A Question from One of Our Workers Comp Blog Readers - I see that you do quite a few presentations on Workers Comp. What is the subject that you talk about most and what subject causes the most questions?

The subject that I speak on Workers Comp about really depends on the audience. I spend a large amount of prep time tailoring my speech to the attendees. Workers Compensation is not the most exciting subject.

The subject that seems to be the most popular is the Workers Comp claims that have gone from a minor claim to a much more serious claim for no reason. The other main concern by employers is when employees will not return to work.

The main subject that I present is what can be done by employers to control Workers Comp costs TODAY. I will mention the Five Keys to Cutting Workers Comp Costs. There are prior posts that cover them in more detail. They are:

1. Immediate injury reporting
2. Medical Treatment Networks
3. Return to Work Programs
4. How the employee was treated
5. Adoption of management to cutting Workers Comp costs

I have spoken about these five for well over twenty years. It is amazing how many of the employers questions can be answered by these five topics.

If you are in the Raleigh NC area on 6/10/08, I will be presenting on Workers Comp. See the next post for more information.

A Word of Warning - There are two main situations where we have seen Workers Comp cause the premature demise of a business, especially small businesses. They are:

1. Not being familiar with the laws concerning the number of employees that require a Workers Comp policy. You may not have to have Workers Comp insurance with up to five employees in a certain state while other states require a policy with one employee. This is a quick way to hear from the Insurance Commissioner with a cease and desist injunction order.
   
2. Similar to #1, an employer that hires subcontractors may be on the hook for a claim if a subcontractor is injured. Make sure your contractors show you a certificate of insurance.

Let's say that you do not have enough employees to require your company to have Workers Comp insurance. You have contracted with a company that has seven employees but does not have Workers Comp insurance. The term that I have coined - The Ladder of Insurance(c) will apply.

The Workers Comp courts will start with the sub and move their way up the ladder of companies until there is Workers Comp insurance or the deepest pockets. What will happen in this case is that the court will rule against you for benefits. So, you do not have Workers Comp insurance? Well, you will need to dig deep and pay cash or sell everything in the business and pay the claim.

Let's say that you do have Workers Comp insurance but the same situation applies. The Workers Comp courts will find you liable as the sub did not have their own insurance. You turn the claim into your Workers Comp insurer and THEY DENY COVERAGE. Remember, you did not pay premiums to cover the sub. Once again, it is time to pay straight cash.

Free list of definitions at http://www.cutcompcosts.com/definitions.html

Below is an article about Ohio Workers Compensation. Ohio is one of the states that has a state-run Workers Compensation system. I have predicted that all monopolistic Workers Comp systems will eventually fail and/or open up to a free-market system. Ohio's Workers Comp system basically failed, but was propped up by the state government. It is great to see Ohio adapt a great cost saver for employers.

Nearly 280,000 employers participating in the Ohio Bureau of Workers' Compensation (BWC) system have the opportunity to select the managed care organization (MCO) that will manage their workers' comp claims for the next two years. MCO open enrollment is underway and runs through May 30, 2008.

BWC's mission is to protect injured workers and employers from loss as a result of a workplace accident, and to enhance the general health and well-being of Ohioans and the Ohio economy. A network of 24 MCOs support this mission, serving as a primary link between injured workers, medical providers, employers and BWC.

MCOs assist Ohio's employer community regarding medical management and return-to-work initiatives for their injured employees. They partner with employers to ensure prompt filing of claims, timely treatment for injured workers and swift implementation of recovery programs.
“As Ohio businesses compete in today's global economy, one of any employer's most important assets is a safe and healthy work force,” said BWC Administrator Marsha Ryan. “When an unfortunate incident occurs in the workplace, the goal of a safe and timely return to work is paramount. MCOs are an important component in ensuring rapid and adequate treatment for the injured worker.”

Every two years, BWC holds an open enrollment period that allows Ohio's public and private state-fund employers the opportunity to evaluate each MCO's customer service and medical management performance. It is the employers' decision to remain with its current MCO or to choose another MCO to medically manage workers' compensation claims.

BWC provides MCO services to Ohio employers as part of their workers' compensation premium payment. These services are available at no additional cost.

To assist Ohio employers in choosing their MCO during this open enrollment period, BWC offers educational resources including the MCO Selection Guide and MCO Report Card. These tools can be found by visiting ohiobwc.com, or more information may be provided by phone at 1-800-OHIOBWC.

Next up - A Question from one of our readers

What is the UNISTAT date and why is the most critical date of any Workers Compensation policy?

The UNISTAT date is the actual date that the reserves/total incurred is used to calculate your E-Mods. It is not the policy renewal date. We have seen agents, adjusters, and even some underwriters become so very concerned about an employer's Workers Comp policy during the last month of the policy. Other than marketing the insurance company, the last month of a Workers Comp policy is a useless time to do anything in regards to reducing the reserves on a file.

The UNISTAT report is filed by your insurance carrier with the State Rating Bureau or NCCI to calculate your Experience Mod. The UNISTAT report is one of those kind of "hidden" factors that figures into your Workers Comp policy.

When is your UNISTAT Date? Email us at to see when your UNISTAT occurs. As I said in the last paragraph, it is not and never will be your policy renewal date.

OK, so what is the all important Workers Compensation date? Not one employer has emailed us the correct answer.

We have posted on this subject before in this blog. We usually hear the following answers:

• The Workers Comp policy renewal date
• The Workers Comp policy expiration date
• The date that the NCCI or State Rating Bureau calculates the E-Mod
• The Workers Comp audit billing date
• The day the Insurance Carrier's Workers Comp auditor visits

None of the above are correct - the last one is important, but not as important as the Unistat Date. Check the next blog for an explanation of the Unistat Date

A Quick Question - What is the most important date of all having to do with your insurance policy for Workers Compensation? This is one that I have asked about in a post previous to this one.

If you said the renewal date, you are throwing Workers Comp $ down the drain. Check with this blog tomorrow to find out that very important date.

Why do I keep bringing up this very important Workers Comp date? Over 99% of the employers we have asked this question to has said the renewal date. When only .6% of the employers know the answer, we become very concerned.

Email me at if you think you know the answer, or if you would like to know before tomorrow's post.

Our main website is www.cutcompcosts.com

The One Thing We Are Unable To Do - We are very assertive/aggressive in dealing with Workers Comp insurance carriers, NCCI, State Rating Bureaus, and other parties. We owe that to our clients.

The one thing that we have been asked to do that WE WILL NOT DO is to intentionally aid in the misrepresentation of classification codes and other insurance data to cut Workers Comp costs. Trying to cheat insurance carriers will only cost more in the end. Quite a few states are now pursuing employers that intentionally lower payroll info, pay claims under the table, or misclassify their employees. As we have advised in the past, it is best to pay your fair share.

This situation does not come up often, but we do have to address the situation now and then.

We also will never try to cut Workers Comp costs by taking " a roll of the dice" on a long shot to see if any cost reduction might occur for our clients. This often will backfire and end up costing our clients even more of their Workers Compensation budget. We only make recommendations on statistically significant data and results.

Bottom Line - you should pay what you owe, but not one penny more.

Our main website is www.cutcompcosts.com

You corrected a problem on your year 2003 Workers Comp claims loss run. Can you expect a refund of premiums? Under most circumstances, there would be no refund as it was too far into the past. In fact, the ONLY loss run that can be corrected is the most current one.

We have been asked very often to try to dispute an old loss run. Over 95% of the time, we are unable to assist due to the NCCI or State Rating Bureau rules. We cannot correct a file that was seriously over-reserved on old Workers Comp loss runs.

How does your company or any employer keep from over-paying due to incorrect loss runs with mistakes such as over-reserving, claims from a different employer, double entry of the same claim, etc?

As I have posted in the past - please check my old posts - follow the files with online claims access or obtain a Workers Comp loss run monthly or at least quarterly. Review and monitor the loss run like a financial statement. If you see something that looks odd, question it immediately.

If you ever feel that you need assistance, please call in a Workers Comp claims loss run expert.

Up Next - A Controversial Workers Comp Definition

Our main website is www.cutcompcosts.com

The Experience Mod or E-Mod - your business's nightmare credit report. How does a credit report compare to the E-Mod or X-Mod?

The main difference between a credit report and a Workers Comp E-Mod is how fast each can be corrected. Let's say that you have your business's E-Mod and your credit report sitting in front of you. If you find a way to correct something in the credit report, the results are immediate. If you want to try to improve your E-Mod and take steps to improve it, the results will take many months or years to show for your efforts.

Another major difference is that if you find an old error on your credit report, you can fix the old error immediately. For instance if you find an error from 2000 on your credit report, you can fix the error and improve your credit score. You cannot correct a Workers Comp reserving error from the year 2000. It just does not work that way.

Check out my next blog to see why correcting an error on your loss run from the year 2000 will not help your E-Mod.

Our main website is www.cutcompcosts.com

A Question from some of our readers - What types of employers have the most mistakes in their Workers Compensation policies?

We used to have an exhaustive list of employers that listed all of the employers that had mistakes in their Workers Comp policies. After examining Workers Comp policies for over 12 years, we have found that no one type of employer has more mistakes in their policies. We have found that West Virginia employers have a higher rate of Workers Comp mistakes in their policies than other states.

Recently, two types of employers have popped up on our radar screens for having errors in their Workers Comp policies. They are companies that:

• Manufacture or use dyes or inks in their manufacturing processes
• Manufacture non-woven fabrics

Our main website is www.cutcompcosts.com

Question from one of our readers - How long do we have to dispute the payroll audit results that we just received? Should we call in NCCI to do an inspection?

We have often seen where the insurance carrier tells the employer that they have ten days to pay or dispute an audit when sending an audit billing. Most State Rating Bureaus and the NCCI allow a dispute up to 30 days after receipt of the audit results. That does not mean the receipt of the billing if a notice of audit adjustment has preceded the billing.

Calling in your State Rating Bureau or the NCCI and disputing the audit may cost your company more than it is worth. It is usually best to dispute the audit with the insurance carrier. If you call in NCCI, you will have to pay for the inspection, which can be expensive. What happens if the NCCI causes your rates to be ever higher after their inspection? You can possibly cost your company even more Workers Comp premiums. There are certain times such as this to call in an expert such as J&L to examine the premium audit.

Our main website is www.cutcompcosts.com

A Question From One of Our California Readers - Is California a tougher state than other states for your company to provide Workers Comp review services?

We have heard this question often over the past five years. Fortunately, we have aided employers in recovering premiums from SCIF and have been able to reduce quite a few CA companies' Workers Comp costs. The rules in CA are somewhat different than most other states. I have noticed that quite a few of the rules from the WCIRB (Workers Compensation Insurance Rating Bureau) have been modified to be more like the NCCI. This was a good move by the WCIRB.

The main differences are the span of time that can be examine for overcharges and there was only one provider of Workers Comp insurance for many years. The latter made it very complicated to look elsewhere for Workers Comp insurance coverage. That has all changed with SB 899 which has finally enabled a semi-open market for Workers Comp insurance.

That being said, please look at one of my old posts on The Red Flags for Overcharges. This list applies to any state or states.

We have also heard the same question often from employers in:

• Ohio
• West Virginia
• New York
• North Dakota
• Wyoming

The bottom line is that do not let the states that you are operating in dictate your insurance budgets.

Up Next - How Hallmark (r) Can Help Your Insurance Budget

Our main website is www.cutcompcosts.com

The Oklahoma Manufacturers Association's Big Mistake - A few days ago I had posted about the Oklahoma Manufacturers Association wanting to establish a self-insurance pool for Workers Compensation. They have done well with a health insurance pool and wanted to try to do the same with Workers Comp.

Workers Comp requires a large pool of employers to insure themselves. The Law of Large Numbers requires a huge pool of insureds. I also question that the pool should be homogeneous employers. The Law of Large Numbers is the same as the old saying about "Safety in Numbers."

So many self insurance pools have went under that I will not list them as it would take up tens of pages. Why did these self insurance pools not survive? The Law of Large Numbers requires the risk to be spread over a very large group.

If the Oklahoma Manufacturers Association starts a self insurance or risk pool, they will be segmenting the manufacturers from all other employers in the state of Oklahoma. If all manufacturers are having problems with say, back strains and carpal tunnel, what in the group would offset these injuries?

One of the other problems is that ALL manufacturers would have to join the risk pool. Usually when a risk pool in founded, a small percentage of the possible members will join. There may be more members joining later, but usually the pool has already suffered too many losses to spread the risk and the members see their Workers Comp premiums double the next year.

Pools will usually take in all applicants, regardless of their past claims histories and E-Mods. This initiates the process of Adverse Selection. Adverse Selection occurs when the riskiest companies sign on to a risk pool without the balance of the safer companies also coming into the risk pool.

I do hope the Oklahoma Manufacturers Association has a very successful risk pool for Workers Compensation. The odds are stacked very heavily against them.

Up Next - More on Oklahoma
Our main website is www.cutcompcosts.com

Before we go on to the OK analysis of the Compsource bill, I thought it was best to answer the most popular question from our blog readers - this was also blogged on 10/25/07.

Another Question from Our Workers Comp Blog readers - There are a few companies that do Workers Comp premium reviews such as J&L. Do you do anything different than your competitors?

Answer - There are a few things that separate us from our competition. The main two are:

• Premium Audits/Reviews - I am a former Systems Engineer and programmer. We use homegrown software in doing our premium reviews. We are able to find more inconsistencies or errors in the premiums paid than our competitors. Our software drills down into the Workers Compensation data much further than the packaged software that is on the market as of today. As I have an actuarial/statistical, computer, and claims background, we are able to apply unique models to the data for analysis.
  
• Reserve Audits/Reviews - I have a heavy claims background that allows us to initiate a reserve review and a premium review at the same time. No premium review company has this level of expertise in both these areas. Ask one of the premium review companies about reserve reviews and they will usually tell you that they know of someone that they can refer you to in another company or they will refer you to a sub-contractor.

We are able to analyze both areas to the fullest. We start with the premiums paid and work our way back to the E-Mod and then to the reserves on the Workers Comp files. We then analyze the reserves to make sure that the files are reserved properly. We do all of the statistical processes "in-house."

We have also started doing quite a large number of performance file reviews for larger insureds.

I regret sounding like advertising, but it is the truth. We are not in business to be like the other companies.

Our main website is www.cutcompcosts.com

Oklahoma is near and dear to my heart as it is my home state. There are many problems with this bill that is not understood by the Oklahoma house. This could be an insurance disaster in the making. Please see my blog response underlined below. They did not consult an Workers Comp insurance consultant before they passed the bill.

Bill would expand CompSource coverage to out-of-state workers
by Janice Francis-SmithApril 24, 2008

OKLAHOMA CITY – Oklahoma businesses will get better service from the state-created workers’ compensation insurer if House Bill 1959 is signed into law, the president of CompSource Oklahoma said Tuesday.

HB 1959, by Rep. Ron Peterson, R-Broken Arrow, would give CompSource the authority to provide insurance coverage for employees who work out of state for an Oklahoma-based company. The Legislature created CompSource to make sure Oklahoma businesses would always have access to workers’ compensation coverage for their employees. The agency operates as a non-profit, self-supporting insurance company for Oklahoma employers.

Current law requires CompSource to provide insurance coverage only for employees who work in Oklahoma. Oklahoma-based businesses that have employees working in surrounding states have to obtain coverage for those workers from companies in those states.

“We had an Oklahoma business that had to go to four or five mechanisms just to find coverage sometimes,” said Terry McCullar, president and CEO of CompSource. HB 1959 will simplify matters for those companies, allowing them to insure all of employees with the same company.
“We’re not going to be licensed on all those different states,” said McCullar. “We will have to enter into an agreement with a private carrier. They will actually write the business on their paper, and we will assume the risk. Will it amount to a lot of business, no. But it is certainly a customer service issue. It makes doing business in Oklahoma easier.”

HB 1959 passed easily on its own merits in the state Senate after Lt. Gov. Jari Askins voted to end a skirmish over a proposed amendment to the bill. Sen. James Williamson, R-Tulsa, had proposed an amendment to require Senate confirmation of gubernatorial appointments of judges to the Workers Compensation Court.

Askins voted in her capacity as president of the Senate to break a party-line tie vote, defeating the proposal to add Williamson’s amendment to HB 1959. Once the amendment was removed, the bill passed on a vote of 29 to 19, sending the measure to Gov. Brad Henry’s desk for his signature.

The best way to get the best services without government subsidy is to privatize the state fund through a mutual company, and allow it to operate like a real insurance company, beholden, not to political and internal interests, but to their policyholders. Comment By John Thompson

Privatizing any insurer is always the best way to go. I have commented on that often in my blog http://www.cutcompcosts.com/www/blog.htmlHowever, how will Compsource inspect the out-of-state risks? Will they use NCCI? They cannot just blindly write coverage with some type of inspection. What if they have employees in CA? CA will not allow insurance out of Okla. Is Compsource registered to write coverages in these states? Has anyone consulted a WC insurance consultant. What benefits will be paid - based on OK or the other state? This is going to be a complete legal mess.

Legislation by non-WC knowledgeable personnel will end up costing big bucks.

Our main website is www.cutcompcosts.com

This is a great article on Workers Comp risk and the Law of Large Numbers - Check back tomorrow to see why this type of Workers Comp arrangement rarely survives long term.

By Jim Stafford
NewsOK

Broad acceptance of a health insurance plan offered by the Central Oklahoma Manufacturers Association has prompted the group to explore a workers' compensation package for the state's manufacturers, officials said Tuesday.
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The manufacturing group has hired Arthur J. Gallagher Risk Management Services of Tulsa to develop a new workers' compensation insurance package for small and medium manufacturers, said Bob Carter, an extension agent with the Oklahoma Manufacturing Alliance.
What are the savings?The proposed workers' compensation insurance could save manufacturers 10 to 20 percent on premiums, Carter said.

Workers' compensation insurance is a major expense to manufacturers, said Jory Gromer, president of the Central Oklahoma Manufacturing Association. Gromer is general manager of Green Bay Packaging in Chickasha.

"This is why we are looking at the feasibility of a plan on an association basis,” Gromer said. "In order to accomplish this, we are asking member and nonmember manufacturers across the state to provide us with certain workers' compensation data. All data will be held in strict confidence.”
The plan would be offered to manufacturers statewide, said Carter, who works closely with the association through his role with the not-for-profit Oklahoma Manufacturing Alliance.

The group's health insurance product, which is offered in partnership with Blue Cross and Blue Shield of Oklahoma, has enrolled more than 200 manufacturers throughout the state, Carter said. That covers about 12,000 employees and their family members.
"Blue Cross told us the increase for COMA participants in the 2008 health plan would be zero,” Carter said. "One of the nicest things that could ever happen to this group is the fact that there was no premium increase in 2008 for any company.”

