January 2004 Archives

January 29, 2004


A recent study on lower back pain and return to work was conducted by a Dutch research team, and the findings were unsurprising to those of us who espouse the idea of an active rather than a passive recovery whenever possible. In the study, workers with nonspecific low back pain who engaged in a graded activity program returned to regular activities - including work - sooner than those who got "normal care." On average, the active recovery path cut one month off a three-month recovery period, and follow-up studies showed no difference in the reinjury rate.

This study bolsters the case for employers to have a safe, progressive return to work program that eases injured workers back to their normal jobs. The study author comments:

"Athletes and other professionals are highly motivated, have high self-esteem, are not depressed, and have a strong motivation to keep doing what they always do," he suggests. "Can we imbue the injured worker with some of the ideals and motivation of the injured athlete?" Based on the van Mechelen team's study, the answer appears to be "yes." Their program changes how disabled workers see -- and cope with -- their lower back pain."

Dr. Jennifer Christian is an occupational physician who has worked in settings ranging from an insurer's office to right on the shop floor. She often uses "the grocery store test" as a barometer of fitness for work. It goes something like this: If you worked in your family grocery store, would you be back at work, or would the injury or illness preclude that? Of course, it goes without saying that any worker's return to work after an injury of illness must be planned carefully within physician restrictions.

The hidden key in both this study and the grocery store test may well center on that all-important word, motivation. If you are an employer, ask yourself this: would your employees be motivated to come back to your workplace?

By the way, if you ever have the chance to hear Dr. Christian speak at a national meeting or forum, do be sure to sign up...she is quite a forward thinker on workers compensation and disabilty issues.

And thanks to Judge Robert Vonada and his always excellent PAWC weblog for pointing us to this study.

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January 28, 2004


Peter Rousmaniere has a column entitled A Voice of the Worker in Risk & Insurance that is well worth reading. He reports on the Workers Compensation Research Institute's (WCRI) study, Outcomes for Injured Workers. The research encompassed 3,000 claimants in California, Massachusetts, Pennsylvania, and Texas. It's one of the first studies from the worker perspective, assessing recovery, return to work, and access to and satisfaction with health care.

There is much in the study that provides a springboard for further study - why are workers more satisfied and why are outcomes better in MA and PA than in CA and TX? Satisfaction and recovery, it appears, do not align with the highest expenditures, for example.

Rousmaniere discusses one disturbing aspect of the study that points to a worker population that is being marginalized:

"Many injured workers never succeed in returning to the wage levels they had achieved before their accidents. The data suggest that the vast majority with less than an eighth grade education do not get close to where they were pre-injury. They account for much of the injured workforce in states like California and Texas, maybe due to the large Hispanic workforces there."

He suggests that, given these circumstances, the most attractive option for these workers might be joining the cash sub-economy or to seeking some form of permanent disability awards.

Rousmaniere suggests that " ... the workers' comp system can respond only so much on behalf of this worker group. The California system's tableau of generous legal and medical benefits for claimants is a mirage. The concept of voc rehab has largely failed as a major solution. What may help are better incentives for the employer to retain the worker from day one of the injury and through, if and when a permanent award is made."

We must ask ourselves if, in these instances, we are fostering a permanently disabled class. Clearly, the most successful outcomes occur when incentives are aligned - worker and employer. Both must have an investment in and commitment to the benefits of recovery and return to work.

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January 28, 2004


Thanks to Pulse for pointing us to the study Changes In Health Insurance Coverage During The Economic Downturn: 2000 - 2002. The study reports that the uninsured population has grown by 3.8 million during that time period. Low-income Americans, particularly males and nonparents, fared the worst, as gains in public programs failed to offset lost employer-sponsored coverage. Look to the possibility of more uninsured workers trying to secure coverage where they can - this includes potential cost shifting to the workers' comp system.

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January 25, 2004


If you have multi-state exposure, keeping up on the various laws can be a challenge. Here are two handy tools:

The Department of Labor's State Workers' Compensation Laws & List of Benefit Tables offers 20 separate tables available in either html (web) or pdf (adobe) formats.

