All posts tagged workers’ comp

Agency Recommends Further Rate Cuts for California Employers

3d illustration of scissors cutting golden dollar sign, over white background

The reforms that were ushered in by the state Legislature in 2012 seem to be paying off, with the Workers’ Compensation Insurance Rating Bureau of California recommending that benchmark rates be cut by an average of 5% in July.

The Rating Bureau has forwarded its recommendation for a mid-year rate cut to the California Department of Insurance, and the insurance commissioner will hold a hearing on the filing likely in May. The filing was made in reaction to lower-than-expected medical cost development, as well as the cost of indemnity benefits per claim.

The Rating Bureau is recommending that the average rate that California employers pay for workers’ compensation coverage be adjusted downward to $2.30 per $100 of payroll. That’s 5% lower than the official benchmark rate as of Jan. 1 and 10% lower than the average rates that insurers had on file on Jan. 1.

If the insurance commissioner agrees with the recommendation and he reduces the official benchmark rate, the new rate will apply starting July 1.

Insurers are free to file their own rates and they use the official benchmark rate as a guide-post for pricing their policies.

Rates will vary across industry sectors, and more often carriers have been adding surcharges on policies for employers in certain regions, such as Southern California.

Besides some costs decreasing, the Rating Bureau noted that there are also some upward cost pressures – such as insurers’ overhead costs of adjusting claims, and fees paid to outside attorneys, experts and investigators. There was also a 91% increase in lien filings in 2015.

SB 863, passed by California legislators in September 2012, increased benefits for injured workers as of January 2013 and included a number of changes intended to reduce system costs.

Those included an independent review process for medical treatment and billing disputes, fee schedules for home health care, language interpretation and other comp-related services, and fees for lien filings.


Identifying Problem Workers’ Comp Claims, Fraud with Predictive Modeling


With decades of information in their databases, many insurers have started using those statistics to their advantage to intervene earlier in problem claims and to identify potential fraud.

With years of data to rely on, insurers have identified certain triggers that can indicate that a claim may require additional intervention and more hands-on management. The predictive modeling program will alert a claims adjuster when it identifies certain parameters or events.

This early identification of problem claims is helping employers and insurers achieve better outcomes for injured workers, as well as save money and time. As the trend continues, it should help reduce claims costs by eliminating more fraud and also lower the cost of some claims and reduce the time some injured employees are away from work recovering.

Conventional wisdom in workers’ comp is that 20% of the claims account for 80% of the losses. Efforts such as early claims reporting, medical case management and return to work have long proved essential for reducing claims.

Predictive modeling aims to improve the ability of insurers to identify claims that require early intervention.

Insurance predictive modeling applies statistical techniques and algorithms on insurance and claims data to develop variables that predict the likelihood of a particular situation (like a worker staying off work for longer than average).

While predictive modeling has been successful used for years by automobile insurers, it’s been slower to catch on in workers’ comp, particularly because it requires multiple data sets for which data availability can be scarce.

Predictive modeling begins with the first notice of loss and then continues to monitor for certain trigger points and specific actions during a claim’s lifecycle.

In the case of a potentially fraudulent claim, some of these could include the number of prior injury claims submitted by a claimant and the amount of time that an allegedly injured claimant is out of work.


Employer tackles medical costs

Supermarket chain Ahold USA, a self-insured employer, started using predictive modeling in early 2012.

Ahold’s model uses claim characteristics, medical transaction details, and other data sources to identify factors that are predictive of higher claims costs.

Some of the indicators the company uses include multiple visits to doctors and the use of certain prescription drugs.

The model then prioritizes claims that need special handling and medical case management. This helps injured employees receive appropriate medical care to reach maximum medical improvement and return to work sooner.

The company’s predictive modeling can indicate whether a claim has the propensity to develop adversely. It can also be used to evaluate the likelihood that a claim will result in litigation.

It may also provide the ability to identify workers’ compensation claims with a greater likelihood of surgery. Such tools allow adjusters to develop case strategies at first notice and gain control over the claim as it progresses.

The results for Ahold have been positive, resulting in a lower workers’ comp expenditures in “low seven digits.”


Insurer birddogs fraud faster

National insurance company Chubb Corp. has been using predictive modeling for both its workers’ comp and automobile claims.

At Chubb, predictive modeling begins with the first notice of loss and then continues to monitor for certain trigger points and specific actions during a claim’s lifecycle, such as the number of prior injury claims submitted by a claimant and the amount of time that an allegedly injured claimant is out of work.

