Bending the Workers
Compensation Cost Curve
1
© 2017 HUB International Limited.
Topics of Discussion
•
Current State of Workers Comp Market
•
Non-Work Comp related influences on rates
•
Changes for 2017
•
Demystifying the Ex-mod
•
Non-conventional programs to affect additional savings
•
Update on Health Care Reform
2
© 2017 HUB International Limited.
Workers Compensation – Current State of the California Market
Claims are Expensive!
•
Average cost of an indemnity claim is $82,234
•
Average medical costs of an indemnity claim is $40,678 which includes medical
cost containment programs
•
Average cost of indemnity is $29,030
•
The current trend for medical, indemnity and allocated costs are all increasing
•
The combined ratio for carriers is holding steady ~ 94%
“Workers’ Compensation: Benefits, Coverage, and Costs, (2014 data)”; Marjorie L. Baldwin and Christopher F. McLaren. National Academy of Social Insurance.
3
© 2017 HUB International Limited.
Workers Compensation – Current State of the California Market
Trends
•
Rates are declining – Average rate charged at end of 2016 was $2.67 per $100
payroll which is down 12% since 1/1/15
•
2016 Oregon WC Premium Rate Ranking Summary has California as #1 – the
most expensive state in the nation for workers’ compensation insurance
•
Recent recommended rate decrease for 7/1/17 is around 8%.
(This is only advisory. Carriers will adjust according to their business model. )
•
As of 1/1/17, the industry average filed pure premium rate is running about 10%
higher than the advisory pure premium rate.
•
Despite recent cost trends, rates are still expected to decline in 2017 and possibly
2018.
“Workers’ Compensation: Benefits, Coverage, and Costs, (2014 data)”; Marjorie L. Baldwin and Christopher F. McLaren. National Academy of Social Insurance.
4
© 2017 HUB International Limited.
Non-Work Comp Related Influences on Rates
Premium Increases with no change in exposures
•
•
Minimum Wage is now up to $10.50 as of 1/1/17
Change in First Aid, Officer Exclusions, and Experience Mod calculations
Marijuana and Workers’ Compensation
•
•
•
•
Employees can still be tested for drug use
Illegal by Federal Law which means employers can still prohibit use and possession while working.
If tested and found positive for marijuana use, an employee can be terminated if it is clearly written into
the company policy.
It is recommended that any written policy insert wording that restricts or prohibits all drugs where they
are restricted or prohibited by state OR Federal laws.
Health Care Reform
•
5
Move from ACA to AHCA and the removal of employer and individual mandate will put pressure on WC
market
© 2017 HUB International Limited.
Impactful Changes for 2017
Officer Exclusion
•
•
•
•
Effective 1/1/17 for all in force policies and for new policies on or after 1/1/17
Directors and Officers must now have at least a 15% ownership in the business and must
sign a waiver prior to policy inception
Includes General Partners of Partnerships and Managing Members of LLC’s
For In Force policies, there may be additional premium due if currently excluded officers do
not own 15% or more of the company
First Aid Claims
•
•
•
6
Effective 1/1/17, medical expenses for ALL claims now need to be reported
Intended to eliminate the misclassification of claims
The definition of First Aid claims has not changed, only the method by which they are
reported has
© 2017 HUB International Limited.
First Aid and the Experience Modifier
Typical savings from a first aid program is 1-3 points off the experience mod
A lot of concern now that payments for first aid need to be reported to the WCIRB which will eliminate the
potential experience mod savings
Obviates First Aid programs where employers pay for their own claims to affect experience mod savings
It is up to the employer to first report the amount paid on a claim to the carrier
All first aid claims will be lumped together in the “Under $2,001” category which means frequency is not the
issue, it is cost
Only time it may significantly impact the experience modifier is if there is more than one claim on the
experience report which obviates the 1 claim rule
If there is only one claim on the experience report, the maximum impact on the experience mod is 25 points
above the best possible mod. Add a first aid/medical only claim and the 25 point cap is removed
7
© 2017 HUB International Limited.
