NWCDC Presenters Offer Insights
The 23rd annual National Workers’ Compensation and Disability Conference® & Expo takes place Nov. 19-21 at the Mandalay Bay Resort and Casino in Las Vegas. The conference is produced by LRP Publications, which also publishes Risk & Insurance®.
With more than 30 breakout sessions scheduled, conference organizers have tried to address many of the challenges and solutions to workers’ comp and disability practitioners. Here’s an in-depth look at a handful of those sessions.
How to Reduce Costs With a Wellness Program
Friday, Nov. 21 from 10-11:15 a.m.
Work site wellness programs can improve health risk factors in employees that drive workers’ comp costs. That’s a fact that Karen Curran can prove definitively.
The director of health risk management for Pinnacol Assurance says an ongoing, five-year study of work site wellness programs implemented by policyholders of the Colorado insurer suggests that certain health issues increase the risks of an occupational injury and hike the costs of such claims.
“Workers’ comp adjusters have known this for years and years and years, but there was no statistically valid data to support their anecdote,” Curran said. “That’s what I’m going to bring to the table.”
The study is one of the few showing that modifiable health risks and management of comorbid conditions can impact the number and cost of occupational injuries. More importantly, Curran will outline a health risk management program she says can help reduce workplace injuries and severity. A key she says is focusing on people, not just safety.
“In workers’ comp we do a great job of promoting safety measures — ladder safety, use of harnesses, focusing on slips and falls,” she said. “But think about this: You’ve done all the ladder and scaffolding safety training you can. But you have a crew of 350-pound guys, which is not unheard of, but all your ladders are rated at a 250-pound level. What risk management needs to be taking place?”
Anyone contemplating a work site wellness program can benefit from the session, she said. While wellness programs have been around for years, they are new to the workers’ comp arena.
“One of the things that I think has happened is that wellness programs have resided within health insurance,” Curran said. “Over time we’ve seen that the health of employees is impacting productivity as well as other aspects of a business. All of a sudden, risk managers and others are saying, ‘this isn’t just related to our health care benefits, we’re seeing productivity and absenteeism impacted. We need to get employees healthier because they are not at work.’”
For a wellness program to be successful, Curran advocates speaking to employees in a way that is unintrusive. As she explains, it’s a matter of combining wellness with safety.
“In every business today, workers expect to work in a safe environment. They are used to having safety meetings where people say ‘wear your goggles, hard hats.’ That’s not intrusive to a person because people understand you want them to be safe,” she said. “We’ve used that infrastructure to bring wellness into this.”
Strategies for Overcoming Operational Challenges and Benchmarking Program Performance
Wednesday, Nov. 19 from 11 a.m.-12:15 p.m.
A landmark study of claims leaders released last year gave companies a unique opportunity to measure their core competencies, best practices, technology, medical management performance, and talent development against those of their peers. With phase two of the study set to be revealed soon, organizations have a chance to drill down to the challenges they face and potential solutions. But the session will provide more than just the latest data.
“We want to really take the data and talk about it from an operational perspective,” said Denise Gillen-Algire, director of managed care and disability corporate risk for Safeway Inc. and the study’s author. “What does it mean to you and what are we doing from an organizational standpoint to drive what we are doing now or in the future?”
Joining Gillen-Algire on the panel will be Jason Beans, CEO of study-publisher, Rising Medical Solutions; Ray Jacobsen, managing director of Aon Benfield; and John Smolk, principal manager of workers’ compensation for Southern California Edison. The session will be targeted to anyone involved in managing claims.
“The study was focused on claims leaders from various industries — insurance companies, self-insured employers, third-party administrators — anyone who manages claims that would like to consider some of the operational challenges and see what options are available in terms of what their peers are doing and be able to talk about them,” Gillen-Algire said. “The focus is not just the data, but what are some of the business impacts of the results of the study and what can organizations do with the information to improve operational performance.”
