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How Tracking Near Misses, Employee Training Reduces Injuries

Business woman gives safety presentation at office. Multi-ethnic group of professionals.

The latest trend in workplace safety best practices is tracking “leading indicators” – or events that take the lessons learned from past events – to reduce the chances of future injuries.

Safety professionals are increasingly keeping track of near misses, hours spent on training and facility housekeeping and measuring the impact on the organization’s overall safety record. And they are finding that this approach is having a significant impact in preventing injuries.

The trend is a new one. For years, workplace safety managers and industrial safety engineers used lagging indicators to track and manage workplace injuries and illness. They would evaluate:

  • Injury rates
  • Injury counts, and
  • Days injury-free


The major drawback to only using lagging indicators of safety performance is that they tell you how many people got hurt and how badly, but not how well your company is doing at preventing incidents and accidents.

In the last few years, safety-minded companies have been shifting their focus to using leading indicators to drive continuous improvement. Lagging indicators measure failure, but leading indicators measure performance – and that’s what we’re all after.

And even if you don’t have dedicated safety professionals on your staff, your organization can learn from what its larger counterparts are doing. Surveys like a recent one of safety professionals by the online news site EHS Today can be valuable to even small firms.

EHS Today surveyed about 1,000 environmental, health and safety professionals about which leading indicators they are tracking the most. The top 10 are:

  1. Near misses
  2. Employee audits/observations
  3. Participation in safety training
  4. Inspections and their results
  5. Participation in safety meetings
  6. Facility housekeeping
  7. Participation in safety committees
  8. Overall employee engagement in safety
  9. Safety action plans execution
  10. Equipment/machinery maintenance



As you can see, a leading indicator is a measure preceding or indicating a future event that you can use to drive activities or the use of safety devices to prevent and control injuries.

Leading indicators are focused on future safety performance and continuous improvement. These measures are proactive in nature and report what employees are doing on a regular basis to prevent injuries.

Used correctly, leading indicators should:

  • Allow you to see small improvements in performance
  • Measure the positive: what people are doing versus failing to do
  • Enable frequent feedback to all stakeholders
  • Be credible to performers
  • Be predictive
  • Increase constructive problem-solving around safety
  • Make it clear what needs to be done to get better
  • Track impact versus intention


Creating a leading indicator

To design a leading indicator, you need a framework that takes into account the near-term, mid-term and long-term objectives that will lead you to your goal.

Suppose you want to reduce strain injuries in your printing plant. You might want to start by identifying the factors that lead to these injuries.

Ergonomics is an obvious factor, but you could get more granular or more general in your consideration. Loads, repetitions and workstation design might be factors at the individual level, while work procedures, the pace of work, and safety culture might be important factors at the operational or corporate levels.

You can track the data to see which areas are likely to cause future strain injuries. And once you do that, you have a model for how the injuries occur. At that point you can consider what type of interventions you may want to implement to prevent future strain injuries.


Workers’ Comp Medical Costs Fall in Wake of Reforms

workers comp construction

The workers’ comp reforms in 2013 have generated surprising cost savings in treating injured workers in California, with overall medical costs per claim falling 8% over a three-year period.

That’s in contrast to the years of inflation before the reforms, when the average medical costs per claim were increasing by an average of 6.5% a year. The new study by the Workers’ Compensation Insurance Rating Bureau of California dissected claims costs between July 2012 and June 2015, finding the medical cost savings were greater than originally anticipated.

SB 863 increased benefits effective January 1, 2013 and January 1, 2014 and provided for a number of structural changes to the California workers’ compensation benefit delivery system.

In total, based on the most current information available, the WCIRB estimates the impact of SB 863 is an annual net savings of $770 million, or 4.1%, of total system costs.

The new study, released in early December, looked at the effects of the legislation on the medical costs associated with treating injured workers. The Rating Bureau had anticipated that reforms would cut medical costs, but it underestimated the effects.

These cumulative savings were primarily driven by changes to the physician fee schedule and pharmacy services, which collectively represent around 61% of all medical service payments. The use of medical services also dropped, due to a more stringent regimen of independent medical review (IMR) of claims.

Additional savings were generated by outpatient facilities and medical equipment providers, which when combined, represent roughly 16% of all medical service payments.

