The latest edition of Cavalcade of Risk, hosted by Dennis Wall at Insurance Claims and Issues, is up. It’s the risk-free option for checking out a potpourri of interesting posts related to risk.

And while we are on the topic of risk, let’s give a Bronx cheer for Jamie Dimon, CEO of JP Morgan Chase, for the work of his risk management team. The bank’s $2 billion plus loss was the result of “sloppy” and “stupid” trading, a “mistake” which involved “bad judgment,” and which caused losses that are “very unfortunate” and that come at an “inopportune time,” but which in any case are not “life threatening.” The risk management team is supposed to prevent such problems, not perpetrate them. Oh, well, that’s just the risk you take when your frisky risk managers manage risk.

For those who seek risk conundrums, workers comp is fertile ground. From a micro perspective, the unfortunate Ronald Westerman, a paramedic for a California ambulance company, embodies many of the elements that result in sleepless nights for claims adjusters and actuaries: Westerman had an inordinately long commute (2.5 hours each way!), a sitting job with periodic lifting (inert patients and medical equipment), along with the comorbidities of hypertension, obesity and diabetes. In two years of ambulance work, Westerman gained 70 pounds, thereby compounding the co-morbidity issues.

In March 2009 Westerman returned home from a 36 hour shift and suffered a stroke. His doctor determined that the stroke was work related and that Westerman was permanently and totally disabled. He was 50 years old. While there was some dispute over the cause of the stroke, an independent medical evaluator surmised that it was caused by a blood clot moving through a hole in Westerman’s heart to his brain, otherwise known as in-situ thrombosis in his lower extremities – a direct result of too much sitting. (We blogged a compensable fatality from too much sitting here.)

At the appeals level, compensability centered on the performance of a shunt study – an invasive test – that would have determined whether the blood clot caused the stroke. Westerman was willing to undergo the test, but his wife refused to authorize it, due to his fragile health. If there was no hole near the heart, the entire theory of compensability would be disproven; the stroke would not have been work related.

Had the defense attempted to force the test issue, it would have given rise to yet another conundrum: was refusing an invasive test the equivalent of “unreasonable refusal to submit to medical treatment”? Indeed, does a diagnostic test, by itself, meet the definition of “treatment”? Fortunately for Westerman, the defense requested – but did not attempt to require – the shunt test.

Managing Comorbidities
Our esteemed colleague Joe Paduda, who blogs over at Managed Care Matters, provides the macro perspective, one which is unlikely to aid in the sleep patterns for actuaries. He reports on the impact of comorbidities on cost from the recent NCCI conference:

The work done by NCCI was enlightening. 4% of all claims (MO and LT) between 2000 – 09 had treatments, paid for by workers comp, for comorbidities, with hypertension the most common. These claims cost twice as much as those without comorbidities [emphasis added].

It is beyond doubt that comorbidities make work-related injuries more expensive. But what, if anything, can claims managers do about this? In the Westerman case, there is not much to be done, as the stroke resulted in a permanent total disability. But in other cases where there is a path to recovery and even return to work, adjusters should flag these claims for early, intensive intervention, including psychological counseling and support for weight loss and other life style adjustments. To be sure, this would increase the upfront costs, but these steps just might go a long way toward mitigating the ultimate cost of the claims.

As is so often the case in workers comp, it’s “pay me now” and “pay me later.” To which I can only say to my claims adjuster and actuary friends, “sweet dreams!”

We begin the week on a somewhat bizarre note, as Donald Duck does safety in this vintage 1959 cartoon clip entitled “How to Have an Accident at Work.” When it comes to safety, Donald is everyone’s nightmare worker. For those of us in the workers comp field, this may seem more horror film than cartoon, but Donald, unlike ordinary workers, is literally indestructible.

This clip was a sequel to “How to Have an Accident in the Home”

Hank Stern of Insure Blog has hosted the latest edition of the health work review. It’s a bouquet of wildflowers, well worth a few minutes of your time. And if you think palliative care is just for the terminally ill, check out Diane Meier’s inspiring post, which reads like a sprig of lilacs in a mason jar on the kitchen table.

These are the calm days before the coming storm. For most employers, workers comp falls under the “business as usual” category. If a worker is injured, the standard protocols are followed: secure medical treatment; report the claim; if it’s convenient and not too difficult, bring the worker back on temporary modified duty. Sure, you will eventually pay for the losses in the form of higher premiums. But rates have been low for a long time. As for the experience mod, how high could it possibly go?

Pretty high! NCCI’s new rating plan will roll across the country throughout 2013, beginning in January in a handful of states and finishing up in Utah at the year’s end. Employers who pay attention to these things know that primary losses – the most expensive dollars in every claim – are doubling from the current cap of $5,000 to $10,000 in 2013, and eventually going up to $15,000 by 2015. It sounds a bit ominous, but it’s still way off in the future, right?

The future is now. Most employers are currently operating in policy year (PY) 2012, which began sometime between January 1 and today. The losses under this policy will not be included in the experience mod until PY 2014 and they will remain in the calculations through PY 2016. In other words, the increased primary losses in these calculations have already been incurred – not only for PY 12, but going back as far as PY 09. The future rating plan, in other words, is not only with us, it’s behind us!

What Should Be Done?
Employers who want to stay on top of their insurance costs need to ratchet up their loss control programs. The best injury is the one that never occurs. And for those moments when a safety program fails, employers need to enhance their post-injury management programs, which should include:
- Employee awareness on hazards and safety
- Supervisor training in immediate post-injury response
- A relationship with a quality occupational medical provider
- Prompt reporting of all injuries to the insurer
- An effective and aggressive temporary modified duty program
- Accident analysis to prevent recurrence

To be sure, these key elements are no different from what was needed under the current rating system. But the situation is about to change dramatically. With primary losses doubling and eventually tripling, the need to manage claims from day one has become much more important. Under the current system, the “heavy losses” end at $5,000. Going forward, the heavy losses push much deeper into each claim and will come back to haunt employers in future experience mods.

Waiting Periods: No Time for Waiting!
For employers in states managed directly by NCCI, there is an opportunity to reduce primary losses substantially. If injured employees can be brought back to work – in regular or modified jobs – before the end of the waiting period, the medical-only costs associated with the claim will be discounted by 70%. Waiting periods vary from state to state, with the shortest running for three days and the longest for seven. Once the waiting period is over, out-of-work employees are eligible for indemnity (lost wage) payments and the discount disappears.

So here is some free – and, if I must say so, extremely valuable – advice: do everything humanly possible to bring injured workers back to work before the end of the waiting period. Even if medical bills run to thousands of dollars, the total amount of these primary losses will be reduced by 70% – if, and only if, return to work occurs before indemnity kicks in.

This may not seem important today, but once the experience rating sheets for PY 2014 and beyond start to hit the your desk, you will see the wisdom of this preventive action. The experience rating changes may still be months away, but you are already operating under the new rules. For those who remain oblivious to what is already happening, the future may be dark and ominous indeed.