The study includes key takeaways/recommendations organizations can address to improve operational performance. Included are things such as investing in talent development and alternative recruitment strategies to drive claims effectiveness. Another is to consider using predictive analytics and workflow automation, something many organizations currently do not do.
One that can be easily implemented by companies both large and small is leveraging data warehousing capabilities. That can be an easier alternative to a complete overhaul of a company’s data systems.
“The challenges many claims organizations face is the many legacy systems and peripheral systems that help them manage daily claims. So if we use a data warehouse or some mechanism to integrate them, that’s a lot more cost effective and possible,” Gillen-Algire said. “There would be no way most small- to mid-sized companies could replace their claims systems — it’s cost prohibitive, and impacts operations for nine months to a year.”
Additional challenges that the panel will address relate to the Affordable Care Act. For phase two of the study, the 404 claims leaders included in the survey were asked questions about whether health care reform has had an impact on their operations.
‘When we included them in the survey, we didn’t anticipate much response because we figured it was too new,” Gillen-Algire said. “Surprisingly, 27 percent of respondents reported some impact on claims.”
The top answer was cost shifting to workers’ comp followed by increases in overall claims costs. Other impacts from the ACA noted were an increased number of claims and limited access to medical providers.
Health Care Reform: Strategies You Can Apply Now
Thursday, Nov. 20 from 1:30-2:45 p.m.
With 27 percent of claims leaders in a recent survey saying they are already feeling the effects of the Affordable Care Act, it is time for organizations to take action. That’s the idea behind this breakout session.
“There’s a lot of posturing and discussion around guessing, forecasting the impact of the ACA. This session will take a point/counterpoint perspective,” said Denise Gillen-Algire, director of managed care and disability corporate risk for Safeway Inc. “We will present some known data from studies/research, but will also take that information and say, ‘OK, now what do you do as claims organizations to mitigate the impact or prepare for it.’ That’s the key focus of the session.”
Gillen-Algire and William Wilt, president of Assured Research, will offer a high-level presentation targeted to workers’ comp practitioners who are concerned about the impact of ACA on their claims. They will provide the latest data as well as strategies companies can take immediately.
“One of the key strategies is how organizations think about their partnerships with physicians, because physicians and health care organizations are going to be the key to managing workers’ comp claims now, knowing that medical is almost 60 percent of claims costs,” Gillen-Algire said. “It is expected that will increase. So your relationship and how you manage physician contracts and networks is going to be important.”
Risk Financing: Selecting the Best Option for Your Company
Wednesday, Nov. 19 from 2:30-3:45 p.m.
Is retention worth the risk? That’s a question many companies are trying to answer as they seek ways to reduce their workers’ comp costs.
“The ideal target audience for the session is risk managers or CFOs from mid- to large-sized companies — companies that are big enough to consider retaining risk as part of their workers’ comp program,” said Mark Walls, vice president of communications and strategic analysis at Safety National. “
Walls will discuss the various risk financial options available and highlight the significant differences between guaranteed cost coverage, high deductible programs and self insurance. “For example, a lot of people think high deductibles and self insurance are the same thing,” he explained. “It’s really not. There are a lot of nuances that are very different. It’s really important for risk managers to understand those differences.”
The goal of the session is to help organizations find their ideal program. That may mean taking on more risk or staying with what they already have.
“The big reason to shift out of guaranteed cost coverage is the opportunity to save money,” Walls said. “Your guaranteed cost premiums are based on your anticipated losses plus built in expenses and profit for the carrier. So when you switch to some type of risk retention program, you have the ability to achieve savings not only from the expense side, but there is also a tremendous opportunity to achieve savings from your risk control practices by reducing your losses, which’ll have a direct impact to your bottom line.”
That can be a double-edged sword for some organizations, however. As Walls explained, taking on some of the risk requires a solid loss prevention program.
“If your losses go bad, are higher than expected, it could end up costing you more money,” he said. “Because of that, you’ve got to have the foundation of the very strong loss control/loss prevention program.”
Apply Post-Loss Claims Data to Structure Your Pre-Loss Safety Culture Program
Thursday Nov. 20 from 8:30-9:45 a.m.
