Revamped Program Takes Flight
When the merger of American Airlines and U.S. Airways was completed on Dec. 9, 2013, creating the world’s largest airline, the task of integrating 100,000 employees covered by workers’ compensation looked like Mission Impossible.
But newly named director of American Airlines workers’ compensation Jennifer Saddy, who formerly was director of workers’ compensation at U.S. Airways, seized the bull by the horns, and in short order, a complete overhaul of the massive workers’ comp program was on its way.
“We basically started an entirely new workers’ comp program,” said Saddy. “We put together a new workers’ comp team and redefined the roles of that team. We selected almost all new service vendors.
“So from my perspective, we were doing all this and at the same time working with our front-line operations folks to get this accomplished while they were involved in very different aspects of the mergers and integrations,” said Saddy, who also holds the title of director of corporate insurance and risk management.
Known as an enthusiastic, highly focused team leader, one of the first initiatives Saddy undertook was to realign her team’s goals and put a plan in place to resolve the 5,874 American Airlines legacy claims.
Pulling the Team Together
Saddy and her brokers at Willis held weekly calls with the adjusting team to discuss the most costly claims and to ensure the team had a plan to reach a resolution.
The combined forces achieved a consequential 20 percent reduction in overall open claims, and a 29 percent reduction in aged pending (claims more than two years or older) in under one year.
“We started the closing push at the end of January 2014 and results are through year ending Dec. 31, 2014. In fact, as of Dec. 31, 2014, the combined airline had less open claims than pre-merger American Airlines stand-alone.”
Right from the start, Saddy was determined to move out on as many fronts as possible.
She quickly reached out to the new airline’s four big unions.
“I meet with the unions on a quarterly basis,” said Saddy. “But for the most part, our union contracts don’t have a lot of information about workers’ comp. So some of the most common complaints from the unions have been customer service-oriented and the employees feeling they are not being supported and getting phone calls returned. If the adjuster is not returning a phone call, I need to hear that real-time.”
“We basically started an entirely new workers’ comp program. We put together a new workers’ comp team and redefined the roles of that team.” — Jennifer Saddy, director of workers’ compensation, director of corporate insurance and risk management, American Airlines
As part of her plan to roll out the new workers’ compensation plan as seamlessly as possible, Saddy called a two-day, all-hands-on-deck summit that included her team and all vendors.
“We discussed the merger of the two airlines as well as outlining goals and expectations,” said Saddy.
“However, to make it not only interesting but fun, we did a ‘rock star’ theme. Only rock stars were invited to come as a part of the new program.”
Her rock stars included the 19 members of her workers’ compensation team, newly chosen TPA Sedgwick, Willis, and various other vendors.
“We are now planning for our second annual summit,” Saddy said. “And instead of a rock star theme, in this one we are all superheroes.”
Another aggressive, vital step Saddy took early on was to hire Sedgwick as the combined company’s TPA. An RFP was issued in early April 2014, and Sedgwick was hired on May 23 of that year.
Sedgwick has 79 adjusters working on the American account: 54 adjusters who are entirely assigned to the account, with 25 adjusters that are “designated” (they also handle claims for other accounts).
“The Sedgwick team has worked incredibly hard this past year to make our workers’ comp program a success,” said Saddy. “As we have undergone significant change due to the integration, they have proven themselves to be a flexible partner and embraced our new culture.
“They were quick to adopt the realignment of our workers’ comp goals, while delivering immediate results,” Saddy added.
Changes in Claims Management
Tied into the new agreement with Sedgwick was a revamp of the account instructions an adjuster must follow. Some examples of the changes include:
- The adjuster must receive approval from Saddy’s team prior to assigning defense counsel.
- The adjuster must receive settlement authority from Saddy’s team to engage in settlement discussions with the employee/attorney.
- The adjuster reserve authority limit was reduced.
Another very successful initiative has been the significant expansion of the company’s nurse case management program. Saddy and her team selected three vendors, with more than 30 nurses overall assigned to the program.
“One of the things that I think has been very helpful in moving a claim forward, reducing the duration and getting the employee back to work sooner is that we’ve assigned nurses to basically every claim where the employee is not performing their regular job duty, or where they’re working with some kind of restriction,” said Saddy.
The role of the nurses is to be a medical advocate and communicate with the employee. They also provide return-to-work information to the front-line managers as well as coordinate with the medical team involved.
“The nurses’ goal is to be the liaison between all three of these parties to get information to where it needs to go,” said Saddy.
