Debate raged in 2015 about whether the workers’ compensation system is nimble enough to adapt to the “on demand” or “sharing” economy, if medical and wage benefits are fair, how much the exclusive remedy defense is eroding, if employers should be allowed to opt out of the system and set up their own, and whether the interests of employers and employees are in balance, which is the trademark of the “grand bargain” in which employers agree to provide a safe workplace and cover workplace injuries costs in exchange for employees giving up their constitutional right to sue their employers. Little was resolved and the debate whether workers’ compensation is a good deal for employers and employees is likely to continue in 2016 and beyond.
While some employers may dismiss the “loftiness” of such discussions, the underlying issues are relevant to their day-to-day operations. For example, generally, it has been difficult for lawyers to get around the exclusive remedy defense; however, OSHA’s proposal for an online database to give the general public access to employers’ injury histories and its ability to assess violations across an entire enterprise make it easier to prove “an intentional act.” An alarming trend of whistleblower lawsuits and public shaming of employers by OSHA has, in some cases, unjustly harmed the reputation of employers.
Although the insurance industry has been a slow adapter, big data, predictive modeling, pricing to target, or other technological tools now are added to aid in pricing of policies. The long-term effects of prescription opioid abuse as well as medical advances and new technologies are extending the claim tail. Medical diagnoses for pain management and psychological claims are gaining traction and lines are blurred defining work-related injuries. Medical marijuana is legal in many states. More workers have health insurance, but what this means for workers’ comp is unclear. And the workforce is changing, as it never has before, with more mobile, older, temporary, and part-time workers.
All this means employers need to be agile and strategic in how they handle the growing complexities. Here are some do’s and don’t for 2016:
- Do understand how the insurance company perceives your risk. While insurance companies have new technological tools in their arsenal to boost underwriting results and identify profitable accounts, the fact remains premiums are based on how the insurance company perceives your risk and how much you have improved your risks and reduced claims over the past years.
- Do know your lowest possible Experience Modification Factor (Mod). The Mod probably is the best single source to understand your workers’ comp program. By analyzing and gathering data, you can identify the risks that are adversely affecting your Mod and then focus on the programs and processes needed to reduce this risk. It’s important to remember this is an ongoing process. Not only does it enable you to determine if your programs are working and identify new risks, it helps shape the insurance company’s perception of your risk.
- Do review and strengthen your relationships with doctors. Smart employers have developed outcome-based networks that foster an understanding of occupational injuries, return-to-work options, and the overall wellness of the workforce. Even if there is a strong, mutually supportive relationship, there needs to be a dialog about emerging issues such as addictive opioids and alternative pain management programs, compounded drugs, comorbid health conditions, psychological issues, physician dispensing, telemedicine, and changing workforce demographics. Medical services now contribute to more than 60% of workers’ comp claims – constant monitoring is key.
- Do recognize that the way you interact with an injured employee is often the most important factor in the outcome of the claim. Studies show that a worker’s fear of being fired after an injury has a large and pervasive effect on costs and outcomes, and injured workers will seek attorneys when they have such fears, do not hear from their employer, or encounter difficulties receiving their medical or indemnity benefits. The roots of distrust are often present long before the injury when employees perceive production and delivery deadlines as more important than safety. Only an unwavering focus on maintaining a safe workplace builds trust, motivation and commitment.
- Do know how your workforce is evolving. More temporary or part-time workers mean different training challenges, adjustments may be needed to help aging workers avoid injuries, and mobile workers need to be cognizant of their responsibilities for working safely. Independent contractor designation remains under close scrutiny. Automating processes that once relied on workers requires a vastly different set of safety protocols.
- Do stay abreast of changing federal and state laws. If you operate sister facilities, enhance safety communications. Be sure each facility is aware of OSHA activity and similar issues are corrected. Pay attention to medical marijuana cases and be sure the employee handbook is clear and up to date. While most legal decisions have centered on the fact that marijuana is illegal under federal law and favored employers, the situation is fluid and zero tolerance policies are being challenged.
- Do include safety and health in the due diligence, if your company acquires another company or company’s facility. Carefully examine their OSHA and workers’ comp data.
- Do strengthen your communication skills. Communication failures are at the heart of many out of control claims, and to some extent, it’s understandable (but unacceptable), given the many stakeholders involved: employer, injured employee, co-workers, supervisor, physician, nurse case manager, insurance company, agent, claims adjuster, and government. Yet, an effective plan to resolve the claim can only succeed if there is strong communication between all parties.
- Don’t operate in silos. The relationship between health care and workers’ comp is changing and more employers are realizing the importance of integrating all disability and health benefits. Some argue that the Affordable Care Act (ACA) will lead to a healthier work force and lower comp costs, while others argue the ACA has forced changes in how group health medical services are paid creating a financial incentive to shift costs to workers’ comp, particularly in areas such as musculoskeletal conditions where causation is up to the opinion of the physician. In addition, higher out of pocket costs for employees in health care can impel workers to file more comp claims. These factors demand more vigilance, which can only come with integration. Such integration also eases the development and implementation of strong compliant policies with the Americans With Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA).
- Don’t be placed in OSHA’s Severe Violator Enforcement Program (SVEP). While many employers are under the erroneous impression that the SVEP is only for employers that commit the most egregious offenses, it simply is not true. There is an average of 12.4 new SVEP employers per month; 50% are small employers (fewer than 25 employees); only one in four qualifying cases involve willful violations, most arise out of repeat violations; and no employer has been removed from SVEP based on exit criteria. Employers are entered in the SVEP at the time the citation is issued before the employer can defend itself and are subject to public shaming that harms the company’s reputation. They also face multiple follow up inspections, inspections at related facilities, and possible higher insurance rates or loss of coverage.
- Don’t treat OSHA violations lightly. If you’ve had an OSHA inspection, it’s important to consider how to handle a citation at the time it is issued, as it has important implications for the future. Even though it may be a minor violation and the inclination is to accept it, the penalty may not be the most important consideration. Does the abatement put you at a competitive disadvantage? Does it expose you to future repeat violations, with much higher fines and possible Severe Violator designation? How does it impact sister facilities?
- Don’t rely on the claims adjustor to manage your claims. Be proactive by reviewing claims at least quarterly and keep your agent and adjuster apprised of changes. Importantly, this ensures you will review loss runs and assess all open claims three months into your policy year, giving you three months to reduce or close claims before the Mod is calculated, which is six months after the policy anniversary date. Closing the claim before the data is sent to the rating bureau can mean significant savings on your premium.
- Don’t underestimate your employees’ concern about workplace violence. Do have a workplace violence prevention policy. It’s become a hot topic as well as a hot button enforcement issue for OSHA, citing employers under the catch-all General Duty Clause who do not do enough to protect their employees from violent acts. It impacts other employment laws as well.
- Don’t violate employee privacy when conducting surveillance. According to a 2015 study, nearly one-fourth of small business owners have installed surveillance cameras to monitor employees on-the-job and prevent workers’ comp fraud and there has been talk of employers using drones to monitor worksites. While employers and their insurers generally have the right to conduct surveillance of workers, there should be legitimate reasons to do so, and such efforts should not run afoul of privacy and anti-stalking laws.
- Don’t cut corners on recruiting and hiring practices. It will come back to haunt you in many ways.
- Don’t adopt new technologies simply because they are the latest and greatest. In an analog world, safety was compartmentalized. The emergence of connected technologies makes it even more critical for “front line” employees to be part of the decision-making, and eliminate any disconnects between reality and upper management’s perception of reality.
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