The model flags claims based on patterns that have historically proven fraudulent and patterns that the claims adjuster may not detect.

If a claim is flagged, the adjuster can investigate further and/or monitor the claim. If certain warning signs appear, the claim is referred to Chubb’s insurer’s special investigation unit. At that point the SIU can work with the claims adjuster to investigate further.

Before predictive modeling at Chubb, it could take up to 180 days to spot potentially fraudulent workers’ comp claims and assign them to the SIU. Now that number is down to six days.

Also, predictive modeling has led to a significant increase in accepted referrals to the insurer’s SIU. As a result, the number of investigation days has decreased, and the company has achieved significant cost savings.


How to Reduce Your Liability during Company Holiday Party

If you’re throwing your staff a Christmas party this year, don’t forget that holiday soirees also mean increased liability for workers’ comp, harassment and third-party injuries.

For example, did you know that if one of your staff is injured at your holiday party it could trigger a workers’ comp claim, since it could be considered “within the course and scope of employment”?

Workers’ comp and employment law attorneys have different opinions about this, but the overriding consensus is that some of it could become a workers’ comp claim if:

  • Attendance is mandatory, regardless of whether it’s expressed or implied.
  • The party is held during working hours.
  • The event is held on your premises.
  • Employees are recognized with rewards, or if you give out bonuses at the event.
  • The event includes vendors or customers.


The rules for this can vary depending on the state and how broadly the courts define “scope of employment.”

For example, in Minnesota three years ago, an employee had been out on medical leave for a non-work-related injury, and she went to the company’s annual dinner after she received an invitation and the promise of a turkey.

After she had collected her turkey, however, she slipped, fell and injured herself in the parking lot. The state supreme court found that the employer had directed the employee to come to the premises to obtain the turkey, which the court noted was a form of bonus compensation.

In California, all company-sponsored events fall within the course and scope of employment, because they benefit the employer by improving employee morale and furthering employer-employee relations.

But the biggest issue is liability, and a case in 2013 should make you think twice before serving alcohol – or even allowing your staff to bring their own booze.

In the case of Purton vs. Marriott International, Inc. the California Supreme Court found the employer, hotel chain Marriott, liable for the actions of an employee who took his own liquor to a company party, drove home drunk and killed another motorist.

The court found that as long as the proximate cause (intoxication) was within the course and scope of employment, the employer could be liable.

Here are 10 tips to help ensure that cheer does not turn into a legal nightmare:


  1. Attendance must be voluntary. To make sure that your employees understand this, clearly state it in the invitation and any announcements you may post about the party in your workplace.
  2. Hold your event after working hours and at a venue other than your office. This reduces the likelihood the party will be perceived as work related.
  3. Also, don’t try to coax employees to come by implying that attendance can help them advance their careers or standing in the office, or that not coming would be viewed by other staff as the employee not being a team player.
  4. Don’t give out awards, bonuses or any types of recognition that would indicate that they are there for business reasons.
  5. Strongly consider NOT inviting vendors, customers or others with whom your company conducts business.
  6. Tell your employees that they can bring their spouses and significant others.
  7. Remind employees that normal workplace standards of conduct are to be respected. Remember, when alcohol is served at parties, it may reduce inhibitions and can lead to sexual harassment or discrimination claims.
    If you do receive a complaint about discrimination or harassment, don’t shrug it off. Take it seriously and conduct a proper investigation and interview the employee complaining, the one who is accused and any witnesses.
  8. If you want to truly reduce your risk, you should limit or not serve alcohol. Whatever you do, don’t have an open bar. Close the bar at least one hour before the end of the party. Also, hire a professional bartender who knows when to cut people off.
    Arrange for no-cost transportation for any employee who should not drive home. If you do plan to have alcohol, also serve plenty of food.
  9. Tell employees not to post pictures from or comments about your company party on social media without a policy in place.
  10. Discuss your exposure with us to make sure that you are properly covered for any liabilities that may arise out of the function. Call us! We are always here to help.


company christmas party

Medical Marijuana Complicating Workers’ Comp

While insurers and employers have expressed concern over the rise of medical marijuana in the context of workers’ compensation, some experts and new research suggest it could reduce the use of controversial and highly addictive opioids to treat pain.

There is a growing consensus in the workers’ comp community that any treatment that can reduce the use of opioids is worth considering. Several studies have found that long-term use of opioids to treat pain associated with workplace injuries often ends up increasing the cost of claims, as well as keeping many workers off the job longer than usual.