The workers compensation insurance law tool at insure.com offers four search tools: a search for a summary of individual state laws; a sort of states by whether the employer or the employee has choice of physician; a sort of states by availability of a state fund; and a sort of states that allow self insurance for employers or employer groups.

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January 23, 2004


Exclusive remedy generally protects an employer from a lawsuit. If an employee suffers a work related injury, the employer provides a state-regulated schedule of benefits to cover medical care and lost wages during recovery. In exchange for these benefits, the employee forfeits the right to sue. Workers compensation becomes the sole or exclusive legal remedy. Often, this protection is extended to insurers who are acting as agents for the employer.

However, there are exceptions. One exception is bad faith on the part of the insurer. A successful bad faith suit might be triggered by an insurer's nonpayment of claims, mass denial of claims, or the like.

This week, a woman in South Dakota just secured a $12 million award for a bad faith claims practice, most of it in punitive damages. The claim involved the denial of about $8,000 in medical bills for a carpal tunnel injury. The original grounds for denial centered around compensability and whether the injury arose out of and in the course of employment.

Her insurer said the denial occurred because "there was a lack of proof that her hand problems were caused by her work" and further suggested that "her hand problems were likely the result of a 1998 home injury, not her work in the kitchen of the nursing home."

A determination of work-relatedness and compensability are huge issues in many repetitive stress injuries, and if this claim dispute had ended there, the claim might have stayed within the realm of the state workers comp authority to uphold or deny. But in this case, the insurer's claims handling practice was the smoking gun that gave rise to a charge of bad faith, opening the door to a suit.

" ... the case centered around a Travelers Insurance incentive program that offered bonuses to claims workers who lowered payouts on claims. Called the Claim Professional Incentive Program, it offered workers end-of-year bonuses of as much as 20 percent of their pay if they reduced overall payouts from one year to the next.

Abourezk argued that the program created an improper conflict of interest for claims adjusters, who are supposed to be motivated by fairness to claimants, not cost control for insurance companies."

The judgement will be reviewed by a higher court so the punitive award may or may not stand, but it serves as a cautionary tale to insurers -- who are, after all, essentially finance companies -- that managing a workers compensation claim is not simply the exercise of processing paper in the most cost efficient way possible, but the response to a human event. In our experience, keeping the focus on the person rather than the dollars generally results in the most favorable outcome by whatever measures you use for success.

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January 23, 2004


Workplace violence is the second leading cause of worker deaths - and the top cause among women. Is there "fashionable" and "unfashionable" workplace violence? Jordan Barab makes some strong points on this topic and the idea of profiling as a preventative measure:

"Instead of generating profit-making consultants, unfashionable workplace violence focused on boring issues like staffing levels in institutions, lockdrop safes and windows in retail establishments that left a clear view to the street, and locked doors and security guards for social service agencies. Instead of making money, these preventive measures cost money.

The problem with the fashionable workplace violence, is that it was largely a myth. So-called "worker-on-worker" or "internecine" violence never amounted more than about 7% of all workplace violence, even though it received close to 97% of the press."

...more on workplace violence at Confined Space

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January 20, 2004


When disaster happens, every decision made by management is scrutinized. After a recent oil tanker crash which killed four people on Interstate 895 in Maryland, investigators opened the books on the company's safety record (below average) along with a careful review of the employee's driving and health history (inconclusive). While the primary goal of the investigation is to determine the cause, investigators are always looking for a "smoking gun" -- the crucial information management should have known but did not; the key steps management or the employee should have taken, but did not. It boils down to "what should you know? What did you know? And what did you do about it?" First, investigators try to determine responsibility (the cause of the accident). Then comes the blame. After a disaster like this one, more than a company's reputation is on the line. The company's future is at risk.

In this particular tragedy, we may never know what caused an experienced driver to lose control of his rig, plunge off a ramp and incinerate three other vehicles and their drivers. But the lessons for managers are clear: establish unambiguous standards for your employees. Document your safety and enforcement efforts. And take prompt action when standards are not met.