The Central Oklahoma Manufacturers' Association claims 339 member companies from across the state. Member companies pay an annual membership fee of $50.
A statewide plan?Oklahoma's workers' compensation rates are higher than neighboring states of Texas, Kansas and Arkansas, Gromer said.

"Our intent with this plan is two-fold,” Gromer said. "First, we want to help local manufacturers save a substantial amount on workers' compensation premiums. Second, we hope the state would consider using this plan, along with our health care and long-term care plans to attract out-of-state manufacturers to Oklahoma.”

Up Next - Why Employer Group Associations Insurance Plans Are Rarely Successful

Bill Review in Workers Comp - One of the most controversial areas in Workers Comp from we have observed is when the carrier or TPA charges an employer to do their Workers Compensation bill review. We have seen overcharging for things such as:

• Price per bill or per line
• PPO Network Access Fee
• % of Savings - this one is abused the most
• Physicians Discount Fee
• Hospital Bill Negotiation Fee
• Many others using different and catchy names

This is one area that if you feel that you do not understand, it is best to call in an expert. We discovered in 1998 a bill review and PPO company that was overcharging a public employer $680,000 per year in just bill review fees. The public employer signed off on the review contract, so there was no $ to be recovered.

There are now "boutique" PPO and bill review companies that are independent of insurance carriers and TPA's. They are really catching on in California with their recent Workers Comp law changes. These boutique PPO companies work directly with the employers, usually Self Insureds or Large Deductible programs.

These bill review fees may be billed off-claim, which makes them very hard to track.

Next Up - PBM's - are they worth the fees?

Acting Like a Workers Compensation Fully Self Insured = Control = Workers Comp Cost Savings .

I have covered the ways that almost any employer can apply some of the techniques used by fully self insured employers to control Workers Comp costs. We started with what the very small employers can do up to very large employers.

There is one area that I intentionally left out until now. Somewhere in the mix between small deductibles and fully self insureds, captive insurance arrangements may be applicable. I recently had a client ask if they could have a captive when they were actually large enough to be fully self insured. The marketer for the captive seemed to have them convinced that a captive was superior to being fully self insured. I could not agree, unless there was some arrangement about captives that I do not understand.

I have posted about captives in the past. The definition of a captive is:

Captive insurance companies are limited purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups, they sometimes also insure risks of the parent company's customers. A captive is a risk management technique where a large corporation can finance losses by making payments to a wholly owned subsidiary called a captive insurer who then pays the losses. If the captive only insures its single parent corporation and/or subsidiaries owned by the parent it is called a pure captive. Captives are located in many places offshore from the United States, including Bermuda, Cayman Islands, Vermont, Guernsey, Luxembourg, Barbados, and the British Virgin Islands.

There are many advantages to captives. One of the areas that we have covered over the last few posts is control. Some of the control is turned over to a captive manager and the claims are usually handled by a TPA. One of the concerns that we have heard from captive insureds is the inferior claims handling by the assigned TPA. The other concern we have heard is when the fronting company or captive manager goes out of business. Who handles what then?

Captives are still very new to the Workers Compensation industry. Therefore, we cannot recommend the use of or the avoidance of a captive.

Cutting your Comp Costs - Acting Like a Self Insured - Self Insured with a TPA

One of the most misunderstood areas of Workers Comp that we have seen over the past fifteen years are Self Insureds with a TPA that is paid on a flat fee basis. The Self Insureds have told us that they are out of the Workers Compensation system as they are paying fee out-of-pocket and are only paying for reinsurance and a TPA fee. Nothing could be further from the truth.

TPA's are spending $ directly from your insurance budget. A really bad claims year cannot be reduced by the E-Mod system as with regular insureds. The claims have to actually be monitored MORE closely than with a regular Workers Comp insurance arrangement.

The term LDF (Loss Development Factor) actually becomes the replacement for the Workers Compensation E-Mod system. As I have pointed out in the last three articles, CONTROL is the most important factor in reducing Workers Comp costs. How can a Self Insured with a TPA reduce their insurance budget by keeping control of the claims? The easiest way is to bring the claims fully in-house, thereby eliminating the TPA. This is not a simple task, but it will pay off a large amount of $ in the long run. With the claims department as part of your company controlling costs are much easier than hiring a TPA and control of the claims will increase as there are no outside parties involved in the Workers Compensation claims process.

All overhead expenses, salaries, claims processing systems, and other costs must be compared to the TPA costs to see if this is a worthwhile venture. One of the minimum things to consider is if there are enough claims to make a claims load for at least one adjuster.

I skipped over Captives and will discuss that next time.

Next Up - Captives for Workers Comp

Workers Comp Premiums Savings - Acting Like a Fully Self Insured

Large Deductible Programs

We have received many emails and calls from employers with Large Deductible programs. The number of clients we have with Large Deductible programs has grown phenomenally over the past few years. Most of them want to become fully self insured which is a great option. That will be covered in the next post.

Large Deductible programs require/allow an employer to set a deductible of $250,000 or $500,000 with an aggregate number of say $5,000,000. If a single claim goes over the single claim limit or all the claims exceed the total aggregate, then regular Workers Comp insurance would kick in to pay the claims.

The employer pays their claims under the limits out-of-pocket and their claims are handled by a TPA. This is very close to the goal of being fully self insured. The companies must be large enough for a carrier to set up this type of agreement.

A large amount of premiums dollars can be saved by paying claims out-of-pocket. However, there is one surprise that occurs with Large Deductible programs. We are contacted often when this occurs. EVEN THOUGH YOU ARE IN A LARGE DEDUCTIBLE PROGRAM, ALL CLAIMS ARE STILL REPORTED TO THE NCCI OR STATE RATING BUREAU. PLEASE DO NOT THINK YOUR E-MOD IS REDUCED BECAUSE YOU ARE PAYING THE CLAIMS DIRECTLY OUT OF YOUR BUDGET.

I have a NCCI Experience Rating Report for a large trucker right in front of me now. They were told by their agent that the E-Mod can be reduced by being a Large Deductible. That in not true and can heavily affect how the Large Deductible Program is written. This may also be an impediment when an employer tries to become fully self-insured.

Questions? Our email address is Our website address is www.cutcompcosts.com There is a list of free info under the tab -Free Stuff-.

Ways to Save on Workers Comp Premiums - Acting Like a Fully-Self Insured

Workers Comp Insurance Pools

Insurance Pools were a great way to save on premiums in the past. Homogeneous employers were grouped together into risk pools and each member of the pool paid their share of the Workers Comp total costs. The Insurance Pool Administrator which operated like a hybrid TPA would adjust the claims, handle all filings, and handle all administrative duties for a fee.

These are not as popular as they were in the 1990's due to the law of large numbers. Risk pools such as trucking, construction, food service etc. did not have enough members to spread the risk. One or two members having a very poor Experience Rating would over-burden the rest of the pool. The pools were often not large enough to offset the employers with many or a few very serious claims. Insurance Pools are still in existence.

If you are considering joining an insurance pool, make sure you have an expert or a team of experts analyze the pool before signing on. We received many calls and emails on trucking pools where the employer had very few claims and their Workers Comp premium doubled.

There are now very many hybrid insurance pools that may save an employer on premiums. Once again, please make sure that the pool is healthy before turning your Workers Comp program over to a pool administrator.

Next Up - Large Deductibles - some surprises

Questions? Our email address is
Our main website address is www.cutcompcosts.com

Small Companies Can Operate Like A Self-Insured (in a way) - From the last post we are going to start with the smallest companies and work our way up to the largest. The theme is saving money by operating like a Workers Comp fully self insured.

• No Coverage - this is a very controversial topic. I am not saying to avoid paying Workers Comp premiums. In certain states, there is a minimum of employees that are required for the State to require that you have Workers Compensation insurance. Some states will not require a company to have Workers Comp coverage if they have less than three employees. Make sure to email us or call your State's Department of Insurance before making this decision.
• Ghost Policies - this is another controversial way to cover a small company's Workers Comp burden. Companies can purchase policies that provide nothing other than a certificate of insurance for Workers Comp coverage. I have come across these with trucking companies. Before buying one of these policies, make sure that all the options are explained to you.
• Small Deductible - As companies grow, this may be a viable option. The employer can pay all claims out-of-pocket to a certain amount, say $300. This cuts the small claims down significantly. There are many options on this type of coverage such as all claims are still filed with the insurance carrier, but the first $300 is billed back to the employer. One of the complications of doing this is when the employer does not report a serious claim timely. There are many ways to use the small deductible programs.

The first three options above are for the smaller companies to retain some of their risk like a larger company that is fully self insured. When an employer retains some of the risk, they can control their Workers' Comp costs at least partially.

We will move onto the next three tomorrow. As always, email us at with questions and check out our main website at www.cutcompcosts.com

One of the Easiest Ways to Control Workers Comp Costs - in one word - The word which has already been used in the last sentence is CONTROL. The more control that your company has over the way that your Workers Compensation claims are handled will ALWAYS result in a reduction in what you pay in Workers Comp premiums.

The ultimate goal of every employer should be to handle their own claims in-house with their own on-staff adjusters. In-house claims handling is usually reserved for only the largest of insureds as a company must prove to the State Insurance Commissioner that they are large enough and stable enough to be a Self-Insured.

So you are sitting there reading this and saying - "I am too small a company to be Self-Insured." That may be true, but there are techniques that are employed by Self-Insureds that a company can use in your everyday operations to cut Workers Comp Costs.

For this and the next few posts, we will cover some of those techniques. We will go from the techniques that larger companies can use down to the companies that pay the minimum Workers Compensation premiums.

The list of techniques by company size is as follows:

• Self-insured with a TPA handling your claims


• Captive


• Super Large Deductible


• Large Deductible


• Insurance Pool


• Small Deductible


• Ghost Policies


• Flying with No Coverage - not the illegal kind

Remember, what the bottom line is to make your insurance department like a in-house fully self-insured. As this may go a little long, I will cover two per day. Keep reading each day as there will be something in here for a company of any size in any state.

Bookmark this page in your favorites and come back to see the next post tomorrow. As always if you have any questions, please email me at or call me. Our main website is at http://www.cutcompcosts.com/

Up Next - Operating Like a Fully Self-Insured Part I

More on the West Virginia Conference - Outside of the Mandolidis decision, I thought that the insurance carriers were very positive about writing Workers Comp coverage in West Virginia. I was interviewed by the Charleston Daily Mail which is the local newspaper for Charleston, WV. I commented in the interview that I wished that Insurance Commissioner Cline would have been able to make it, but I was informed that she was in China for the National Association of Insurance Commissioners (NAIC).

I wish to thank the West Virginians for their hospitality. I enjoyed working with quite a few of the employers and look forward to the open market that will exist post 7/1.

The NCCI has done a commendable job in setting rates as how could rates have been set without any prior data? The NCCI used seven similar states to come up with rates, which is about as good as it gets.

We shall soon see how the open market functions. Well, it is not quite an open market as Brickstreet, the monopolistic carrier will be handling all the governmental employees' Workers Comp for a few years into the future.

The Bottom Line - all this can only come out positive for the citizens and business of West Virginia.

Next Up - More Workers Comp Cost Cutting Techniques

Our main website is www.cutcompcosts.com

The Mandolodis Decision and West Virginia Workers Compensation - On 04/08/08 I attended the West Virgina Workers Comp Conference. The Conference is a prelude to the open market for Workers Comp in WV as of 7/1/08.

The Mandolodis decision discussion became very contentious. The one area that concerned me, as it did most of the insurers, was the Mandolodis decision. Please see my last post for a breakdown of what the suit entails for Workers Comp insurers.

While the NCCI said that Mandolodis would not affect any employers' E-Mod, there was a great concern that there would be coverage under Part B of a Workers Comp policy. Part B of a Workers Compensation policy is known as Employers Liability. It was designed as a catch-all in case a suit was brought against an employer that would be considered a liability claim.

Most state statutes and Supreme Court cases have ruled that there is a sole remedy for Workers Comp and that employees could not choose to sue their employer under a liability claim. Such suits would wreck the Workers Comp system.

Mandolodis seems to have punctured the employer's veil of Workers Comp as a sole remedy. That leaves the insurers and employers of WV in an interesting situation. One of the solutions that I had heard at the conference was to have a stop-gap policy that addressed the Mandolodis claims. This would seem to work on the surface, but Mandolodis claims involve an INTENTIONAL act by the employer. Insurance never has and never will cover an intentional act. This may complicate the situation even further.

The NCCI (National Council on Compensation Insurance) is the final decision maker on whether those claims affect the E-Mod. They gave their assurance that it would not affect an employers Workers Comp E-Mod. My understanding is that Brickstreet (the state-mandated temporary monopolistic Workers Comp carrier) is offering a Mandolodis coverage for a certain % on top of the original policy.

I am sure there is going to be some effect from the Mandolodis decision in WV. We may have to wait until 2010 to see what the final effect was from this conundrum.

Next Up - More on the West Virginia Conference

Our main website is www.cutcompcosts.com

The West Virginia Workers Comp Conference 04/08/08 - Instead of covering most of the major topics, I thought I would cover the Mandolodis decision that has so many of the insurance carriers very concerned about writing new Workers Compensation policies beginning 07/01/08.

In 1978, the West Virginia Supreme Court of Appeals issued a ruling in Mandolidis vs. Elkins Industries Inc. that meant an employee can sue his employer for "deliberate intent" without having to blame a specific person for the injury.

Following the Mandolidis decision, the state began a new insurance program, called the Employers Excess Liability Fund, which allows companies to buy additional coverage to protect them from the added potential liability stemming from the Mandolidis decision. The Legislature turned the opinion into law, which was followed by a "flurry of cases in 1992 and 1993." The statute established a strict, five-part test a plaintiff would have to meet to file a legitimate deliberate intent lawsuit. But the Supreme Court, in its interpretation of the five-part test, watered down those standards significantly.

A 2000 Supreme Court opinion in Roberts vs. Consolidated Coal Co. has made deliberate intent cases even more problematic. The workers' compensation statute removes certain defense strategies a company can use in return for legal protection from lawsuits. The court ruled in Roberts that because deliberate intent lawsuits relate to that statute, the defense limitations apply.

Thus, employers cannot present evidence that criticizes the injured worker. For example, if a worker sues his employer because he believes an injury was the result of faulty equipment, the employer cannot argue the worker used the equipment incorrectly. The employer would be limited to proving that the equipment functioned properly. Mandolidis litigation is a problem because it seems that every serious injury results in a deliberate intent lawsuit being filed.

West Virginia and the Mandolodis Decision Part II

Our main website is www.cutcompcosts.com

Definition - Consent to (Consented) Premium - Consented premium allows the insurance carrier to deviate from their state filings for a certain Workers Comp Class Code. This is a popular way to write policies in the state of Florida. A carrier supplied factor is added to the filed rates. The "consent" is given by the signature of the insured.

This usually happens when a company is very hard to classify or the classification code that is closest in nature to the company does not account for all of the risks inherent to the specific employer. These consented premiums must be pre-approved by the department of insurance where coverage is sought.

We had reviewed a recent policy where the consented premium was 280% more than the filed classification code. The insured employer had signed off on the consented premium.

The advantages to Consented Premiums are:

• Allows a hard-to-cover employer to have Workers Comp insurance coverage
• Must be approved by the Department of Insurance

The disadvantages are:

• A much higher Workers Comp premium cost.
• If any questions come up later about the policy or audit, it is very difficult to dispute as the premiums and classification codes were consented to by the employer
• There may have been a classification code that more closely fit the employer which could have avoided a heavy surcharge
• The E-Mods are being calculated from a less-risky classification even though there is a higher-risk element added to the policy

Next Up - The West Virginia Workers Comp Forum of 4/08/08

Our main website is www.cutcompcosts.com

To our blog readers - our blog producer software had a slight error which has now been fixed. We will soon have a place for our readers to sign up to have our Workers Comp daily blog emailed to them.

I have been traveling quite heavily over the last two weeks. We will have a blog on the West Virginia Workers Comp Forum next week. It should be interesting.

Please feel free to check out the large list of Workers Comp and Financial definitions at http://www.cutcompcosts.com/definitions.html

If you have any questions or comments, please feel free to email them to

Workers Compensation Reserves - The Silent Budget Killer - I have posted very often about the process for calculating Workers Comp premiums. The one area that I could never cover enough is Workers Comp reserving. The reserves are the engine for all calculations that have to do with calculating your Experience Modification Factor or E-mod.

What makes the reserves on a file so unique? In all the process of how your Workers Comp premiums are charged, the Reserves are the only unregulated numbers in the equation. The reserves on a Workers Comp file are left up completely to the claims department. The adjuster can set the file reserves at any level they wish. The only regulation the file has is the supervisory staff of the claims department.

How are reserves calculated? It is usually some form of an educated guess by the claims adjuster. You have very little control over the Workers Comp reserve figures.

How do you take control of your reserves? A Workers Comp Loss Run review is a great way to make sure you are not overpaying on your Workers Comp premiums. One of my prior post covers the review in detail.

If you feel that this is a very complicated process, you are very correct. Do not hesitate to call in a claims expert such as our company to help you make sure you are not overpaying.

Next Up- A Workers Comp Definition

Our main website is www.cutcompcosts.com

Another Workers Comp Definition - This is one that I have posted about previously - Total Incurred - is the funds that have already been paid out + the Reserves on the file. The E-Mod is calculated using Total Incurred as one of the main items. The Paid part of Total Incurred can rarely be adjusted. The Reserves, however, can be negotiated. The three parts of the Total Incurred are

• Indemnity Payments/Reserves
• Medical Payments/Reserves
• Expense Indemnity/Reserves.

If you look at your NCCI or Rating Bureau Sheets, you will only see one loss figure as the Total Incurred is the total of the above three bullets.

I wanted to start with the Total Incurred as I wanted to talk more about the Reserves part of the Total Incurred figure in the next post.

Next Up - Reserves - The Secret Budget Buster

Our main website is www.cutcompcosts.com

Two Subrogation Questions to Ask your Workers Comp Adjuster - there are two questions that you will need to ask the Workers Comp adjuster who is adjusting the file.

They are:

1. Have you sent a notice letter to the carrier of the negligent third party, and may I have a copy of that letter?
2. What is the status of the subrogation lien?

There is a much longer list of questions, but these are the two basic ones that a Workers Comp employer should be asking often if there is a possible lien on the file.

There are time limits for giving a third party insurance carrier notice. The Workers Comp adjuster may be absorbed into the Workers Compensation file and may have overlooked putting the third party carrier on notice. Any amounts recovered by your Workers Compensation carrier must be immediately entered into the file. Almost all Workers Comp adjusters do not have a background in Auto, Premises, General, or other type of liability coverages.

There are quite a few tricks and traps in Subrogation. Remember, when the Workers Comp Adjuster's lien is negotiated down, that is your money that is being lost. Not following the subrogation of your Workers Comp lien can ruin a great avenue to recover funds that will bring down your E-Mod.