Secret of the Experience Modifier
The X-Mod Myth v Truth
Myth: The experience mod is not the most critical component to work comp pricing
o Truth: Since open rating in 1995, premiums are heavily determined by loss rating – underwriters already have
an idea of what they want to charge before the mod is even applied
o
The X-Mod Reality
If you have an experience mod above 100%, you are likely paying more for work comp premiums than your
competitors
o The Experience modifier gives you a very good indication regarding your safety performance and culture
o Experience modifiers at or above 125% can lead to OSHA inspections and lost business
o
Scheduled Credits
All carriers build credits into their rating system. Some are rated for credits as high as 50% or more
o Scheduled credits can be used to offset a spike or increase in your work comp premium as long as there is a
good story to tell
o Carrier competition can lead to increased credits
o
8
© 2017 HUB International Limited.
Scheduled Credits
Underwriter’s
silver bullet
They cannot exceed
the scheduled credits
they have filed with
the state
Like their rates,
carriers also file
for credits
9
© 2017 HUB International Limited.
Programs can result in
savings:
• Return to work
• Written Safety Program
• Healthcare program
• Medical Provider Network
Non-Traditional Programs
where credits can be
applied
• Voluntary Benefits
• Wellness Programs
There are also incentives for workers and/or medical
providers to over-report injuries or illnesses as work
related. The 100% coverage of medical costs under
workers’ compensation creates incentives for both groups
to identify a work-related cause when the etiology of an
injury or illness is uncertain.
Workers’ Compensation: Benefits, Coverage, Costs (October 2016)
National Academy of Social Insurance
“Workers’ Compensation: Benefits, Coverage, and Costs, (2014 data)”; Marjorie L. Baldwin and Christopher F. McLaren. National Academy of Social Insurance.
10
© 2017 HUB International Limited.
Non-conventional ideas to
bend the cost curve
Voluntary Benefits
11
© 2016 HUB International Limited.
Adding Voluntary Benefits
Voluntary Short Term Disability & Accident Insurance can help!
Research Now & Aflac conducted an online survey with 945 Employers of all group sizes
40% of all companies
providing access to
voluntary Accident
insurance
experienced declines
in their workers’
compensation claims
31% of all companies
providing access to
voluntary Accident
insurance
experienced declines
in worker
absenteeism
36% of all companies
providing access to
voluntary Short Term
Disability insurance
experienced declines
in their workers’
compensation claims
30% of all companies
providing access to
voluntary Accident
insurance
experienced declines
in worker
absenteeism
“Impact of Voluntary Accident Insurance and Voluntary Disability Insurance on Workers’ Compensation Claims and Worker Absenteeism Study”; July 2014. Aflac.
12
© 2017 HUB International Limited.
Why It Works
Those
hurt off-the-job have protection
Reduced Monday Morning/Friday Afternoon claims
Employee
has funds to pay for treatment
Small off-the-job injuries are treated minimizing risk of larger injury occurring on-the-job
Ease
of filing voluntary insurance claims rather than workers comp
Important Note: Accident & Short Term Disability are not replacements for workers compensation coverage and should not be provided in lieu of workers
compensation coverage
13
© 2017 HUB International Limited.
Bending the curve
with Workplace
Wellness
14
© 2016 HUB International Limited.
2017 Workplace Wellness Trends
FINANCIAL WELLBEING
DIVERSE WORKFORCE IMPACT
MENTAL HEALTH AT WORK
LINKING SAFETY & WELLNESS
CULTURALLY RELEVANT PERKS
15
© 2016 HUB International Limited.
