Construction on the Upswing
With the construction industry undergoing a solid rebound from the disaster brought on by the great recession of 2008-2009, it’s no surprise that the demand for P&C coverage is going along for the ride.
However, two brokers who specialize in the construction industry (both of whom were Power Broker® winners in 2014), said it’s not necessarily business as usual in this post-recession world.
Aon’s Matthew Walsh, managing director in the Chicago office, who serves the construction industry, said Aon has seen an appreciable uptick in projects nationwide, as well as outside the United States.
Segments within the construction industry that are on the upswing include federal and state government building projects, some private sector building, and a growth in public-private partnerships (P3s), which are typically funded and operated through a partnership of government and one or more private sector companies.
Walsh warned, however, that as the speed of the recovery increases, so do the challenges on a state-by-state jurisdictional basis from a liability standpoint.
“Syncing up the jurisdictions with new contracts is critical,” he said.
“As the velocity of the recovery increases, there also is an increase in the factors that come to bear on case law, both from a statutory and contractual perspective.”
Because of that, Walsh said, contractors are focusing even more on bringing a solid, quality labor force on board for projects, and that in turn increases the focus on subcontractors and their workforces.
The quality of the workforce has an impact both on liability and workers’ comp, as trained workers are less likely to be injured, more likely to be aware of safety issues, and more likely to provide high-quality work, lessening potential construction faults.
Keith Jurss, senior vice president, professional liability for Willis’ national construction practice, added that his firm is also seeing commensurate growth in construction coverage.
But this time around, Willis is being asked to look at programs within so-called “project” business, where owners and contractors join together to insure much larger efforts than prior to the recession.
“A $200 million construction project used to be really big,” he said. “Today, we are seeing billion-dollar projects on a regular basis, and the size continues to go up.”
The result is more joint venturing, which requires complex “project” coverages that consolidate many policies into a single coverage program.
Premium Fraud in the Spotlight
Unpaid workers’ comp premiums are costing New York hundreds of millions of dollars, according to an official. In the wake of a grand jury’s report, New York County Prosecutor Cyrus Vance is calling for major changes to the system.
The release of the report by the New York State Supreme Court Grand Jury coincided with the 103rd anniversary of the Triangle Shirtwaist Factory Fire in Greenwich Village that killed 146 people. The state’s workers’ comp law was closely associated with the tragedy.
“The widespread premium fraud detailed by this Grand Jury Report is deeply troubling and underscores the critical need to reform the workers’ compensation system,” Vance said in a statement. “My office’s Tax Fraud and Money Laundering Unit will continue to pursue those who cheat the system, but the best protection for New York’s workers is a system that is itself protected from fraud and abuse.”
The report followed investigations by the unit into false information provided to the New York State Insurance Fund in connection with applications for, and audits of, workers’ comp policies, the statement said. Vance said investigations by his office looked at incidents of insurance premium fraud that, among other things, cost New York City and state “substantial revenue.”
As Vance explained, an employer’s premium is based on each covered employee’s job classification. Rates for a relatively safe job can be much lower than that for a dangerous job.
“This system, which requires employer self-reporting, is easily abused by unscrupulous employers who misclassify employees,” Vance said. “Employers can easily lie about what work a particular employee performs, for example, reporting a roofer as a clerical worker, and thus paying a significantly lower premium. More egregious is fraud where an employer misclassifies a worker who is required to be insured under the system as an independent contractor, but is an employee.
Estimates indicate New York City’s construction industry in 2011 cost the city and state about $500 million due to worker misclassifications. This lost money is typically made up by cost shifting from somewhere else.
The grand jury’s report included a variety of recommendations from the following categories:
- Increased penalties to ensure that sentences are proportionate to the magnitude of the fraud.
- Increased transparency by reforming the application and audit process, thereby making it more effective and less susceptible to fraud.
- Increased dissemination of information into the hands of those charged with investigating and prosecuting fraud.
- Increased education for employees and the community at large about the workers’ comp system and its value to the public, so that everyone is better able to protect the system from fraud.
“A well-functioning workers’ compensation system not only generates significant revenues for the City and the state, but also fosters equality in the marketplace and allows small businesses to flourish, creating the sorely-needed jobs. It benefits every employer, every employee, every consumer, and every taxpayer,” the report said.
Achieving More Fluid Case Management
Risk management practitioners point to a number of factors that influence the outcome of workers’ compensation claims. But readily identifiable factors shouldn’t necessarily be managed in a box.
To identify and discuss the changing issues influencing workers’ compensation claim outcomes, Risk & Insurance®, in partnership with Duluth, Ga.-based Healthcare Solutions, convened an April roundtable discussion in Philadelphia.
The discussion, moderated by Dan Reynolds, editor-in-chief of Risk & Insurance®, featured participation from four tenured claims management professionals.
This roundtable was ruled by a pragmatic tone, characterized by declarations on solutions that are finding traction on many current workers’ compensation challenges.