Subrogation is one area where I recommend that you use an adjusting expert. Subrogation can be very complicated and confusing even to the adjuster that is on the file. We have had to assist the Workers Comp adjuster on quite a few claims in recovering the funds from a third party liability carrier. The largest one we have had so far is over $1million.

Next Up - Another definition from www.cutcompcosts.com/definitions.html A list of free definitions that you can download.

From Our Definitions Tab at http://www.cutcompcosts.com/definitions.html This is one of the most misunderstood areas in insurance, and especially Workers Compensation, that we see costing insureds millions of dollars a year.

Subrogation: Prevents the insured from collecting loss payments from his or her own insurer and from the responsible third party for the same loss. Once the insurer pays a loss caused by a third party, the insurer takes over, or is subrogated to the insured's common-law right of action against the negligent third party.

What does this mean to the employers? If there are any accidents where another party is responsible (critical - or even partially responsible) for an on-the-job-injury, your Workers' Comp carrier should be pursuing funds from the third party's insurance carrier. This is one area where we see so much of the employer's money go down the drain.

Next Up - Two Subrogation Questions to Ask your Workers Comp Adjuster

Our main website is www.cutcompcosts.com

Released from the West Virginia Department of Insurance

WEST VIRGINIA’S FOLLOW-UP CARRIER FORUM

In response to the overwhelming attendance from our Open Market Forum in September 2007 and the requests for updates of recent legislative items, the Offices of the Insurance Commissioner invite you to join your colleagues for a second Workers’ Compensation Open Market Forum.

This April 8th forum will provide you with the information needed to smoothly enter the West Virginia market and will allow you to ask specific questions your company may have regarding this new opportunity. Join the West Virginia Offices of the Insurance Commissioner and NCCI for a forum designed to provide workers' compensation carriers with additional information needed to begin writing business in WV. This is a valuable opportunity for senior management to learn first hand of what is being experienced in WV and provide answers to questions relative to this new market opportunity. Participants will learn about the legal updates that have occurred, NCCI's filings and what they must do to take advantage of the quickly approaching July 1, 2008 opening date.

WHEN: Tuesday, April 8, 2008 9:00 am to 3:00 pm (Registration starts at 8:30)

WHERE: Town Center Marriott, Charleston, WV

Among the topics we will cover are:

• The New West Virginia Market
• Legal Issues and Update
• NCCI Loss Cost Development
• NCCI Underwriting Plans
• Residual Market

We are going to attend and will post about the Conference on 04/08/08. This meeting is critical if you plan to write or are considering writing Workers Comp coverage in West Virginia.

Our main website is www.cutcompcosts.com

The Difference Between Workers Comp File Reviews, Premiums Reviews, and Reserve Reviews - yes, they are all different.

I have posted on this issue more than a few times. This is most of what we do for a business. I felt the need to re-post on the subject as we receive questions daily on file, or premium, or reserve reviews. Employers, agents, and others are sometimes confused by the terms.

• File Reviews - also called Performance Reviews. File reviews are usually reviewing all aspects of the way that a Workers Comp Claims Adjuster handled a specific file or group of files. The performance on the set of files is scored against a group of weighted criteria. Any trends are noted. We do not and will not pick out a few things that an adjuster erred on in the handling of the Workers Compensation claims. We look for trends such as over-reserving of files, late three-point contact, etc. Most adjusters do very well in our audits.


• Reserve Review - we should call this the Total Incurred Review, but most people outside the Insurance Industry refer to the Total Incurred as the reserves. We review the Workers Comp loss runs to make sure that the reserves are in line with the accident and the claims status provided by the adjuster. This can be part of the File Review.


• Premium Review - this is where we actually confirm all the premium calculations and the structure of the calculations. We examine areas such as classification codes, E-mods, original Workers Comp policies, year-end audits, etc.

Quite a few of our clients are now requesting E-Mod reviews. This is where we assist in lowering the E-mod or getting a company out of the Assigned Risk Pool. There are many areas where a company's Workers Compensation premium payments may be reduced. We see so many companies just writing a Workers Comp premium check without questioning how the payment was calculated. Questioning the $ you pay out is the best place to start a Workers Comp premium reduction program.

Our main website is www.cutcompcosts.com

A Further Analysis of the Wyoming Workers Compensation System

One of the areas that Wyoming will need to examine is how Workers Comp claims are handled - specifically if claims that should be accepted are instead denied. This is one of the lingering questions about the North Dakota Workers Compensation system. Is there a trend to over-deny claims as the adjusters in North Dakota and Wyoming know that the Workers Comp system is one-sided?

A high-quality full claims audit from an outside source would enable Wyoming to find out if they are being fair to their injured employees. The word "independent" is crucial. The audit would have to be superior to the one in North Dakota.

From the Casper Star Tribune:

• A recent assessment of workers comp's finances by Pacific Actuarial Consulting suggested that about $642 million is required to cover benefits and liabilities based on historic and current income and payouts. It also suggested a more conservative view may call for $848.7 million, which would cover a major catastrophic scenario.
• As of Jan. 31, workers comp's cash balance was $925,296,141, according to outgoing director Gary Child. So whether the surplus is in the neighborhood of $77 million or $283 million, advocates from both the employee and employer viewpoints say they want a more detailed analysis of the finances.

I do not ever, and will never accept an analysis from anyone in an insurance position that uses the word or words "worst-case scenario". Therefore, the analysis by Pacific Actuarial Consulting that 848.7 is needed for a catastrophe is not valid. However, I have not reviewed their findings. The $642 million seems high, but is probably more in line with actual needs of the Wyoming Workers' Compensation System. Producing a LDF (Loss Development Factor) should be sufficient for the projected needs.

One of the great things about the Wyoming Workers Compensation system is that attorneys, legislators, administrators, and others are asking questions.

Next Up - The Difference Between Premium and Reserve Audits - they are very different.

Our main website is www.cutcompcosts.com

An Analysis of The Wyoming Workers Comp State Fund's Surplus - While we are on the topic of State Funds, Wyoming has been in quite a few online Workers Compensation publications with their huge surplus. Basically, the two basic questions that are being asked are:

• What do they do with the surplus?
• How did Wyoming get to have such a surplus?

The Wyoming surplus issue is complicated. We will address the first bullet point today and cover the second one in the next blog post.

It is, and has been, our opinion that any surplus that involves a Workers Comp Fund surplus should be returned to the employers. The surplus clearly indicates that Wyoming has been overcharging their employers for years. Refunding the Workers Comp premiums pro-rata should be the way to go. If the surplus was very small then, the State Fund of Wyoming should retain it to pay claims. I understand the surplus to be $925,000,000. That is not a small surplus for Wyoming. One may equate the return of premiums as a business stimulus. We would have to look at the numbers to see the amount of the surplus that should be returned to the employers.

One article that I read indicated that the injured employees were the ones that were shortchanged. I would have to disagree with that totally as there has never been a study conducted anywhere at any time that indicated that underpaying employees caused a surplus in a State Fund's premium. If the employee benefits were to increase that would affect only the FUTURE premiums, not the current and past ones.

One area that has seem to have arisen in North Dakota with no conclusions drawn there is that too many claims were denied and that increased the surplus. I will write a blog on that in a following post about the process of a litigated Workers Comp claim in a monopolistic state such as Wyoming or North Dakota. Could the claims process in a monopolistic Workers Compensation state be unfair? Possibly.

Next Up - Analyzing the Amount of the Surplus that should be returned.

The Answers to the Final Five Questions on the Last Blog with One More Question added:

6. We could not file a dispute with the North Dakota government or WSI as the dispute had to be filed BEFORE the end of the bidding. We would have filed a dispute for the small number of files that the provider examined in their review vs. cost, but the number of files reviewed were not published until AFTER the audit was completed.

7. A recent North Carolina public bid for a file review of 350 files had a range of $27,000 to $65,000. So with 475 files, that would be 475/350 * 65,000 = $88,214 maximum.

8. Yes, we are familiar with the audit provider. The are one of the larger companies that bid on quite a number of projects.

9. We know no one at the WSI or within the North Dakota state government.

10. Yes, we do realize that we were posted on some of the politically-based websites in North Dakota. We made no effort to contact anyone with the North Dakota press. We have heard from a few news outlets and have been interviewed on the blog postings.

11. This is another question that we just added - Did I review the report from the provider on WSI's website? What was my opinion of the report?

The report was well done from a structure standpoint. However, the numbers are not there to draw any conclusions. One area that that was remarkable was that the provider's team could have performed an audit on 475 files from 1/28/08 through 2/1/08. That is five workdays or 37.5 hours. The norm is one file per hour on the average. Lost-time files may take longer than one hour to review, but medical-benefit-only files brings the average back to within an hour. That would be 12.67 files per hour. The review team would have needed to consist of 13 auditors at a minimum to accomplish this task that quickly.

Our main website is at www.cutcompcosts.com

Update - if our website looks a little in disarray, our website provider's server crashed. When they ran the backup, it was a file from an old work-in-progress file. The blog, however is still working well. We are fixing the website as I am typing this info.

I was going to blog about Wyoming's Workers Comp concerns, but I received such a huge response to my last blog on my assessment of the Workers Compensation file review that was performed by North Dakota's recent service provider. I will not name the provider due to the legalities of disclosing the company that performed audit. It is public record and can be found on the WSI website and in different articles.

Some of the questions that I received today were:

1. Why did I think there were not enough files examined in the audit?
2. What is the usual normal % of files examined?
3. How many areas does J&L look at in files audits?
4. What is the area that most of the mistakes are found?
5. What can be done about the audit if it was less than adequate?
6. Why did we not file a dispute with the North Dakota WSI?
7. What is the normal charge for 350 files?
8. Are you familiar with ********, the audit service provider?
9. Did I write the last blog due to the underlying personnel changes that were made with the audit? Do I know any of the personnel involved?
10. Did I realize that the blog was posted on a very reputable North Dakota political website?

My answer (respectively) to the above questions are:

1. The purpose of an audit is to show a statistical trend in certain areas of a group of Workers Comp files. There has to be enough files to generate instances of trends. Workers Comp files can be very complicated, so there may be a number of trends that have to be examined.
2. The Workers Comp industry standard is 10% of the files. My standard is 1/7 of all files in a set. In the case of the North Dakota file audit, that would have been from 3,000 to 4,000+ files.
3. We look at 33 areas that are scored by using a weighting system that is predefined. We usually have all 33 to add up to a number, which we designate as 100%, or the perfect score. The weighting system would change from state to state. We do more of a "performance audit." With me being a former Workers Comp adjuster for many years, J&L is not in the business of questioning an adjuster's decision on a file (usually).
4. Most of the mistakes we find in Workers Compensation files are in two main areas, both with devastating effects on the file. They are the work performed by the adjuster upon receipt of the Workers Compensation First Report of Injury (three point contact) and reserving of the files. Even self-insureds can be heavily affected by the wrong reserves on the file.
5. This would be one that the citizens of North Dakota and the personnel at WSI would have to handle. As I said in the last blog, according to North Dakota rules, we could only object BEFORE the bid, not after. One interesting thing is that the number of files the provider was going to review was released AFTER the bid, not before the beginning of the audit. I have never seen that before in all my years of Workers Comp experience.

Next Up- I will answer 6 - 10 tomorrow. I do not like the blogs to be too lengthy each day as reading info on Workers Comp can be tedious to say the least.

Our main website is at www.cutcompcosts.com

ND's Workers Compensation Conundrum - One of my prior posts addressed some of the problems with North Dakota's Workers Comp system. I think there now may be a problem larger than the ones they tried to fix with multiple audits of their WSI. The WSI paid over $160,000 for an overpriced and underperforming audit. I, which I rarely do, would stake my reputation on it.

We were given a Request for Proposal along with other organizations that do Workers Comp claims file audits. The number that was supposed to be considered was 30,000 claims over the last few years. The provider, and I use the term loosely, reviewed little more than 350 files. Using straight division, that would be 350/30,000 files. That totals an unconscionable 1.17% of the files. NO JUSTIFIABLE CONCLUSIONS CAN BE DRAWN ON THAT SMALL A % OF WORKERS COMP files. As a long-time student of statistics, and as the industry standard dictates, the provider could not have drawn one iota of any type of recommendations. The number of Workers Comp files that needed to be reviewed should have been 3,000 - 4,000.

The cost of the project was astounding. It was about 100% larger than most providers would have charged. The bidding for the project left it to the bidder to figure out what was a statistically significant number of files. Quite a few promising companies did not even bid due to the sheer volume. A number should have been published by ND to make sure that there was a level playing field, which there was not.

The time taken to do the project was longer than allowed, which once again pushed out the small companies as the RFP said the project had to be completed in a very short time, without question .

I am aghast that ND took this lackluster (at best) Workers Comp file review and are drawing conclusions from it. The file review was at a minimum 2,650 files short of being able to draw any conclusions. The minimum standard for the industry is 10% of the files. No company could object, as according to ND rules, the prospective bidders must file a dispute BEFORE the bid, not after.

I do hope North Dakota realizes the mistake made and tries to rectify it. Without doing that, the citizens of ND were heavily shortchanged on this one.

Our website is at www.cutcompcosts.com

Up Next - Wyoming's Concerns About Their Monopolistic System

A Question From One of Our Blog Readers - What is the one thing that I can do to quickly reduce my Workers Comp premiums?

I wish there was a quick-fix for paying less Workers Compensation premiums. There is a one-year lag time between anything a company does today and those actions affecting the E-Mod. Taking actions today is a start, but it needs to be a long-term goal. An action plan has to be put in place ASAP and then followed for three years to really have an effect on the E-Mod.

As I have mentioned in prior blogs, the first thing to do is to quit writing Workers Comp premiums checks without understanding the premium bill. If it is a bill from the initial policy, then review every page of the policy and ask questions. If the premium bill is from a Workers Comp audit, then make sure it is accurate. If there are any questions, about the Workers Comp policy or audit, there is a time limitation for disputing the premium bill. Most of our initial contacts from employers are due to"Something just does not seem right - a gut feeling."

The bottom line is to not just write a check and consider it an overhead or fixed cost. Workers Comp is a variable cost. One of our favorite sayings is "Stop writing checks and ask questions." If you do not feel comfortable, do not hesitate to bring in a premium, reserve, or claims expert. It will almost always prove to be money very well spent.

I blogged "Red Flags That You May be Overpaying for Workers Comp" a few weeks ago. Check that one out. If you ever have any questions, please feel free to email me at or call us.

Up Next - Back to North Dakota's Workers Comp Conundrum

Our website is at www.cutcompcosts.com

My Company is in the Assigned Risk Pool, are we paying that much extra, and if we are, how do we get out of it ASAP?

We currently have quite a few employer clients that have asked for us to help get them out of the Assigned Risk Pool. The Workers Comp Assigned Risk Pool is where the State chooses a carrier for an employer as there was no coverage for them in the voluntary market. The insurance company must cover the risk. The insurer charges a HUGE rate over the voluntary market. Who could blame them as this is "take them as you find them" insurance coverage.

A certain state's advisory Workers Compensation insurance rate for the Administrative/Clerical positions (Classification Code 8810) is 60% higher in the Assigned Risk Pool than in the regular Workers Comp voluntary market. As you can see, you are paying a much higher rate when in the Pool.

What is the quickest way to get out of the Assigned Risk Pool? This is a much-debated point. The most obvious one is a Safety Program. Keeping losses from happening will do the most for your E-Mod and Workers Comp insurance rates. However, there is a one year lag between your current safety efforts and the E-Mod you have now. Safety programs do take time to show in your insurance premiums.

Reviewing your loss runs is very important. They need to be reviewed long before your Uni-Stat date and any corrections made. There are quite a few prior posts on reviewing your loss runs. If you at any time feel in over your head in reviewing and/or negotiating reserves with your Work Comp claims adjuster, please call in an expert. These reviews can make or break a Workers Comp program. Do not call the Workers Comp adjuster up and say something like - "My reserves are too high. I am paying too much in premium." Be specific to what claims are over-reserved in your opinion and why.

The other ones are filing a timely report of injury, referral to a good medical treatment network, having a great return to work program, and employee treatment. These will bring your E-Mod and Workers Comp premiums down quickly.

Our main website is at www.cutcompcosts.com

Up Next - A Question From One of Our Blog Readers

The Most Expensive Component of all Workers Comp Claims - this is one that surprises most people. When I ask this question at presentations, the answer is usually the medical cost of the claim, or pharmaceuticals, or even settlements.

The most expensive part of a Workers Compensation claim is....poor adjusting decisions. If the Work Comp claim adjuster makes a mistake on the file, the insured/employer ends up paying for the result of that mistake through a higher E-Mod resulting in higher premiums.

One of the most common mistakes we see is in the area of file reserving. Check back on the blogs where I mention Worst Case Scenario. Your Workers Comp premiums are calculated from the reserves on a file, better known as the total incurred. AS I HAVE SAID NUMEROUS TIMES IN THIS BLOG, WHAT YOU HAVE PAID ON A CLAIM HAS LITTLE OR NOTHING to do with the Workers Comp premium paid. It is the total incurred. Please see my prior posts on total incurred.

In my years in insurance companies and TPA's, the only employees that understood what goes into paying premiums at the most basic level was the Workers Comp claim department. However, no adjuster has an exact idea of what effect a file reserve or total incurred has on an employer.

The other area that we see most of the errors and higher cost is in how expedient the employer was in reporting an accident (lag time) and how quickly the adjuster made the appropriate contacts. Within 48 hours AFTER AN ACCIDENT HAPPENS, the Workers Comp claim has already established its final cost factors. Yes, in 48 hours the claim's direction cannot be changed. There is a prior post of mine on that subject.

Next Up - My Company is in the Assigned Risk Pool, are we paying that much extra, and if we are, how do we get out of it ASAP?

Our website is at www.cutcompcosts.com

Monopolistic Workers Comp States Examined - As of today, there still six states that have monopolistic state funds - They are North Dakota, Ohio, Washington, West Virginia, and Wyoming. West Virginia is still in a monopolistic condition as only one carrier, Brickstreet(c) can write Workers Comp business there. That will change on 07/01/08. Please see one of my prior posts on the investigations into the state funds going on in ND and OH.

In these six states, the state governments mandate that employers purchase workers compensation insurance from the state fund. These states don't even allow insurance companies to sell workers' compensation to employers headquartered within their borders.

There is a caveat to state funds that most employers do not realize until they receive a surprise claim. Even if your business isn't domiciled in one of these states, you could still be affected by their laws. If one of your employees is injured in any of these states and decides to file a workers compensation claim, that state's laws would apply. That is why "employer's liability" coverage is very important. If you have an employee that is injured in WA and you do not have coverage there or employer's liability, you will pay for the expenses directly out-of-pocket and may face steep fines from the Insurance Commissioner of that state.

