Industry News

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Workers’ Compensation: Current Legal Cases & News

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Insurance & Risk Advisor — May 2019

The following is an overview of some recent court cases and news that could affect boroughs’ workers’ compensation rates:

Protz Case- A July 2017 case upended the insurance industry when it eliminated a portion of workers’ compensation law regarding temporary or permanent disability. It resulted in the PA Compensation Rating Bureau (PCRB) increasing workers’ compensation insurance rates in February 2018 by 6.06 percent as well as impacting future claims by allowing more injured employees to receive permanent versus temporary benefits.

In response to the PCRB rate increase, the legislature passed a new law in the fall of 2018 that established a new threshold for permanent disability. The PCRB reduced the rates by 5.24 percent on Jan. 1.

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What Tax Reform Means For Individuals and Businesses

Anthony R. Marciano, EA | Investment Advisor Representative — Summer 2018

After years of discussion surrounding business tax reform, the Senate and House of Representatives finally agreed on a package. In late December, President Trump signed these new regulations into law. The laws provide a net tax reduction of approximately $1.456 trillion over the 10-year budget window.

For many reasons, business owners and investors were optimistic about the passage of this bill. And rightfully so, as there are many potential benefits for both businesses and individuals in this tax package. It slashes both corporate and personal taxes, offers a wide array of new deductions and creates some interesting benefits for S-Corporation owners, individuals and owners of pass-through entities.

With that being said, the new laws are incredibly convoluted. Rather than simplifying the tax code, the revisions have resulted in a higher level of complexity than ever before, and many businesses may struggle to understand and properly respond to the new code.

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The Formula for Reducing Workers' Compensation Costs: Eliminate the Errors and Overcharges

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — August 2018

Whether a borough is insured in a trust or by an insurance company, the experience modifier is one of the biggest drivers of its workers’ compensation premium. The lower the experience modifier, the lower the premium will be.

An experience modifier is based on a borough’s data, total claim dollars, and audited payroll amounts over a three-year period. This data gets reported to the workers’ compensation rating bureau or to the trust’s actuary. The borough’s data is then compared it to other municipalities’.

If the actual claim costs meet expectations, the borough earns an average grade, which is a 1.00 experience modifier. If the borough is better than average, a credit modifier (e.g., 0.91) is received, and for worse than average, a surcharged modifier (e.g., 1.26) is given.

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Group Benefits, Life insurance, healthcare, financial management, businesses, employers employees
Gap Insurance a Popular Solution for High-Deductible Company Health Plans

Brad Prentice, CHRS | Executive Vice President, Insurance Division — Winter 2018

An employee realizes his health plan calls for a $3,500 deductible should he get sick or injured. He also realizes his wife is on the plan, and she likewise has a $3,500 deductible, and both deductibles have to be met before the insurance kicks in… $7,000 total. This means that he and his wife both need to be hospitalized before coverage ensues.

But, there is a happy ending (or at least as happy as you can get facing a serious injury or illness). It turns out his company offers a “gap plan,” a separate insurance policy for as little as $50 a month to cover his deductibles. Think of it as “insurance on insurance.”

Gap plans, which are used to cover out-of-pocket expenses like high deductibles, and are also known as “supplemental insurance” and “limited benefits,” are becoming increasingly popular among businesses. With monthly premiums on health insurance increasing at a staggering rate, more people are choosing cheaper, high-deductible options. In 2016, more than 90% of people buying insurance under the Affordable Care Act, chose plans with an average deductible of $3,000 or higher. As the name implies, medical gap insurance supplements a healthcare insurance plan by helping pay for medical costs that are accrued before a plan’s deductible level has been reached.

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The Impact of Opioids on Workers’ Comp

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — January 23, 2018

It’s frustrating for any employer, particularly one who understands the value of an early return-to-work process, to deal with a doctor that does not encourage employees to go back to work as soon as possible. And it’s a major reason injury costs are escalating.

The National Council of Compensation Insurance (NCCI) has tracked workers’ compensation costs for decades. Its studies reveal a significant change in how the costs line up. For example, in 1987, medical costs represented 46 percent of all injury costs and indemnity (wages) payments were 54 percent. By 1997, just 10 years later, medical costs were 53 percent compared to wages at 47 percent. In 2007, medical costs increased to 59 percent while wages were 41 percent.