But there are also concerns about using marijuana to treat injured workers: It’s still illegal under federal law, and it may be detrimental to a worker’s efforts to return to work after the injury has healed.

In August, the Minnesota Department of Labor and Industry adopted a rule establishing criteria for long-term opioid treatment that also said medical marijuana is not an “illegal substance” for injured workers under state law. It remains illegal under federal law, however.

The U.S. Food and Drug Administration has not approved marijuana for any medical condition, so it’s difficult to compare its effects with other drugs used in workers’ comp. Also, there have been few studies looking at the efficacy of marijuana in treating pain.

Insurers are often loath to pay for a prescription for a drug that’s illegal under federal law.

So for now, state courts seem to be the battleground over the use of medical marijuana to treat injured workers.

In New Mexico, the state Court of Appeals has ruled three times since 2014 that medical marijuana is “reasonable and necessary” for injured workers, and that it should be covered under workers’ comp.

In each New Mexico case, physicians supported the use of medical marijuana when opioids and other medications failed to relieve injured workers’ chronic pain.

In the most recent case, Sandra Lewis vs. American General Media and Gallagher Bassett, the injured worker’s health care provider opined that the “benefits of medical marijuana outweigh the risk of hyper doses of narcotic medications.”

There have been no similar cases brought in other states with medical marijuana laws in place, but it’s reasonable to assume that the courts would side with injured workers in light of state law.


Do employers, insurers have to pay for claimant’s medical marijuana?

It has yet to be determined whether the answer is affected by state or federal regulations. Even in states in which marijuana use is legal for medical purposes, laws may not require insurers to pay for it.

In a situation in which the employer or insurance provider is located in a state that does not allow for medical marijuana and chooses to pay for its use for an employee in a state in which it is allowed, the employer may find themselves in violation of their own state’s laws, as well as federal law.

In the states in which it is currently legal to use marijuana for medical purposes, legal protection is afforded to patients diagnosed with a variety of illnesses. Generally, these include pain relief, particularly of neuropathic pain, nausea, spasticity, glaucoma, and movement disorders.

Marijuana is also a powerful appetite stimulant, specifically for patients suffering from HIV, the AIDS wasting syndrome, or dementia. Legislation varies widely, and can be as vague as that in California, which reads, “Any debilitating illness where the medical use of marijuana has been ‘deemed appropriate and has been recommended by a physician.’ ”

Scientists have confirmed that the cannabis plant contains active ingredients with therapeutic potential for relieving pain, controlling nausea and stimulating appetite, and in the workers’ comp arena, chronic – and especially neuropathic – pain stands out as an issue that insurers must address.

On the other hand, “Marijuana has the potential to cause or exacerbate problems in daily life, including increased absences, tardiness, accidents, workers’ compensation claims and job turnover,” according to the National Institute on Drug Abuse.

Marijuana is classified as a Schedule I drug, meaning it has a high potential for abuse and no currently accepted medical use in treatment in the United States.


What Employers Can Do

  • All employers should have a drug policy in place, which must be re-evaluated on a consistent basis to ensure compliancy with state and federal laws.
  • Paying for medical marijuana under workers’ compensation is a gray area and could have repercussions. Until the laws are clarified, payment should be under the direction of the state board. In addition, each case must be reviewed individually.
  • When an employee returns to work after being treated with marijuana, keeping them and other employees safe should be the primary concern. Although this should also be considered when an employee is treated with any medication, extra caution is needed due to the fact that marijuana use is still illegal under federal law.
  • Employers should review their workplace and employment policies to incorporate changes as they occur.


Bureau Recommends 12.2% Rate Cut for 2016

California’s workers’ compensation statistical agency will recommend that benchmark rates be reduced by an average of 12.2% for policies incepting at the start of next year.

The rate filing is actually for a 0.8% reduction, but that comes after benchmark rates were cut 10.2% on July 1, so that’s why the average rate reduction for January policies is higher.

The Workers’ Compensation Insurance Rating Bureau will file the recommendation with the state insurance commissioner, who has the final word on rates in California. He can either choose to approve or reject the rate, and if he does the latter he can set the rate himself on the advice of Insurance Department actuaries.

And this time he may actually go against the filing, because the employer and labor members of the Bureau’s Governing Committee recommended a rate reduction of 6% from July 1 levels, which would have translated into an 18% reduction for policies incepting on or after Jan. 1, 2016.