This coverage would pay for related expenses and damages in case you are ever sued for the employment-related injury or illness. Most insurers may offer this extended coverage in these states, but only if you specifically request that they add it to your policy. There are a few Workers Compensation carriers such as The Hartford (c) that add it to all Work Comp policies.

I always recommend in all my presentations that employers make sure they have an "all-states" endorsement to their policies. It does not cost that much and can save an employer's Workers Comp program from taking a big hit.

Next Up - The Most Expensive Component of all Workers Comp claims, and it is not the medical component, in fact it never shows up in a file any place. No, really, check it out.

Our website is at www.cutcompcosts.com

What is the main reason for the problems that State-run Workers Comp programs are experiencing? While there are many problems that have surfaced with State-run Workers Comp programs, there is one area that is quite lacking in the usual State Fund.

Workers Comp used to be a very simplistic process where benefits were paid, forms were filed, and everything was copasetic. My, how those times have changed. Workers Comp soon became a contentious process where attorneys, rehabilitation professionals, and other parties were added into the mix on a large percentage of the claims. The number of litigated or settled files skyrocketed.

The State Funds were not running their programs like a business. They were keeping their Workers Comp analyses very simplistic while companies such as Liberty Mutual(c), Travelers (c) used very complex analyses to match the complex world that Workers Comp was becoming very rapidly. In other words, the State Funds were running their programs as a program not like a business with a profit motive.

Experience Mods, Classification Codes, Loss Costs, etc were becoming a very exact science on what insurance carriers charged their insureds. State Funds ran up huge deficits where if the Fund was a carrier in a Rated state, the Insurance Commissioner would have put the carrier into receivership. West Virginia, for example, was running up a huge deficit very rapidly, but now the market is changing to a free-market system.

Not all monopolistic states are in that much trouble. However, I think you will see over the coming years, a switch to private insurance from the monopolistic states that are in place.

Next Up - Monopolistic States Examined

Our website is at www.cutcompcosts.com

What is the Problem? - There are many challenges that are faced by state-run Workers Compensation programs. The ones that are most prevalent as of now are:

• Solvency
• Fraud
• Mismanagement
• Have To Take All Applicants
• Lack of Accountability
• Not Using Good Business Models
• No Competitive Forces
• No Profit Motive
• Customer Service Issues
• Deficient Claims Handling Service

There are states that have converted or are now in the process of converting their Workers Comp to a privatized system. Nevada has been successful and West Virginia is in the process with Governor Manchin taking the lead to push the system from the State Fund to Brickstreet(c) to an open market as of 07/o1/08. The West Virginia Insurance Commissioner Janet Cline has taken a tiger by the tail and has tamed it for the most part.

California's State Fund (SCIF) was a quasi-state run system as they held an extremely high percentage of the Workers Comp insurance market for many years. Their new Insurance Commissioner Pozner is in the process of cleaning up SCIF.

Up Next - What is the main reason for the problems that State-run Workers Comp programs are experiencing?

Our website is http://www.cutcompcosts.com/

The Woes of North Dakota's Workers Compensation Program - if you have been reading any of the recent Workers Comp publications, you may have seen some mention of North Dakota's very intense problem with their Workers Comp Department - Workforce Safety and Insurance or WSI.

I have read at least 20 articles on the investigations of the North Dakota WSI. They have been subjected to and will be subjected to numerous audits over the next few months. People have been jailed, only to be reinstated into their position and then fired again.

We had reviewed a Claims Processing Audit RFP for the WSI that wanted all of their claims to be audited going back five years. This was a big task to do as the requirement was to be on-site in February in North Dakota. So many of our Worker comp claims reviews have been electronic since 2001, but the WSI did not have the data structures to enable an electronic review.

All this is a symptom of one main problem, and that has been what I have said since the 1990's about states that handle their Workers Comp insurance programs like North Dakota. What is the problem? Check out the next post.

PS I just wanted to say that any of the personnel we had dealt with from the State of North Dakota were friendly, thorough, and very professional.

Up Next - What is the problem?

Our main website is www.cutcompcosts.com

The IRS Shocks Everyone on Captive Taxes - One of the most hotly debated and controversial topics since the bid rigging accusations, has hit the Workers Compensation world. The Internal Revenue Service has performed a complete U-turn on attempting to tax captives upfront, or actually to not allow the upfront tax write-off.

As I said in my last blog from a few weeks ago on this situation, I felt that the IRS was going to completely tax captives on the funds that were set aside to pay claims and not allow the taxes to be written off on the reserves set aside to pay claims when the claims were paid. The IRS had always said that a taxable event happens when the money is set aside for any type of financial arrangement. However, now captives are an exception to the rule.

Ever since September 2007, the IRS had said they were going to have public hearings on them taxing captives. I was 99.9% sure they were going to tax captives upfront when the money is set aside for paying claims - or in reality - were not going to allow a tax write-off which is one of the main benefits for a large employer to create a captive for their insurance, especially for Workers Comp. Captives may now spread very quickly as an alternative risk financing arrangement. That is, until the IRS takes another crack at trying to disallow the reserve write off for taxes.

Captives are not the answer for all insurance situations, but they are now much more appealing with the advantage of an upfront tax write-off for reserves.

Next Up - The Woes of North Dakota's Workers Compensation Program

Our main website is at www.cutcompcosts.com

Governor Mark Sanford's Fight for Reducing Workers Compensation Reserves in South Carolina -

I have posted quite a few times on the plight of Governor Sanford and his trials/tribulations in trying to fix a major problem with the Workers Comp system in South Carolina. Governor Sanford has recognized a major problem with Workers Comp and is trying to correct it by preventing the Workers Comp Commissioners from being able to just pull a number out of the air as an award for permanent partial disability.

In our Workers Comp file reviews for South Carolina employers, we often see very high reserves left on a file when a viewing is upcoming on a file. These reserves directly affect what employers end up paying for Workers Comp premiums. The adjusters are usually baffled with forecasting what the Commissioner may award an injured employee on a file. There can be a very large difference on the same file with the same type of injured employee.

What Governor Sanford is trying to do is take the subjectivity out of the settlement and make it objective as possible.

We have seen articles that say Governor Sanford is stretching his bound of authority too far or is walking down paths that his predecessors have already attempted and failed. The Supreme Court of South Carolina has decided to take up the issue soon. This may be a way for South Carolina employers to save millions in premiums.

If you are a South Carolina employer or pay South Carolina Workers Compensation premiums, please support Governor Sanford in his quest to save you part of your Work Comp budget.

Next Up - The IRS Stuns the Workers Comp World

Our main web site is http://www.cutcompcosts.com/

How Many Chances are there for Errors in Your Workers Comp policy, premiums or reserves? I started to write this blog and remembered that it was discussed in a prior blog. Before you look back into the J&L blog, what would be the likelihood that an error has incurred in your Workers Comp premiums?

Check back further in the blogs to see the number. What do you think it is - 50 chances, 500, or 1000? If you cannot find the blog, let me know. It is worth the read.

The next blog will be on a person we have followed often in his effort to straighten up the Workers Compensation laws in his state - Governor Mark Sanford of South Carolina. We have blogged the South Carolina Workers Comp System woes for months.

Up Next - Governor Mark Sanford's Efforts

Our main web site is http://www.cutcompcosts.com/

The NCCI (c) - who are they? The National Council on Compensation Insurance is based in Boca Raton, FL. They perform the Workers Compensation rating calculations for employers and insurance companies in over 20 states. Even the states that do not use them for their rating calculations base their Experience Modification Factors (E-Mods/X-Mods) on their math. There is really no other company that promulgates E-Mods.

Most of my interactions with NCCI have been very positive as they do realize they are a service organization and seem to treat people as such. You may have noticed the large NCCI insignia on your rating sheets. If you have not seen those sheets and you have the fiduciary responsibility for your company, please obtain a copy of them ASAP as they impact your Workers Comp insurance budget heavily.

One of the main tasks that NCCI has undertaken is to change their Classification Code system by what seems to be a consolidation of the number of Classification Codes that are in place. There are now over 600.

There are state minimums to have an Experience Rating. If your company has grown very quickly from a very small company, you may be in line to be Experience Rated. Also, if you have a large deductible program for your Workers Comp clams, the carrier is still going to report your claims to the NCCI or State Rating Bureau.

I will not go into the E-Mods or Classification Codes in this post. Please check out the prior and archived posts on those subjects.

Next Up - How many chances are there for a mistake to be made in a Work Comp policy?

Our main web site is http://www.cutcompcosts.com/

Are Self-Insureds Really Out of the Workers Comp system?

I often hear when talking about Workers Compensation that a company is self-insured and does not need to worry about the trials and tribulations of the Workers Comp system as it is today. Actually, even if you are self-insured, the Workers Comp system is still there, but the numbers have changed.

Loss Development Factors (LDF's) are a twist on the E-Mods that are promulgated for regular insureds. The span of time involved is much longer - 10 years vs. 3 years for an E-Mod. You have to budget for those payouts just as if you had regular insurance. J&L has calculated a number of LDF's over the years. There is software out there that will do LDF's, but there has to be some intuitive inputs to the programs. An LDF is not set in concrete.

The claims are handled by a Third Party Administrator (TPA). The files are handled the same whether an insured is self-insured or not. One of the areas that we sometimes have concerns is that if there are self-insured and regular-insured files in an adjusters claims load, the self-insured files sometimes seem to have less care. I am not saying that this happens all the time, but we have seen enough in our audits to call it a trend.

If you are self-insured up to a certain amount, say $250,000 the insurance carriers are still required to report your claims numbers to NCCI or the State Rating Board and your company will still receive an E-Mod.

You may look back in our archived posts on the post called the Self-Insured Phenomenon for another article on Self-Insureds.

Next Up - The National Council on Compensation Insurance (NCCI)(c) - who are they and what have they been up to lately?

Our main web site is www.cutcompcosts.com

Follow-up Questions to My Last Post - we have received quite a few questions about the software that we have developed for analysis for Workers Compensation policies, premiums, E-Mods, and reserves. We are in the process of making the software available to businesses through our website on a per-use basis. Creating intuitive web-based software is a large task.

As of now, we use the software internally as an aid to performing Workers Comp analyses for our clients. What is the number one error we have found on Workers Compensation policies and reserves? Check the archived posts to see what we have uncovered in our analyses.

The first step to cut your Work Comp costs is asking why? If your company and you are just writing checks and not questioning anything, you have a 50% chance of overpaying for your coverage. A good reference guide when dealing with Workers Comp is on our website at http://www.cutcompcosts.com/definitions.html Print the definitions out or save them to your hard drive. They will come in handy.

Next Up - Are Self-Insureds Really Out of the Workers Comp System?

Our main website is www.cutcompcosts.com

A Question From Our Blog Readers - Can you give me a quick history on J&L Risk Management Consultants?

Without sounding like an ad, I started J&L Insurance Consultants, Inc in 1996. I was originally helping the spinning mills in North Carolina straighten up their Workers Comp claims filings and to help them with their E-Mods. Some of them were disastrous with E-Mods over 2.0. Due to NAFTA and GATT, the spinning mills closed very quickly.

I started noticing that the Workers Comp policies were written incorrectly and had many mistakes on them. I had a heavy statistical background and decided to address and try to correct mistakes in the premium calculations and the reserving of files. What I wanted to offer was an analysis that started at the premiums paid and worked back towards the reserves that caused the E-Mods to change.

As far as I know we are the only company that offers this service that is not involved with making an agent's commission. Some companies are great at analyzing one piece of the process, but we are the only ones that have intuitive software for premium calculations and reserving.

Being a former Systems Engineer for a major computer company, I was able to construct software that would enable employers to analyze and cut their Workers Comp Costs. We have found it to be invaluable in helping employers cut their comp costs over time.

Our main website is at http://www.cutcompcosts.com/

A Question From One of our Blog Readers - In one of your earlier blogs, you said that Workers Comp monthly or quarterly loss runs are like gold to an employer. What are the deadlines for reviewing them to try to reduce my premium?

Our recommendation is that you set aside some time after receiving each monthly/quarterly loss run to review the claims. One of the reasons that you must review them very often is one of my old work comp rules -

You cannot go back and change what has been paid on a Workers Comp file or change the reserve after the file has been closed. Workers Comp reserves are the "here and now" money that is going to affect your insurance budget for up to five years.

Workers Compensation premiums have a look-back period where we can go back into the past a few years, but we can do nothing with the reserves on a file that has already been handled and closed. There are some companies that will go back into the past and try to sue their Work Comp carrier, but that is usually a long, drawn out process where everyone loses.

There are some prior posts that cover how to look at your loss run in this blog. You must start talking to your insurance carrier three months after your new policy just renewed. That does sound strange, please read this carefully. Do not start trying to review your reserves in November for a January 1 renewal date. You are months late and will not help your E-Mod or premiums.

Feel free to email me at if you wish to know when you need to start reviewing your reserves and when your reserves will affect your E-Mod and premiums.

Up Next - Another question from our blog readers.


Our main website is www.cutcompcosts.com

South Carolina Governor Mark Sanford tries to reel in his state's very costly Workers Comp system.

There will be much debate about whether Governor Sanford can actually order a group of impartial (?) judges to use the American Medical Association (AMA) guidelines in deciding permanent disability ratings. There will also be questions about whether a Workers Comp judge can use synthetic future earnings on which to base part of the rating.

One thing is for sure. Workers Comp insurance rates for SC will see a reduction in a few years if Governor Sanford gets his way. Why?

Whenever we are doing file, premium, or reserve reviews for a SC client, we often have to email or call the adjuster that is on the file to answer a few questions or for a status. The reserving of a SC file is almost impossible with judges subjectively coming up with an impairment rating out of the blue.

What an employer pays premiums from is the total incurred figure set by adjusters on the respective employer's Workers Comp files. An adjuster has to increase the amount of total incurred and reserves more than a file in a state outside of SC. There is no way to GUESS what $ a judge is going to give a claimant at their viewing. I remember many years ago when I was trying to set reserves as an adjuster for South Carolina Work Comp claims. I usually put up quite a large amount of extra reserves for the viewings as they were so subjective.

A Workers Comp adjuster is going to usually go on the high side of their estimation. If there was some standard for permanent partial impairment ratings, everything would be much easier and save employers thousands. This is not to say that we should shortchange an injured employee, just have a standard.

There are certain quirks in all Workers Compensation laws in most states. This just happens to be one that is very costly to the South Carolina business community. This all will likely play out in the South Carolina Supreme Court and that will likely not be the end of it.

Next Up - Answering a Question We Received a Few Days Ago

Our main website is http://www.cutcompcosts.com/

How long does one bad year of claims affect a company's Workers Comp insurance premiums? This is a question we receive very often.

The first thing to look at is the state laws and rules how your E-Mod or X-Mod is calculated. That will have some bearing on the length of time. Most states caulculate the E-Mod/X-Mod over a three year span. However, the three year span does not "kick-in" immediately the next year. What happens, for example in 2008 will not affect your insurance company premiums until the 2010 policy. Why?

Workers Comp is calculated on a delayed system. The E-Mod for a claim in 2008 will hit the E-Mod on the 2010, 2011, and 2012 policy years. Yes, you pay THREE times for a bad claims year. That is the way the Workers Compensation system is structured for losses.

Do you pay 1/3, 1/3, and then 1/3 of the bad claims year of 2008? NO You will pay more like 60%, 60%, and 60%. But wait, that does not add up to 100%. You can now see how a bad claims year can be very expensive.

The NCCI or State Rating system that is in place amplifies the amount that the Work Comp carrier reserves on the claims. Is it a fair system? It is the one we have in place. The best way to stay out of the system is with a safety program; making sure that you are being charged the proper premiums; and making sure that the reserves on your files are accurate.

Next Up - SC Governor Sanford is now in Federal Court trying to keep Workers Comp under control in SC.

Our main website is www.cutcompcosts.com

What number should a safety person be the most concerned with for Workers Compensation? I have asked this question often when presenting to Loss Prevention, Safety Engineers and similar positions. The answers that I often hear are:

• Number of accidents
• Lost workdays
• Self-inspection results

Those are all important. When a VP or President of a company asks me what number is the most important in evaluating a Work Comp safety program, I always say the Experience Modification Factor (E-Mod or X-Mod). Why? Because it is the distilled number of what the claims costs are for a certain company. In other words, it is the insurance carrier's notation of how the safety program is performing over a few years, not just one.

Oh, and self-insureds are not immune from the E-Mod. There is a different term for the E-Mod for self-insureds and it is the Loss Development Factor (LDF). The LDF may cover more years than the E-Mod, but it is still the ultimate evaluator of a company's safety program.

I often hear from safety personnel that the insurance is "some other department's problem." Nothing could be further from the truth.

Bottom Line - The LDF or E-Mod/X-Mod is the Workers Comp safety program's effectiveness turned into cash.

Next Up - How long does one bad year of claims cost a company's Workers' Comp program?

Our main website is www.cutcompcosts.com

The news for the day is on captives. I was a little slow to understand how captives worked when they first were written a few years ago. I do not want this post to sound like "I told you so." Check the prior posts on captives. Has the day of atonement arrived for this type of insuring agreement?

The IRS - as I said in a prior post - is not going to let what they consider an immediate tax deduction for Workers Comp reserves established for future losses of an affiliated company. This never had really sounded quite right to me as how a tax deduction could be earned for money that HAS NOT been paid for Work Comp losses. The IRS is never going to let a tax deduction occur for a FUTURE event such as a captive making a claim payment.

The IRS passed the rule in September 2007. They are holding hearings on this rule on Feb 29th in Washington, DC. Some of the captive managers have quit writing captives. Will there be some type of retro-tax? Who would be responsible for the retro-tax payments?

Workers Compensation has become a complicated insurance product. The post-Feb 29th ruling by the IRS could make this even more complicated.

Next Up - What number should a safety person be the most concerned with for WC?

Our main website is www.cutcompcosts.com

We were caught up in a huge Workers Comp consulting project and I have neglected the blog page. OK, so here is the next installment of Claims Q&A with Kevin Quinley.

Claim Auditing Questions . . .

In doing claim audits, are there recurring issues or problems you see with claim-handling?

There are two that we see the most which heavily affect the outcome of a WC file. Those two are Immediate First Contact and Poor Communications. Often we see where an adjuster writes the injured employee, employer, and treating physician a form letter and then documents that there was immediate three point contact. Talking with the employer, doctor, and employee about their WC claim ASAP is a great way to start the proper communications in the file.

The other related area is adjusters working the file, but not making any contacts with all of the or at least some of the parties involved. Good communication is the main job of the adjuster. If this is not done as shown by a trend by an adjuster or by a TPA/Carrier, we become very concerned.

What are the most common findings or observations? See previous question.

How should claims people prepare for an audit before undergoing one?

Quit stressing when they hear their files are being audited. Some file audit firms consider a very nervous adjuster as a “red flag.” There is nothing that can be done to do a “quick-fix” on the files. The one thing that I recommend is to be friendly and smile at the initial meeting. Do not EVER put the auditor on the defensive if they ask you a question. Auditors that are on the defensive tend to be more subjective in their file appraisals.