Financial Stress & Wellbeing
Of employees say they
spend 3+ hours/ work
week thinking about or
dealing with issues
related to their personal
finances
of U.S.
employees are
distracted at
work by financial
stress*
29%
32%
of Americans report
financial stress
prevents them from
living a healthy lifestyle
37%
80%
of employers are
creating or expanding
their financial
wellbeing programs to
improve employee
engagement
*Source: American Psychological Association. (February 4, 2015.) Stress in America™: Paying With Our Health, retrieved from https://www.apa.org/news/press/releases/stress/2014/stress-report.pdf
16
© 2016 HUB International Limited.
Financial Stress & Wellbeing
Stress is the number one driver of lost
productivity.
Finances are the top driver of stress.
Employees overwhelmed by their financial
situation are less likely to prioritize healthy
behaviors like eating well, exercising and not
smoking.
Employers are responding by including a
financial component within their wellbeing
programs.
17
© 2016 HUB International Limited.
WHAT YOU CAN DO:
1. Communicate
the link between financial
wellbeing and overall health & wellbeing.
2. Provide
multiple types of financial
resources:
1.
2.
3.
4.
5.
Health care & benefits education
Financial planning
Saving for life events
Budgeting
Debt management
3. Provide
access to a personal investment
advisor to assist employees with needs
based on specific financial stage.
Diverse Workforce Impact: Generational Differences
PERSONAL WELLNESS PRIORITIES BY GENERATION
Physical
Emotional
Spiritual
Millenials (1982-2000)
Intellectual
Gen X (1966-1983)
Social
Boomers (1947-1965)
Occupational
Environmental
0%
18
© 2016 HUB International Limited.
20%
40%
60%
80%
100%
Source: Global Wellness Institute & Everyday Health Inc., Unlocking the Power of Company Caring, Workplace Wellness
Survey, 2016
Diverse Workforce Impact: Generational Differences
Many employers struggle with how to
meet the needs of today’s multigenerational workforce.
WHAT YOU CAN DO:
1.
Consider your workforce demographics and
do not take a one-sized fits all approach with
communications or programming.
Positioning initiatives in a broader and
integrated fashion with a focus on
employee’s
overall
wellbeing
helps
engage a diverse workforce.
2.
Ensure that physical, mental and emotional
wellbeing is included in the solution.
3.
Look for associations in data sets (claims,
health screenings, focus groups, employee
surveys) to determine priority.
19
© 2016 HUB International Limited.
Mental Health at Work
69%
of employees report that work is
a significant
source of stress
35%
of employees lose
1+ hrs. of productivity per day due
to stress
64%
67%
of employees want more
emotional/mental health
resources from their
employers
of employees with high levels of stress
feel extremely
fatigued & out of control
20
© 2016 HUB International Limited.
Source:Aon Hewitt (2016). Consumer Health Mindset Survey, Virgin Pulse (2015). 4 Simple Ways to Help Employees Beat Burnout.
Mental Health at Work
Wellbeing strategies often focus solely on
physical health, but for a happier, more
productive team, integrating mental and
behavioral health initiatives is crucial.
This integration serves to meet a growing
need. Employees report wanting more
emotional and mental health resources from
their employer such as mindfulness and
resilience training.
21
© 2016 HUB International Limited.
WHAT YOU CAN DO:
Consider measures to support and protect
employee wellbeing such as:
1.
Flexible work schedules and time
management procedures
2.
Raising awareness and creating an open
culture to discuss mental health and stress
3.
Integrating mental health and wellbeing
throughout workplace policies
Linking Safety & Wellness
Smoking quit rate of
workers in integrated
interventions compared to
stand alone cessation
programs
High risk individuals are
3 times more likely to file a
workers’ comp claim
Of companies
outperformed the S&P 500
when providing exemplary
safety, health, and
environmental
programs
Source: Fabius R, Thayer R, Dixon BA, et al. 2013. The Link Between Workforce Health and Safety and the Health of the Bottom Line: Tracking
Market Performance of Companies That Nurture a “Culture of Health.” JOEM 55(9):993-1000.
22
© 2016 HUB International Limited.