Saddy also moved the responsibility of communicating with an injured employee from her team to the local supervisor or manager. This provided more personal outreach, Saddy said.
This transition also enabled the corporate workers’ comp team to better manage the overall claims process, including oversight of service partners.
On another new front, at the end of last year, Saddy and her team called a summit meeting of all the attorneys who handle claims for American.
The team presented a litigation performance scorecard that outlined how attorneys’ progress would be managed and how their results would be measured.
Safety and Training
Training is a hallmark of Saddy’s program. Claims adjusters, nurses, doctors and union members who are involved in the workers’ comp program are regularly given training in the airport environment and maintenance facilities, as well as at the same on-site facility where flight attendants train.
“We have the adjusters push and pull a 250-to-300 pound beverage cart,” said Saddy. “We also have them open up the aircraft door on every airplane type we use. We also have them train on the baggage ramps, where many of our serious injuries occur.
“This gives them a better sense of how airline employees work on the job.”
Another innovative injury prevention program that Saddy and her team have been involved with is the expansion of on-site athletic trainers through Fit Matters. American has provided fitness equipment for use by its employees.
The result, Saddy said, has been an 11 percent reduction in soft tissue/musculoskeletal injuries, which represent the majority of the company’s injuries.
These athletic trainers work with employees to develop proper lifting techniques and emphasize the importance of stretching before shifts.
Saddy and her team also established two pharmacy providers, using Helios as its pharmacy benefits manager and Prium to review pharmacy data. Based on a variety of triggers and warning signs, they perform physician-to-physician discussions to ensure appropriate prescriptions.
“By partnering with these two vendors and staying focused on early intervention, we have seen success in reducing the risk to our employees from over-prescribing while reducing pharmacy spending to approximately 7 percent of total medical spending, compared to the industry average, which is approximately 15 percent of medical spending,” Saddy said.
Since Saddy and her team have swung into action, all of the workers’ comp metrics have improved — and all of the reductions are significantly better than industry averages.
Among the most impressive achievements was a 22 percent reduction in collateral requirements from its carrier, based on the airline’s improved financial condition and the new workers’ compensation approach and processes.
“It’s this type of partnership that helps us reduce workplace injuries, and in turn, means a healthier, safer workplace.” — Paul Morell, vice president of safety, security and environment, American Airlines
In addition, total incurred costs decreased by 12 percent, or $80 million, and total outstanding reserves were reduced by 10 percent, or $27 million, in the past year. The current year closing ratio (current year defined as claims that open and close within the same year) increased to 72 percent, compared to the prior year’s closing ratio of 60 percent.
Not only was Saddy’s team able to close more current year claims than in years past, but they also closed them more quickly while reducing costs.
“This illustrates that the employee is receiving more timely information and appropriate care while allowing the employee to recover and not only return to work sooner but to return to their family as well,” Saddy said.
Paul Morell, AA’s vice president of safety, security and environment, said, “Part of being an industry leader in safe and reliable airline operations is making sure our safety programs are reflective of the need and risk of our operations. By working together with our workers’ comp team, we are able to develop programs that address any issues immediately.
“It’s this type of partnership that helps us reduce workplace injuries, and in turn, means a healthier, safer workplace,” he said.
For Saddy, workers’ compensation is about helping an employee during a difficult time.
“Workers’ compensation can be complex, challenging and confusing, but it doesn’t need to be,” she said.
“At the end of the day, it’s about engaging our employees and providing the best medical care available, allowing our employees to return to work as soon as possible and as safely as possible.”
Read more about all of the 2015 Teddy Award winners:
Revamped Program Takes Flight: The American Airlines and U.S. Airways merger meant integrating workers’ compensation programs for a massive workforce. The results are stellar.
Checking Out Solutions: From celebrating safety success to aggressively rooting out fraud and abuse, Stater Bros. Markets is making workers’ comp risk management gains on multiple fronts.
Revitalizing the Program: In three years, the Columbus Consolidated Government was able to substantially reduce workers’ compensation claims costs, revamp return-to-work and enhance safety training.
Spreading Success: Barnabas Health wins a Teddy Award for pushing one hospital’s success in workers’ comp systemwide.
A Bird’s Eye View
Unmanned aerial vehicles (UAVs) — aka drones — are an integral but polarizing part of 21st century life.
The benefits are well-known: whether used as a tool or a toy, miniature remote-controlled aircraft equipped with high-resolution cameras can provide stunning aerial shots as well as photograph hard-to-access areas, which explains their increasing popularity with both consumers and businesses.