Are there “red flags” you look for when doing a claim audit?

We do heavy statistical analysis on the 33 areas that we look at for trends. If there is a trend by adjuster or insurance carrier, then we red flag that one area. This happens very rarely except in one area. Over-reserving or under-reserving the files is a red flag that we notice very quickly. We do stat analysis to confirm our findings. The numbers speak the loudest.

Over the years, do you sense any differences in skill among the claims profession in general? Is claim service getting better or worse?

Claims adjusting has followed a definite trend. It is how the industry or a certain carrier decides on the file loads for adjusters. An overloaded adjuster cannot do the job that the insureds are relying on them to do on their files. When the industry/carrier trend is to lighten loads, the file handling improves proportionally.

For a firm looking to tame its workers compensation claim costs, what is the ONE thing they can do to deliver the greatest return on investment?

Time Management training pays bid dividends. Stress management seminars seem to help. The old “claims roundtable” is also a great meeting to have for adjusters to discuss difficult files. We can tell the difference on file reviews between trained and untrained adjusting staffs. The one word is training.

How do workers compensation claims people avoid getting burned out?

As mentioned before, they must remember that they ARE NOT claims adjusters. That is their job. In other words, leave it all at work. That is the secret to surviving in claims. Forget the files when you walk out the door every evening.

In a blind taste test, can you tell much of a quality difference between TPA claim services and insurer/staff claim services? Comment, please.

Yes, when we compare files where a carrier also functions as a TPA. Flat-fee files seem to receive less attention.

If there is indeed a “brain drain” of seasoned claims people retiring, how can companies counteract that trend to salvage acceptable levels of expertise?

There are carriers that do a great job of training incoming recruits. They also weed-out recruits that will not make it in the adjusting world. Liberty Mutual has an outstanding training program. Training and screening will fight the brain drain.

What are employers’ biggest complaints about workers compensation claim service?

As I mentioned before, it is poor communication. They often do not know what is happening on their files. I always tell employers to request online claim access as they can follow the files without having to disturb the very busy adjusters.

What is the ideal caseload for an adjuster handling lost-time workers compensation files? Comment.

Oh, this is a loaded question. It depends on the state, but I would say 100 for a claims trainee, 150 – 175 for an experienced adjuster, and 200-225 for a Senior Adjuster. In my career, I have had to handle 250 files in 7 jurisdictions/states at one time. I juggled it very well until I burned out from fighting fires.

Next Up - Workers Compensation News

Our main website is www.cutcompcosts.com

OK, so I have been out of action on the blog for the holidays. Business has picked up tremendously, so the Workers Compensation blog has been suffering. I will not go over the best designation for claims or reserve reviewers today.

I will instead add in the Work Comp Claims Productivity Q&A session with Kevin Quinley of Claims Caffeine. Kevin asked very good questions. The address to join Claims Caffeine is https://login.yahoo.com/config/login_verify2?.intl=us&.src=ygrp&.done=http%3a//finance.groups.yahoo.com%2Fgroup%2Fclaims_caffeine%2Fjoin

You must get a lot of email. How do you manage it and stay on top of it?

I do not try to answer every email as I receive it. I set aside three times in the day where I answer emails. If you are accustomed to Outlook, you can direct certain messages into certain Outlook email folders. For instance, if it comes from a high priority sender, the email message will go into the High Priority box.

I also use Maven Beacon teaches typing to hone my typing skills. There are many levels of instruction on a typing teacher program such as this.

Do you use a Blackberry or PDA as a productivity tool?

No, but I use a LG AX490 cell phone to surf the web and to answer and send emails. That phone is the only one like it in existence. It has a full keyboard built in right on top of the number pad.

What are your biggest interruptions and how do you manage them?

My biggest interruptions are phone calls that could have been handled by an email. We try to contact adjusters by email only as that saves the adjusters’ time and the notes are easily added to their file documentation.

You must travel a good bit. What tips do you have for readers on how to save time and stress during business travel?

Airports are slammed with passengers and will be for many months to come. You are likely not going to get to your destination on time. Accept that fact and the stress will lower quickly. A real time saver is to print the boarding passes out the day before you fly. Always join any and all frequent traveler programs. Even if you do not use the airline, hotel, car rental etc that often, you will be treated better than without a frequent traveler #.

If you drive a large amount of the time, try to listen to Books on CD/Tape as a great diversion. My favorite is the 7 Habits of Highly Effective people. There is some incredible advice on settling files in that Book on CD. The chapter on win-win is a great one for claims people.

If you could offer just one productivity tip, what would it be?

DO NOT stress out. Study after study has shown that one loses about 40% of their productiveness under stress. You are the expert, so be the expert.

Do you use a daily To-Do list? If so, how long is it usually?

Yes, I use a To-Do list on Outlook. I actually switched from the Outlook task list to using just the Calendar as the tasks just have to be calendared and that takes two steps to do the same thing. My To-Do list has a rolling average of twenty items.

How do you set your day-to-day priorities amidst shifting work demands?

Many years ago I was sent for two days of training conference on setting priorities. The bottom line result:-
· AA –Do it immediately
· A - Do it that day
· B - Do it that week
· C - Do it that month.

Each priority will move up the line during the daily routine. Some priorities could move down the line. Keep working on the top 20% (AA and A). If you can get through the A’s and start working on the B’s, there will less fires to put out in your daily routine.

How do you find time to keep current on professional reading and developments within your field?

I subscribe to about twenty different e-zines (all free of charge). I read the headlines and then print or copy and paste the document to my desktop in a folder called reading material to read at the end of the day. If I cannot find time to read them at least I read the headlines.

What is the one thing you wish you had known starting out in your business that you know now?

QUIT STRESSING. Claims is a &$^#* job if you let it stress you out. Keep calm and remember that claims adjusting is a job. Never refer to yourself as a claims adjuster. Leave the job at work.

Based on how you see claims people work, how do you think they could work smarter?

Keep the stress level low. Do not take the job home with them. I see too many adjusters just freak out on an audit of their claims. Guess what? Most of the time they are doing a good job. You are the experts, so act like and be the experts.

Return all calls, emails, and all other communications within 24 business hours. You do not have to have an answer. Call/email and say I just wanted to let you know I am working on it and I will get back to you by a certain date or when a certain thing happens. As the old saying goes – when you are silent, people will expect the worst.

Bottom Line – quit stressing, be confident, do your 24 hour contacts, and communicate.

Next Up - Workers Comp Claims Auditing Q&A from Kevin

Our Main Website is www.cutcompcosts.com

A Comprehensive List of Insurance Designations - I sometimes hear comments that there are no insurance designations for a certain area of insurance that would help someone in the job advancement. The following list should remove any doubts as to that fact.

In my next post, I will point out some of the important ones for a claims, reserve, or premium reviewer.

AAAM American Academy of Actuaries Member
AAI Accredited Adviser in Insurance
AAMS Accredited Asset Management Specialistsm
AAPA Associate, Annuity Products and Administration
ACA Associate of the Conference of Consulting Actuaries
ACAS Associate, Casualty Actuarial Society
ACII Associateship of the Chartered Insurance Institute
ACLA Automobile Claim Law Associate
ACLS Automobile Claim Law Specialist
ACP Associate Compliance Professional
ACS Associate Customer Service (LOMA)
ACS Associate Customer Service (IIC) ACSR Accredited Customer Service Representative 28
AEP Accredited Estate Planner
AFA Associate Financial Advisor 31
AFC Accredited Financial Counselor
AFSB Associate in Fidelity and Surety Bonding
AFSI Associate, Financial Service Institute
AFSR Accredited Financial Services Representative
AIAA Associate, Insurance Agency Administration
AIAF Associate in Insurance Accounting and Finance (IIA)
AIAF Associate in Insurance Accounting and Finance (LOMA)
AIAM Associate in Insurance Account Management
AIC Associate in Claims
AIDM Associate Insurance Data Manger
AIE Accredited Insurance Examiner
AIIC Associate of The Insurance Institute of Canada
AIM Associate in Management
AIP Associate in Insurance Production
AIRC Associate, Insurance Regulatory Compliance
AIS Associate in Insurance Services
AIT Associate in Information Technology
ALHC Associate, Life and Health Claims
ALMI Associate, Life Management Institute
Alternative Investments Certificate
AMIM Associate in Marine Insurance Management
AOHST Associate Occupational Health and Safety Technologist
APA Accredited Pension Administrator
APA Associate in Premium Auditing
API Associate in Personal Insurance
APM Associated Professional Member
APR Accredited Pension Representative
ARA Associate, Reinsurance Administration
ARC Associate in Regulation and Compliance
ARe Associate in Reinsurance
ARM Associate in Risk Management
ARM-P Associate in Risk Management for Public Entities
ARPM Associate in Risk Pool Management
ASA Associate of the Society of Actuaries
ASF Associate in State Filings
ASLI Associate in Surplus Lines Insurance
ASP Associate Safety Professional
AU Associate in Underwriting
AWMA Accredited Wealth Manger Advisor
BCE Board Certified in Estate Planning
BPA Business Process Advisor
CAIB Canadian Accredited Insurance Broker
CAM Chartered Asset Manager
CAP Chartered Advisor in Philanthropy
CAS Certified Annuity Specialist
CASL Chartered Advisor for Senior Living
CCIB Canadian Certified Insurance Broker
CCLA Casualty Claim Law Associate
CCLS Casualty Claim Law Specialist
CCMP Certified Case Management Professional
CCP Certified Compliance Professional
CEA Certified Estate Advisor
CEBS Certified Employee Benefit Specialist (Canada)
CEBS Certified Employee Benefit Specialist (US)
CEP Certified Estate Planner
CERA Chartered Enterprise Risk Analyst
Cert CII Certificate in Insurance
Cert PFS Certificate in Financial Planning
CFA Chartered Financial Analyst
CFE Certified Fraud Examiner
CFP Certified Financial Planner
CFP CFP Certification Curriculum
CFP Certified Financial PlannerTM Professional Education Program
CFS Certified Fund Specialist
CHC Certified Housing Counselor
ChFC Chartered Financial Consultant
CHST Construction Health and Safety Technician
CIAM Chartered Insurance Agency Manger
CIC Certified Insurance Counselor
CIDM Certified Insurance Data Manager
CIE Certified Insurance Examiner
CIMA Certified Investment Management Analyst
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FCAS Fellow, Casualty Actuarial Society
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FIIC Fellow of The Insurance Institute of Canada
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WCCP Workers’ Compensation Claims Professional
WCLA Workers Compensation Claim Law Associate
WCLS Workers Compensation Claim Law Specialist

Our main website is www.cutcompcosts.com

What to Look For in a Workers Comp Claims Expert - choosing a great Workers Comp claims review expert is some of the best strategically invested money in a company's budget. The main things to look for in your search are:

• Designations - such as AIC, ARM, CPCU, etc. Our next post will cover some of the designations. These designations are granted after a candidate passes national exams for a certain number of courses.
• Years of Experience - while this is a great indicator, we have performed review work after a so-called very experienced claims consultant that did not review the files very well.
• From One of the Big Companies - this is not an indicator of the level of service you will receive as it is down to the individual claims consultants in the companies that will service your account.
• Experience in a Certain State - this is not a big factor as one might believe. The main thing to remember is a claims consultant that has multi-state experience shows adaptability to different state systems.
• Prior Claims Adjusting Experience - there are some claims consultant companies that have no or few employees with actual claims adjusting experience.
• Statistical Backgrounds - this is critical for file by file reviews and is important for finding trends in the claims reserving
• No Conflicts of Interest - any person that may make a commission off your Work Comp policy may not be able to give an uninfluenced opinion.

I did not put these in any order of importance. The best of both worlds is to have a reserve/claims expert company that also reviews the premium calculations. A shameless plug - we are one of the few companies in existence that do both.

Up Next - Designations - What are they??

Our main Website is www.cutcompcosts.com

You have online access or you have all of the loss runs - what do you do now?

You will mainly be concerned with just the reserving part of the claim for now. One of the important points to remember is that with a Workers Comp loss run review, you cannot really question what has happened in the past, especially on closed claims. The Total Incurred for a closed claim is the amount paid. There is not much you can do once a bill or settlement has been paid. That is why it is important that Loss Run Reviews are performed quarterly or monthly.

Do you have an email sent to you in reserves reach a certain level or if a massive bill/settlement is being considered? If not, you are leaving an open checkbook against your E-Mod.

Without a claims technical background, common sense is the rule for doing loss run reviews. Take a look at the open claims.

• Does the amount for reserves (Total Incurred minus Paid) look right?
• Has the claim that was once a more serious claim now resolved itself?
• Is the employee back to work?
• Do you have an employee on your loss run that is not one of your employees?
• The list goes on and on for areas to possibly find mistakes in a Workers Comp claims reserve/loss run review.

If you feel that there is still something wrong after doing a self-review, you may want to contact a Workers Comp claims review expert.

Shameless plug - Claims reviews and especially online claims reviews are our specialty along with premium audits.

Up Next - What to Look For in a Work Comp Claims Review Expert

Our main website is www.cutcompcosts.com

Work Comp Loss Run Reviews (Getting Online Access) Obtain a copy of your current Workers Comp loss run for all claims less than 5 years old. If you have online access, that will help greatly. If not, check with your current and past carriers to see if you can access your claims online.

Ask for access to all notes, reserve increases, supervisory reviews, and any data that was input at the time of the First Report of Injury. Ask for as many User IDs and passwords that are needed for your company. We have seen where 10 people were having to take turns using one User ID. There are security concerns, but if your company is large enough there should be more accessibility than one User ID.

If you do not have online claims access, you will likely have to email the adjuster to get statuses, etc. It is advisable that you do a quick review before emailing the Workers Comp Adjuster. I do not recommend emailing for a status on every claim. See the next post for more info.


Next Up - You have online access or you have all of the loss runs - what do you do now?


Our main website is www.cutcompcosts.com

Worst Case Scenario - These words send chills through me like no others in anything that deals with Workers' Comp. I did not like to say them when I was an adjuster long ago, and I do not like to hear them now.

Worst Case Scenario has to do with the reserving on your Workers Comp claims. In my last post I pointed out that 16 East Coast hurricanes were originally forecasted for 2006 by one of the large Risk Management companies. That was the Worst Case Scenario. Companies were charged property premiums as if the end of the world was going to occur in 2006. The premiums have been reduced some by the later forecasts of very few storms.

However, in Workers Comp, worst case scenario seems to be the norm for every claim. How do you know if your company is being reserved at and charged for the worst case scenario on your Workers Compensation claims? That is coming in the next posting.

Up Next - Loss Run Reviews

Our main website is www.cutcompcosts.com

A List of Red Flags That You May be Overpaying on your Workers Comp - shortened version -

You will need to think back over the last five years on your Workers Comp insurance for all of the following:

• Has your company experienced significant increases in Workers’ Compensation premiums?
• Has your company incurred charges for uninsured subcontractors or owner-operators?
• Has your insurance company included in your payroll any owner-operator expenses?
• Do your Classification Codes include “all employees” or “not otherwise classified” (NOC)?
• Has your company changed ownership or business operations?
• Has your company experienced a merger or expansion into other states?
• Has your company left a relationship with an Employee Leasing Company or a PEO?

Has your insurance company, NCCI, or State Rating Bureau changed, omitted, or added..

• Classification Rates?
• Classifications Codes?
• Experience Modification Factor?
• Payrolls?

Were your Insurance Company’s Workers’ Compensation Audits ……

• More than 120 days after the Policy Expiration Date?
• Conducted via telephone?
• Conducted using 941’s or state unemployment forms?

Did the Workers’ Compensation Auditor………

• Not leave a copy of his or her Worksheets?
• Ask very few questions?
• Examine very few records?
• Is your payroll audit always brief and superficial?

Some other areas that are Red Flags:

• Has the NCCI or your states’ rating bureau responded to a question or complaint unfavorably?
• Has your policy’s modifier been labeled as either “contingent” or “preliminary”?
• Has an endorsement increased the modifier after the policy began?
• Has your policy been frequently endorsed with changes to classification, rates, or payrolls?
• Are your employees paid a significant amount of overtime?

There are may other Red Flags. The above ones are the most common that we see when an employer is overpaying their Workers Comp premiums. Think back over the last five years. If some of these have happened to your company, you likely are overpaying for your Work Comp coverage.

Next Up - Worst Case Scenario - Remember When There Were 16 Hurricanes Forecasted for the East Coast for 2006?

Our main website is www.cutcompcosts.com

A January 1 Renewal Date Can Cost You $ on Your Workers Comp Premium - This is one of the easiest ways possible to reduce your Work Comp premium. Renewing your policy on January 1st is akin to shopping on Christmas Eve or getting a tax professional's help the week of April 15th.

You may find a gift on Dec 24th or you may find tax help on April 14th, but you may not get the service you deserve as the merchants or tax professionals are overloaded at certain times of the year. It is the same with your Workers Compensation policy.

The majority of policies renew on January 1. Agents, underwriters, in fact, every department is completely overloaded then. If we have any issues where we need to contact an agent, we try to avoid between today (12/10) and the end of the year. Everyone suffers, but who pays the bill for the possible inattention? Of course, it is the policyholder. You are lumped in with most of the policyholders. In tracking our clients' files, we find that 60% of them renew on 1/1. Why not use one of the 364 other days to give your agent and carrier time to spend on your policy?

We recommend in all our presentations and to our clients to also avoid July 1, when most of the public entities renew. In fact we recommend renewing in the middle of the month, if at all possible and your budget allows this to occur.

Strange, but true................

Up Next - A List of Red Flags that You May be Overpaying on your Workers Comp. This is one of our most requested Workers Comp documents.

Our main website is www.cutcompcosts.com

Item from the Workers Comp News - I ran across an interesting article recently about one of the states that we quite a few clients in - West Virginia. Some of the legislators there still seem to want to have an oversight committee on Workers Comp, namely the Workers Compensation changeover from Brickstreet as the monopolistic carrier to a full open market on July 1, 2008.

As I was quoted in the Charleston WV Daily Mail, any type of "fine-tuning" to the open market would greatly and most likely negatively impact the introduction of the open market. Governor Manchin would likely veto any such legislation.

There exists already an "oversight committee" of sorts in WV as in most states. That is the Department of Insurance, headed by Commissioner Jane Cline. That is what a Department of Insurance does is to be the overseer of the insurance programs in their respective state. Commissioner Cline and her department has and will do a fine job in that role.

In my opinion, amplifying the problems that were encountered with Brickstreet as an expectation of how the general Workers Compensation market would function is not going to help solve the problems that existed even before Brickstreet, of which there were many.

I have been informed there is another West Virginia Work Comp Insurance Conference coming up in Charleston, WV in April of 2008. That should be an interesting conference.