Ten years ago, Cooper Standard Automotive had 647 open claims and reserves of up to $10 million. Today there are 121 claims with reserves under $3 million. What made for the change was looking at the company’s post loss information to prevent future injuries and changing the way things are communicated.
“I’m saying look at your loss run. Where are your costs? What department are they in?” said Patricia Hostine, global manager for workers’ compensation at Cooper Standard. “What I’m saying is, ‘look at what your payments are – pivot table – dissect them. What locations are struggling? It’s not predictive modeling; it’s just looking at what you are spending.”
Using your loss data information can help develop your brand for safety and workers’ comp. Having a brand for these programs is key.
“We don’t think about branding workers’ comp, but if you don’t have a brand, how do you know what your goals and objectives are?” Hostine said. “Branding and the workers’ comp piece never seem to be linked. I link them because if there is no brand, how do you know what your brand is? Otherwise it becomes the cost of doing business.”
The brand piece helps improve the way the safety message is communicated. Hostine said it’s important to restructure the language and use the right message to help injured workers navigate through the workers’ comp process and return to work sooner.
“How do you reply to your stakeholders? An employee is a stakeholder. So the most basic [way to restructure language]is ‘is it an injured worker? A claimant? Is it a slug?’” she said. “He is a valued employee … when did they go from employee to claimant because they are still an employee and even better, a valued employee.”
Post-Accident Drug Testing Prompts ADA Questions
A window manufacturer could be forced to pay a large jury award and punitive damages because of its drug testing policies. A U.S. appeals court has sent the case back to a lower court to determine whether the employer’s tests violated the Americans with Disabilities Act.
The case, Bates, et al. v. Dura Automotive Systems Inc., presents a cautionary tale for employers seeking to prevent workplace injuries through drug screening. While the federal District Court had ruled in favor of the plaintiffs, the appellate court’s decision leaves the fate of the employer in the hands of a jury.
Testing the boundaries of what constitutes a medical examination or disability-related inquiry, Dura’s drug testing policy requiring disclosure of prescription medications raised questions that should be decided by a jury, the 6th U.S. Circuit Court of Appeals said. In reversing the ruling by the U.S. District Court, Middle District of Tennessee that the ADA prohibited the testing, the appeals court said the key issue was whether Dura’s test was designed to reveal an impairment or information about the employee’s health. Determining that a jury could go either way on the question, the appeals court sent the case back to District Court.
Specifically, the higher court reversed, vacated, and remanded the portion of the lower court’s judgment on employees’ ADA Title I claims against Dura related to testing for legal prescriptions that had machine-operation warnings. The higher court reversed the district court’s conclusion that the drug-testing protocol was a medical exam or disability-related inquiry and vacated a related punitive damages award, with one judge dissenting (see box).
According to the appeals court, it was for a jury to determine whether the testing would reveal medical conditions or was narrowly focused enough to avoid discriminating against employees who take prescription drugs.
Under Equal Employment Opportunity Commission definitions, a “medical examination” is a procedure or test that seeks information about an individual’s physical or mental impairments or health. One of the factors bearing on this determination is whether the test is designed to reveal an impairment or information about employees’ physical or mental health.
The appeals court saidit was not clear whether Dura’s testing to find out whether employees were taking machine-operation restricted prescriptions was a medical exam.
“The urine test itself revealed only the presence of chemicals,” the appeals court held. “No one suggests that the consumption of prescription medications containing these chemicals constitutes protected medical information (or even an ‘impairment’).”
Nonetheless, there was evidence of inconsistencies between Dura’s written and actual drug testing policies. The appeals court cited reports of Dura’s alleged disparate treatment of individual employees, which it said could “evince a pernicious motive.”
“For instance, one plaintiff … claims that [Dura] asked her directly about her prescription medications and fired her for not reporting them, and [Dura] allowed another plaintiff to return to work despite testing positive,” the appeals court explained.
There were also lingering questions about whether the testing amounted to a disability-related inquiry.