By the way, it appears that all the victims in this tragic accident were working. Which in turn means that all the fatalities are probably work related. Regardless of what the investigators find, there will be workers compensation benefits paid to the surviving families. In the short run, the individual employers of these victims will see their workers compensation premiums rise as the costs of these claims are factored into the experience rating. If the company owning the tanker is found in any way to be responsible for the accident, there may well be subrogation which shifts the costs away from the workers compensation policies onto the liability coverage of the tanker company. It's a tangled web indeed. Disasters usually play out in just a few horrifying moments, but the consequences are felt for years to come.

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January 18, 2004


The New York Times today features a shocking story on night shift employees who are locked in at Walmart and its affiliated stores. (free registration required) In a work practice that seems like something out of a Dickens novel or a third world sweatshop, exits are locked at night under the guise of protecting workers. The article relates the story of one employee, Michael Rodriguez of Corpus Christi, TX, who waited hours to get help for a crushed ankle because all exits but the fire exit were locked, and there was no manager with a key. He had been led to believe that he and his supervisor would both be fired if he used the fire exit.

"The reason for Mr. Rodriguez's delayed trip to the hospital was a little-known Wal-Mart policy: the lock-in. For more than 15 years, Wal-Mart Stores Inc., the world's largest retailer, has locked in overnight employees at some of its Wal-Mart and Sam's Club stores. It is a policy that many employees say has created disconcerting situations, such as when a worker in Indiana suffered a heart attack, when hurricanes hit in Florida and when workers' wives have gone into labor."

Company spokespeople maintain the practice is to protect workers who work in high crime areas, but employees and other industry insiders say the practice is primarily to curtail "shrinkage" or theft.

It's boggling to know that such draconian work environments still exist in this country. A little over 12 years ago, 25 workers lost their lives while trying to kick down doors in a fiery inferno in a chicken processing plant in North Carolina. Yet the practice still persists, although one might think these would be isolated incidents rather than accepted policy in the world's most prominent retailer.

There is no more fundamental mandate than worker safety. Not only is protecting workers the right thing to do, it's usually the cheapest thing to do in terms of risk management.

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January 18, 2004


We've added a few new corporate weblogs to our resources sidebar:

adjuster.com, featuring claims adjusting news.
The Small Business Blog, a weblog for and about small business.
BusinessPundit, a weblog focusing on corporate strategy, economics, neuroscience, and more
Business 2.0, a weblog maintained by the editors of Business 2.0.

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January 15, 2004


One of workers' compensation's overarching principles was driven home to me today when a colleague asked me a question. He had attended a marketing meeting at a New England insurance carrier's headquarters. During the meeting, a carrier representative passed out a one-page memo addressing the benefits of timely reporting of injuries. The carrier's memo asserted that prompt reporting, on its own, could lower the cost of claims by as much as 47%.

My colleague asked the carrier representatives where this assertion came from. Strangely, they had no idea. It seemed to be like a tribal myth, just passed around from person to person with no attribution. So, he asked me.

I really have no idea where this particular carrier got its data, but I do know that in the summer of 2000, Glen-Roberts Pitruzzello, ACAS, an actuary and pricing analyst with The Hartford Financial Services Group, wrote the definitive study on prompt reporting for the National Council on Compensation Insurance's (NCCI) Summer Issues Report. As accessing the link will show, the study is still available online from NCCI.

His findings, which involved analyses of 53,000 claims, are more than compelling. Here are some of them:

1. Injuries reported within 2 weeks are 18% more expensive than those reported within 1 week. And it gets progressively worse as time goes by. For example, injuries reported between the 4th and 5th week following an injury are 45% more expensive.

2. The biggest finding involves back injuries, which, as a group, are 35% more expensive if not reported within the first week.

3. Soft tissue strains and sprains are 13% more expensive if not reported within one week; carpal tunnel injuries, in which onset is admittedly difficult to pinpoint, are 11% more expensive with late reporting.

4. Litigation is another area impacted by late reporting. Twenty-two percent of injuries reported within 10 days are litigated; 47%, when the reports arrive more than 31 days following the injury.

Although prompt reporting is only one of a number of management best practices to lowering workers' compensation costs, it's an important one. It's one of those overarching principles. Moreover, we've found that well-managed companies are more likely to report injuries promptly than less well-managed organizations.

Nonetheless, one has to ask, "If prompt reporting saves so much money, why don't more employers do it?" Well, 20 years experience with more than 4,000 companies suggests the following answer to me: They don't know any better. They've never been taught. That's shameful.