Medical-legal and inpatient hospital services, when taken together, represent approximately 23% of all payments and were the only services to register increases in costs per claim over the three-year period.


Other findings of the study include:

  • Payments per claim via the physician fee schedule (46% of all medical costs) decreased by 9% over the three-year study period. This decline was due in part to the introduction a new and more accurate fee schedule that is widely used in many states. That fee schedule took effect on Jan. 1, 2014.
  • Costs per claim for pharmaceuticals (which account for 15% of all medical costs) declined by 22% during the study period. But the legislation did not address drug costs, and the decline was largely the result of a drop in medical service usage – or utilization – due to the increased use of IMR.
    This reduction in utilization had a particular effect on the prescriptions of highly addictive drugs called opiates, such as OxyContin, the outlays for which fell 48% during the study period.
  • Inpatient hospital costs (12% of all medical costs) increased by 14% on a cost-per-claim basis over the study period. The costs declined in the first half of 2013 likely due to the elimination of payments for duplicate surgical hardware enacted by SB 863.
  • Costs per claim for outpatient facilities (7% of all medical costs) dropped 7% during the study period. Since the majority of these payments are to ambulatory surgical centers (ASCs), the primary driver of the savings was the reduction in reimbursements to ASCs enacted by SB 863.
    That said, outpatient facility cost payments started inching higher in 2015 due to upward adjustments in the Medicare ASC fee schedule as well as changes in the types of outpatient services these facilities provide.
  • Costs under another fee schedule for a variety of services like durable medical equipment, prosthetics and orthotics, fell 12% over the study period. The reforms had nothing to do with this, but rather, the costs were affected by changes to Medicare fee schedules.


Despite these results, the Rating Bureau noted that the trend may be reversing. It said payments per claim for all medical services increased 4% in the first half of 2015 from the same period the year prior.


New Legislation Aims to Cut Workers’ Comp Drug Costs

Gov. Jerry Brown is expected to sign recently passed legislation that could further reduce workers’ comp claims costs in California.

The Legislature in September passed AB 1124, which would establish a new drug formulary that would limit the types of medications that can be used to treat injured workers.

The law is seen as vital to controlling costs as the cost of some medications – particularly off-label, compound medications and specialty drugs – continues to rise at a quickening pace.

Also, because California’s workers’ comp system lacks a drug formulary, payers have often complained of price-gouging for certain pharmaceuticals, like compound medications.

California insurance experts are optimistic that a new workers’ compensation prescription drug formulary will help injured workers and reduce claims costs.

Both insurers and employers have expressed optimism about the effects of the legislation if signed into law.

Over the past decade, the workers’ comp spend on prescription drugs has increased more than 250% through the first two years of treatment and accounts for some 13% of a claim’s overall medical costs, according to the California Workers’ Compensation Institute, which has studied the issue. The share goes higher as claims age, and often accounts for 20% of the medical costs in a claim.

The institute’s research suggests that a formulary could save California employers anywhere from $124 million to $420 million a year, depending on how restrictive the Division of Workers’ Compensation (DWC) makes the formulary.

The estimate is based on the experience of Texas and Washington states when they adopted a workers’ comp formulary to stem double-digit increases in spending on prescription drugs.

Not only that, but the increasing prevalence of doctors prescribing highly addictive opioid medications is also a concern for employers and insurers. While the drugs are not particularly expensive, overuse and abuse can lead to worse workers’ comp outcomes, such as longer times away from work.

Mark Pew, senior vice president for Prium, told the news website workcompcentral.comthat potential savings will follow from the most important role of a formulary, that is, “to make sure injured workers are only taking drugs that are appropriate for their conditions. Cost savings are a side effect of doing the right thing for the patient from a clinical standpoint.”

Pew said that for many providers and patients, prescribing or taking drugs is the easiest way to try to address pain.

However, a lot of patients receiving powerful narcotic painkillers don’t report any improvement in function or quality of life, and they are still reporting pain at a six, seven or eight on a 10-point scale, he added. The medications are not doing anything to address the root causes of the pain, the injured worker doesn’t return to work, dosages increase and new drugs are required to deal with side effects.

Pew said there might be some situations in which a strong opioid is appropriate for non-malignant cancer pain, and a formulary would still allow injured workers access to these drugs in such situations.