Linking Safety & Wellness
Traditionally
viewed
as
separate
initiatives, more and more companies are
recognizing that health impacts safety,
and safety impacts health.
WHAT YOU CAN DO:
By breaking down the silos that exist
between these two programs, employers
are experiencing the magnified impact
that comes from aligning safety and
wellness strategies.
2. Aggregate
1. Create
a cross-collaborative team of safety
and wellbeing champions with a shared
vision and goals to integrate health & safety
initiatives.
& analyze different types of
data:
health screenings
workers’ compensation
• absenteeism rates
• medical claims
•
•
3. Engage
Risk Management and Absence
Management Teams
23
© 2016 HUB International Limited.
Culture and Perks
56%
Organizations that create a culture defined by:
• meaningful work
• deep employee engagement
• job & organizational fit
• strong leadership
outperform the S&P 500 by 325% and have a
competitive advantage over their peers when
attracting and retaining top talent.1
of employees said they
would trade a standard
salary increase for
certain perks
2
Source: 1.http://journals.lww.com/joem/Fulltext/2016/01000/The_Stock_Performance_of_C__Everett_Koop_Award.3.aspx
2. Technology Advice Research: 2015 nationwide internet survey of 486 working aged adults.
24
© 2016 HUB International Limited.
Culture and Perks
Research shows that happy workers are more
productive!
Companies are continuing to
focus on cultivating a culture of health and
wellbeing.
In an effort to further enhance culture and
employee engagement, many employers are
offering unique employee perks in addition to
traditional benefits.
Finding the right perk means identifying what
employees value. A perk that’s great for one
company might not be as valued at another.
25
© 2016 HUB International Limited.
WHAT YOU CAN DO:
1.
Analyze relevant data to determine the perks your
employees will value the most.
•
2.
For example, millennial employees may be more attracted to
companies with student loan repayment programs while
baby boomers may place more value on long term care
options.
Looking for a low budget perk?
•
Bring concierge services to your employees that remove
barriers and increase productivity such as:
•
•
•
discount programs
onsite services
elder/child care support
Caution: Some perks or services may be considered taxable income to an
employee. Consult your corporate tax professional for more guidance on taxable
benefits.
Health Care Reform
26
© 2017 HUB International Limited.
The Latest on Healthcare Reform
HR 1628 – 5/4/17
•
“Pay or Play” mandate- Repealed as of 1/1/2016
•
ACA reporting- partial repeal of Employer reporting requirements for ALEs (IRC 6056 as of 1/1/16), but retains
reporting on offer of MEC coverage (IRC 6055)
•
Repeals Myriad of ACA taxes: PCORI, Health Insurance Tax, Exchange surcharge in small group coverage,
medical device manufacturer tax, annual limits on health FSAs, Medicare taxes for high-income earners, etc.
•
Cadillac Tax plan- Delayed until 2026
•
Individual mandate penalty- Repealed and replaced with a 30% surcharge on premiums when individuals
experience a break in coverage greater than 63 days within a 12-month period
•
Insurance marketplaces/exchanges: Modifies rating methodologies from a 3:1 to a 5:1 ratio; modifies the provision
of subsidies to individuals in exchanges as of 1/1/2019
•
Medicaid Expansion: Repeals expansion as of 2020 and grants states discretion ability to establish eligibility criteria
for Medicaid eligibility
•
Market reform changes: Provides state discretion to define essential health benefits as of 1/1/2020 and allows for
the creation of high-risk pools for individuals with chronic conditions , prohibits pre-existing condition exclusions
Passing H.R. 1628 in the House is the first step of the legislative process. The Senate must also pass H.R. 1628 before
the bill is sent to President Trump for signature.
27
© 2017 HUB International Limited.
Thank you!
Neal Stehly, SVP, Benefits Division
[email protected]
Jon McPheters, Workers Comp Claims Advisor
[email protected]
28
© 2017 HUB International Limited.