Weighing in Dura’s favor was how it used a third-party contractor to conduct the tests. Specifically, the appeals court explained that the test, which required positive-testing employees to disclose medications to the contractor who then relayed only machine-restricted medications to Dura, did not have to reveal information about a disability.
“[Dura’s] third-party administered test revealing only machine-restricted medications differs from directly asking employees about prescription-drug usage or monitoring the same,” the appeals court explained. It noted that EEOC guidance defines a “disability-related inquiry” as a “question (or series of questions) that is likely to elicit information about a disability.”
The employees argued that the test was designed to seek information on possible weaknesses in workers and then exclude them from the workplace. But the appeals court held that a jury could conclude that Dura was trying to avoid gathering information about employees’ disabilities. Still, it noted that the testing went further than what the ADA’s drug test exemption for illegal drugs permitted.
Throughout its five-year history, the case has tested various provisions of the ADA.
In 2010, the appeals court held that only individuals with qualifying disabilities under the ADA could pursue a claim under a provision that prohibits employers from using qualification standards, employment tests, and other selection criteria that screen out individuals with disabilities.
In other words, employees in the case without disabilities could not establish that they came under the protections of that section of the law, and the appeals court held that the district court incorrectly classified their claims under that provision.
One appeals court judge in Bates, et al. v. Dura Automotive Systems Inc.,disagreed with the majority’s view of medical exams and disability-related inquiries.
“Some of the terminated employees provided [Dura] with doctor’s notes stating that the use of their prescription medication did not affect work performance,” Circuit Judge Julia Smith Gibbons wrote. “[Dura], however, refused to allow these employees to return to work unless they discontinued their medications regardless of whether the medications had any real likelihood of affecting their ability to perform the job safely.”
In Gibbons’ view, this tipped the scales toward a finding of discrimination because it disregarded medical advice.
Additionally, Gibbons felt that the majority took a “cramped view” of EEOC guidance on whether a test is designed to reveal an impairment of physical or mental health.
“An employer’s purpose in using a particular test must be considered in its ‘larger factual context,’” she explained. “In this case, that larger factual context includes how [Dura] used the test results.”
Gibbons also maintained that the tests had to be considered alongside Dura’s blanket-firing policy.
She questioned why the manufacturer would disregard the employees’ doctors who stated that the employees could perform their jobs safely in spite of their prescriptions.
A New Dawn in Civil Construction Underwriting
Pennsylvania school children know the tunnels on the Pennsylvania Turnpike by name — Blue Mountain, Kittatinny, Tuscarora, and Allegheny.
San Francisco owes much of its allure to the Golden Gate Bridge. The Delaware Memorial Bridge commemorates our fallen soldiers.
Our public sector infrastructure is much more than its function as a path for trucks and automobiles. It is part of our national and regional identity.
Yet it’s widely known that much of our infrastructure is inadequate. Given the number of structures designated as substandard, the task ahead is substantial.
The Civil Construction projects that can meet these challenges, however, carry a unique set of risks compared to other forms of construction.
“The bottom line is that there is always risk in a Civil Construction project. If the parties involved don’t understand what risk they carry, then the chances are there are going to be some problems, and the insurers would ideally like to understand the potential for these problems in advance.”
– Paul Hampshire, Vice President – Civil Construction, LIU
The good news is that recent developments in construction standards and risk management techniques provide a solid foundation for the type and risk allocation of Civil Construction projects they are underwriting. Carriers need to be able to adequately assess the client and design and construction teams that are involved.
For Builder’s Risk Programs, a successful approach prioritizes a focus on four key factors. These factors are looked at not only during the underwriting phase of the project but also in the all-important site construction phase, under the umbrella of a Risk Management Program, or RMP.
Four key factors
Four key factors that LIU focuses on in underwriting and providing risk management services on a Civil Construction project include:
1. Resource knowledge and experience: When creating a coverage plan, carriers work to understand who is delivering the project and how well suited key staff members are to addressing the project’s technical and management challenges. Research has shown that the knowledge and experience of those key players, combined with their ability to communicate effectively, is a big factor in the project’s success.
