Case Studies

Trucking and Excavating Company

UNICO Group helps excavating company dig up answers to reasons for high open reserves.

Insured

The insured is a large trucking and excavating company located in Nebraska, with a fleet of 50 trucks, 90 employees, and $10 million in annual revenue.

Situation

The company had large open claims that negatively impacted its experience mod. The current agent was not vigilant in identifying or monitoring the claims.

Assessment

In reviewing the data, Certified WorkComp Advisors (CWCA) from UNICO quickly realized that the high experience mod was due to an open reserve claim of $304,138 by a prior carrier. The current agent had no communication with the adjuster on this claim and nothing was being done to monitor it.

Solution

Using the skills learned at the IWCP workshops, UNICO’s Claims Advocate determined that the treating doctor had concluded that an expensive, recommended two level fusion surgical procedure was not suitable for the injured worker. Since this information was not communicated accurately to the carrier, the claim remained open and active. UNICO contacted the adjuster and it was agreed to lower the reserves to $121,070. The Claims Advocate then continued to work on the claim and assisted in a lump sum settlement that was pending at the Nebraska Workers’ Compensation Court.

The settlement was approved and the total payout was $89,520.

Result

UNICO saved its client $183,068 on the open reserve. The lowering of the reserve lowered both the company’s workers’ compensation cost and experience modification which saved this company thousands of dollars.

HVAC Business

Classification Review

We recently met with a plumbing and HVAC business and reviewed their workers’ compensation class codes. In doing so, we found they had an incorrect code on their policy. We were able to help that business recover more than $15,000.00 from their insurance company for the two years that the incorrect code was used. That company is now a client of ours and we are helping them with OSHA training and assisting them with improving their safety program.

Wholesaler Gets Down To Nuts and Bolts With A Return-To-Work Program

Insured

The business is a wholesaler specializing in the shipping of nuts, bolts, and other parts to the automotive industry. The company employs 50 workers.

Situation

Traditionally, the company had a low experience mod, but was now looking at a potential leap from .92 to 1.15. The company did not understand the reasons for the significant jump.

Assessment

Certified WorkComp Advisors (CWCA) determined that the projected increase was the result of a handful of injury claims in which workers were taking several weeks to return to work. One claim, in particular, was driving the increased cost. An employee, who suffered a hand injury, was undergoing surgery. The doctor, unaware of any type of return-to-work policy, prescribed four weeks out of work. The insurance company added the estimated cost to the claim reserve.

Since reserves are treated in the same way as costs incurred, this was the wake-up call to the employer, who had previously felt he was “saving money” by having workers’ compensation pay his employee. He was unaware of the financial implications for his company due to the indemnity payments for the time away from work.

Solution

A Certified WorkComp Advisor (CWCA) worked closely with the company to give them a better understanding of the impact of the lack of a light duty return-to-work policy and helped them establish a return-to-work program. This turned the previous discretional medical disability into no disability allowing the injured worker to return to light duty within days of her surgery.

Result

As a result of the CWCA’s actions, the company avoided having a $5,000 premium increase and stopped a potential 10% increase on its experience mod.

Workers’ Comp Education Puts Trucking Company On The Road To A Lower Mod And Lower Premiums

Insured

The insured is a large transportation and trucking company, with a fleet of 250 trucks, 1,100 employees and more than $100 million in revenues.

Situation

The company’s workers’ comp related costs were growing steadily at a rate of 30% per year over a three-year period.

Assessment

In reviewing the data, Certified WorkComp Advisors (CWCA) quickly realized that exceptionally high employee turnover was driving much of the rise in costs. Because of the turnover, safety meetings were infrequent, training ineffective and job-related injuries were on the rise. The indirect costs of high turnover puts more pressure on other employees who take on additional responsibilities, resulting in low morale and lost productivity. Moreover, managers’ time was diverted from risk management as they focused on recruiting and hiring new employees. There was also no effective return-to-work plan in place. CWCAs showed the employer both the direct and indirect costs of the poor hiring practices, excessive injuries, and limited injury management efforts.

Solution

CWCAs used ModMaster to help the client better understand how workers’ compensation works, and the importance of monitoring loss run reports. They also worked with the company to improve hiring practices, decrease employee turnover, make safety messages more effective, revise the safety manual, establish a return-to-work program, and work with the HR department on a program promoting a safe and healthy lifestyle for drivers.

Result

Over three years, the program implemented by the CWCAs successfully lowered the company’s experience mod from 1.3 to .63 and lowered premiums from $1 million to $463,000.

School System Learns A Lesson In How To Reduce Its Mod

Insured

A public school system with 150 employees.