The advantages of face-to-face case management visits with injured workers got some of the strongest support at the roundtable.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” participant Barb Ritz said, a workers’ compensation manager in the office of risk services at the Temple University Health System in Philadelphia.
Telephonic case management gradually replaced face-to-face visits in many organizations, but participants said the pendulum has swung back and face-to-face visits are again more widely valued.
In person visits are beneficial not only in assessing the claimant’s condition and attitude, but also in providing an objective ear to annotate the dialogue between doctors and patients.
“Oftentimes, injured workers who go to physician appointments only retain about 20 percent of what the doctor is telling them,” said Jean Chambers, a Lakeland, Fla.-based vice president of clinical services for Bunch CareSolutions. “When you have a nurse accompanying the claimant, the nurse can help educate the injured worker following the appointment and also provide an objective update to the employer on the injured worker’s condition related to the claim.”
“The relationship that the nurse develops with the claimant is very important,” added Christine Curtis, a manager of medical services in the workers’ compensation division of New Cumberland, Pa.-based School Claims Services.
“It’s also great for fraud detection. During a visit the nurse can see symptoms that don’t necessarily match actions, and oftentimes claimants will tell nurses things they shouldn’t if they want their claim to be accepted,” Curtis said.
For these reasons and others, Curtis said that she uses onsite nursing.
Roundtable participant Susan LaBar, a Yardley, Pa.-based risk manager for transportation company Coach USA, said when she first started her job there, she insisted that nurses be placed on all lost-time cases. But that didn’t happen until she convinced management that it would work.
“We did it and the indemnity dollars went down and it more than paid for the nurses,” she said. “That became our model. You have to prove that it works and that takes time, but it does come out at the end of the day,” she said.
The ultimate outcome
Reducing costs is reason enough for implementing nurse case management, but many say safe return-to-work is the ultimate measure of a good outcome. An aging, heavier worker population plagued by diabetes, hypertension, and orthopedic problems and, in many cases, painkiller abuse is changing the very definition of safe return-to-work.
Roundtable members were unanimous in their belief that offering even the most undemanding forms of modified duty is preferable to having workers at home for extended periods of time.
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Unhealthy households, family cultures in which workers’ compensation fraud can be a way of life and physical and mental atrophy are just some of the pitfalls that modified duty and return-to-work in general can help stave off.
“I take employees back in any capacity. So long as they can stand or sit or do something,” Ritz said. “The longer you’re sitting at home, the longer you’re disconnected. The next thing you know you’re isolated and angry with your employer.”
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Whose story is it?
Managing return-to-work and nurse supervision of workers’ compensation cases also play important roles in controlling communication around the case. Return-to-work and modified duty can more quickly break that negative communication chain, roundtable participants said.
There was some disagreement among participants in the area of fraud. Some felt that workers’ compensation fraud is not as prevalent as commonly believed.
On the other hand, Coach USA’s Susan LaBar said that many cases start out with a legitimate injury but become fraudulent through extension.
“I’m talking about a process where claimants drag out the claim, treatment continues and they never come back to work,” she said.
Social media, as in all aspects of insurance fraud, is also playing an important role. Roundtable participants said Facebook is the first place they visit when they get a claim. Unbridled posts of personal information have become a rich library for case managers looking for indications of fraud.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” said participant Barb Ritz.
As daunting as co-morbidities have become, roundtable participants said that data has become a useful tool. Information about tobacco use, weight, diabetes and other complicating factors is now being used by physicians and managed care vendors to educate patients and better manage treatment.
“Education is important after an injury occurs,” said Rich Leonardo, chief sales officer for Healthcare Solutions, who also sat in on the roundtable. “The nurse is not always delivering news the patient wants to hear, so providing education on how the process is going to work is helpful.”
“We’re trying to get people to ‘Know your number’, such as to know what your blood pressure and glucose levels are,” said SCS’s Christine Curtis. “If you have somebody who’s diabetic, hypertensive and overweight, that nurse can talk directly to the injured worker and say, ‘Look, I know this is a sensitive issue, but we want you to get better and we’ll work with you because improving your overall health is important to helping you recover.”
The costs of co-morbidities are pushing case managers to be more frank in patient dialogue. Information about smoking cessation programs and weight loss approaches is now more freely offered.
Managing constant change
Anyone responsible for workers’ compensation knows that medical costs have been rising for years. But medical cost is not the only factor in the case management equation that is in motion.
The pendulum swing between technology and the human touch in treating injured workers is ever in flux. Even within a single program, the decision on when it is best to apply nurse case management varies.
“It used to be that every claim went to a nurse and now the industry is more selective,” said Bunch CareSolutions’ Jean Chambers. “However, you have to be careful because sometimes it’s the ones that seem to be a simple injury that can end up being a million dollar claim.”
“Predictive analytics can be used to help organizations flag claims for case management, but the human element will never be replaced,” Leonardo concluded.