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January 13, 2004


One of the best things about weblogs is the news filtering function they fill - they find good things for you. Here are a few items we might have missed but for our fellow bloggers.

40 government sites you can't live without via The Small Business Blog
"Whether it's a loan, a contract or regulatory information you seek, these sites are just what you need to get acquainted with what the government can do to help you start or grow your business."

Why can't we get anything done? via Circadian Shift
"Stanford B-school professor Jeffrey Pfeffer has a question: If we're so smart, why can't we get anything done? Here are 16 rules to help you make things happen in your organization."

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January 13, 2004


Workplace safety isn't an academic exercise as Jordan Barab at Confined Space reminds us with his grim tally of last week's workplace deaths. It's a terrible list, yet an important reminder in light of yesterday's post touting a decline in frequency. If you are an employer, ask yourself this - are you doing everything within your power to ensure that none of your employees will make this list?

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January 12, 2004


Last week, NCCI reported on a recent study on workers' compensation claim frequency and, as they reported last year, frequency continues to decline. They cite several potential reasons for this - employer safety initiatives, increased use of robotics and power assisted processes, and ergonomics, to name a few. Here is a breakdown by size of claim - note that the highest decreases are in the smaller claims, and the decreases in high-dollar claims are significantly less pronounced:

  • For claims less than $2,000, a decline of approximately 35%
  • For claims between $2,000 and $10,000, a decline of 18%
  • For claims between $10,000 and $50,000, a decline of 8%
  • For claims more than $50,000, a decline of 8%

The severity decrease is the good news. The flip side of the coin is that medical and indemnity costs are galloping full steam ahead in the wrong direction. Not so good at all.

In the early and mid-'90s following reforms, indemnity was relatively stable. But according to NCCI actuary Tony DiDinato, "The last seven years have seen the trend turn upward once again, with workers compensation indemnity claims increasing an average of 7.4% annually since 1996. In 2001 and 2002, respectively, claim costs rose 7.3% and 6.0%."

DiDinato goes on to characterize medical claim cost trends are alarming, "with double-digit increases the last two years." He attributes this to increased utilization and prescription drug costs. (Prescription drugs were recently discussed here and here).

Cleary, employers are making progress in workplace safety (although we would advocate that any injuries are too many injuries) but it would appear that they must do a much better job of managing injuries from the point they occur right on to an employee's successful return to work. Perhaps the "buyer's market" of the late 1990s lulled some employers into forgetting how vital this is?

It brings to mind an old Bob Dylan lyric: "And here I sit so patiently, waiting to find out what price you have to pay to get out of going through all these things twice."

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January 8, 2004


The workers' compensation goings on in California are proving that Gov. Arnold Schwarzenegger can flex his muscles in the legislature just as well as on the big screen.

He wants "real reform" on his desk by March 1 --- or else.

"Modest reform is not enough," the Republican governor said during his State of the State Address earlier this week. "If all I get is modest reform, I am prepared to take my workers' comp solution to the people. It will be on the November ballot."

California, the state which, if it were a country, would have the fifth leading gross national product in the world, also has workers' comp costs that, at $29 billion, are more than twice as high as anywhere else in the country. The Governor has proposed a plan that, he says, will reduce costs by $11 billion. Understandably, the plan is as full of controversy as the Governor, himself.

Now, with his "I will take it to the people" stance, he has upped the ante considerably.

While Gov. Schwarzenegger's plan seems, from our vantage point, to have a number of elements employers will find reasonable, it fails to address one of the major problems in the current system. That is, as Stanley Zax, president of Zenith National Insurance Co. in Woodland Hills said, the plan fails to address a provision in the state's Labor Code that requires disputes to be "liberally construed" in favor of the worker.

We've seen a lot of states go through workers' compensation crises over the last 20 years. They've all attacked the problem in one way or another, but in every case, the ones who've emerged with significantly better systems have done so by building coalitions among the vested interests who have been persuaded to compromise for the good of all.

What seems to be going on here is this: After a steady, inexorable slide into a kind of workers' compensation black hole, California now has a kind of Governor who thinks he can yank the system back to where it belongs by the sheer force of his personality.

