Translate Risk Data Into Familiar Language
Sorting through a mountain of data to deliver valuable information to a corporation can be a daunting task for risk managers.
But aligning risk management metrics with the company’s broader strategic vision while tailoring information to meet the specific needs of corporate leadership, operations personnel, and injured employees can inspire positive change throughout the organization, according to risk managers for The Walt Disney Co. and Wal-Mart Stores Inc.
Instead of providing operations managers with workers’ compensation claims measurements that risk managers comprehend -such as case reserves or average cost per claim- think creatively to provide actionable information and performance measurements that operations personnel easily grasp.
Report to operations managers how much more additional product or services their business units must sell or produce annually to offset their claims losses, advised Michele Adams, director claims management & business strategies risk management services in Lake Buena Vista, Fla. for Walt Disney World Resort.
Discussing the “unit cost equivalent,” or the amount of additional sales needed to offset claims costs, will grab managers’ attention, Adams said.
“That is meaningful,” she said. “That is a different way to approach analysis than just [evaluating and reporting] typical, run-of-the-mill loss runs.”
Adams spoke at the recently held Workers’ Compensation Institute’s annual conference in Orlando, Fla. She was joined by David Stills, VP risk management for Wal-Mart and Scott P. Rogers, executive director and executive VP casualty operations at Sedgwick Claims Management Services Inc.
“The audience in particular is one of most important things you should think about when you begin approaching risk management and data analysis,” Adams said.
The scope and scale of Disney operations produce a complex array of data. To mine it for meaningful information, Adams said she continually considers the company’s strategic vision.
Safety is one of Disney’s key cornerstones and part of its culture, for example. So she connects her metrics and messages to safety because people across the organization respond to the concept.
“The audience in particular is one of most important things you should think about when you begin approaching risk management and data analysis.”
— Michele Adams, director, claims management and business strategies risk management services, Walt Disney World Resort
But she does that in language they understand. To do that she continually reminds herself that she works for an entertainment and resort-destination company, not a risk management company, Adams said.
“Ensure you have alignment between your risk management metrics and the company’s objectives,” Stills agreed.
At Wal-Mart that calls for a balancing act of controlling costs while taking care of injured associates.
Common claims practices such as contracting for discount provider networks, reducing charges for bill review services, and negotiating down legal counsel fees are probably not enough, Stills said. So Wal-Mart relies on “advanced analytics.”
“By advanced analytics I am talking about taking it to next level and using the data that you have,” he explained.
Wal-Mart, for example, uses data to understand early on which workers’ comp claims will likely become litigated cases.
It also analyzes its data to determine which case managers and medical providers will have the greatest positive impact on a specific claim. That includes rating doctors based on their outcomes and ability to help associates.
“Number one for us is to take care of our associates,” Stills said “So if we know who the best providers are we want to get our associates to those providers. If we know the cases that are more significant we want to get those cases to our best case managers so the associate can heal, get back to work and get back to their normal lives.”
However, succeeding with data analytics requires employers to take responsibility for understanding their own data and how they can use it to meet their objectives. That cannot be left only to business partners, such as third party administrators or insurers, to manage, he added.
“Your TPA is important in your business, but don’t rely on them completely to hand you a metrics package at the end of the month,” Stills said. “You need to own the data. You need to be proactive.”
In Search of New Absence Management Strategies
Corporate silos separating workers’ compensation departments from the non-occupational disability management side of the house prevail at most companies, although some sophisticated employers are finding efficiencies by coordinating aspects of the two.
Those employers are integrating employee lost-time data, coordinating claims tracking, and transferring best practices from one side of the house to the other.
They are doing so to reduce overall costs, understand employee leave and absence drivers, and to increase productivity, several large employers told the recently held Disability Management Employer Coalition’s annual conference.
PepsiCo, for example, is three years into a program overhaul to eliminate unaccounted for absences, eliminate overpayment of benefits or salaries, and mine its data to learn whether its benefits drive workers to choose between pursuing either workers’ comp or non-occupational disability benefits.
The company traditionally maintained a strong workers’ comp program for managing claims and a solid disability leave management program, said Barbara LaRocque, benefits director at PepsiCo unit Frito-Lay.