Drones are also inexpensive. Starter kits cost only $75 to $150 and cheaper four-propeller drones typically sell for $600 to $700. Sophisticated models with cameras can run to about $3,500. But the pricing continues to drop while the optics packages steadily improve, said Grant E. Goldsmith, vice president of Avalon Risk Management and president of its overwatch division.
“Many new drones have 4K cameras, which are really nearly Hollywood quality,” he said. “It is really the drop in price point in good optics that is making them more practical to many kinds of users.
“All drones are subject to loss and damage in a hard landing situation but at $3,500 they approach the level of ‘disposable aviation’ assets for many users.”
However, growing demand is accompanied by increasing disquiet over the “nuisance potential” of drones to violate privacy and cause accidents, particularly when used in proximity to aircraft. Idaho-based Snake River Shooting Products recently launched the “drone munition” — a shot shell containing steel ball bearings that fits a 12-gauge shotgun, for customers seeking to repel the “Drone Apocalypse.”
These concerns haven’t prevented companies from seeking Federal Aviation Administration (FAA) authorization to use drones for commercial purposes. As Risk & Insurance® reported in April, four insurers — American International Group Inc., Erie Insurance Group, State Farm Mutual Automotive Insurance Co., and United Services Automobile Association — were among 125 companies submitting successful applications.
Applicants also included corn processing giant Archer-Daniels-Midland Co, which got the go-ahead to use drones for locating and assessing crop damage to accelerate claims processing. The company plans to start employing the technology during 2016.
Pennsylvania-based Erie Insurance said that FAA approval would enable the company to offer policyholders an improved service, yet retain the personal touch.
“We see drones as high tech meets human touch,” said Gary Sullivan, the company’s vice president of property and subrogation claims.
“Drones will help our claims adjusters get an early look at potential damage without putting themselves in harm’s way due to unsafe conditions, such as on a steep roof or at the site of a fire or natural disaster,” he said. “The sooner we can get in and assess damage, the sooner we can settle claims and help make our customers whole again so they can move on with their lives.”
At State Farm, spokesman Jim Camoriano said that employing drones is in line with the insurer’s work with vehicle manufacturers to advance airbag and seatbelt technology.
“Our use of unmanned aircraft is another example of State Farm’s commitment to the use of technology to better serve our customers. So far, feedback from those outside the industry continues to be optimistic on the potential benefits of using this type of aircraft.”
Since gaining the FAA’s approval to test and use drones as part of its commercial operations, State Farm has been engaged in flight testing UAVs at private test sites near its corporate offices in Bloomington, Ill. As yet, the insurer hasn’t determined a date for test completion.
Camoriano acknowledged that press coverage raises several questions regarding the use of the technology, but said that concerns arise mostly from recreational use of UAVs.
“We consider customer privacy one of our top priorities, and our use of this technology will adhere to all applicable laws and regulations to ensure consumer privacy,” he said.
Waiting on the FAA
Reports on UAVs’ potential usually mention their usage in the wake of disasters, to provide high-resolution images while accessing areas either too dangerous or inaccessible for manual inspection. A recent example cited is the explosions at a Chinese chemicals warehouse in Tianjin on Aug. 12. Footage shot from a drone shortly afterward vividly captured the extent of the damage.
To date, the reality for U.S. firms has been less dramatic, said Matt Ouellette, owner of Indiana claims service Ouellette & Associates and 2015-16 president of the National Association of Independent Insurance Adjusters (NAIIA). His firm uses drones mainly for commercial building inspections up to 300 feet above ground level and in the immediate aftermath of intersection vehicle collisions to assess the impact.
“Before we go to the expense of renting a boom lift, which costs around $1,500, we can use a drone for no more than $200 to $300 plus the adjuster’s fee for a preliminary inspection to ascertain the cause of damage and whether it is covered by insurance,” said Ouellette. “In some cases, it results merely from poor maintenance of the building.
“A fixed-wing drone flying over an area hit by hurricane or tornado can map out the area as a whole and provide insurers with valuable information on their likely exposure and how many of their insureds have suffered loss or damage. They can home in close and get good pictures.
“You can get FAA approval via a Section 333 exemption, which many businesses are applying for and getting these days. But the majority of drone operators likely operate without FAA approval.” — Grant E. Goldsmith, vice president of Avalon Risk Management
“We use four-prop hovercraft drones rather than the fixed wing variety for our commercial buildings and intersection accident inspections. They’re less expensive than fixed-wing, the latter being the type to which the FAA pays most attention.”