Maybe he can. Maybe he's just bigger than life enough to do it, but we wouldn't bet on it.

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January 6, 2004


As I've said previously, a company that wants to have low workers' compensation costs has to have effective ways to measure the performance of its safety and injury management efforts. In December, I wrote about the Cost of Losses per Full Time Equivalent Employees (FTE). Today, it's time to talk about the Severity Rate.

In nearly all cases, time away from work drives the cost of losses more than any other determinant. This is why modified duty plays such a vital role in controlling costs. Therefore, the severity rate, which measures lost time, becomes the single best non-economic indicator of the overall effectiveness of a company's workers' compensation program. So, what is it, and how do we calculate it?

The severity rate is the number of days away from work due to workplace injury or illness per 100 full time employees (FTEs) per year. It sounds daunting, but the Department of Labor has made it easy to get and use this data.

For more than thirty years the Occupational Safety and Health Administration (OSHA) has required most companies to maintain what is called the "OSHA Log." On this report, every workplace injury and illness is recorded along with the resulting time away from full duty, as well as time spent on restricted duty.

Every year, each company required to keep the OSHA Log sends a copy of it to the DOL, which includes it within a national database maintained by its Bureau of Labor Statistics. The BLS collates data from each Standard Industrial Classification (SIC Code) and publishes an annual national average rate of time away from work, or "severity rate," for each SIC Code.

To calculate your severity rate, divide the total number of days lost due to occupational injury or illness by the total number of hours worked by all employees. Following this, compare your severity rate with the average for your SIC, published annually by the BLS. Remember, the average for your SIC is nothing more than the middle of the bell curve; it is neither good nor bad. You should set for your company a goal of maintaining a severity rate that is 50% less than your industry's average.

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January 6, 2004


The story continues to unfold as the FDA says "nix" to states and cities seeking to import prescription drugs from Canada to get relief from onerous pricing here in the U.S. No states are actually importing drugs yet, but many say they will fight the FDA ruling. The cities of Springfield, MA and Montgomery, AL are both currently running programs to purchase drugs, and saving quite a bit of money by doing so.

The ruling was a response to Illinois Gov. Rod Blagojevich's request for a waiver to allow the state to purchase drugs from Canada for state workers and retirees. He estimates that the state could realize a savings on the order of $91 million a year.

The FDA frames this as a consumer safety issue saying that "imported drugs could be tainted, old or fake," but to many these protestations seem disingenuous. The pharmaceutical industry no doubt fears that this could open the door to drug pricing controls here in the U.S., and it would seem likely that the administration is going to want to keep the deep pockets in this industry happy pre-election.

See our prior discussion of this issue and a study pointing to the alarmingly high prescription drug costs in workers' comp.

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January 6, 2004


...and those spankings from co-workers left you feeling a little bruised? Well you'll get no relief from the tort system, at least not in Minnesota where the Appeals Court invoked exclusive remedy as the only potential avenue of relief. It will be interesting to see if this passes the compensability test. Usually horseplay isn't compensable, but it can often hinge on whether the employer has a policy discouraging any horseplay, or whether they actually condone or even participate in any tomfoolery. If the company president was among the paddlers, it may prove to be an expensive birthday party indeed.

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January 4, 2004


PA Judge Robert Vonada of PAWC points to an article in the New York Times about two different treatment options for back pain and the methods hardware manufacturers use to market their products to doctors and hospitals. Would you be surprised to learn that the more expensive treatment is prevalent, despite lack of evidence that it is more effective? We weren't.

Confined Space has a scathing indictment of OSHA for its abandonment of a workplace TB standard and the public health ramifications that this might have in the era of SARS which requires similar precautions.

The Employers' Lawyer informs us that the 2000 Census Data has recently been released, and also reports on an a court judgement involving a police officer who was discharged for no longer being able to fulfill his job requirements and the disability/ADA implications.

The HIPPA Blog has some advice for physicians on strategies for ensuring that medical privacy programs are in good working order.

Small Business Trends has an interesting roundup of the top small business software in 2003.

A story posted on the Harvard Law School blog leads to an article on the University's experience with building a community of 350+ webloggers among students and faculty.

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