The legislation does address this issue by requiring the DWC to include in the formulary guidance how an injured worker can access drugs for off-label use “when evidence-based and medically necessary.”


ACA Spurs Benefits Rethink among Employers

Expected cost increases stemming from the Affordable Care Act are spurring employers to consider new approaches to benefits funding and administration.

The increasingly complex benefits environment is also making employers rethink their benefits strategies, which may allow them to take advantage of new opportunities for benefits communication, funding and administration, according to the “Guardian Workplace Benefits Study,” released in August.

Although many employers in the study emphasized the need for cost control, they also expressed a growing interest in raising their employees’ financial security and satisfaction with provided benefits.

Only three in 10 workers surveyed said they felt financially secure. What little security they feel hinges, says Guardian, on their workplace insurance benefits. In fact, 42% of employees surveyed indicated that they rely on their benefits for all or most of their financial preparedness.


Whose responsibility is it?

Only 16% of employers in the insurer’s study strongly believed that they have a responsibility to ensure their employees’ financial preparedness.

Large employers (those with at least 100 benefits-eligible employees) were more inclined to express some belief that they had this responsibility (46%) than were smaller firms (29%). In contrast, nearly two in three employees believed that employers have a responsibility to offer them insurance and retirement benefits.


Cost-sharing as a strategy

Most employers surveyed predicted substantial increases in the cost of health insurance that are tied to the ACA.

That said, fewer employers compared to last year said they were shifting more of the premium cost burden to their employees as part of their effort to reduce their own costs. More employers said they instead were seeking out increased efficiencies and reductions in administrative burdens.


Workers sound off

While many workers who were surveyed said they felt their benefits met their personal needs and positively impacted their financial health, those with lower incomes ($25,000 to $49,000) were less likely to think that their benefits met their needs, were affordable, or improved their health or financial security.

One area where workers expressed much greater satisfaction was with the effectiveness of their benefits communication. In addition, workers who had more assistance and communication from their employers appeared to place more value on their benefits.


Other ACA concerns

Employers in the survey seemed uncertain about how to manage the administrative and compliance requirements of the ACA.

Only 60% of large employers felt well prepared for the post-health care reform area, and 40% of smaller companies felt well prepared.

Those companies that said they are more likely to increase the level of outsourcing for their benefits programs were also more likely to state that they were unprepared for the ACA.


Other coverage

Although most employees have access to some kind of health insurance for themselves and their families, one in three has no disability insurance, one in four has no life insurance, and one in five has no retirement savings plan.

Furthermore, even when employees are offered these benefits, they often do not take advantage of them due to either poor decision-making or ineffective communication, according to the survey.


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



Flood Insurance Is Wise Choice, Even in Drought Areas

The recent flooding in Austin and surrounding areas has hit local businesses hard as they try to recover and clean up, costing them money for the clean-up process and lost business.

Few of the businesses in the up-until-now drought-stricken area carried flood insurance according to local news reports, and they’ll end up footing the bill themselves. The flooding in Texas shows that it can happen anywhere, and that some areas in most states are prone to flooding, including California.

But there is a stark reality with every flood: 40% of businesses affected by a natural or human-caused disaster never reopen. By preparing your company now for a potential disaster later, you can help reduce the impact any catastrophe will cause and ensure your business recovers quickly.

Federal law requires homes and buildings in flood plains to carry flood insurance, but only if they have a mortgage from a federally regulated or insured lender, according to the National Flood Insurance Program (NFIP). Those living outside of high-risk flood plains are typically not required to carry it.

Typically, homeowners can only buy flood insurance through the NFIP, but businesses do have other choices.

The best way to keep your business afloat after a flood is to be prepared in advance for the unthinkable. You can start by:

  1. 1.     Understanding your risk. Your local county should have on its website a list of areas identified as flood plains and floodways, as defined by the Federal Emergency Management Agency (FEMA). By knowing which areas are prone to flooding, you can better understand how your business might be affected in the event of a large rainfall.


2. Purchasing flood insurance.  Most commercial property insurance policies may not include flood coverage as part of the package. Talk to us so that we can explain what these policies entail and how you would be covered. There are two options for flood insurance:

  • The NFIP, which will insure a commercial building up to $500,000, and the contents of the building up to the same amount. Insurance premiums vary depending on the location of the property and its risk of flooding.
  • A flood policy from an insurance company. These policies will often provide larger limits, as $500,000 is often not enough for most businesses should they be hit by a flood. Call us for details.