Situation

The school system’s experience modification factor escalated over the past five years, from as low as .97 to a high of 1.34, though it had experienced no significant workplace injuries during that time.

Assessment

Certified WorkComp Advisors (CWCA) investigated the situation and discovered that the previous agent had not visited the client’s office in nearly four years. They conducted an experience modification analysis and reviewed loss run reports, finding five open claims that had never been taken off the books by the previous agent. The open claims had high reserves and were costing the client approximately $17,000 per year in added premiums.

Solution

Calls were made to both the underwriter and the HR department of the school system, resulting in the rapid closing of the open claims. The CWCA also initiated a return-to-work program and a five-step procedure to ensure that all workplace injuries are properly reported to the appropriate departments within 24-hours of their occurrence. The five-step program included on-site safety and compliance training to promote a culture of safety within each school, creation of a safety policy manual that included reporting procedures within various school systems, implementation of post-accident drug testing, and establishment of a primary care/occupational physician relationship for injured employees. Since initiating the plan 12 months ago, there have been zero claims.

Result

As a result of these actions, the school system saw its experience modification factor quickly drop from 1.34 down to .87, creating an annual savings of $15,000 in premiums.

Returned Premium And Lower Mod For Social Service Agency

Insured

The insured is a regional social services agency providing day habilitation, vocational, residential, and evaluation services to approximately 400 disadvantaged adults. With a payroll of $8,975,000 for 315 employees, they operate eight day-habilitation facilities and 16 residential programs in which consumers live independently, with employees visiting their residences daily to provide needed services. The organization also operates a thrift store, cookie bakery, and a distribution enterprise. In 2004, the insured reported total revenues of $13,405,468.

Situation

Services consisted of a policy provided by an assigned risk carrier and an annual visit by the insurance company’s auditor and loss control representative. Their 2004 experience mod jumped to 1.85 from 1.55 and 1.58 the previous two years. When they received a renewal bill from their carrier and a renewal policy from their agent, they had no idea why their premium was so high. Management thought the system was out of control and there was no way to control the increasing costs.

Assessment

A Certified WorkComp Advisor (CWCA) collected loss data from carriers for three previous policy years. The advisor compared the data to that found on the experience mod worksheet and found errors in all three of them. In the first year, seven errors were found, each consisting of closed claims with incorrect loss amounts listed. In the second year, 27 errors were discovered; most of these were closed claims with loss amounts listed as twice their actual values. In the third year, the policy included one aggravated inequity claim as being open for $15,877, when in fact it had closed a few days after the valuation date for $944. Errors were not the only problem; the insured also had no process in place to perform pre-employment physicals and had no means to manage employee workloads to accommodate physical limitations.

Solution

In addition to addressing the 35 individual errors from the three previous years with each of the appropriate carriers, the CWCA discussed with the insured the claims, their causes and what may have been done to prevent them and to better manage them. He impressed upon them the need for conditional offers of employment and pre-employment medical exams, so if an issue arose with an employee they could accommodate his or her workload. At first, they were unsure of the applicability, but accepted the plan after the CWCA discussed the direct and indirect costs to the organization, the personal cost to the employee and pointed to specific instances where a pre-employment exam could have made a difference.

Result

The CWCA pursued corrections with the previous carriers. Corrections for the 2000 policy year reduced the mod to 1.8. Corrections for the 2001 policy year and the correction of the aggravated inequity in 2003 reached the bureau nearly simultaneously and a 1.69 mod was issued. In total, the client received a returned premium of more than $24,000.

Plastics Manufacturer Avoids Potential Increases

Insured

A plastics manufacturer with 200 employees and revenue of $30 million.

Situation

The company was sitting on an insurance time bomb with two large open claims that threatened to cause its annual premiums and experience modification factor to increase dramatically and they weren’t sure what to do about it.

Assessment

Certified WorkComp Advisors (CWCA) began an extensive analysis of all open claims by running loss-run reports. They discovered that Claim 1 was open with a medical reserve of $17,000, and Claim 2 was open with a medical reserve of $10,000 and indemnity reserve of $10,000. Further investigation showed that Claim 1 was inactive, but remained open. In the case of Claim 2, the claimant had returned to work and the indemnity reserve was no longer necessary.

Solution

As a result of the findings by the CWCA, the file on Claim 1 was closed and the reserve was eliminated. Claim 2 was also closed with the indemnity reserve removed and the medical reserve reduced to $7,000.

Result

With a reduction in reserves of $30,000, the client avoided a 15% increase in their experience mod that would have cost them close to $10,000 annually for the following three years.

Metal Fabricator Saves $40,000

Insured

A metal fabricator with annual revenues of $2,800,000 and 26 employees. The company manufactures metal sign-holders for various retailers.

