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PEO Risk Management Advisor - August 2011
The document contains three summaries: 1) The first summary discusses the importance of transparency in medical bill review programs. It notes that net savings, not ROI or other metrics, best indicates program performance. Without transparency into clear data and overall results, bill review programs cannot be optimally effective. 2) The second summary provides information on heat-related illnesses for workers and others. It identifies heat cramps, heat exhaustion, and heat stroke as the main forms of heat illness, with heat stroke being life-threatening. Risk factors include heavy work, protective clothing, poor physical fitness, and certain medical conditions. 3) The third summary announces a free webinar series from the Certification Institute on
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PEO Risk Management Advisor - August 2011
- 1. PEO ADVISOR RISK MANAGEMENT © Praxiom Risk Management August 2011 Features The Importance of Transparency in Medical Bill Review - Jason Beans, CEO, Rising Medical Solutions Medical bill review can be a powerful tool in the claims management arsenal, if used properly. The savings achieved through a well run program directly impacts the bottom line, reducing claims costs and increasing surplus. The process is much more technical and complex than most people realize and, due to that, I see up to a 20% difference in overall program savings in many states. That difference makes a huge impact on whether your program is performing or underperforming. Data analytics can also dramatically impact your results, and this should be part of any good bill review program. Nowhere else can such a wide array of data be produced that allows for comprehensive claims analysis and alerts. The capabilities of data analytics are infinite and underutilized. Companies need to start doing a better job of flagging claims that need intervention, setting reserves with predictive models, recognizing fraud and identifying the best treatment patterns. The problem is that the optimal performance of a bill review program requires one critical component: “transparency.” However, instant access to clear data is too often the exception, not the rule. One area that frequently lacks transparency is the reporting of results. I often see data broken into micro-bites that hide or mislead the client about their program’s overall results. The most important number to judge your bill review program by is not ROI, or PPO penetration, or even the bill review program fee – it is the net savings (total savings less the bill review fees). Let me give two scenarios: Would you rather have a $20 to $1 ROI or a $6.67 to $1 ROI? Sounds like a simple question, but the out- comes are actually not what you’d expect. In scenario A: Imagine a bill with $1,000 in charges, $200 in fee schedule discounts and a $10 bill processing fee (20 to 1 ROI). The resulting bill cost is $810, with a net savings of 19%. In scenario B: You get an additional $200 discount over fee schedule (e.g. PPO, nego- tiations) at a 25% of savings rate, bringing the total savings to $400 for $60 in fees ($6.67 to $1 ROI). The resulting bill cost is $660, with a net savings of 34% – demon- strating why it’s net savings that is really the key metric to give you the best indica- tion of program performance. Continue Reading... Avoiding Heat Illnesses - John Conrad Whether you are a worker or weekend warrior, hot and humid conditions can cause heat illnesses. Each year, workers, home owners and athletes experience heat re- lated illnesses that in some cases result in deaths. Confirmed heat related death sta- tistics for workers average about twelve per year. During an eleven day period of 100 Professional Employer 2011 Conference degree temperatures, July 16 through 27, 2006, heat was September 12-14, 2011 attributed to 86 deaths in California. JW Marriott Orlando Grande Lakes 4040 Central Florida Parkway Those most affected are workers exposed to hot and humid Orlando, FL 32837 conditions, especially those performing heavy work tasks or using bulky protective clothing and equipment. Some work- www.napeo.org/PEM2011 ers might be at greater risk than others if they have not built up a tolerance to hot conditions, are in poor physical condition, are older, or if they have heart disease, high blood pressure, or are taking certain medications. So, what are heat illnesses? There are three major forms of heat illnesses: heat cramps, heat exhaustion, and heat stroke, with heat stroke being a life threatening condition. Continue Reading... © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 08/11
- 2. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk Management Free Webinar Schedule The Certification Institute’s PEO WC Risk Management Webinar Series www.certificationinstitute.org The Certification Institute’s free webinar series returns in August with another full schedule. Participa- tion in June and July was very high, with over 300 individuals representing 75+ PEOs. The webinars are short, 1-hour courses that cover important tactical topics for PEO operators. The webinars also provide access to resource material and industry operational statistics that won’t be found elsewhere. While sponsored by the CI, the webinars are being hosted by Certified Risk Managers from the PEO consulting firm of Praxiom Risk management. New Webinar in August: Underwriting Profitable PEO Clients Tuesday, August 9th and 23rd: 2:00 to 3:00 (ET) http://peounderwriting.eventbrite.com At the conclusion of the webinar you will have an understanding of: Obtaining the right underwriting data Hazard Groupings and client classifications When to pre-inspect