Understanding the Risks
If it ain’t broke, don’t fix it. That was the clear message from a client to Richard Geiger when the firm reorganized itself and split off a large chunk of its business.
“We recently completed a spin-off where we needed to duplicate our marine liability structure at an aggressive price,” said the risk manager.
“Rick successfully completed that assignment, getting us the same coverage for the new entity with a cost structure we liked. I was confident he would be able to get it done. Rick was able to negotiate a very aggressive pricing structure at below minimum premiums with the same coverage for some of the layers.”
Another client had a workers’ compensation policy that included limited cover for the Jones Act and U.S. Longshore and Harborworkers’ Compensation Act.
The Jones Act is a federal law that requires the movement of cargo between U.S. ports be carried in vessels owned by and crewed by U.S. citizens. USLH is workers’ compensation for employees specifically when working on or near navigable waters and engaged in maritime employment.
The additional elements of the coverage were expensive, despite a million-dollar retention.
The client said Geiger was able to isolate those specific exposures and place a policy that effectively eliminated the retention and significantly reduced the costs.
Geiger worked with colleagues and insurers in London to create a financial guaranty cover to protect the client’s balance sheet in case of a significant loss after project completion.
Making It Happen
Often, Power Brokers earn their status through innovative coverage and placements, or by resolving a complex claim.
Mira Jacinto had to do it all at once for a client that had suffered “multiple large catastrophic claims,” said the risk manager.
A previous reorganization of the company’s business plan, combined with the losses, drove the firm into poor results and forced it to sell a significant portion of its operations.
The risk manager said that Jacinto was instrumental in getting things back on track. She revised the company’s program after the divestiture, supported management in crafting a risk program for its new, smaller operations, and went to domestic and international markets to secure placement.
Jacinto transformed the client’s turnaround story from a negative one to a positive one, and was able to place customized coverage and secure an overall reduction in rate.
For another client, the challenge could not have been more different.
The firm had prospered, and it asked Jacinto to recommend and implement opportunistic expansions in coverage.
At a time when many companies are emphasizing supply-chain efficiency and trying to reduce inventory, Jacinto found readily available capacity in the market for excess stock exposure, enhancing the client’s marine program at very low cost.
For a third client, a very large retail operation with an evolving business model, Jacinto was credited with keeping the inventory program current with rapid changes in the company.
Meeting the Challenge
“Our cargo coverage was a mess,” said one risk executive. “Our whole business practice had changed and suddenly we went from holding no inventory to holding a lot. It was suddenly a huge exposure both in warehouses and out in the supply chain.
“We had changed our whole stock-throughput policy, and our coverage had not kept pace. We were paying way too much.”
The exec’s company put out an RFP and ultimately chose Michael Pellegrini. “He fixed the gaps and saved us money.”
Part of the challenge, the client said, was that that the company is known for its lean supply chain. Presenting the company to the market was as much a question of perception as it was underwriting and risk management.
Nevertheless, Pellegrini was able to double limits to $200 million, and enhance coverage across the board for the transit and inventory risks, all while securing a rate reduction of more than one-quarter of the previous bill.
Having secured increasingly favorable successive multiyear cargo and transit placements for one client, Pellegrini had to dig a little deeper in 2014 to find efficiencies to be gained in the client’s excess layers that were placed offshore.
Pellegrini was able to craft a presentation that generated competition by previously reluctant domestic underwriters. The result was significant reductions by the incumbent London markets.
Expertise for Diverse Needs
Times have been tough for some in the marine sector, but companies were able to rely on the expertise of Kevin Sisk.
“This was a terrible year for our industry, and a tough one for our company,” said the owner of a private firm. “Margins sunk very low, to the bare bones.
“We put a lot of pressure on Kevin, and he really helped us when we needed it. We changed the whole nature of our company, sold off some big operations, and concentrated on a few others. Our whole financial structure changed and our whole risk profile changed.
“We had to go back to our underwriters — sometimes for our whole placement, sometimes just for segments. But Kevin really earned his stripes this year; we got seamless changes in coverage,” the owner said.
In a strikingly different testimonial, another client faced other needs at a fast growing firm with many small clients. The owner said that with expansion had come strong pressure from small clients for the company to handle the risk management and insurance for projects.
The Catch-22 was that if Sisk’s client refused to shoulder the burden, it risked losing the project or customer entirely; if Sisk’s client accepted, the risks exposures could be greater than any gain from the project.
The client credited Sisk with being able to accommodate the risks — in some cases within the firm’s existing program. In other cases, he worked with the client and its customer to craft coverage for the project that enabled it to proceed without unduly burdening the contractor.