Situation

With no history of carpel tunnel issues, the insured experienced a rash of carpel tunnel injuries unexpectedly, with two in excess of $80,000. This drove the company’s experience mod up to 1.72 and resulted in the policy being cancelled by their workers’ comp carrier.

Assessment

The first claim was a legitimate case and the employee required medical attention and physical rehabilitation. The following claims occurred so rapidly that they were deemed questionable. There was also no clear language in place in the employee manual to address the situation.

Solution

After a detailed analysis, the Certified WorkComp Advisors (CWCA) designed and implemented a detailed and specific plan of action. The insured’s return-to-work program was replaced with a proper recovery-at-work plan and the outdated manual was rewritten. Injured workers were assigned appropriate light duty. The CWCAs conducted educational courses for medical providers, who previously had minimum knowledge of workplace injuries. Finally, the insured was placed with a carrier who better understood workers’ compensation procedures.

Result

The first injury, a 57-year old woman who had to have both wrists medically treated, returned to work through the recovery-at-work program, and the claim remained a medical only claim. This saved the company more than $40,000, and an estimated .40 points on its experience mod. Further declines in the mod are expected as a result of the improved injury management practices.

Hospice Provider Heals Its Ailing Mod

Insured

A hospice caregiver with 340 employees.

Situation

This non-profit company had its experience mod, which typically hovered around the 1.08 mark, suddenly rise to more than 1.12.

Assessment

Certified WorkComp Advisors (CWCA) discovered that the 08-09 policy term was with a “non-subscribing” work comp claims fund. Therefore, since this fund was not a “subscriber” to NCCI, the loss information for that one policy term was not being used in the calculation of the mod. Since this was a particularly favorable year, its exclusion was adversely affecting the mod. Inclusion of the policy year would lower the mod 6 or 7 points.

In addition, CWCAs discovered a substantial subrogation settlement on one claim that could be used to lower the amount reported to NCCI.

Solution

The CWCAs sent the data via an ERM 6 form to NCCI. The corrections were made and the lower mod was calculated. This action also enabled the company to receive a “refund” for the overpayment of work comp premium for the two following years, which also impacted the third year after the 08-09 policy term.

Moreover, a substantial subrogation settlement on one claim of approximately 70% was recovered from the at-fault auto insurer. This allowed the claim to be reported to NCCI at a much lower dollar amount.

Result

Within two years of this action, the company saw its experience mod drop from 1.12 to a low of 0.96, with a total savings in work comp premiums of $17,974.

Nursing Home Conglomerate Saves $350,000

Insured

A conglomerate of associated companies including nursing homes, hospice service providers, and professional service providers.

Situation

Over the course of five years, the company purchased several nursing homes and developed new business ventures including hospice services, home care services, and a consulting company. Numerous errors were made when combining the facilities’ loss experience. Some were never combined with the parent and were issued their own rating, while others had multiple payroll and claims history reporting errors. This resulted in multiple experience modification errors, totaling $329,000. It was determined that the insurance broker was in over his head and it was necessary to hire an outside consultant to untangle the mess.

The decentralization of management and operational practices triggered procedural disconnects; specifically, in regards to hiring practices and workers’ compensation management. The absence of a centralized workers’ compensation management program led to a lack of accountability. This caused rampant claims problems, leading to a combined loss ratio of 86%.

Assessment

Certified WorkComp Advisers (CWCA) met with the management team. There were several major issues. The company had no formal injury management program; fraudulent and excessive claims were rampant throughout the organization; employees were hired without pre-screening measures, often hired with pre-existing physical conditions that led to expensive workers’ compensation claims; there was no formal relationship with medical facilities for treatment of injuries or assistance in the hiring process; employees were kept out of work until they could perform their job at full duty; supervisory staff had no injury and claims management training or procedures; and there was no one person in the company responsible for hiring or injury management.

Solution

Through the CWCA’s assessment process, the company determined it did not need the services of the external firm. The CWCAs completed the process of overcharge recovery. The chart below details the experience mod reductions the CWCAs were able to generate for the company just from experience modification corrections.

The CWCAs immediately implemented an injury management program, and worked to close outstanding claims and mitigate any damages. They established a sound pre-employment screening process, including conditional offers of employment, physicals and drug screenings. They also worked with the company to develop relationships with local occupational health facilities to manage all pre-employment screenings and workers’ compensation injuries. Transitional job descriptions and a back-on-the-job program were established to reduce indemnity claims and return injured employees to full duty as soon as possible. An in-house injury management team was created to supervise program implementation. The CWCAs provided extensive training to all levels of management at each facility and worked with the senior management team to develop and institute new policies and procedures.