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The Impact of Opioids on Workers’ Comp

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — June 15, 2017

A 16th-century philosopher once observed that on many occasions “the remedy is worse than the disease." And this would seem to be the case, when narcotics are prescribed to treat workplace injuries and that "cure" becomes the addictive problem.

In all, about 2.8 million pri-vate-industry workers and 752,000 public-sector employees suffered nonfatal workplace in-juries in 2015, more than half re-sulting in time away from work, according to the most recent figures from the federal Bureau of Labor Statistics. But that only tells half the story.

According to a survey by Comp-Pharma, an industry group that seeks to control workers’ com-pensation spending, more than $1.5 billion was spent on opioids by workers’ compensation insur-ers in 2015, with prescriptions for injured workers accounting for 13 percent of the total opioid pharmacy costs in the U.S. that year. Survey respondents cited opioids and addiction as their most pressing concern.

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For Better Results, Find the Link from Employee Wellness to Wealthness

Regulations alone cannot improve safety. Buy-in at all levels is needed to change the culture.

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — June 15, 2017

Although OSHA-compliant, many employers continue to have injured employees. DuPont demonstrated this point through a study of over 40,000 injuries, where it was revealed that unsafe actions caused over 80 percent of injuries. This illustrates that in order to reduce injuries, you need to improve your safety culture.

When Paul O’Neill was about to step into the role of CEO at Alcoa, financial experts expected Alcoa to announce an aggressive expansion. They were shocked when the first announcement O’Neill made was that he planned to overhaul the company’s safety program.

Although Alcoa’s program was already considered excellent, O’Neill believed it could be improved. He understood that safety touches every employee in the organization, top to bottom, no matter what position they hold. This is where he wanted to start to change the culture of the organization; to make it a better-performing, better-behaving organization.

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No Industry is Safe from the Threat of Cyber Fraud – Especially Construction

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — May 12, 2017

The Internet is an informational super-highway, tethered to how business is conducted. But like any heavily-traveled road, it can also be a place fraught with danger. Just when companies think all is well and are cruising along without a worry, with anti-virus seatbelts securely fastened, they suddenly get slammed by a big rig with the words “Cyber Fraud” on the side. Some companies survive the wreck, while others aren’t so lucky, but the ensuing damage is devastating.

According to an article in Forbes, cybercrime costs are projected to top $2 trillion by 2019. IBM Corp.'s Chairman, CEO and President, Ginni Rometty, recently stated that cybercrime is the “greatest threat to every profession, every industry, every company in the world.”

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Five Things That Drive Up Workers’ Comp Premiums

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — May 2017

There are numerous factors that can give you sticker shock when you see your workers’ compensation premiums, and none of them good. But they can be, for the most part, manageable – if you know what they are.

Poor Hiring and Training

A lot of problems can be traced back to the hiring phase, which is where many employers first drop the ball. It’s important to have a detailed job description that spells out the physical requirements of the job. Many times, employees re-injure “pre-existing” ailments because they do not know the full scope of what the job entails and, unfortunately, these are covered by workers’ compensation. You can even go a step further and have a doctor conduct a fit-for-duty physical as a doctor is less likely to “approve” a person who physically cannot perform the job.

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Install Back-Flow Prevention When Transferring Risk on a Construction Project

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — March 2017

Just because it’s signed, doesn’t mean it’s insurable. Risk transfer is making sure the risk ends up on somebody else’s lap should an injury, fire or some other mishap occur during construction.

Risk should flow downhill, like a vertical relay race where the baton of risk is passed off from the general contractor to the subcontractor to all the other workers down the construction food chain. If the general contractor hires a subcontractor, and that sub-contractor’s worker drops a pipe, causing an injury, the GC wants to make sure that injury liability doesn’t swim upstream like a salmon. Subsequently, the subcontractor is going to try to pass the insurance baton off to the injured worker’s insurance company further downstream.

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Is the ACA Impacting Workers’ Compensation Claims?