If you have any questions about WV Workers Comp or any other Workers Comp matter, please visit our main website at http://www.cutcompcosts.com/ or email me at

Next Up - Why Having a January 1 Renewal Date on Your Workers Comp policy is Costing you extra $$$.

Our main website is www.cutcompcosts.com

Questions from a Workers Comp agent -

• Do your services replicate what I do as an agent?
• Will your services make me look bad in front of my client(s)?

The answers are No to the first question and an emphatic NO to the second.

Our largest section of business comes from agent referrals. At one time, 70% of our business was due to agent referrals. While we do have the same goals as a Workers Comp insurance agent, we are able to "drill down" further into a company's policies as we spend a large amount of time with each client's data. We are not under the time pressures that agents are under when writing a policy for an employer.

We have never tried to discredit an agent or to question what an agent has done for an employer. In fact, one of my first bullet points in all my presentation is "Do Not Blame Your Agent." An agent has to work within the structure that has been built by the Workers Compensation Underwriter, insurance commission, NCCI/State Rating Bureau, general marketplace, etc.

Agents drive the market for all of Workers Comp. If there were no agents, there would be no marketplace and all states would operate under a monopolistic form of insurance, which has been shown to not be the best for employers.

Next Up - Work Comp Items from the News

Our main website is http://www.cutcompcosts.com/

The #1 Question on Workers Comp From Our Readers over the last few months is -

Q: I have just received an audit billing of $47,500 from our Workers Compensation policy from last year. What do I do now? My total premium for last year was $93,000. The bill is for over 50% of what I paid last year.

A:

1. Do not just pay the bill. Do not just write a check and assume it is a part of doing business. Once you write the premium audit billing check, you have lost a large amount of leverage.
2. Ask for a full breakdown of the premium billing and why it changed.
3. If it was due to tremendous growth by your company and payrolls spiked, you likely owe it, but just make sure you understand where the increase figures all came from before writing the check.
4. If the premium audit bill was due to a major change to your policy, you should be very wary of what changed.
5. If you do not feel comfortable writing the check, please consult a premium audit specialist company. That, of course, is what we do every day.
6. You may have a deadline in the number of days to appeal the audit. Do not wait until the very last minute as there may be penalties for not responding if you question the payroll audit. Always use certified return receipt mail if you decide to launch a dispute.
7. Along with #6, do not call or email for premium audit help if the deadline to pay or dispute the audit is in a few days.
8. Do not just dispute the premium audit bill because you think it is just too expensive. You must have some basis for your dispute. Remember, this is the same agent and workers comp insurance carrier that you will have to deal with next year.

#1 - #8 from above is why we say "Stop just writing checks."

Up Next - We answer a question from an agent.

Our main website is www.cutcompcosts.com

The Easiest Way to Monitor Your Claims and Lower Your Workers Comp Premiums - If you have online access to your Work Comp claims notes, reserve history, background, etc, then you are in possession of a very valuable tool in controlling your Workers Compensation costs.

If you do not have online access, ask your Workers Comp insurance carrier or TPA (if you are self-insured) for a username and password. You will need to request full access to all notes, reserves, etc. If you are having to choose among many Workers Comp carriers or TPA's, online access may be worth spending more than the lowest bidder.

Online access allows you to have:

• Up to the minute knowledge of what is occurring in the claim
• Reserve history to explain why reserves were increased
• Will likely result in less contact with the adjuster to find out the claim status, saving you time. If you call/email the adjuster for a status, he/she will be looking at the same claim notes to give you an update.
• Allows you to do an internal audit of all claims w/o the expense of doing an in-office audit.
• Many other advantages to having online access - all save time and $.

We do a large number of online Workers Comp claim audits. It is much less expensive than an in-office audit. In fact, we are doing one for one of the largest employers in North Carolina as of now.

Up Next - Blog Readers' Questions

Our main website is www.cutcompcosts.com

Contacting your Work Comp Adjuster - If you have found something questionable about your total incurred or reserves, then you may want to contact your Workers Compensation claims adjuster.

From being an adjuster many years ago and listening to adjusters' comments, there are a few simple rules that will help you in discussing reserves/total incurred when contacting your adjuster:

1. Know who your Workers Comp adjuster is for every one of your claims, even if you have a new carrier. If you do not know who this is - you need to find out.
2. Email your adjuster - calling your adjuster is OK, but they will still have to look at what you are questioning and get back with you. Do not expect immediate answers.
3. Do not say - My reserves are too high without specifics. We see agents do this one very often. Make sure you are updated with all the info.
4. Be very specific with your questions. Do not send the adjuster a three page email.
5. Quite often, the adjuster does not know of a claim's development that would make the file worth less $. Updating the adjuster by email on what is happening on the claim is a great idea. It is even better to scan and email or fax any info that you receive on the claim to the adjuster ASAP.
6. Never threaten the adjuster with the Insurance Commissioner. This is only as a last resort. Please remember you may have to work with this person on your claims for many years.
7. Do not immediately ask for the adjuster's supervisor. Give them time to resolve your concerns.
8. KNOW WHEN YOUR TOTAL INCURRED AND RESERVES hit your E-Mod. Calling an adjuster two weeks before your policy expiration is fruitless. See my old posts or email me at on when your E-Mod is affected.
9. Self-insureds - the adjuster is spending your $ directly from your budget. Even though there are no E-Mods to be concerned with, your Workers Comp LDF's are calculated from the reserves for budgeting purposes. We sometimes hear self-insureds say that they are glad they are not in the insurance system. Actually, you are even more than the non-self- insureds.
10. If you feel that you would be in over your head, contact a claims professional - shameless plug - that is what we do every day.

Workers Comp is full of buzzwords. Please click on http://www.cutcompcosts.com/ and click on the Definitions tab for a large list of definitions or email us at if you have questions on any of the terms used in this or prior posts.

Next Up - The Easiest Way to Monitor Your Claims and Lower Your Premiums

Our main website is www.cutcompcosts.com

Effective Workers Comp Reserve Reviews - this is the area that seems to be the most misunderstood. We often have employers contact us about a loss run they had just received or about how their E-Mod increased so rapidly in one year.

We often recommend that the employer obtain a copy of their loss run. Your insurance carriers will provide a copy on request. The Work Comp carriers will usually provide a loss run quarterly.

Please remember that only the OPEN claims can be dealt with as a closed claim or the previous reserves on a closed claim cannot be questioned later on. That is why it is so critical to track the claims as they develop. Discussing a reserve that was opened on a claim three years ago will not do any good. In other words, when a loss run is received, it should be reviewed on receipt.

Things to look for in a Workers Comp loss run are:

• Old claims still open
• Resolved claims still open
• A small amount of indemnity total incurred with a large amount of medical total incurred, or vice-versa.
• A large increase in reserves or total incurred on a claim
• A re-opening of a closed claim
• The total incurred does not match the claim, such as a large amount of reserves on a minor injury
• The injury listed does not match the employee's injury
• An injured employee's name that you do not recognize
• Anything that just looks out of place.
• Many others

UP NEXT- Contacting your adjuster if you find something questionable.

Our main website is www.cutcompcosts.com

And the fastest way to reduce your Workers Comp premiums??? - It is the reserve review. The reserves are the engine of the premium charging process by insurance carriers. I had written a post on this very subject a few weeks ago.

When is the critical date to start a reserve review - 9 months before the next policy date. Why start so many months ahead of time? Actually, you have only 3 months, not nine. Please note - almost all policies lock in their E-Mods 6 months before the policy.

No matter what policy provisions are in place, if the reserves on the files are wrong, you are paying dearly for Workers Compensation coverage.

Next Up - How do you effectively do a reserve review?

Our main website is www.cutcompcosts.com

Workers Comp Audit Bills - The insurance carrier's Workers Comp payroll auditor has been in for an audit. A few days later you receive a bill. What are your options?

• Pay it - which is what we see most of the time. Companies should not just write a check and not question how the increase occurred. We have seen companies that will at least look through the audit and question the auditor. This may result in a reduction in the bill. What do you do if the auditor says no to your disputes?
• Review it - going through the original policy, any modifications during the policy period by the insurance carrier, and the payroll audit thoroughly may result in savings. Were the savings all your were supposed to receive for your efforts?
• Call your agent - that may be a good tactic, but your agent has already looked over everything previously, or have they?
• Call in a premium expert - that is what we do as part of our services for no fee upfront.
• Write the Insurance Commissioner - this is one area where we see a company irreparably harming their relationship with their agent and insurance carrier. Contacting your respective Insurance Commissioner should only be done as a last resort before taking legal action. Never use the Insurance Commission as a bargaining tactic. We have never seen that work to the benefit of any employer.
• Contact the State Rating Bureau or NCCI - that is sometimes a good idea, but what questions do you ask them? What would you want them to do for your company?

There is a common theme to all the bullets above except the first one. They all involve asking "why"? That is the most powerful way to reduce your Workers Compensation premiums. See our previous post on asking why. One of our clients just received a premium return of $240,000. How? They started asking "why?"

Next Up - I left one area out that is more important than anyting mentioned in the last three posts. It is the fastest way to reduce your Work Comp premiums and it starts up just about the time of the audit billing.

Our main website is www.cutcompcosts.com

#3 and The Insurance Premium Auditor - who exactly are they and what is their role? The most calls and emails that we receive are just after a company has received their yearly Workers Comp payroll audit and has been charged an additional amount of money beyond the initial funds paid when the original policy was issued.

The Work Comp insurance company auditor usually will come in person within 60 days of the end of the policy period. The payroll auditor reviews all of the documents needed and then either issues a credit or an additional billing. Our statistics show that well over 80% of the payroll audits result in an increased bill. The post-audit premium bill can be substantial. Sometimes there are valid reasons for an increased bill, such as more payroll.

One thing to remember is that the auditor can just about change whatever they want and deviate from the policy. They work for the insurance carrier and they are usually overloaded with companies to audit. Most of the mistakes that we see with a company's workers comp premiums occur at the time of audit.

You have received a bill after the audit that says pay within a certain number of days. What do you do?

We will cover that in our next post. Workers Comp Audit Bills

Our main website is www.cutcompcosts.com

Payroll (Premium Audits) - the mother of all Workers Comp budget busters. There are three kinds of Premium Audits - also called Payroll Audits. Usually, the audit is conducted within 60 days after the end of a policy period.

There are three types of premium/payroll audits:

1. Self-Reporting - the employer faxes calls in or electronically reports the payroll - Danger - how do you know what classification code that each of your employees falls under for reporting purposes. You may be overpaying your premiums. Check your Work Comp insurance policy - is the job types in your company described by your Classification Codes? Are your sure there are not certain discounts that apply? Quite often, you may not have an agent. Ask questions now or you will pay more later.
2. Phone Reporting - The Workers Compensation insurance carrier will call you directly, or your accountant, or some other outside financial consultant to obtain your payroll information. See #1 for the dangers of this type of reporting. Has anyone from your insurance carrier seen your operation - most likely not at all. Are there certain mandated discounts that you are not receiving? Once again, you may not have an agent. Even if you do, only YOU know the business that you are in and the type of work that your employees perform daily. Once again, ask questions now or pay later.
3. This one causes special concerns. I will cover it in the next posting.

#3 and The Insurance Premium Auditor - who exactly are they and what is their role?

Our main website is www.cutcompcosts.com

The Four Factors that are critical at the time of the initial Workers Comp claim are:

1. How was the employee treated by their employer at the time of the claim?


2. Did the employer have a medical network established to send the employee to for treatment? Was that employee sent to an established network medical provider?


3. How quickly was the Work Comp First Report of Injury filed with the insurance carrier or TPA?


4. Did the adjuster talk with the employee, employer and physician within 24 hours of receiving the first report of injury?

The clock is ticking when an employee reports an injury. I have studied Workers Compensation claim trends for over 20 years. If #1 - #4 above is not completed in 48 hours, the cost of Workers Comp claims jump tremendously.

If the answer to any one of the four above questions is No, your company will be trying to control much higher than normal claims costs and paying at least 1,600% more claims $.

Next Up - Payroll (Premium Audits) - the mother of all Workers Comp budget busters

The Workers Comp Claim is Over in 48 Hours - this is one of the most startling truths about Workers Compensation claims.

This is why immediate notice of the claim being filed with your Work Comp carrier is so important. The three point contact by the adjuster must be made very quickly. The injured employee should be contacted within 48 hours after reporting the accident if lost time from work is indicated.

The employee already has filed their claim and has sought medical treatment in the first 48 hours. There is already a treating physician on the file. Until the adjuster has investigated the claim, the control of the claim is with the employee. The current and future cost of the claim has been set. There is nothing that can be done to lessen the major cost factors of a claim after 48 hours.

How this all occurs will heavily influence the amount of reserves/total incurred (see previous post on the Total Incurred) that the adjuster establishes on the file.

Next Up - The Four Factors that are Critical at the Time of the Initial Workers Comp Claim

Our main website is www.cutcompcosts.com

Some Misconceptions about Workers Comp E-mods and Loss Runs - The main misconceptions that we have seen are:

• Only the open claims make a difference on the E-Mod - any claims opened within certain policy periods affect the E-Mod no matter whether they are closed or open on your Workers Comp loss runs. (See the previous post on Experience Periods)
• The claims for last year will affect the E-Mod - Your Experience Period does not include the claims from the last year. For example, if your policy is renewing on 1/1/08, then the claims for 1/1/04 - 12/31/06 will be counted, BUT NOT THE TOTAL INCURRED FIGURE FOR 12/31/06 or 12/31/07. See our previous posting on Total Incurred. The Unistat Date is critical.
• I only need a loss run yearly - For better control of your Workers Comp Costs, you should have online access to your reserves and the ability to run a loss run on demand. Your insurance carrier should be supplying loss runs at least quarterly. Online access is the best way to look at loss runs. Check with your Work Comp insurance carrier's IT department to see if you are allowed online access. Most carriers have the service available for free.
• Worst of ALL - I cannot control what reserves are on a claim - Communication with the Workers Comp adjuster will always help keep reserves at a reasonable amount. See our previous blog on the Five Ways to Cut Workers Comp Costs. Doing those five things and letting your adjuster know you are doing them will help greatly.
• I cannot tell if the total incurred or reserves are out of line - If you feel you are in over your head, then consult with a reserving expert. We negotiate reserves with insurance companies and third party administrators daily.

Next Up - The Claim is Over in the First 48 Hours

Our main website is www.cutcompcosts.com

A Workers Comp question from one of our blog readers - This is a question that we are asked quite often at presentations and at client meetings.

What is the difference between paid, total incurred, and reserves on our Work Comp loss runs? The way that most carriers and TPA's define the terms are as follows:

• Paid - what was paid on the Workers Compensation file to the date of the loss run. If any large bill or payment was in a pending status, Paid does not include the bill until a check has been cut. THIS IS ONLY PART OF WHAT YOUR EMOD IS CALCULATED FROM ON YOUR UNISTAT DATE.
• Total Incurred - this is what was paid + the Work Comp reserves on the file. THIS IS WHAT YOUR EMOD IS CALCULATED FROM ON YOUR UNISTAT DATE. The Total Incurred on the file include the reserves.
• Reserves - This is the estimated amount the Workers Comp adjuster thinks will be spent on the claim OVER AND ABOVE WHAT HAS BEEN PAID ON THE CLAIM.
• PAID + RESERVES = TOTAL INCURRED

If you have not heard of some of the terms in this blog, check out http://www.cutcompcosts.com/ and click on the Definitions Tab.

Check out our next installment - Some misconceptions about Emods and Loss Runs

Our main website is www.cutcompcosts.com

PEO's - Professional Employment Organizations - a new "old trend" in Workers Compensation. PEO's are another area we are questioned on when we talk or consult with employers. The main question we receive on them is about the recent investigations and convictions of some of the larger PEO's owners.

PEO's are really a twist on a temporary agency. Most employers seem to think that PEO's only provide Workers Comp services. The PEO's provide almost all and sometimes more benefits than their original employer. The employees of a company that uses a PEO are really no longer employees of that employer. They are employees of the PEO. What PEO's give is a "buying power" as they consolidate all the employees of their client companies into one large company.

With Workers Comp insurance, the PEO is able to negotiate better rates than individual employers. They pass along some of the savings to their client employers. It is a win-win if all goes well.

The states Insurance Commissioners are starting to monitor PEO's more closely. There are two states that used to have less than two pages of regulations on PEO's, but now each have more than 24 pages of regulations.

The one area where employers need to look over their WC policies very closely is when and if the company ever decides to leave a PEO arrangement and go back to regular Workers Comp insurance. We have seen this often.

Should a company use a PEO? PEO's have been under a dark cloud as of late. A PEO may be good for a company with a high E-Mod or a quickly increasing E-Mod. I look at them the same as Captive arrangements. Are they really a true type of Workers Comp insurance? Time will tell, but do not ignore this option. Make sure you have someone look over the PEO arrangement very closely before signing on and MONITOR the PEO and the claims services you are receiving.

Next Up- Answering more Work Comp questions from our blog readers.

Our main website is www.cutcompcosts.com

The Most Common Error in Workers Comp Premiums - we are asked this question very often. For quite some time there were so many answers that I could not actually give one answer. After reviewing hundreds of Work Comp policies and using statistics to quantify the errors, there is one that stands out as an obvious error.

The error we see most often is - you are going to have to contact us by email. Check out our website at http://www.cutcompcosts.com/ for the email contact info. If you email us, we will answer the question by return email. You will have answered the question just by emailing us. That may sound odd, but it is true.

Our main website is www.cutcompcosts.com

West Virginia Workers Comp Environment - We are now closing in on the West Virginia having an open market for Work Comp insurers to write policies as of 7/1/08. I have been asked often about what the market will look like as of 1/1/09. Brickstreet now has 100% of the market and will until 7/1/08. As I was quoted before in the Charleston Daily Mail, the insurance carriers will have to accept the Brickstreet model to enter the market as the data that NCCI has worked from to give Loss Cost Codes was data primarily provided by Brickstreet and data from "similar states."

The actuary from NCCI that set the rates for West Virgina commented in a meeting last month that it will take a number of years to have true data to use for rate setting purposes.

Overall, Brickstreet had a very huge and difficult task in taking on the claims directly from the Fund and taking on all new claims. However, the fund claims were sub-contracted out.

Back to the original question - I am unsure of how the market will look on 1/1/09. The closest state to West Virginia was Nevada in their Workers Comp situation. I think the main thing is that there be no outside interference to the market from any of the parties involved. The market will take care of itself as it has in many states for many years.

The West Virginia Insurance Commission website has a large amount of information. Commissioner Jane Cline has been very open with statistical information. Check out their website to find out a large amount of info.

West Virginia will need to monitor the PEO's (Professional Employment Organizations) that will come into the state to write business. We will explore PEO's later this week.

Next Up - The Most Common Error in Workers Comp Premiums

Our main website is www.cutcompcosts.com

Workers Comp News Item - On Friday, the South Carolina Industrial Commission decided to not go along with Governor Mark Sanford's previous Order that the Industrial Commissioners decide permanency ratings based on the AMA guidelines. I did not think the Commissioners had that power as they were appointed by South Carolina's governor.