Result

There has been a dramatic decrease in the frequency and severity of claims. The company’s combined loss ratio dropped from 86% to 12%. Four out of five longstanding claims have been closed. The injury management program has significantly decreased the number of indemnity claims by returning workers to transitional duty. With the inception of the injury management team, the company is better able to manage injuries. Through pre-hire screenings, the company has eliminated a handful of prospective employees who could not meet the physical requirements of the position and has reduced the hiring of potential workers’ compensation claims. The projected 2009 mod and ARAP will produce a 49% decrease in insurance premium, resulting in a savings of $350,000.

General Contractor’s Workers’ Comp Drops $101,207 In Just Two Years

Insured

A commercial general contractor with 110 employees and revenue of $52 million in 2006.

Situation

A 62% workers’ comp surcharge drove up the company’s experience modification factor which jumped to 1.12, costing them an additional premium of $185,000 per year. It also restricted them from bidding work for large corporations that required a 1.00 or lower experience mod.

Assessment

A review of the 2004-2005 experience mod worksheet, the loss data from the previous four years, and OHSA logs revealed that the number and severity of claims was higher than expected.

Solution

A Certified WorkComp Advisor (CWCA), showed the general contractor how they were paying the insurance company $3 for every $1 paid in claims. He designed an aggressive rehab plan of action: installing a safety committee, including training and recordkeeping, providing administrative support for the company by running the WorkComp process, and training the safety coordinator. In addition, he worked with the client in establishing a relationship with Occupational Medical Center, initiating a claim reporting system and a return-to-work process. He also assisted them in completing necessary job descriptions.

Result

Experience mod went down from 1.12 to 1.03, with a projected 2007-2008 mod of .95. Because of a radical reduction in the number and size of workers’ comp claims, additional discounts were negotiated, lowering the premium cost from $430,302 in 2004 to $394,000 in 2005 and $365,318 in 2006.

Electronics Manufacturer Saves $85,500 In 3 Years

Insured

The business is an electronics manufacturer. The company employs 110 workers and has gross revenues of $30 million.

Situation

After splitting from a large national manufacturer, the company saw its mod jump to 1.45, causing uncompetitive labor costs and a loss of profitability.

Assessment

It was determined that the increase in the mod was a result of an increase in the severity of repetitious injuries to hands and wrists, due to the type of light assembly work involved. The mod was also being driven up by a number of malingering claims and too much reliance by the manufacturer on their insurance company to manage the claims after they happened, resulting in higher premium costs. The manufacturer had neither established return-to-work procedures nor 24-hour claim reporting requirements.

Solution

The focus was on lowering the severity of the hand and wrist injuries and improving the outcome of the malingering claims. A Certified WorkComp Advisor (CWCA) set up an occupational clinic relationship with pre-employment testing, including grip testing to eliminate potential future claims. A clinical relationship was also put in place for existing claims, the CWCA set up a return-to-work process and made the clinic aware that light duty was available as a return-to-work option. This assured early intervention, proper medical treatment, and a speedier return to work. He also trained supervisors on 24-hour reporting requirements and the impact that workers’ compensation has on the employer’s costs, and started regular safety trainings. Furthermore, he worked with management to demonstrate the value of this process by showing them how much money they would save.

Result

Malingering has been eliminated and the outcome from severe claims has been reduced from $35,000 to $6,500, resulting in savings of $85,500 for three years.

Glass Manufacturer Avoids Loss Through Return-To-Work Program

Insured

The business is a commercial glass manufacturer that employs 40-50 workers.

Situation

An employee suffered a shoulder injury while moving large plates of glass. The immediate medical diagnosis by the treating physician was for two weeks off duty. As a result, the employer was faced with a substantial indemnity claim and potential increase in both experience mod and annual premiums over the next three years.

Assessment

It was determined that the injured employee had made no effort to communicate to the doctor that the company had a return-to-work program, instituted by the Certified WorkComp Advisors (CWCA). In addition, the doctor had not taken the initiative to learn about the program and available transitional opportunities before submitting his medical evaluation.

Solution

The CWCAs contacted the doctor’s office on several occasions, explaining the company’s return-to-work program, and how it would be beneficial to the employer, employee, and the doctor’s office. The doctor agreed and re-wrote the evaluation, prescribing an immediate return to work on restricted duty for two weeks. At the end of the 14 days, the employee returned to full-duty status.

Result

As a result of actions taken by the CWCAs, potential malingering and lost time were avoided and the claim was kept out of the indemnity category. This enabled the company to bypass a potential claim of $12,000 and a resulting increase in its mod and premiums.