Loss Ratio and EMR impact on renewal pricing Retention and Rate Level objectives Returning Webinars Workers Compensation Experience Mod for PEOs – Understanding the EMR Worksheet Thursday, August 4th and 18th: 2:00 PM to 3:00 PM (ET) The key components of the NCCI experience mod and calculation Interpretation of codes and abbreviations Recommendations for influencing a reduction in the EMR Workers Compensation Experience Mod for PEOs – True Cost of Client Claims Thursday, August 11th and 25th: 2:00 PM to 3:00 PM (ET) Minimum and controllable EMR Premium associated with controllable EMR The ‘true” cost of a claim A single client’s impact on EMR and premium Measuring PEO WC Performance Tuesday, August 16th and 30th: 2:00 to 3:00 (ET) Requirements for data analysis Ideal Risk Management Information System (RMIS) capabilities Key WC metrics to monitor and timing Best client level reports Best PEO level reports To view all the current webinars and register, follow the link below: www.peoriskmanagement.eventbrite.com © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 08/11
- 3. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk Management Measuring PEO Performance Evaluate your PEO’s practices vs CI This section is dedicated to those PEOs that manage their Workers certification guidelines... Compensation program through a Large Deductible or captive ar- As we review the CI’s best practices for PEO risk management in each rangement, and utilize positive results as a profit center. of their 5 categories, evaluate how your PEO stacks up by answering Premium these questions: There are many definitions of WC premium that can be confusing and are often times mixed up erroneously. Here is a good list of Risk Control Assessment the most common premium definitions. Manual Premium = (payroll/$100)/ manual rates Compliance with Risk Control Requirements—Have you established written procedures for requiring the Client to comply with “critical” Subject Premium = manual premium * increased limit charge (this recommendations? Do your procedures should include: is also the premium that is “subject to” the EMR Communication requirements to the client Standard Premium = Subject premium * EMR (also called Modified Target dates for compliance Premium) Taking appropriate action if Client fails to comply Deductible Premium = Standard premium * deductible factor Documenting the action(s) taken Discounted Premium = Standard premium * discount factor New Client Needs Assessment— Has the PEO established written procedures for conducting a “needs assessment” of each new client? Estimated Premium = Discounted premium + Taxes + assessments Do you produce a service plan that is consistent with the needs as- Final Premium = Premium determined after audit sessment? Do the Needs Assessment and Service Plan consider Cli- Other forms of Premium used in Retrospective Plans include: ent requests for specific services and requirements included in the CSA? Do the procedures include how the Service Plan will be docu- Basic Premium = Standard premium * Basic factor (this is the por- mented and used? tion of the retro plan that covers admin costs, overhead, profit, and insurance charges) Providing Appropriate Risk Control Services— Has the PEO estab- lished written procedures for delivering Risk Control services to Cli- Minimum Premium = Standard premium * minimum factor (this ents consistent with Service Plans? represents the least amount you potentially pay on a retro plan) Accident Investigation— Have you established poli- Maximum Premium = Standard premium * maximum factor (this cies requiring investigation of employee accidents represents the most you potentially pay on a retro plan) when they result in a work related injury and subse- quently reported as a claim? Do the policies describe which accidents will be investigated (med only, lost Workers Compensation Highlights time, specific injuries, etc)? Have you identified what method will be used for investigation (telephone vs on-site) and the The WC Benchmarking Analysis format of documenting the investigation results? By John Keller, CRM ARM CIC AAI Certificate Tracking Confirmation - Do you have a tracking process in A Benchmarking Analysis is one of the most beneficial tools for place for clients with material contingent workers’ compensation evaluating operational efficiencies, yet it is significantly underuti- exposure? lized. Background Investigations—Has the PEO required as part of the When a Benchmarking Analysis is completed for a company’s service plan and CSA that the clients cooperate with the PEO in con- Workers’ Compensation program, there are three primary areas of ducting pre-employment and/or post-employment background inves- focus: Accident, Post-Injury Cost Management, and Organizational tigations? Is an MVR review, where applicable, a part of the back- Procedures. Each of these three components can have numerous ground investigations? ratios and statistics that can be used for comparison. Which ratios Claims Review— Does the PEO review and document, at least are used typically depends on the industry and the type of work monthly, the claims experience and resulting recommendations for being performed. Below is an outline of the most common statis- clients with claims frequency or severity issues? Do you use the re- tics used in each component of a Benchmark Analysis with a brief sults of these reviews to implement client-specific corrective actions description. such as placement on the watch-list, providing risk control services, The Accident Component and/or terminating the client? Frequency Rate – is a measure of the number of claims (anything >$0 paid) divided by a predetermined measure. Insurance compa- nies most commonly express this as… Continue Reading For more on CI requirements visit: www.certificationinstitute.org © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 08/11