Creative Solutions to Keep Clients Afloat
HUB International’s B.C. Thibeaux III earned his laurels this year by crafting powerful and innovative programs for small operators in a beleaguered industry.
“B.C.’s aggressive and creative thinking showed me how to limit my company’s and my customers’ exposure, by getting non-owned vessel owners to list us on their policy as additional insured,” said one owner. “And then he was the architect in implementing that policy.”
The client has been an owner and operator of offshore vessels for more than 30 years, along with marketing and managing a large fleet of non-owned vessels. So it was no mean feat to show him an approach he had not heard about before.
In another case, a client needed traction with underwriters before he could even begin to think about creative options.
“When I met B.C., my company was having a very difficult time getting underwritten,” said the company executive.
“Many brokers didn’t even acknowledge us with a return phone call. Although we are a small account, B.C. treated us like a major [one], aggressively attacked the market and got us coverage, which effectively saved us from tying up the fleet. B.C. kept us in business.”
Another client had multiple claims on both employer’s and general liability, which were separate. First, Thibeaux worked with the client on safety and risk mitigation, and then was able to find a Lloyd’s underwriter willing to take the placements under a single policy.
Out of Sight, Out of Mind
“Out of sight, out of mind.” That phrase is a useful reminder of the vulnerabilities many organizations unknowingly face when it comes to their far-flung supply chains.
Following some quiet years where natural catastrophes and supply chain disruption issues aren’t front page news, management often turns to seemingly more pressing matters.
However, low risk quality at one’s key facilities, or that of their suppliers and customers, can leave unprepared organizations susceptible to business disruption. Two often overlooked aspects warrant consideration: The first is an organization’s exposure to natural hazards on a country-by-country basis, given that all nations have particular vulnerabilities to one or more perils like earthquake, windstorm or flood.
While mega-catastrophes often spring to mind as a major contributor to supply chain disruption, outwardly smaller weather events can wreak fiscal havoc too.
The second aspect is a country’s level of commitment to addressing natural hazards (i.e., whether local building codes and standards exist, are robust and enforced).
Yet, lower costs and higher productivity often entice businesses, with little consideration of the supply chains consequences, into less resilient countries — regions where economies are emerging, labor is cheap, facilities are built in natural hazard-prone locations and risk management practices are weaker than more developed nations.
While mega-catastrophes often spring to mind as a major contributor to supply chain disruption, outwardly smaller weather events can wreak fiscal havoc too.
Last year, in a poll of the U.S. workforce, more than one in four employees said their company had been hit financially as a result of the winter weather and didn’t have an emergency plan to keep business going during such scenarios.
All told, since 2000, the economic losses globally from natural disasters are estimated to be approximately $2.5 trillion, according to the United Nations Office for Disaster Risk Reduction.
When you can’t make savvy decisions about the resilience of your supply chain to disruption, the chance of it disentangling increases. Under such circumstances, it can take two years or more for companies to recover from a supply chain failure, research finds.
Yet, despite those statistics, 90 percent of companies still do not quantify supply chain risk when outsourcing production, according to a recent study by the Global Supply Chain Institute.
Certainly, the need to continually gauge Mother Nature is just as important as assessing ongoing macroeconomic and geopolitical factors within each country where one’s supply chain extends. For example, what if a key supplier is located in a region with robust building codes and standards that adequately address local natural hazards, but the region’s economy is destabilizing by political upheaval?
By factoring suppliers’ differing risk profiles on a country-by-country basis and which firms could most affect revenue growth and profitability, a buying organization can make sounder choices.
The most resilient companies take pains to identify, analyze, quantify and correlate these various physical threats with other key factors that can jeopardize the timely flow of supplies from across the world.
Only after a comprehensive analysis of such data can organizations be in a position to soundly prioritize supply chain and risk management efforts to ensure their business continuity, competitiveness and reputation.
Mitigating Fraud, Waste, and Abuse of Opioid Medications
There’s a fine line between instances of fraud, waste, and abuse. One of the key differences is intent and knowledge. Fraud is knowingly and willfully defrauding a health care benefit program for personal gain or profit. Each of the parties to a claim has opportunity and motive to commit fraud. For example, an injured worker might fill a prescription for pain medication only to sell it to a third party for profit. A prescriber might knowingly write prescriptions for certain pain medications in order to receive a “kickback” by the manufacturer.
Waste is overuse of services and misuse of resources resulting in unnecessary costs, whereas abuse is practices that are inconsistent with professional standards of care, leading to avoidable costs. In both situations, the wrongdoer may not realize the effects of their actions. Examples of waste include under-utilization of generics, either because of an injured worker’s request for brand name medication, or the prescriber writing for such. Examples of abusive behavior are an injured worker requesting refills too soon, and a prescriber billing for services that were not medically necessary.