While insurers recognize the benefits of using drones for post-catastrophe inspection, they haven’t actually started using them, he added.
One obstacle is that the FAA’s readiness to exempt companies from the ban on commercial drone use isn’t yet accompanied by regulations setting out guidelines as to what work is and isn’t acceptable.
The FAA, said Avalon’s Goldsmith, “hasn’t yet published its rules for small drone usage with the national airspace, and these rules will likely not be published until 2017, so the interim period will continue to see a growing number of commercial users dodging both the FAA and local regulations at the state and city level while flying for business purposes.
“You can get FAA approval via a Section 333 exemption, which many businesses are applying for and getting these days. But the majority of drone operators likely operate without FAA approval.”
Ouellette said that in the absence of such clarification, some carriers are holding back from using drones themselves or authorizing their use by claims adjustment specialists.
“The passage of any legislation is likely to prove complex as many different parties need to be considered. The aim is for regulation that’s useful and not overly stringent.”
“I assume that many insurers are waiting for the dust to settle on the privacy and regulatory concerns before fully embracing drone technology,” agreed Stephen L. Brown, owner and president of Baton Rouge, La.-based Brown Claims Management Group.
“As an independent adjusting firm, we have had several insurers inquire about using our drone to assist in the inspection of roof claims.
“But it seems that it comes mostly from a place of curiosity, from the standpoint of seeing just what type of imagery this technology can produce in contrast to that generated by more traditional means.”
Brown also struck a note of caution on whether insurers could extend the use of drones beyond investigating catastrophe and hard-to-access risks to include more routine work.
“They could be, but to be honest, the small drones that we use are not easily flown in anything less than optimum weather conditions or where obstructions are nearby — and so we still only use them in a small percentage of investigations and inspections.”
However, there are some applications beyond property losses — specifically general liability and transportations losses — where aerial video can be a tool in documenting the scene of the accident, Brown said.
No Threat to Adjusters
Longer-term, does the drone spell the end of the traditional claims adjuster?
No way, said Ouellette, particularly as UAVs still have to be piloted.
“Certainly they can provide great images; however, the adjuster still needs to follow up with measurement and assessment work. He or she still has to provide much of the essential detail that drones aren’t able to capture.”
Brown agreed. “Drones will continue to be but one tool available to the field adjuster and will never fully replace the personal inspection. There will be instances in which the drone inspection is just not practical under the circumstances, due to adverse weather, physical obstructions, and the like.
“There will never be a day,” he said, “when drones can 100 percent be a replacement for adjuster ‘boots on the roof’ when it comes to property inspections or the personal touch that human claims adjusters can bring to loss investigations, appraisals and settlements.”
The Doctor as Partner
Professionals helping employees return to work after being on disability or a leave of absence face many challenges. After all, there is a personal story behind each case and each case is unique.
In the end, the best outcome is an employee who returns to the job healthy and feeling well taken care of, while at the same time managing the associated claim costs.
Learn what most employers want from their group disability and life benefits program.
While many carriers and claims managers work toward these goals, in the end they often tend to focus on minimizing costs by aggressively managing claims to get the worker back on the job, or they “fast track” claims, approving everything and paying little attention to case management.
Aggressively managed claims can leave many employees and their doctors feeling defensive and ill-at-ease, creating an adversarial relationship that ultimately hinders return to work and results in higher direct and indirect employee benefit costs for the employer. Fast track or non-managed claims can lead to increased durations, costs and workforce productivity issues for employers.
Is it possible to provide a positive employee benefit experience while at the same time effectively managing disability and lowering an employer’s overall benefit costs?
A Unique Approach
Liberty Mutual Insurance’s approach to managing disability and absence management focuses on building consensus among all stakeholders – the disabled employee, treating physician, employer and insurer. And a key component of this process is a large team of consulting physician specialists, leading practitioners from a variety of specialties, highly regarded experts affiliated with leading medical universities across the country.
“About 16 years ago, our national medical director, Dr. Ed Crouch, proposed that if we worked with a core group of external consulting medical specialists – rather than sending most claims for Independent Medical Evaluations – we could do a better job making disabled employees and their attending physicians comfortable, and therefore true partners in producing better disability management outcomes and employee benefit experiences,” said Tim Kastrinelis, senior vice president, Distribution Partnerships at Liberty Mutual Benefits.