One of the most expensive parts and the reason for the horrendous increases of Work Comp rates premiums is that there is no standard in that state when a viewing takes place to assess the permanent partial disability. You could put the same person in front of two different commissioners and get two totally different South Carolina impairment ratings. North Carolina, for instance, is much more objective with their permanency ratings.

It is now and has been almost impossible for an Workers Comp adjuster to set the reserves on the file as the final permanency rating is a roll of the dice, at best. The permanency ratings are a large part of what E-Mods consist of in charging the South Carolina employers their premiums. To be safe, the adjuster must put up a very high reserve to forecast the permanency rating which is akin to forecasting the weather.

This is one of the most unfriendly to business decisions I have seen come from any state body in many years. When employers pull up stakes and move to neighboring states, then the legislature and other governing bodies will wonder why the tax base is shrinking. This has happened before in Maine, Massachusetts, California, and other states. When employers pick up their businesses and move them, an alarm will go off. Who is hearing the alarm now except Governor Sanford?

There is a saving grace. The case may move into the courts to be settled. This will likely be one that the South Carolina Supreme Court will need to examine. Between now and then, South Carolina businesses have had a total of a 50% increase in their premiums over the last two years. West Virginia's motto is "Open for Business". Is South Carolina's "Going Out of Business?"

Next Up - A Review of the Workers Compensation environment in West Virginia

Our main website is www.cutcompcosts.com

Another Question from Our Workers Comp Blog readers - There are a few companies that do Workers Comp premium reviews such as J&L. Do you do anything different than your competitors?

Answer - There are a few things that separate us from our competition. The main two are:

• Premium Audits/Reviews - I am a former Systems Engineer and programmer. We use homegrown software in doing our premium reviews. We are able to find more inconsistencies or errors in the premiums paid than our competitors. Our software drills down into the Workers Compensation data much further than the packaged software that is on the market as of today. As I have an actuarial/statistical, computer, and claims background, we are able to apply unique models to the data for analysis.
• Reserve Audits/Reviews - I have a heavy claims background that allows us to initiate a reserve review and a premium review at the same time. No premium review company has this level of expertise in both these areas. Ask one of the premium review companies about reserve reviews and they will usually tell you that they know of someone that they can refer you to in another company or they will refer you to a sub-contractor.

We are able to analyze both areas to the fullest. We start with the premiums paid and work our way back to the E-Mod and then to the reserves on the Workers Comp files. We then analyze the reserves to make sure that the files are reserved properly. We do all of the statistical processes "in-house."

I regret sounding like advertising, but it is the truth. We are not in business to be like the other companies.

Next Up - News Article Analysis

Our main website is www.cutcompcosts.com

Blog Readers Questions and Comments on Workers Comp

We received this question recently:

A consultant came into our offices and sold us on doing Workers Compensation premium reviews. The services looked similar to what you offer to employers.

The consultant said that they found a major error which would result in a premium refund of $36,500. By contract, we had to put up 1/4 of that amount ($9,125) to start the premium recovery process from our Work Comp carrier. The consultant wrote a letter for us but disappeared after that time. The carrier needed followup information from the consultant. We have heard nothing from the consultant and we have received $0 in refunds from the carrier. What should we do? Is this normal?

PS on the question - I sent back an email and asked them if the contract guaranteed the consultant 25% upfront and it did.

Answer - We see this situation a few times a year. We are contacted by a company that had a Work Comp premium review by a consultant and money was paid upfront and the consultant was nowhere to be found and no help.

There are many reputable companies in the Premium Audit/Review business that accept no $ until their client company receives a refund or credit. We heavily advise against putting up a deposit or paying upfront until your company receives the Workers Compensation premium refunds first.

PS on the answer - We were able to contact the carrier and we found out that the consultant company was incorrect in the errors that they supposedly found in the Work Comp policies. The consultant would not return our calls.

Next up - Another question from our blog readers - you may email any questions you have to Our main website is at www.cutcompcosts.com There are archives on our Workers Comp blogs on the right side of the page.

Searching for Workers Comp terms in Google and the mistakes that are made in the Work Comp searches

Below is a list of commonly misspelled words as used in searches for Workers Compensation terms. We have highlighted the words that caused the mistaken Workers Comp searches in all of the search engines. Why did these Work Comp searches result in zero results? They all contained misspellings. Google will usually correct the words, but not always. The other search engines may just give you a null result.

One interesting thing to note is that there were multiple searches with these errors in them. Some are over 500 instances a year. These were not one-shot errors.

• lawers for workmens comp
• waiver of suborgation on workmen's
• workmens comp laws settelmemts
• negociating workmens compensation settlements
• workmans compensation permanancy
• find average workmans comp insurance settelment payment
• average workmans comp insurance settalment payout
• repetive motion injuries and workmans compensation
• aplacation for wv contractors workmans comp
• utah workmans comp fraud investgators
• how do I aquire workmans comp insurance
• colorado workmans comp modfied duty
• permanent disabilty for workmans comp
• permanent disabillty for workmans comp
• workers comp average settelment offer
• insurance settelment offers workers comp
• insurance settalment offers workers comp
• calucating workers comp disability
• workers comp termenated
• workers comp settelments
• workers comp retialiation cases
• workers comp aattorneys
• workers comp iinsurance
• workers comp exepemt
• workers comp atorneys
• usual settelment for back
• workers comp laweyer
• sycattic nerve damage
• locatins of workers comp cases
• cotractors workers comp
• employer requiremtents
• eduacate workers comp trial
• disfiurement workers comp
• directral of special fund workers
• clalifornia workers comp
• setttlements fro workers
• work comp attorny

Next Up - Blog Readers Questions and Comments on Workers Comp

Our main website is www.cutcompcosts.com

The blog post today was supposed to be about Searching for Workers Comp terms in Google and the mistakes that are made in the Work Comp searches

We will get back to that tomorrow as there was a bit of interesting news today from the IRS about the use of Captives. I have been through a few Captive training courses that left me asking the question - How can a captive count as Workers Compensation insurance? The IRS is back to contemplating about insureds not paying a tax on the reserves that are held for Workers Compensation expenditures.

For quite some time, companies that were insured through captives did not pay any tax on the reserve amounts. The IRS may one day rule that the reserves are taxable. In fact, there is an article out now saying that this may be the case. The situation will need to be monitored very closely in the next few years.My understanding is that offshore captives would still not be taxable as the IRS would have no jurisdiction over any offshore Work Comp captives. This would be very harmful to the domestic captive business as the reserves remaining non-taxable is one of the greatest benefits of being in a captive. Vermont would be heavily affected.

The following 28 states allow Workers Comp captives:

• Alabama
• Arizona
• Arkansas
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Florida
• Georgia
• Hawaii
• Illinois
• Kansas
• Kentucky
• Maine
• Missouri
• Montana
• Nevada
• New York
• Ohio
• Oklahoma
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Utah
• Vermont
• Virginia
• West Virginia

Not all of the 28 states have Work Comp captives operating in them yet.

Next up - Searching for Workers Comp terms in Google and the mistakes that are made in the Work Comp searches

Our main website is www.cutcompcosts.com

Searching for Workers Comp terms in Google, Excite, Yahoo, etc - Best Tips

Searching for what you want to find in Google and the other search engines can be very tough. Work Comp searching is even more difficult. Some things to remember are that there are some many versions of Work Comp.

There are quite a few variations on Workers Compensation:

• Workers Compensation
• Work Comp
• Workers Comp
• Workmens Comp
• Workmans Comp
• Workers' Comp
• Workmen's Comp
• Workman's Comp
• Worker's Comp
• Many more terms - some of the above ones are spelled wrong, but that is what people are searching for in their Work Comp searches.

The list is mind-boggling. What does one do in Google? My suggestion is to not use apostrophes whenever possible. Google in their great way will try to help with the spelling. My hat is off to Google for spellchecking.

Use exact searching - Workers or Workers Comp or Workers Compensation will give you different results. I recommend always putting your searches in quotes. The word Workers by itself has 205,000,000 search results in Google.

Next up - What terms will give you a zero in results when you do a Workers Comp search ? There is a theme to it. Honest, really.

Our main website is www.cutcompcosts.com

What is the secret question to ask anyone that deals with your Workers Comp to see if they understand the whole Work Comp picture? The answer - you will need to email me at to find out. It is a good one that I use very often. I have busted quite a few so called Workers Comp gurus with it.

One more housecleaning item - I have been jumping around trying to give a good overall view of Workers Compensation. I will go back into the archives from the last few months to see if any Work Comp matters that I brought up need to be finished - have the loose ends tied up.

Check the bottom of my last blog to see how to get a ton of free info from our http://www.cutcompcosts.com/ website.

Up Next - Workers Comp News

Our main website is www.cutcompcosts.com

Reserve Reviews - the hidden way to save $ on your Workers Comp premiums - Reserve reviews are not something that most of our competition care to address. However, reserve reviews are just as important as premium reviews. Once again, we try to use the word review and not audit - see previous blog.

Premiums reviews "look-back" three years into the past. Reserve reviews are the "here and now" part of your Workers Compensation premium. It is virtually impossible to go back in time and try to negotiate reserves. What you have on the file today is what counts.

Workers Comp file reserves are the engine of the E-Mod process. Reserves are not only what is spent out on a Workers Compensation file, but what the adjuster thinks will be spent out on the claim over its lifetime. Please remember, the funds that are paid on an open file to date have little to do with the reserves on the Work Comp file. You are charged THREE TIMES over three years for the reserve figure on the file. Not reviewing your reserves is like putting cash in the shredder.

Reserves run a totally different cycle from premium reviews and your E-Mod. For instance to figure your E-Mod for 1/1/08, the reserves are used as they were on your Unistat date which should be 6/30/07. Here is a very important point. Whatever the reserves are on 6/30/07 at 5PM, is what your E-Mod is figured from for your 1/1/08 policy date.

If you/we happen to find that a Workers' Comp file is over-reserved on 7/11/07, that is just they way the ball bounces. What I am getting at - is that you should start your reserve review program as soon as your new policy goes into effect.

For a 1/1/08 policy, the reserve review needs to start at least by 3/1/07. It takes a few weeks to begin studying, negotiating and tracking your reserves. Your reserves need to be tracked up to and including 6/30/07.

This is a different cycle than the Work Comp premium reviews - see previous note. The Bottom Line is that you must start very early to get your reserves in line. If you feel that you are in over your head, call a reserve review specialist such as our company. Do not just write checks.

Next Up - What is the secret question to ask anyone that deals with your Workers Comp to see if they understand the whole Work Comp picture?

Our main website is at www.cutcompcosts.com If there are any terms that you need to look up, please click on the Definitions tab or use the Contact tab to email us for questions.

What is the difference between a premium review and a reserve review? Often, during one of our presentations or in speaking with potential clients, or clients, we are asked how our Workers Compensation premium reviews differ from our reserve reviews.

To keep from boring you to tears, we will cover Premium Reviews today and Reserve Reviews next time. We avoid the word audit when we can as audit has such a bad connotation - IRS audit, year-end payroll audit by the insurance carrier, etc. Audits sound confrontational.

Premium Reviews - this is also called a policy review. We look at the "mechanics" of how your Workers Comp premium has been calculated. We look at various items including:

• Payroll Statements
• Current and previous Work Comp policies
• Website advertising and brochures
• Previous Work Comp year-end payrolls audits from the insurance carrier
• NCCI or State Rating Bureau sheets
• Audit Billing Statements
• Audit Workpapers
• Any type of premium adjustment after initial policy issued
• Job Descriptions for each employee
• Description of Operations

We are often asked why we need website info, brochures, advertising, and a description of operations. We want to take the time to understand your company and what your company does in its operations. Without knowing it exactly, we would not be able to do a complete and accurate premium review.

We can usually go back three years from the date of the review. If we find errors, we can usually recover the error for three years, not just one. With a premium review, we are looking at the current Work Comp insurance situation and back in time for three years.

Next Time - Reserve Reviews - the hidden way to save $ of Workers Comp

PS Our main site is at http://www.cutcompcosts.com/ Feel free to read our archived articles. They can be accessed by clicking on the months on the right side of the web page.

When do we usually hear from companies that need help? This is a question that was posed to me at a recent conference. Surprisingly, the 80/20 rule applies here. 80% of the companies that contact us have just renewed or are going to renew their Workers Compensation policies within the next few days. 20% contact us at other times during their Work Comp policy year.

If you have just renewed a policy and we find errors in your Work Comp policies, your company would likely lose one year of refunds. There is a three year "look-back" for premium recoveries. If we are contacted on January 15 on a January 1 renewal, the third year that is furthermost in the past may be lost. We recently had a small trucking company lose the third year of refunds which were worth about $30,000 to the company.

The best time to contact us is three months before your policy expires. That gives us time to do a very thorough premium review. If you want us to do a reserve review, then we need to start three months after you policy renews.

Do not get me wrong, we are always glad to hear from companies that need our help on their Workers Compensation policies. We just hate to see a company miss out on recoverable funds, especially in this economy.

Next Up - How do Premium and Reserve reviews differ? (Hint - night and day difference)

Our main website is www.cutcompcosts.com

NCCI Retired an HVAC Classification Code - where does that put your company?

Quite a few of our clients that have been overcharged on Workers Compensation are HVAC employers. Now, to even complicate matters more, the HVAC Classification Code 5536 has been eliminated due to problems of code enforcement. The Code was moved to other Classification Codes, all being at a higher rate than Classification Code 5536. We are starting to see this more often when the NCCI shifts or closes out a Class Code.

If you have had this Class Code in the last five years in your Workers Comp program, you may need to have an underwriting expert check this situation for your company. There are only a few states where the 5536 Classification Code is still allowed.

The NCCI has always been a very professional and fair organization to deal with over the years. We are not questioning their integrity whatsoever. We just do not want any employer to be overcharged in their WC policies or at the time of the year end payroll audit.

The "look-back" period to recover Workers Comp Premiums is three years.

Next Up - We answer the question - When do we usually hear from companies that need help?

Our main website is www.cutcompcosts.com

My Apologies - due to traveling and being in an area with sketchy WiFi and very slow dial up service, the blogs have not be tended to for about 10 days. Our main website is at http://www.cutcompcosts.com/

Brickstreet has a class action suit filed on them - a manufacturer is asking for class action status. The only Workers Comp carrier since 1/1/06 in West Virginia has been Brickstreet. It seems that Brickstreet has allegedly been charging an agent's fee on all of their Workers Compensation policies even though they have not had any agents providing their services. If this is the case, this is a very serious allegation.

If you are from West Virginia, please click on our above homepage link as there is a message there for West Virginia employers. We have found additional errors in the Workers Comp policies on over 2/3 of the ones we have examined for WV employers. One of Brickstreet's underwriters was quoted as saying there are errors on over 80% of their policies. You owe it to your company to have your policies reviewed.

Next Up - NCCI retires a classification code that involves HVAC employers

Our main website is www.cutcompcosts.com

Gov Mark Sanford - SC Takes Stand on Workers Compensation Permanency Ratings

Our hats are off to Governor Sanford. For quite some time, South Carolina has made setting reserves on files with a permanent disability rating almost impossible. The Workers Comp Insurance Commissioners could just assign a very subjective permanency rating to a Workers Comp file.

The Workers Comp adjusters in South Carolina have had a tough time setting reserves on files as a permanency rating could vary as much as 300-400%.

Reigning in these arbitrary assignments of permanency will enable the Workers Compensation file reserves to be more easily estimated. In our file reviews, the adjusters have always commented they cannot assign a low rating % to the reserves as the Commissioners can just throw out a number and make the insurance carrier of self-insured just pay up or appeal the rating.

We shall see how the ratings will be changed now that Governor Sanford has stepped in to save companies in South Carolina millions in Workers Compensation premiums.

Our main website is www.cutcompcosts.com

The Third Concern

Subrogation has a kind of quirky standard definition. To me, it is the possibility of another party having to share the monetary responsibility of an insured incident or accident.

I give the example in my manual of a company salesperson on sales calls being hit by another car in the back bumper and sustaining Workers Compensation injuries. The driver of the other car should pay for the damages sustained and reimburse the Workers Comp carrier.

We usually see two errors being made during our file reviews:

• We often see the subrogation funds being added back into the file after the file has been closed. However, the amounts reported to NCCI may not change. The funds could greatly affect a company's Workers Compensation E-Mod.
• The Workers Comp adjuster may not have enough time to pursue subrogation or may take a small % of the liability settlement.

Both instances are E-Mod killers. As I pointed out in my manual, there are 13 basic functions of a claims adjuster. Subrogation is one of the lower priority tasks.

Our main website is www.cutcompcosts.com

If you see anything in our blog that you wish to comment on or have questions about , please email We will be coming out with a new Workers Compensation manual soon.

Temporary Agencies and Your Workers Compensation
Our main website is at www.cutcompcosts.com

Another of the major concerns when I spoke at the NC Mid-State Safety Council quarterly meeting was temporary agencies. The three main concerns I have with temporary agencies are:

• In the past temporary agencies would open and close every three years to avoid an experience rating or E-Mod calculation. This harms the way the Workers Comp system is supposed to work. By not having an E-Mod besides 1.0, the temporary agencies that had a horrendous claims history paid no more than the safer ones.
• If the temps working for you do not have Workers Comp coverage due to the temp agency lapsing their policy, the TEMP EMPLOYEES WILL BE YOUR RESPONSIBILITY due to the ladder of insurance - see last post.
• You may not know the policy/cert has lapsed or had voids in coverage. There is no mechanism to inform you of the lapse.

Employers have unwittingly been on the hook for major claims as the temps are now covered by their policy. One way to upset an insurance carrier is to have coverage for employees that were not counted in your payroll. Your company may likely face a cancellation in this situation.

Three Areas of Workers' Compensation Concern

I have been out of action for about a week as this is the end of our tax season. There were three areas that raised the most concern in my presentation at the North Carolina Mid State Safety Council. I will go over each of them over the next few days. Those were:

• Subcontractors
• Temporary Agencies
• Subrogation

The first area -Subcontractors has three areas of concern from what I have seen -

1. The Ladder of Workers Comp Insurance - Workers Compensation courts will move up the ladder of contractors until a company is found to have insurance. If your subcontractor does not have insurance for their employees, you may be stuck for a claim.
2. Certificates of Insurance - A subcontractor may provide you with a Workers Comp Certificate of Insurance. Many companies just take the Certificate of Insurance on its face value. If, for some reason the cert is no good, you may be stuck with a claim.
3. Who is a subcontractor? The IRS has some great rules on who is a subcontractor and who is not. You may want to review them for your Workers Comp subcontractor situation. The link is http://www.irs.gov/businesses/small/article/0,,id=99921,00.html This is a good place to start. Each state's Workers Comp laws has a set of rules for contractors. The IRS website is a good overall guide.