3. Establishing an emergency plan.  Establish an emergency plan that details how things will proceed in the event that your facility is forced to close due to flooding. Consider the following and include them in your plan:

  • Will your employees work remotely, and do they have the resources to do so?
  • Who will be coordinating with your staff during an emergency?
  • What procedures must you put in place to keep your business functioning?
  • How will you communicate and share information with your team?
  • Will affected employees be given time off? If so, how much?
  • Do you have a backup of essential files and records?
  • What will you do if your building is closed for a long period of time?
  • Do you have alternative sites to move inventory to, and from which to work?

Share this plan with employees so that everyone knows what to expect.


4. Taking advantage of community resources. Familiarize yourself with community resources in place to help businesses during emergency situations.

In the wake of many floods, the U.S. Small Business Administration has set up business recovery centers to assist companies trying to recover.

Also, if you need to, you can apply for federal assistance on FEMA’s website, where you can also find information on other recovery resources.


Wright & Kimbrough Insurance Services can help you decide if a commercial flood policy might be in your best interest. Call us!



Six Ways to Get Cited by OSHA

There are few things worse for an employer than to receive a letter or phone call from OSHA requesting information about the company’s compliance with workplace safety regulations.

But many employers either don’t handle their encounters with OSHA well or they fail to properly report serious injuries that have taken place on their worksites. Whatever the case, there is a right way and a wrong way to deal with occupational safety and health authorities.

The right way can make the process easier on the employer, while the wrong way can set them up for frustration, confrontation and heavier fines.

The head of Cal/OSHA’s heat illness prevention unit recently gave an employer outreach presentation on the steps to take if you want to get cited by Cal/OSHA.

Follow the advice at your own risk:

  1. Don’t answer If OSHA contacts you by letter, a complaint referral or by phone, don’t respond. Of course if you do respond, the matter can often be dealt with over the phone or by submitting a written response.
    Respond to inquiries promptly and courteously if you want fair treatment. But if you simply fail to respond, it is a sure-fire way to receive an inspection.
    Sometimes, however, if OSHA has received a complaint, it will likely want to conduct an inspection of your workplace to verify if the alleged conditions exist.
  1. Don’t reportor file a report late for a fatality or serious injury. Doing that results in an automatic penalty of $5,000. Remember, you have eight hours to report a workplace fatality or serious injury to Cal/OSHA after learning of the incident.
    The Cal/OSHA Appeals Board may reduce that penalty if an employer files late, depending on how late they are. But if an employer fails to report at all, it can expect to pay the full amount. Remember: a serious injury is one that requires hospitalization for more than 24 hours other than for medical observation, or if an employee “suffers a loss of any member of the body or suffers any serious degree of permanent disfigurement.”
  1. Fail to comply with document requests. Don’t think that ignoring a document request by OSHA will make the problem disappear. If you can promptly produce the documents requested, including your Injury and Illness Prevention Program (IIPP), it will go a long way to making smooth an encounter with OSHA.
    To make sure that all of your supervisors and managers are on board, put in place transparent procedures to follow if contacted by OSHA. Top priority is informing top management about correspondence with the authorities.
    And don’t worry: you don’t have to keep all of your documents on site. If you have locations in the field, you can keep your workplace safety documents in your office and e-mail them to the OSHA officer.
    One exception is your heat illness prevention program, copies of which must be located on site.
  1. Be unaware of the IIPP requirement. This also includes having employees who are not aware of your workplace safety program.
    Express bewilderment about an IIPP and you can bet that OSHA will want to look at your safety training records and talk to your employees about specific parts of your IIPP.
  2. Provide a generic IIPP. If you want to get dinged, download a generic version of an IIPP from the Internet and present it as your own when asked by OSHA. Even better, don’t include your company name anywhere in the document.
    Another way to land in hot water is to produce another employer’s IIPP, even if you are in a dual-employer situation.
  1. Ignore OSHA regulations for your industry. During a site visit, OSHA will look for hazards, employee exposure, “process flow” and the presence of required elements of relevant regulations. The Division of Occupational Safety and Health will document both compliance and non-compliance, take samples and lots of photos. The division will cite an employer that isn’t evaluating the hazards specific to its worksites.


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