Long-Term Cost Cutting Strategies

Take Action

To further lower your workers’ comp costs, Vistage members Bill Litjen and Gary Uhlemeyer , along with former members Marilyn Murata and Marcia DeWitt, recommend the following steps:

• Conduct regular claims reviews. Once a quarter (or every six months to a year, depending on the number of cases), bring together your workers’ comp physician, insurance broker and claims adjuster to:
• Review the status of open cases and the reserves.
• Keep the lines of communication open.

• Establish a resolution plan to keep open cases moving forward.

  Between formal reviews, obtain injury updates every three months. Litjen also recommends conducting a special review meeting one month prior to the unit statistical filing for your experience rating (the report of claim reserves and payroll information that ultimately formulates your experience modification).

  Murata prefers to review claims three months prior to the unit statistical filing because it allows the claims examiners to close files and follow up with any outstanding issues raised at the claims review meeting. The experience modification plays a major role in determining your premium cost,” she argues, “and time is of the essence.”

• Fight all fraudulent claims. Don’t roll over and pay a suspect claim just because it doesn’t seem worth the fight, and don’t allow your insurance broker or claims handler to do the same. “Fraud can turn into a disease that spreads through an entire organization,” cautions Uhlemeyer. “To protect yourself and your honest workers, fight all questionable claims.”
• Hire a risk manager. Most HR people don’t have the time or expertise to properly monitor the workers’ comp arena. Consequently, Murata advises hiring a risk manager to keep tabs on your workers’ comp program. Whether the position is full- or part-time, internal or outsourced, get someone who knows how to read a “loss-run” report, analyze the losses — including the reserves/total cost incurred — and make recommendations to achieve overall cost savings.
• Practice attorney avoidance. According to our experts, attorneys love to get hold of injured workers early in the process and plant fear, doubt and mistrust in their minds. To avoid this scenario and minimize the chances of litigation:
• Don’t send injured workers to emergency rooms or general care facilities without visiting the facility and establishing a relationship with the medical provider.
• Establish and implement a return to work program. Get injured workers back on the job.

• Remove the fear factor by educating employees about the benefits of worker’s comp, maintaining open lines of communication and reassuring them that your primary goal is to get them back on the job.

  “More often than not, fear drives injured employees to seek out lawyers,” explains DeWitt. “Why? Because they don’t think their employer is protecting or taking care of them. When you educate employees about their rights under workers’ comp law and demonstrate your commitment to treating them fairly, they are far less inclined to listen when an attorney comes calling”

• Adopt a “we care” attitude. Too often, employers simply forget about injured employees until they return to work. Treating people with dignity, care and respect, suggests Uhlemeyer, leads to a much more positive outcome.

  “Forgetting about the employee not only sends the wrong message, it fosters fear and mistrust in their mind,” he states. “Instead, show that you care. Send cards and flowers. Encourage employees to visit the injured worker at home or in the hospital. Reassure people that you value their contributions to the company and want them to return to work. In short, treat people the way you would want to be treated.”

Close Lingering Claims

Workers’ comp claims can linger on for a variety of reasons. And until they get officially closed, the money keeps flowing out of your pocket. To avoid lingering claims, Litjen recommends the following approaches:

• Medical treatment lingers/won’t stop. Contact the treating physician for an explanation and/or seek a second opinion. If the claim gets litigated, encourage your adjuster to object to the medical care and set up a defense exam.
• Uncooperative treating physician. If the injured worker has not hired legal counsel, discuss your concerns and difficulties with the doctor. Offer the employee an evaluation with a specialist in workers’ comp. If the injured worker has initiated litigation, object to the treatment and prepare a defense exam.
• Litigation. A claim that ends up in court typically requires more diligence to achieve resolution. It may require:
• Depositions to obtain information on medical history and previous injuries
• Subpoenas for medical history
• A medical exam with an agreed-upon specialist to resolve outstanding issues

• Denied case. If the injury has been denied but the employee continues to self-procure treatment, determine the appropriate action and declare your readiness to proceed at a hearing/trial.

  What happens when your third party administrator (TPA) drags their feet or refuses to take action on a claim?

  “Consult with your claims liaison immediately and demand the services you’re paying for,” advises Litjen. “You and your TPA may not see eye-to-eye on every claim, but at a minimum they should make a concerted effort to close all claims or give you a reasonable explanation when they can’t. If they won’t do this, don’t hesitate to take your business elsewhere.”

Demand Reform

Finally, say our experts, the system itself needs to change. In many states, fraud, abuse and bureaucratic inefficiencies run rampant. While these may lie beyond your immediate control, you can make a difference. How? By writing to your state legislators and demanding reform.

“Legislators understand that the system doesn’t work properly,” explains Murata. “They just don’t know why it’s broken or what to do about it. Consequently, they need employers to tell them how to fix it.”

What needs fixing? Litjen pinpoints six specific areas that, if properly addressed by state legislators, could have a tremendous impact on the entire workers’ comp system:

• Increase benefits for the legitimately injured worker. Reduce permanent disability and vocational rehabilitation benefits to workers with minor injuries and add those savings to cover serious injuries.
• Establish medical cost controls/fee schedules for medical treatment. These currently exist for doctor visits, hospital, physical therapy and pharmacy but not for durable goods or outpatient surgery centers. Providers need to receive fair rates from the state.
• Establish medical utilization containment/treatment protocols. Cap the number of physical therapy and chiropractic treatments and review their effectiveness in shorter intervals. Eliminate the tendency to maintain the medical condition after the injury is treated and stabilized.
• Reduce litigation/attorney involvement unless or until a claim has been denied. To discourage prolonged litigation and medical treatment, attorney fees should have a cap rather than getting paid as a percentage of claim settlement.
• Allow more/longer control of employer-directed medical treatment. Employers pay 100 percent of all medical expenses; in return they should receive 90-day control over the treatment the injured employee receives. Allow for second opinions by referral.

• Establish standards of conduct for insurance company claims adjusters. All other suppliers in the workers’ comp system — agents/brokers, medical practitioners, rehab providers, attorneys and judges — are required to maintain professional licenses and are governed by a code of ethics. Currently, claims adjusters are not.

  “In California and many other states, the workers’ comp system consists of a patchwork of legal and legislative barriers that just don’t work,” concludes Litjen. “The system can be fixed, or at least dramatically improved — but only if you make your voices heard. Write and/or call your legislators and demand reform. Tell them specifically what’s wrong with the system and what they need to do to make it work. If enough business leaders make enough noise, they will listen.”

  DeWitt agrees.

  “Of course there are external factors outside your control, but you get much better results by taking a proactive stance,” she says. “Don’t sit back and hope that your claims will somehow reduce themselves or that some outside entity will magically solve the problem for you. Instead, send a strong message to your elected representatives and take command over what you can control inside your organization. Let your people know you are committed to properly managing your workers’ comp program, and then hold everyone accountable for following through.”