“The problem was we had no overlap,” LaRocque said. “One never had anything to do with the other. Instead there was a lot following through the cracks.”
Consequently, the employer was not efficiently returning workers to their jobs even after leave times expired. It required duplicate medical forms to satisfy workers’ comp, disability and Family Medical Leave Act needs, and the company’s human resources department and managers struggled to track employees on leave.
But extensive changes began in 2011.
Among other measures, PepsiCo — with 250,000 workers worldwide and about half of those in the United States — centralized employee reporting through a leave and claim center providing a single point of contact for cases leading to time away from work, whether a workers’ comp claim, disability or leave of absence.
“Our mantra at this point was one phone number to call, one place to go, and one person to talk to who can talk about all aspects of your leave, your pay, your benefits, your employment rights, your status with work comp or disability,” LaRocque said.
The centralized intake helps tightly control the determination of benefits eligibility and the notification of managers and human resources of an employee’s leave status, among other advantages.
Other PepsiCo changes have included clearly defining the responsibilities of employees, managers, and human resources. For example, human resources must now stop an employee’s pay if they do not call to report a leave.
The company has also outsourced and leveraged its use of technology. Third party administrator Sedgwick Claims Management Services Inc.’s claim system, for instance, serves as PepsiCo’s “system of record for all leave activity,” helping the employer track employee time away from work.
The progress has also allowed PepsiCo to collect an abundance of data it plans to use to learn more about how its leave changes are impacting cost savings and productivity, LaRocque said. It will also use the data to help determine whether its benefit offerings and other factors drive employees with injuries to select between filing workers comp claims or disability claims.
Several other large employers told DMEC’s conference, held July 27-30 in Las Vegas, of their efforts to integrate aspects of various programs including wellness and employee assistance offerings and programs for managing short term disabilities, long term disability, workers’ comp and FMLA administration.
TPA Broadspire announced at the conference that it will help further such efforts by adding STD, LTD, and FMLA leave management to its portfolio of products.
Broadspire’s employer clients have increasingly asked for her company expand into providing disability and absence management services to compliments its workers’ comp offerings, said CEO DanielleLisenbey.
There are several factors driving demand for outsourced disability management programs, Broadspire said. Those include an aging workforce expected to increase absences and disability leaves and growing employer responsibility for following state and federal regulatory mandates.
Backing an Alternative Medicare Set Aside Strategy
Most employers and insurers limit the risk of one day facing an open-ended medical claim by obtaining federal approval for their Medicare set aside (MSA) arrangements for workers’ compensation settlements.
But some experts point out that obtaining the approval from the Centers for Medicare and Medicaid Services (CMS) is not required by law and can unnecessarily inflate the amount of funds workers’ comp payers allocate for an MSA.
They advocate foregoing CMS approval and self insuring the risk that Medicare may allege one day that an MSA was inadequately funded and demand more money than the payer originally set aside for a worker’s comp claimant’s future medical expenses.
Now IronHealth, a unit of insurer Ironshore Inc., has stepped into that discussion by offering a new insurance policy covering self-insured employers and insurers foregoing CMS approval of the amount allocated for an MSA.
A workers’ comp MSA allocates a portion of a claim settlement to pay for a claimant’s future medical expenses. MSAs satisfy Medicare Secondary Payer (MSP) laws adopted to protect Medicare’s interests. They do so by setting aside money to help ensure Medicare does not eventually pay for a workers’ comp claimant’s future medical costs.
IronHealth’s policy would pay for a defense arguing that the amount of money the insured originally calculated for an MSA was adequate. Should that defense fail, any untapped policy limits left after defense expenses are paid would pay for additional medical expense costs that Medicare demanded.
“We expect the majority of the loss costs in this product to be defense,” said Josh Stein, president of U.S. health care at IronHealth.
“If [say] 16 years down the line after an MSA has been exhausted by virtue of legitimate expenses paid in accordance with the MSA, the claimant tries to get reimbursement from CMS for expenses in addition to that [originally funded] MSA amount. [If] CMS balks and says, ‘Hold on a minute, you didn’t adequately fund the MSA 15 years ago and we think it should have been much higher,’ our policy will kick in to defend the original MSA amount in that dispute with CMS.