“In this way, our consulting physician and the attending physician are able to work with the disability case manager, the employee and the employer to deliver a coordinated, collaborative approach that facilitates a productive lifestyle and return to work.”
The result of Dr. Crouch’s initiative has produced positive results for the clients of Liberty Mutual Insurance. This consensus building approach to managing disability with consulting physician expertise has helped achieve industry leading client retention results over the past decade. In fact, 96 percent of Liberty Mutual’s group disability and group life clients renew their programs.
“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders. …In the end, it’s a win-win for all.”
–Tim Kastrinelis, Senior Vice President, Distribution Partnerships, Liberty Mutual Benefits
A Collaborative Approach
In the case of complex disability medical health situations, Liberty Mutual’s disability case managers play a vital role in seeking additional expertise—an area where the industry’s standard has been to outsource the claimant for independent medical examinations.
However, Liberty Mutual empowers its disability case managers with the ultimate responsibility for the outcome of each claim. The claimant and the case manager stay together throughout the life of the claim. This relationship is the foundation for a collaborative approach that delivers a better employee benefit experience and enables the claimant to return to work sooner; which more effectively controls total disability claim and absence costs.
Sending a disabled employee with complex medical needs to an external specialist may sound like a cost-effective path, but it often comes at the cost of sacrificing the relationship and trust built between the employee and case manager. The disabled employee must explain their medical history to a new clinician, which he or she is often reluctant to do. The attending physician may be uncooperative as this move can appear to question his or her treatment plan for the employee.
As a result, the entire claims process takes on an adversarial atmosphere, building major roadblocks to the ultimate goal of helping the claimant return to a productive lifestyle.
Liberty Mutual takes a different approach. Nearly 100 physicians representing more than 30 medical specialties are available to consult with its medical and claims professionals, working side-by-side with case managers.
More than 95 percent of these consulting physicians are in active practice, and therefore up-to-date on the latest clinical best practices, treatment guidelines, therapies, medications, and programs. Most of these physicians are affiliated with leading medical universities across the country. “We recruit specialists from around the country, getting the best from such prestigious institutions as Harvard, Yale, and Duke,” said Kastrinelis.
These highly-credentialed physicians help case managers focus on providing the support needed for the disabled employee to successfully return to work as quickly as appropriate. Their collaborative work with the attending physicians provides the behind-the-scenes foundation that leads to a positive claimant experience, results in a better outcome for the claimant, and more effectively reduces total claim costs.
Coordinated Care Plan
When one of these consulting physicians reaches out to an attending physician, there’s an immediate degree of respect and high regard for his or her opinion. This helps pave the way to working together in the best interest of the employee, improving treatment plans and return to work results.
In this process, the claimant is not sent to yet another doctor; instead, the consulting specialist works with the attending physician to help fill in the gaps of knowledge or provide information that only a specialist would have. Although not an opportunity to direct care, these peer-to-peer discussions can help optimize care with the goal of helping the employee return to work.
The attending physician may have no knowledge of the challenges the employee faces in order to return to work. A return to work plan created in concert with the specialist, disability case manager, employer, and attending physician can set expectations and provide the framework for a proactive and effective return to a productive lifestyle.
“Our consulting physicians bring sophisticated medical expertise to the discussion, and help build consensus around a return-to-work plan, helping us more effectively impact a claim’s outcome and costs, and at the same time provide a better claimant experience,” said Kastrinelis.
“We can work more collaboratively with the attending physician, manage expectations, and shepherd the employee through the process much more effectively and in a much more high-touch, caring, and compassionate manner. Overall, we’re able to produce better outcomes as a result of this consensus building approach.”
“Our approach – including the use of consulting medical experts – helped us significantly reduce disability costs over two years for one large health service company,” notes Kastrinelis. “We cut average short-term disability claim durations by 4.2 days in that time, while increasing employee satisfaction with our unique disability management model and collaborative, partnership approach.
How did Liberty Mutual’s unique approach lower claim costs, reduce disability duration and improve the benefit experience for one customer?
“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders,” said Kastrinelis.
“Plus, we, the employee, and the employer also get the bonus of creating a better employee benefit experience. This model has shaped our disability and absence management program to more aptly reflect our core mission of helping people live safer, more secure lives. In the end, it’s a win-win for all.”
How does Liberty Mutual provide a superior employee benefit experience?
Tim Kastrinelis can be reached at email@example.com. More information on Liberty Mutual’s group disability and absence management offerings can be seen at https://www.libertymutualgroup.com/business-insurance/business-insurance-coverages/employee-benefits.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.