Has the ACA led to employers’ treating workers’ comp claims like crime scenes?

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — December 2017

The U.S. Department of Health and Human Services (DHHS) reports that the physician supply will increase by only 7 percent by 2020, and starting in 2015, the estimated doctor shortage will be about 63,000. By 2025, the shortage could be as high as 131,000, primarily due to additional users coming into the healthcare system.

The DHHS reports that this collision of care needs and the shortage of both primary care and specialist physicians could greatly impact the delivery of healthcare in the workers’ compensation marketplace. The end game is as healthcare costs, and especially deductibles, rise for individuals, and doctors find themselves conflicted over where they can be better compensated, we may very well see a rise in fraudulent claims.

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Shining a Light on Healthcare Insurance Captives
Brad Prentice | Vice President and Manager, Employee Benefits — September 9, 2016

If you're familiar with spelunking. you know that it involves lowering yourself into a dark cave. completely at the mercy of any hazards that might await. unseen. as you descend into the inky blackness. The only thing you have in your possession. to avoid any potential danger. is a flashlight to show you everything you might encounter and what the potential downfall might be.

This is not the case with being a part of a healthcare insurance captive. a kind of "in-house· benefits plan that covers the assets and risks of a company-with no surprises. At least this is the perception of such a program. But it's a perception that is rapidly becoming a reality as more employers begin to know where to shine the light.

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For Better Results, Find the Link from Employee Wellness to Wealthness

Financial stress reduces worker productivity, increases absenteeism, and can raise employers’ health-care costs Corporate history of health, wealth Numbers tell the story Good coaching

Alex Kline, CFP | Senior Vice President, Retirement Plan Division — June 16, 2016
When I started in this business 32 years ago, any semblance of corporate wellness was limited strictly to the executive level, and very often it constituted no more than a membership at the local gym. It was also a time when everyone dreamed of retiring in their 40s and 50s, with perhaps a company 401k dangling like a carrot in front of them, leading them down that long and winding road to a perceived life of 18 holes on a Florida golf course.

Eventually, companies warmed up to the idea that maybe they should also concentrate on the physical well-being of their employees, offering smoking cessation plans, health club memberships, afternoon stretch time, and granola bars replacing Ring Dings in the break room vending machines. But still, in the battle for their employees' hearts and minds, the impetus was still on just strengthening the body and not the mind.

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Trends in Alternative Risk Financing

A Close Look at the Pros and Cons of Top Program Options

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — May 2016

Alternative risk financing is when a business does not purchase traditional, guaranteed-cost insurance policies but instead purchases insurance where it takes on some risk for potential rewards. There are more insurance premiums invested by businesses in the alternative risk financing market than you might realize, with the use of captives being the most popular of the alternative risk financing programs used.

A September 2006 report by Conning Research & Consulting found that alternative market mechanisms covered about 30 percent of the U.S. commercial insurance market. Since that report, the alternative market percentage had continued to grow rapidly. According to various insurance industry reports, there were approximately 35 percent more captives in 2014 than in 2006. Why is it that alternative risk financing is so popular?

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The Right Prescription for Lowering Workers’ Comp Costs

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — May 2016

Let’s face it. Navigating the workers’ compensation process can be painful for both the employee and the manager. If an employee is injured on the job and is making a workers’ compensation claim, he or she must be medically evaluated by a doctor who will determine if they can return to work, stay home, or return to work with modified duty. The process can be more frustrating if you do not work with a doctor who understands this process./p>

The National Council of Compensation Insurance (NCCI) has been tracking workers' compensation costs for decades. And what those studies reveal is a significant change in how the costs line up. For example, in 1987, medical costs represented 46 percent of all injury costs and indemnity (wages) payments were 54 percent. Fast forward to 1997, and medical costs were 53 percent compared to wages at 47 percent. In 2007, medical costs went up to a whopping 59 percent while wages reduced to 41 percent.

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Don’t Let a Good Hire Go Bad (Avoiding workers’ compensation claims)

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — May 2016

“How can I stop hiring problematic employees?” This is a very common question that tends to follow when a workers’ compensation claim “goes bad” and you never saw it coming.