“If, after the whole process of appeal, we for some reason lose,” Stein continued, “then whatever remains of the limit of liability will be available to pay that claimant’s medical expenses.”
The policies on A-rated paper are available either for individual MSAs or a group of MSAs.
Available policy limits are $500,000 when insuring an individual MSA. When insuring a portfolio of MSAs, each MSA would have an individual limit with a master policy aggregate limit of $10 million.
While insurer interest in the product is expected, there is potential for greater demand from self-insured employers because they experience a greater adverse balance sheet impact from reserving for MSAs, Stein said.
“We are finding in our discussions with people in the industry that more self-insured employers are interested because of the potential benefit to their financial statements by reducing the amount they have to set aside in MSAs by virtue of not asking for CMS to approve it,” he added.
Michelle A. Allan says her clients prefer obtaining CMS approval to eliminate the risk that Medicare will demand additional, unknown sums at some future date. Allan is a Medicare compliance expert and partner at Burns White L.L.C. who represents insurers, self-insured employers and pools.
“There have been [industrywide] discussions about not submitting cases to Medicare [for approval] because it is not a statutory requirement,” Allan said. “It may not be a statutory requirement, but if you have a process available to you that will eliminate that risk, my clients are still interested in getting that approval letter from Medicare.”
Following Medicare guidelines for seeking approval allows his clients to control their risk, agrees James E. Pocius, an attorney and chair of the Medicare Set-Aside Practice Group at Marshall Dennehey Warner Coleman & Goggin P.C. in Scranton, Pa.
Medicare essentially approves a “snapshot in time” of a claimant’s expected future medical expenses, Pocius explained.
Therefore, through risk management practices, such as working with medical providers to assure medical treatments and prescriptions are necessary and the claim’s severity is not exaggerated, employers can limit the amount CMS will require for an MSA.
“Once you get that approval you can settle your case fully closed, it’s done” Pocius said. “Without approval, if it blows up later. you are paying the freight.”
But Jennifer C. Jordan, general counsel at MEDVAL L.L.C. sees potential for a different risk management strategy, one that could be helped by IronHealth’s new insurance policy.
Jordan advised IronHealth in developing its new policy. MEDVAL will assist in underwriting and serve as the point negotiator with CMS when policyholders file claims, according to IronHealth.
Jordan cites several problems with submitting to CMS for approval.
CMS determines appropriate set-aside amounts by “projecting the wors- case medical scenario possible,” Jordan said. That can, for example, force payers to fund surgeries and other procedures that are highly unlikely to occur.
The government also ignores state workers’ comp laws limiting what payers are responsible for, Jordan said.
“So in submitting to the program [for approval], you are accepting that you are paying a premium in exchange for an opinion letter that says the government is good with this number,” Jordan said.
“Once you get [CMS] approval you can settle your case fully closed, it’s done. Without approval, if it blows up later, you are paying the freight.” — James E. Pocius, attorney and chair of the Medicare Set-Aside Practice Group, Marshall Dennehey Warner Coleman & Goggin P.C.
Jordan, however, also advises that an approval letter is not a guarantee that Medicare will never seek additional sums from payers.
Still, her clients commonly seek MSA approval.
“We have one major carrier that does not get approval unless one of the parties [to the claims settlement] demands it,” Jordan said. “They are by far avant garde. They are totally self-insuring the risk. It’s a rather large carrier so it is impressive their organization has embraced [the strategy].”
She also has self-insured employer clients that set a threshold and absorb the risk for cases under a certain dollar amount in value.
IronHealth’s product could help others decide against obtaining CMS approval or shouldering the risk themselves, she said.
“If [payers] are unwilling to self insure the risk, this gives them the opportunity to buy something insurance people understand — insurance,” Jordan said.
But such a product may not be necessary if claims payers follow the law, have practices in place to protect Medicare’s interests, and can justify their MSA protocols and the amount they elect to set aside, Allan said.
Stein counters, however, that there is still potential for CMS to come back one day and argue that the only way to have protected Medicare’s interests would have been to obtain CMS approval for an MSA.