundling Product switchingProduct switching KickbacksKickbacks

Michelle Butler 3

Fraud FactsFraud Facts

Top two states with highest fraud Top two states with highest fraud incidents:incidents:

1.1. CaliforniaCalifornia

2.2. IllinoisIllinois

and the city Chicagoand the city Chicago

The Top Industry for FraudThe Top Industry for Fraud

1. Construction (avg. $10-$15 per $100 1. Construction (avg. $10-$15 per $100 p/e)p/e)

Michelle Butler 4

Procedures for Filing a claim Procedures for Filing a claim Employee and Employer Employee and Employer

PerspectivePerspectiveEmployeeEmployee

Employee must Employee must report injury to report injury to employer employer

Employee Employee completes WC completes WC claim formclaim form

Medical Care: Medical Care: Employees PCPEmployees PCP

EmployerEmployer Employer can Employer can

help to curb help to curb employee fraudemployee fraud

Employer must Employer must cooperate with cooperate with the WC carrierthe WC carrier

Medical Care: Medical Care: PTP (from MPN)PTP (from MPN)

Alan Theodore 1

Action Steps-After Filing/WC Action Steps-After Filing/WC Benefits Employee and Employer Benefits Employee and Employer

PerspectivePerspectiveEmployeeEmployee

What should What should employee do once employee do once claim is filed?claim is filed?

Available Available Benefits: Medical Benefits: Medical Expense, Expense, Disability Pay, Disability Pay, Death Benefits & Death Benefits & Vocational Vocational RehabilitationRehabilitation

EmployerEmployer What should What should

employer do employer do once claim is once claim is filed?filed?

Alan Theodore 2

California is considering linking California is considering linking the OMFS to Medicare’s fee the OMFS to Medicare’s fee

schedules.schedules. What is Medicare?What is Medicare? How are Medicare and Workers How are Medicare and Workers

Compensation related?Compensation related? Medicare’s fee schedule – updated Medicare’s fee schedule – updated

annually.annually. What is the OMFS? – same since 2001.What is the OMFS? – same since 2001. Expected Growth of MedicareExpected Growth of Medicare Expected Population Growth in CaliforniaExpected Population Growth in California

Janel McCormack 1

What is the result?What is the result?Cons and ProsCons and Pros

PROSPROS Expand services Expand services

and reduce and reduce administrative administrative burdens.burdens.

Potential better Potential better patient access patient access to quality care.to quality care.

CONSCONS Dramatic and Dramatic and

Continuous Continuous increases to increases to Medicare costs.Medicare costs.

In turn, higher In turn, higher settlement costs settlement costs for Workers for Workers Compensation.Compensation.

Janel McCormack 2

Workers Compensation Workers Compensation Medical Set-Aside Medical Set-Aside

Arrangement (WCMSA)Arrangement (WCMSA) What is it?What is it? Medicare as Secondary Payer Act 42 USC Medicare as Secondary Payer Act 42 USC

1395y(b)1395y(b) How does it work?How does it work? Why is it a problem - settlements?Why is it a problem - settlements? Past Medical expenses and Future Medical Past Medical expenses and Future Medical

Expenses.Expenses. ““Consider the interest of Medicare.”Consider the interest of Medicare.” Open ClaimsOpen Claims When is Medicare involved (reasonable When is Medicare involved (reasonable

expectation).expectation).

Janel McCormack 3

The Real ImpactThe Real Impact

Should California link Should California link the OMFS to the OMFS to Medicare’s fee Medicare’s fee schedules?schedules?

It will help to It will help to maintain updated maintain updated fee schedules and fee schedules and reduce reduce administrative costs administrative costs as well as expand as well as expand the services covered the services covered by the OMFS.by the OMFS.

The Workers The Workers Compensation Medical Compensation Medical Set-Aside Set-Aside Arrangement Arrangement (WCMSA) has a (WCMSA) has a tremendous effect on tremendous effect on the ultimate the ultimate settlement costs, settlement costs, therefore directly therefore directly helping to increase helping to increase Workers Workers Compensation costs to Compensation costs to the employers. the employers.

Janel McCormack 4

Impact of Business Cycles Impact of Business Cycles on Workers’ Compensationon Workers’ CompensationEconomic shrinkage = Economic shrinkage =

Compensation claim rates drop (in Compensation claim rates drop (in relation to the total number of relation to the total number of hours)hours)

There are fewer inexperienced workersThere are fewer inexperienced workers The least safe equipment is taken out of useThe least safe equipment is taken out of use The pace of work is slowerThe pace of work is slower Workers fearing job loss may defer filing Workers fearing job loss may defer filing

claimsclaims Hazardous industries experience the largest Hazardous industries experience the largest

decline in employmentdecline in employmentKim Murakami 1

Workers’ Compensation Workers’ Compensation Insurance Rate IncreasesInsurance Rate Increases

The Workers' Compensation Insurance Rating The Workers' Compensation Insurance Rating Bureau will present its case for lifting a Bureau will present its case for lifting a statewide benchmark for insurance rates by statewide benchmark for insurance rates by 23.7 percent, the biggest jump in 30 years23.7 percent, the biggest jump in 30 years Seems unlikely that this request will be granted, Seems unlikely that this request will be granted,

realistically a 4-5 % increase should prevailrealistically a 4-5 % increase should prevail Currently, California employers pay an Currently, California employers pay an

average of $2.25 per $100 of payrollaverage of $2.25 per $100 of payroll If that were increased by 23.7 percent, it would If that were increased by 23.7 percent, it would

come to $2.78, less than half the $6.45 average come to $2.78, less than half the $6.45 average rate in 2003rate in 2003

Kim Murakami 2

Why Are Rates Going Up? Why Are Rates Going Up?

Increases are blamed largely on Increases are blamed largely on rising medical costsrising medical costs the latest period for comprehensive data the latest period for comprehensive data

(05-07) cost of surgery rose 19%; (05-07) cost of surgery rose 19%; medicine, 16%; and radiology, 9%medicine, 16%; and radiology, 9%

# of claims has dropped dramatically, # of claims has dropped dramatically, but cost per claim has risen steadilybut cost per claim has risen steadily Critics say increases reflect overhead Critics say increases reflect overhead

costs, profits & legal expenses, rather costs, profits & legal expenses, rather than just medical carethan just medical care

Kim Murakami 3

Specific Trends will Impact Specific Trends will Impact Future of Workers’ Future of Workers’

CompensationCompensation Obesity Obesity statistics reveal that obese workers are statistics reveal that obese workers are

2 x as likely to file a claim as workers who are at a 2 x as likely to file a claim as workers who are at a healthy weight. Costs associated with an obese healthy weight. Costs associated with an obese worker claim are significantly higher.worker claim are significantly higher.

Aging Workforce Aging Workforce as workers age, lost time as workers age, lost time due to illness & injury increases as does the due to illness & injury increases as does the fatality rate for work related injuries. Fatality rate fatality rate for work related injuries. Fatality rate for age 65+ workers is twice the rate from workers for age 65+ workers is twice the rate from workers age 55-64.age 55-64.

Distracted Driving/Equipment Distracted Driving/Equipment Operation Operation highway incidents remain the leading highway incidents remain the leading cause of occupational death (even in economic cause of occupational death (even in economic recession). More than 50% of drivers between the recession). More than 50% of drivers between the ages of 16-61 being distracted while driving.ages of 16-61 being distracted while driving.

Kim Murakami 4

Documents

Workmans Comp Group Presentation