This is a very common question that tends to follow when a workers’ compensation claim “goes bad” and you never saw it coming. Frustration doesn’t begin to describe your feelings. You go through all the necessary steps to find the “ideal” employee who has the skills, education, focus, and attitude to be able to complete his or her job with high efficiency while doing it safely. You believe he or she is going to understand the job duties and responsibilities and accomplish them without constant supervision. You look back and try

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PPCO Twist System
Turning Your Safety Culture Into a Profit Center

Many employers view safety as an expense. However, companies large and small have proven that a change in safety culture can lead to increased profitability

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — September 2015

Face it: your employees are the engine that powers your company, much like an engine powers a race car. If you have a well-maintained, high-performance team, they can endure challenges and go the distance while achieving victory for you. In terms of business, they can help you stay ahead of your competition and create an enduring, profitable company. They allow you to open the throttle and GO! A poor-performing team can hold you back and cause you to lose the race—and profits.

For many employers, the success or failure of a company's workers' compensation program is similar to a dipstick test that demonstrates the quality of their team. Is the engine performing well with clear and fuel oil, or is it being bogged down by thick, dark, and depleted oil?

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Predictive Modeling: a Pro-Active Approach to Managing Workers’ Compensation Costs

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — June 2006

The number of on-the-job injuries continues to decline, yet the total cost of workplace injuries continues to escalate. The paradox of fewer injuries and greater costs continues to baffle employers and professionals in the insurance industry.

Insurance professionals, employers, and business leaders are aware of the following conditions that drive up Workers’ Compensation injury costs:

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PPCO Twist System
Improve Your Risk Profile and Improve Your Bottom Line

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — June 2006

Over the past 20 years, I would guess that I have talked with or interviewed close to 1,200 corporate executives. At some point in our discussions, I always ask the same question: “Would you agree or disagree that your premium is based on the insurance company’s perception of your risk?” Without a doubt, everyone agrees. I then ask them, “What does your risk profile look like? Is it becoming worse, staying status quo, or improving?” They almost always answer, “I have no idea.” .

Not knowing your risk profile is like trying to defend a fort from attack without knowing which walls are the weakest and most vulnerable. Without that knowledge, you have no idea where improvement is needed.

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david r leng article- the perfect work comp storm
Managing Workers’ Comp: The Workers’ Comp Perfect Storm

Many employers view safety as an expense. However, companies large and small have proven that a change in safety culture can lead to increased profitability

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division — September 2015

Hang on to your wallets. Employers already are seeing the tip of a very nasty iceberg as the insurance industry feels itself reelin’ and rockin’ on a number of different fronts, all adding up to the “perfect storm.”

Combined ratios for workers compensation are hitting upwards of 112 percent. This means the insurance industry isn’t making any profits on workers’ compensation this year as every dollar coming in is going out at $1.09. This is worse than 2011, when it was $1.02 going out.

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treating work comp claims-like crime scenes article
Has the Affordable Care Act Led to Employers Treating WorkComp Claims Like Crime Scenes?

David R. Leng, CPCU, CIC, CBWA, CRM, CWCA | Executive Vice President, Insurance Division

Workers' Compensation fraud has been around, one way or another, since the first slacker hurled a spear at a Woolly Mammoth and then complained to the tribe leader he couldn't go out on the next hunt "because he hurt his back," when in reality he'd rather just hang around the cave painting on the walls.

A free “vacation” has long been a motivation of WorkComp fraud, as is monetary rewards. But the Affordable Care Act (a.k.a. ACA, a.k.a. Obamacare) has dumped millions of additional bodies into the healthcare system, putting a significant strain on each citizen’s budget. The U.S. Department of Health and Human Services weighs in with the disturbing news that the physician supply will increase by only 7% by 2020, and starting in 2015, the estimated doctor shortage will be approximately 63,000. By 2025, the shortage could be as high as 131,000, primarily due to the impact of additional users coming into the healthcare system. According to the U.S. Department of Health and Human Services, “This collision of care needs and the shortage of both primary care and specialist physicians could greatly impact the delivery of healthcare in the Workers’ Compensation marketplace.”

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