- 4. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk Management Benchmarking The Benchmarking section is used to outline various industries in terms of their Workers Compensation risk factors, historical claims statistics, and key loss sources. Benchmarking statistics are obtained from a variety of credible sources including the largest WC insurance companies in the U.S. and The Bureau of Labor and Statistics. The statistics used are aggregated from all states and averaged over a 5 year rolling period. All stats below are from claims incurred between 1/1/06—12/31/10. This month we continue our look at hospitality services, with a review of SIC 5461—Retail Bakeries. Bakeries SIC 5461 - Top 5 Loss Sources % Total Incurred Industry SIC: 5461 - Retail Bakeries Machine All Other As of: 4/30/2011 7% 17% Material Handling Period: 1/1/06 - 12/31/2010 31% Average Incurred $2,298 Struck Average Paid $1,615 By/Against 8% % claims > $10,000 5.3% Slip/Fall - Same Slip/Fall - % Incurred >$10,000 75.3% Elevated Level 28% % claims >$25,000 2.3% 9% % Incurred >$25,000 56.2% 0 -3 4 - 10 11+ First Report Mean Median Days Days days Timeliness 7.61 1.0 76.4% 13.2% 10.4% Key Metrics - SIC 54xx Loss Sources Average Inc. % Inc % Claims Frequency Rate 2.3 Material Handling $ 5,855 31.1% 12.2% Loss Rate $0.88 Slip/Fall - Same Level $ 3,158 28.1% 20.4% Slip/Fall - Elevated $ 8,603 9.6% 2.6% NAIC 311811 Struck By/Against $ 821 8.0% 22.3% BLS Stat 2006 2007 2008 2009 Machine $ 9,869 6.7% 1.6% Recordable 1.8 2.9 2.8 1.6 All Other 16.7% 41.0% DART 1.2 1.8 2.1 0.9 Rate Definitions: Frequency Rate = # non $0 claims / payroll per $1M Recordable = # OSHA recordable incidents / 200,000 hours1 Loss Rate = Total Incurred $ / payroll per $100 DART = incidents w/ Days Away, Restricted duty or job Transfer / 200,000 hours1 1—200,000 hours represents the amount of time worked by 100 WSE in one year © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 08/11
- 5. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk Management Benchmarking The Benchmarking section is used to outline various industries in terms of their Workers Compensation risk factors, historical claims statistics, and key loss sources. Benchmarking statistics are obtained from a variety of credible sources including the largest WC insurance companies in the U.S. and The Bureau of Labor and Statistics. The statistics used are aggregated from all states and averaged over a 5 year rolling period. All stats below are from claims incurred between 1/1/06—12/31/10. This month we continue our look at hospitality services, with a review of SIC 5421—Meat and Fish Markets. Meat and Fish Markets SIC 5421 - Top 5 Loss Sources % Total Miscellaneous Incurred Industry SIC: 5421 - Meat Markets 5% All Other As of: 4/30/2011 Vehicles 5% Period: 1/1/06 - 12/31/2010 12% Workplace Violence Average Incurred $7,351 36% Average Paid $4,367 % claims > $10,000 7.6% % Incurred >$10,000 91.4% Slip/Fall - Elevated % claims >$25,000 4.7% 29% % Incurred >$25,000 84.2% Slip/Fall - Same Level 13% 0 -3 4 - 10 11+ First Report Mean Median Days Days days Timeliness 6.03 1.0 75.4% 14.0% 10.5% Key Metrics - SIC 54xx Loss Sources Average Inc. % Inc % Claims Frequency Rate 2.3 Workplace Violence $ 226,578 36.1% 1.2% Loss Rate $0.88 Slip/Fall - Elevated $ 27,865 28.8% 7.6% NAIC 445210 Slip/Fall - Same Level $ 4,605 13.2% 21.1% BLS Stat 2006 2007 2008 2009 Vehicles $ 30,412 12.1% 2.9% Recordable 2.9 4.3 2.8 3.6 Miscellaneous $ 9,327 4.5% 3.5% DART 1.3 2.6 1.9 1.2 All Other 5.4% 63.8% Rate Definitions: Frequency Rate = # non $0 claims / payroll per $1M Recordable = # OSHA recordable incidents / 200,000 hours1 Loss Rate = Total Incurred $ / payroll per $100 DART = incidents w/ Days Away, Restricted duty or job Transfer / 200,000 hours1 1—200,000 hours represents the amount of time worked by 100 WSE in one year © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 08/11
- 6. PEO RISK MANAGEMENT ADVISOR © Praxiom Risk Management Stay Connected... If you haven’t already joined, there is now a group on LinkedIn dedicated to PEO Risk Management. All PEO operators and Risk Managers are encouraged to join and participate in the online discussions. Or, you can simply follow the news posts that relate to PEO, Risk Management, and Workers Compensation. Click here to go to the PEO Risk Management group on LinkedIn and join. With PEO Risk Management professionals averaging 20 years of experience and encompassing a broad range of industry expertise, Praxiom Risk Management is committed to providing a wide range of resources to help PEOs mitigate risk and grow their Workers Compensation profit center. This PEO RM Advisor is a monthly e-newsletter designed to keep PEO executives and Risk Manage- ment professionals informed of relevant topics in the area of PEO risk management. Sharing infor- mation and best practice through e-newsletters is one of the many ways we help support PEO or- ganizations' risk management efforts. If you would like to contribute industry specific content or articles for publication in the areas be- low, you may submit them to the Editor at: RiskAdvisor@praxiom-rm.com. Loss Control Claims Management Performance Metrics RM Information Systems Policy Administration Carrier Relationships Industry Certifications Up Next… We’ll continue benchmarking the hospitality industry with an in depth look into the WC results of: 5511—New/Used Car Dealers 5571—Motorcycle Dealers © 2011 P rax iom Risk Management LLC www.prax iom-rm. com Prax iom Risk Management is a Certified Risk Management and Safety P rofessional firm. 08/11