The filing will propose benchmark rates that average $2.45 per $100 of payroll, but that is an average across all industries and the rate change will vary from sector to sector depending on overall claims costs trends.

Also, whatever the benchmark rate is set at, insurers can still price their policies as they see fit. They use the benchmark rate as a guide for setting their own rates depending on their own experience.

The reason for the rate reduction is that the reforms that were ushered in by legislation in 2013 have proven to be more effective than originally anticipated, according to the Bureau’s chief actuary, Dave Bellusci.

Bellusci identified some of the factors contributing to the reduced indicated pure premium rate:

  • Medical costs for injured workers continue to fall.
  • Costs for claims that involve payment of indemnity (wage replacement) benefits and medical treatment are not increasing as rapidly as expected.
  • A move to a new pricing schedule (called the Resource Based Relative Value Scale) has resulted in higher than anticipated costs savings.
  • Increases in projected wage growth in California due to economic expansion.


These positive developments, however, were somewhat offset by one trend in particular: insurers’ costs of adjusting claims continue to rise due to increased compliance requirements.

The average charged rate for employers in California has slowly been edging upwards since hitting a low of $2.10 per $100 of payroll in 2009. Since then, the final rates employers are charged on their policies have slowly crept up – and they hit $3.07 in January.

With this upcoming rate filing, there is hope that the rates most employers pay in the state will come down.


Average Insurer Filed Rates per $100 of Payroll


Transportation and utilities:            $14.28

Construction:                                     $12.95

Agriculture and mining:                   $10.96

Administrative & other services      $9.71

Wholesale & retail:                            $8.15

Hospitality & entertainment:           $8.03

Manufacturing:                                 $6.95

Education and health:                      $3.83

Finance and real estate:                   $2.53

Information & professional serv.:    $0.99

Clerical and outside sales:                $0.84



Why You Lost Your X-Mod and Your Rates Climbed

The threshold for employers to qualify for experience rating (an X-mod) almost doubled in the last four years, meaning that fewer employers are qualifying and those that may have had one once, don’t qualify any longer.

Additionally, many employers since the recession have been reducing their payroll, which also reduces the workers’ compensation premium level below the X-Mod threshold.

These two trends have resulted in many employers that once had low X-Mods (below 100) having seen their rates go up.

We’ve received calls from some of our customers about this issue, so we want to explain what’s going on.


How an X-Mod works

When an employer receives an X-Mod, it is a numerical value that explains how your claims experience measures up against others in your industry and the premium you pay. An X-Mod of 100 is the average, meaning that your claims come out to be average for your class code.

If you have a better safety record than your peers and your claims costs are lower than average, you would typically have an X-Mod below 100.

The inverse is also true. If your claims are more costly, then your X-Mod will be more than 100.


X-Mod threshold

The X-Mod threshold has been climbing over the last several years at an increasing rate. The new annual premium threshold for being eligible for an experience modifier was raised at the start of this year to $33,300, up 98% from the $16,700 threshold that was set in 2011.

Once an employer no longer qualifies for an X-Mod, their X-Mod is essentially set back to 100, regardless of their claims history. The insurer will still look at the overall cost of your claims, but your X-Mod no longer matters at that point.

In other words, scheduled credits and debits will still apply, depending on your claims costs and claims experience.

For non-X-Mod employers, all companies are grouped according to their business operation or classification code. So if you have a printing shop, your claims costs will be bundled up with all other printing shops in the state for calculation purposes.

The estimated losses of the group are added together and an average cost is obtained, which is then applied to the entire class. The rates determined are averages reflecting the normal conditions found in each classification.

An employer is assigned to a classification to ensure that the rates reflect the costs of all employers with similar characteristics. Although each classification contains “similar” risks, each individual risk in a class is different to some extent (the X-Mod is designed to reflect these individual differences in loss potential).

So if you had an X-Mod higher than 100, you may see a slight downtick in the amount of workers’ comp premium you pay, but for those employers whose last X-Mod was below 100, the opposite could happen.


The takeaway
The best course of action if you no longer qualify for an X-Mod is to continue focusing on workplace safety and keeping your employees from getting injured on the job and filing claims.

And if you do have claims, you should work with us and the insurance company to manage those claims so that you can get the worker back on the job as soon as is feasible and safe for them.


If you have questions about your workers’ comp policy, contact Wright & Kimbrough.

xmod puzzle conceptual