“We look to understand who is delivering a project, their expertise and experience in delivering projects of similar technical complexity in similar working conditions, even down to looking at the resumés of people in key positions,” said Paul Hampshire, Houston-based Vice President with Liberty International Underwriters.
2. Ground conditions and water: Soil and rock composition, the influence of ground and surface water, and foundation stability are key additional considerations in the construction of bridges, tunnels, and transit systems. If a suitable level of relevant ground (geotechnical) investigation and study has not been undertaken, or the results of such work not clearly interpreted, then it’s a red flag to underwriters, who would then question whether the project risk profile has been adequately evaluated and risks clearly and transparently allocated via suitable contract conditions.
“As we all know, ground is very rarely a homogenous element within Civil Construction projects,” LIU’s Hampshire said.
“It tends to vary from any proposed geotechnical baseline specification with the consequential potential for changes in behavior during construction. We need to understand who has assessed the condition of the ground, its behavior and design parameters when compared with a particular method of construction, and all importantly, who has been allocated the ground risk in a project and the upfront mechanisms for contractual ground risk sharing, if applicable,” he said.
Knowing how much water is associated with the in-situ ground conditions as well as the intensity, distribution and adequate accommodation (both in the temporary as well as in the permanent project configurations) of rainfall for a site location and topography are also key. Tunneling projects, for example, can be hampered by the presence of too much or unforeseen quantities of groundwater.
“In major tunneling infrastructure projects, the influence of in-situ groundwater pressures and /or water inflows is a major factor when considering the choice of excavation method and sequence as well as tunnel lining design requirements,” LIU’s Hampshire said.
According to a recent article in Risk & Insurance, tunneling under a body of water is one of the most challenging risk engineering feats. Adequate drainage layouts and their installation sequence for highway projects and, in particular, the protection of sub-grade works are also important. “But under all circumstances, we need to understand how the water conditions have been evaluated,” Hampshire said.
3. Technical Challenges: This risk factor encompasses the assessment of the technical novelty or prototypical nature of the project (or more often, specific elements of it) and how well the previously demonstrated experience of both the design and construction teams aligns with the project’s technical requirements and the form of contract determined for the project. The client can choose the team, but savvy underwriters will conduct their own assessment to see how well-suited the team is to technical demands of the project.
4. Evaluation of Time and Cost: With limited information generally provided, we need to be able to verify as best as possible the adequacy of both the time and cost elements of the project. Our belief is simply that projects that are insufficient in either one or both of these elements potentially pose an increased risk, as the construction consortium tries to compensate for these deficiencies during construction.
Small diameter Tunnel Boring Machine designed for mixed ground conditions and water pressures in excess of 2.5 bar.
In the 1990s and early years of this millennium, a series of high-profile tunnel failures across the globe resulted in major losses for Civil Construction underwriters and their insureds.
In the early 2000s, both the tunnel and insurance industries worked together to create new standards for high-risk tunneling projects.
A Code of Practice for the Risk Management of Tunnel Works (TCoP) is increasingly relied on by project managers and underwriters to define the best practices in tunnel construction projects. This process ideally starts at project inception (conceptual design stage or equivalent) and continues to the hand-over of the completed project.
LIU’s Hampshire said alongside TCoP, the project-specific Geotechnical Baseline Report and its interpretation and reference within the project contract conditions gives the underwriter greater clarity as to who recognizes and carries the ground risk and how it’s allocated.
“The bottom line is that there is always risk in a Civil Construction project,” Hampshire said. “Is the risk transparently allocated or is it buried? If the parties involved don’t understand what risk they carry, then the chances are there are going to be some problems, and the insurers would ideally like to understand the potential for these problems in advance,” Hampshire said.
Paul Hampshire can be reached at Paul.Hampshire@libertyiu.com.
To learn more about how Liberty International Underwriters can help you conduct a Civil Construction risk assessment before your next project, contact your broker.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.