Actions that Interfere with Opioid Management
Early intervention of potential fraud, waste, and abuse situations is the best way to mitigate its effects. By considering the total pharmacotherapy program of an injured worker, prescribing behaviors of physicians, and pharmacy dispensing patterns, opportunities to intervene, control, and correct behaviors that are counterproductive to treatment and increase costs become possible. Certain behaviors in each community are indicative of potential fraud, waste, and abuse situations. Through their identification, early intervention can begin.
- Prescriber/Pharmacy Shopping – By going to different prescribers or pharmacies, an injured worker can acquire multiple prescriptions for opioids. They may be able to obtain “legitimate” prescriptions, as well as find those physicians who aren’t so diligent in their prescribing practices.
- Utilizing Pill Mills – Pain clinics or pill mills are typically cash-only facilities that bypass physical exams, medical records, and x-rays and prescribe pain medications to anyone—no questions asked.
- Beating the Urine Test – Injured workers can beat the urine drug test by using any of the multiple commercial products available in an attempt to mask results, or declaring religious/moral grounds as a refusal for taking the test. They may also take certain products known to deliver a false positive in order to show compliance. For example, using the over-the-counter Vicks® inhaler will show positive for amphetamines in an in-office test.
- Renting Pills – When prescribers demand an injured worker submit to pill counts (random or not), he or she must bring in their prescription bottles. Rent-a-pill operations allow an injured worker to pay a fee to rent the pills needed for this upcoming office visit.
- Forging or Altering Prescriptions –Today’s technology makes it easy to create and edit prescription pads. The phone number of the prescriber can be easily replaced with that of a friend for verification purposes. Injured workers can also take sheets from a prescription pad while at the physician’s office.
- Over-Prescribing of Controlled Substances – By prescribing high amounts and dosages of opioids, a physician quickly becomes a go-to physician for injured workers seeking opioids.
- Physician dispensing and compounded medication – By dispensing opioids from their office, a physician may benefit from the revenue generated by these medications, and may be prone to prescribe more of these medications for that reason. Additionally, a physician who prescribes compounded medications before a commercially available product is tried may have a financial relationship with a compounding pharmacy.
- Historical Non-Compliance – Physicians who have exhibited potentially high-risk behavior in the past (e.g., sanctions, outlier prescribing patterns compared to their peers, reluctance or refusal to engage in peer-to-peer outreach) are likely to continue aberrant behavior.
- Unnecessary Brand Utilization – Writing prescriptions for brand medication when a generic is available may be an indicator of potential fraud, waste, or abuse.
- Unnecessary Diagnostic Procedures or Surgeries – A physician may require or recommend tests or procedures that are not typical or necessary for the treatment of the injury, which can be wasteful.
- Billing for Services Not Provided – Since the injured worker is not financially responsible for his or her treatment, a physician may mistakenly, or knowingly, bill a payer for services not provided.
- Compounded Medications – Compounded medications are often very costly, more so than other treatments. A pharmacy that dispenses compounded medications may have a financial arrangement with a prescriber.
- Historical Non-Compliance – Like physicians, pharmacies with a history of non-compliance raise a red flag. In states with Prescription Drug Monitoring Programs (PDMPs), pharmacies who fail to consult this database prior to dispensing may be turning a blind eye to injured workers filling multiple prescriptions from multiple physicians.
- Excessive Dispensing of Controlled Substances – Dispensing of a high number of controlled substances could be a sign of aberrant behavior, either on behalf of the pharmacy itself or that injured workers have found this pharmacy to be lenient in its processes.
Clinical Tools for Opioid Management
Once identified, acting on the potential situations of fraud, waste, and abuse should leverage all key stakeholders. Intervention approaches include notifying claims professionals, sending letters to prescribing physicians, performing urine drug testing, reviewing full medical records with peer-to-peer outreach, and referring to payer special investigative unit (SIU) resources. A program that integrates clinical strategies to identify aberrant behavior, alert stakeholders of potential issues, act through intervention, and monitor progress with the injured worker, prescriber, and pharmacy communities can prevent and resolve fraud, waste, and abuse situations.
Proactive Opioid Management Mitigates Fraud, Waste, and Abuse
Opioids can be used safely when properly monitored and controlled. By taking proactive measures to reduce fraud, waste, and abuse of opioids, payers improve injured worker safety and obtain more control over medication expenses. A Pharmacy Benefit Manager (PBM) can offer payers an effective opioid utilization strategy to identify, alert, intervene upon, and monitor potential aberrant behavior, providing a path to brighter outcomes for all.