Next time - Temporary Agencies

Our main website is www.cutcompcosts.com

Workers Compensation Loss Prevention - where does it end and begin?

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As I was reviewing my notes for my presentation tomorrow to the North Carolina Mid State Safety Council quarterly meeting, I noticed one common theme. Loss prevention does not stop when the accident happens. It is instead an ongoing process, especially soon after an incident.

From my viewpoint, a Loss Prevention/Safety Officer should be heavily involved in the reporting of the injury to the insurance carrier and in the initial physician referral. Safety personnel are often judged by the E-Mod (see previous posts) that is produced each year. However the Safety personnel may not have control over where the injured employee is sent for medical treatment. The safety department has to be involved, as the first 48 hours after a Workers' Comp claim, the tone is set for the complete claim.

I have heard safety personnel say that their job ends once the accident happens. This could not be further from the truth. I have coined the phrase post-accident safety. I recommend the safety departments become more heavily involved as you are judged by the E-Mod as a testament to your safety program. Ignoring what happens after an accident/incident can affect your performance greatly.

West Virginia Workers Compensation Conference Continued

There were a few areas discussed that will have a major impact on Workers Compensation in West Virginia:

How NCCI calculated advisory rates for WV. From what I could tell, the Old Fund did not keep records that were directly usable by NCCI. So NCCI took 7 states that were similar to WV (not including coal mines) and used them to come up with the advisory rates. The states were:
a. AL
b. KY
c. MD
d. NC
e. SC
f. TN
g. VA.
It will be six years before NCCI has data they can fully use to calculate advisory rates.

The Supreme Court decision Mandible(?) – where the employee can sue outside of WC under Part B of the insurance policy if the employer intentionally harms the employee. This was a large concern to the carriers as the WV Supreme Court had been very liberal with the “intentional harm” part of the Mandible(?) decision. Part B allows employee to sue the employer/carrier very similar to a regular insurance claims with no limits. The WV DOI people there had differing opinions whether this was excluded from a WC policy or not. If this is not excluded some carriers may not come into the state on 7/1/08.

The PEO’s that may come into the state was of a concern to me. As so many of them are not doing well or have been brought up on charges of corruption, the regulations need to be tightened as much as possible. PEO’s can usually offer discounted rates, but at what final cost if they are allowed to operate as freely as has been the case in many other states?

Overall, the WV Department of Insurance and NCCI did a great job as they are in a very difficult position with West Virginia not ever having an open market for Workers' Comp.

Tuesday, September 11, I will be speaking at the North Carolina Mid State Safety Council lunch meeting. The title of my presentation is The Five ASAP Ways To Cut Your Workers Compensation Claims.

Our main website is www.cutcompcosts.com

Our main website is at www.cutcompcost.com



I got behind in my posts. I was attending the WV WC Conference on the changeover of the Workers Compensation program from Brickstreet to the general market on 7/1/08. Here is an article where I was quoted from the Charleston Daily Mail. WV has made great strides in becoming a non-monopolistic state.

158 firms register for workers' compensation conference
by George Hohmann
Daily Mail business editor

More than 150 people -- including representatives of some of the nation's largest workers' compensation insurers -- have signed up for a conference to learn how they can enter West Virginia's workers' comp insurance market.
Pre-registration for Wednesday's conference at the Marriott is a positive indication that there's interest in writing workers' comp insurance in West Virginia when the market opens to competition next July, Insurance Commissioner Jane Cline said today.
"We're pleased with the response and turnout because it does represent a number of companies that write workers' compensation insurance across the country as well as local people who have an interest in the transition and work with the insurance industry," Cline said.
"We've met with a number of national carriers and continue to meet with the trade associations that represent a majority of carriers that write workers' compensation."

On Jan. 1, 2006, West Virginia transitioned workers' compensation insurance from a state-run monopoly to a private company, BrickStreet Mutual Insurance Co.
BrickStreet has been the sole provider of workers' comp insurance in West Virginia since the transition and will remain the sole provider until July 1, 2008.
As of Friday, a total of 158 people had registered for Wednesday's conference. Many represent large national insurance companies, including AIG, Erie, Liberty Mutual, State Farm, Travelers, Wausau, Westfield and Zurich.

Local insurance agents, lawyers, consultants, data reporting forms, West Virginia legislators and representatives of the state Attorney General have also registered.
People are coming from West Virginia, Ohio, New York, Virginia, North Carolina, South Carolina, Alabama, Georgia, Maine, Pennsylvania, Massachusetts, Kentucky, Nebraska, Minnesota, Michigan, Indiana, Texas, Wisconsin, Illinois, Connecticut, Maryland, Colorado, New Jersey and Washington, D.C.

Last week Cline pointed out that workers' comp premiums have declined an aggregate of 27 percent since West Virginia's transition to private insurance. BrickStreet has reported it made a $25.2 million profit in the first six months of this year, continuing the dramatic financial turnaround begun since the transition.
James Moore, president of J&L Risk Management Consultants of Raleigh, N.C., is one of the conference pre-registrants. He said last month, "Any insurance carrier looking to break into the market will have to build off the BrickStreet model. If the big carriers -- Liberty Mutual, Travelers, etc. -- see the model as profitable, they will enter the market, which will be very healthy for West Virginia businesses. Competition creates a pressure to lower prices and increase service.

"If they do not accept the model, they will not enter the market," Moore said. "If no carriers enter the market, that would be very unhealthy for the business environment in West Virginia."
Cline's office and the National Council on Compensation Insurance, also known as NCCI, are hosting the conference. The state Insurance Commissioner regulates insurance companies. NCCI is West Virginia's rating and statistical agent.
The conference will be from 9 a.m. to 3:30 p.m.

Workers Compensation Classification Codes Part II

The main area I wanted to cover here today - should have been last Friday is - how do you tell if your Classification Codes are wrong? This is a very tough one, but here are some observations that we had while reviewing Workers Comp policies:

• You have NOC in your Classification Code
• The Classification Code is not what you do in your business.
• The NCCI or State Rating Bureau has never inspected your business
• Sometimes the Class Codes can be wrong if you have just been inspected (Catch 22)
• The NCCI, Insurance carrier or Insurance Company Payroll Auditor has abruptly changed your Classification Code
• Along with the abrupt change, you receive a very large Workers Comp premium bill
• You have two or more very distinct businesses that are being classified in one "umbrella" class code
• Your competitors are being classified differently
• The #1 way to know is that you or someone in your company has a gut feeling that your Class Code is wrong, or there is something that is wrong overall with your Workers Comp insurance policy - that is when we receive most of our calls and emails and gut feelings are right about 80% - 90% of the time.

I will add to this list as time permits. Those are the ones that I can remember off the top of my head. I am on the road this week traveling to the West Virginia NCCI Conference. West Virginia has come a long way from a monopolistic state for Workers Compensation to a full open market. Brickstreet has been the interim monopolistic private carrier for the last two years and will be the carrier until July 1, 2008.

Our main website is www.cutcompcosts.com

Our main website is at www.cutcompcosts.com

Workers' Compensation Classification Codes - these may also be known as Class Codes, Work Comp Codes, Codes, etc. Today, let us start with the definition of the Class Codes.

As I mentioned in my last post, the errors that we find have a common theme to them which are Classification Codes. In laypersons term, Classification Codes are how a Workers Comp carrier and the NCCI or your state rating bureau views your business operation. For instance, a trucking company may have a Classification Code of 7228 - which are short haul truckers.

There is a very important point that needs to be made now. Your Classification Codes are not the same as your SIC codes. Your Work Comp Class Codes should not be based on your SIC codes. Quite often very small employers start out by doing a self-audit on their payroll and job types. When they grow, the Class Codes that are used year after year may have been based on the owner's self-audit and description of company.

This is not to say that the insured, NCCI, agent, or insurance carrier did anything wrong. Quite often, the Classification Codes are just copied from year to year by the agent. What if you change course in what your business is doing or has any the NCCI or your state rating bureau ever performed an in-person audit? I am not talking about the premium auditor that does a yearly payroll audit. Do your Classification Codes have quite a few NOC's (Not Otherwise Classified)?

A great example is a firefighting company that we assisted that was classified as a water carrier. Why? They had Water in their name. As they were a small company, they were audited over the phone year after year. The firefighters now pay over 60% less in Workers' Compensation premiums after we were able to convince the State Rating Bureau and their insurance carrier of the mistake. Who was to blame? This was just the natural Work Comp insurance process that went slightly awry.

Tomorrow - Classification Codes Part II

The Main Errors We Find When Auditing Workers' Compensation Policies

Our main page is at www.cutcompcosts.com

We have examined a large number of Workers Comp policies in our existence. We find errors at least 50% of the time. The most common errors that we have seen are (in order from most common to least):

• Over-reserving or not closing files timely (see previous post on Total Incurred)
• Employees misclassified into the wrong classification code
• Governing classification code wrong - very expensive
• Subcontractors classified as employees
• Wrong payroll items counted as Workers Comp remuneration
• Two or more distinct businesses classified as one business

When you look at your Workers Comp insurance policies and loss runs, please remember that there are 130 variables that go into a claim and there are 34 steps to taking the Total Incurred and converting them into your E-Mod or X-Mod. Then, there are approximately 1o more steps once you have your Experience Mod to calculating your premium. As each of the variables feed into each other, you can multiply them to see what a chance of error would be for a given Work Comp policy.

130 * 34 * 10 = 44,200

Hold on, though as that is for one claim figuring into your premium. If you have 20 open claims, then you would multiply 44,200 * 20 = 884,000 So, there are 884,000 calculations or variables that must all be correct for you to pay your correct premium. Are you still willing to just write a check to the Workers Compensation insurance carrier?

I wrote about the Self-Insured Phenomenon yesterday. At this point, if your are self-insured, are you thinking that you are OUT of this type of system? Your actuary that sets your LDF's or Loss Development Factors has as many variables and combos to examine. If you are self-insured, then the number of open claims may be possibly even higher.

I will talk about each of the above errors over the next few days. Notice how many times the word Classification is in the above list.

The Workers Comp Self-Insurance Phenomenon

When I write articles, manuals, or do presentations, there was an area that I used to not cover as well as it should have been covered. That is Self-Insurance.

I coined the term "Self-Insurance Phenomenon" after hearing these comments and auditing self-insured files for private companies and governmental entities. This is one area that I have become concerned about in the past few years.

A large percentage of our clients that are self-insured and have TPA’s (Third Party Administrators) handling the claims seem to think that have found some sort of safety net vs. using traditional insurance polices. The expression “We are with a TPA so we are not really paying insurance premiums” is one of the phrases that employers have said to our company personnel often. This is a grave mistake as the TPA is spending directly from the employer's budget, sometimes with not enough oversight.

TPA’s also charge a fixed amount per year to handle the claims that must be in the calculations to compare TPA vs. Non-TPA insurance decisions. Under audit we have found very poor claim handling from TPA’s that are not usually found in the general WC claims environment. This is not to say that all TPA's are bad. Reviewing the claim payouts very often is recommended.

A twist on the same type of thinking is "We have a large deductible, so the insurance carrier only pays after the claims reaches a certain level of $." The insurance carrier still reports your claims to NCCI under a large deductible. As far as NCCI is concerned, you are not self-insured when you are in a large deductible program.

Another comment we often hear from self-insureds is that we only pay the TPA $X per claim per year to handle our claims. As covered in my upcoming manual -there are many charges that a TPA adds in that regular insurance carriers cover in their premiums charged. We have seen the extra charges to be up to 5,000% of $X.

Our main website is www.cutcompcosts.com

Question in response to yesterday's post - You had said there are no guidelines for a Workers Compensation Adjuster to set the Workers Comp reserves on a file - How about the automated reserving programs that are available? Do they work and are they accurate?

Answer - I have seen some of them and audited files where automatic reserves are set. They are no more accurate than the adjuster setting file reserves on their own. A great example is when we audited files for an Ohio client. Ohio is monopolistic. At the time, they were using an automated reserve system. The reserves/Total Incurred for the files were not that accurate. One of the reasons is the adjuster needs to update what is going on in the claim just as if the carrier was non-automated on reserves. The bottom line is the employer was still paying the same premium regardless.

The reason? - There are over 130 variables that go into a Workers Compensation reserve. The software is only taking what it is given, so the reserves are only as accurate as what the adjuster inputs into them. BTW, the BWC of Ohio (Government-ran monopolistic Workers Comp Carrier) is and has been under investigation. What was one of the complaints? -inaccurate file reserves.

Who is in charge of your Workers Compensation budget that is 100% unregulated? Is it your agent, underwriter, premium auditor, or insurance commissioner? No, not any one of those parties as they are all under some type of regulation.

The unregulated part of Workers' Comp premiums is (drum roll) - your Work Comp insurance adjuster. There is a long previous posting on Total Incurred. To not bore any one to tears, I left this part for today.

Your insurance adjuster needs to be licensed in most states, but there is no regulation on the reserves/total incurred they set on your WC claims. What are the guidelines for setting reserves on a WC claim? There are none. As I mentioned in the last post, whatever your total incurred is by the 180th day after your policy period expires is from what you pay your Workers Compensation premiums - plain and simple.

What do you do immediately to make sure you have no overcharges in your premiums?

1. Find your monthly or quarterly Workers Comp Loss Run from your insurance carrier and review it.
2. If you do not have one, request it ASAP.
3. Make sure that all claims that should be closed are closed.
4. If a total incurred or reserves look very large for the claim, email your adjuster.
5. Do you know who the adjuster is on every one of your claims?
6. Do you have a working relationship with that adjuster?
7. Do you have their email address?
8. If you feel you need further help, consult with a claims expert- we are claims and premium consultants. Please excuse the J&L Risk Mgmt ad.

If you answered No to #4 - #6, are you just writing checks to the agent or carrier? There is no need to just think of Workers' Compensation as a fixed cost to doing business. There are more areas to reduce your premium, but this is the one that costs your company the most!

Our main page is at www.cutcompcosts.com

Calculating Your Workers' Compensation Premium - continued

***Please note that any of the terms in this post or others can be found at http://www.cutcompcosts.com/ under the Definitions tab.

Experience Modification Factor

As I mentioned in a prior post, your Work Comp premium calculations include 34 steps. However, those are the steps just to calculate your Experience Modification factor, also referred to as an E-Mod or an X-Mod.

To make a very long story short, there are four main elements that determine your E-Mod:

• total incurred
• claim frequency
• classification codes
• amount of payroll per classification code.

The payrolls per classification code are the basis for what is referred to as "Expected Losses"

Why was the Total Incurred from the last post so important? The Expected Losses are divided by the "Actual Losses" to calculate your E-Mod. Actual Losses are derived from the clams total incurred. The lower the total incurred is, the lower your actual losses. The lower your actual losses, the lower the E-Mod.

An E-mod is calculated on the total incurred SIX months after the close of the policy period. If you have a January 1st renewal date, the State Rating Bureau or the NCCI will calculate your E-mod on 7/1. How can you be charged for premiums six months after your policy has ended? Actually, you are not as Workers' Compensation runs one year behind.

If you renewal is 1/1/08, your Experience Period is from 4/1/03 through 12/31/06. Any policies that started 4/1/03 and ended by 12/31/06 will have an effect on your 1/1/08 renewal for your 1/1/08 - 1/1/09 policy period. The Experience Period runs out on 6/30/07 as the close of the business day. If the reserves/total incurred are reduced by $1,000,000 on 7/1, that big chunk of $ will still show up on your E-Mod and eventually your premiums even though it was reduced the next day.

I know this info is about exciting as watching grass grow, but it is cold hard cash we are talking about with your premiums. We will come back to the Experience Mod later. Whew! That was enough numbers for anyone to have to look at for some time.

Coming up next week:

• Monday - The Unregulated Part of Your Work Comp Insurance Premium - you and the government/Department of Insurance have no control over it and it can kill your insurance budget. Only one person has control and it is not your Workers Comp insurance agent.
• Tuesday - The Self-Insurance Phenomenon - shocking but true.
• Wednesday - The Main Errors We Find When Auditing Workers' Compensation Policies

How are your Workers' Compensation premiums calculated? Your premiums are calculated from a formula that has no less than 34 steps to it. Let's first look at what is the driving force behind what you pay in Work Comp premiums. The reserves, better know as total incurred on the file, is the catalyst of the whole process.

As I have said many times before, WHAT YOU PAY IN PREMIUMS HAS NOTHING TO DO WITH WHAT IS PAID OUT ON THE WORKERS COMPENSATION FILE. The reserves are what the adjuster thinks you will pay out on the file for the life of the claim. As you read this, do you know what the total incurred is for each of your Workers Compensation files? If not, you may be in for a real shocker. Immediately ask for your loss runs from your insurance carrier that show all of the files that are open. Review them closely to see what you are paying for in your premiums. If the total incurred for a file looks high to you, ask the adjuster to explain their reserves.

If you feel like you need help with the loss runs, consult a Workers Comp claims consultant as soon as possible. Remember, you are charged for THREE years for the total incurred on a claim.

Tomorrow - More on the Premium Calculation

Our main page is at www.cutcompcosts.com

The mainstay of all my presentations is the (used to be three) "Five Keys to Saving on Workers' Compensation Costs." This is a time-tested list that will reduce Workers' Comp costs for any employer in any jurisdiction. These come from over 20 years of analyzing claim costs and a study that I performed with over 7,000 Workers' Compensation files. They are:

1. Timely Filing of the First Report of Injury - within 24 hours


2. Physician's Network - where does the employee treat?


3. Return to Work Program - prevents large cases


4. Employee Treatment by Employer, Doctor, Adjuster - reduces malingering and fraud


5. Making Workers' Comp a Priority - do you just write a check to the TPA or carrier?

I found that in a study of the 7,000 Workers' Compensation files that if an employer does not do just one of #'s 1 - 4, the claim cost will increase by 400%. And yes, if none of the first three are done properly the employer will pay 1,200% more than a similar employer that is attending to all of the first three of the five.

I will cover all of them individually through the next five weeks. I will be releasing a manual in the next month that goes even deeper into detail.

Tomorrow - How is Your Workers' Compensation Premium Calculated?

Our main page is at www.cutcompcosts.com

So, we are off and running on the blog postings. What I want to do with this blog is to talk about how to save $ on Workers' Compensation premiums plain and simple. We do not sell any type of insurance. We would consider it a conflict of interest to be consultants on WC and then sell policies.

Our main page is http://www.cutcompcosts.com/ We have a large list of Workers Comp definitions under the tab Definitions. You may want to download those for a great reference when speaking to anyone about Work Comp, especially when you are receiving policy quotes.

I will try to give premium saving tips from the claims handling and the underwriting areas. I will try to post something on WC every day before I shut down my trusty laptop. As I read at least 10 Workers' Compensation publications @ day, I should be able to pass along some tidbits of useful info.

If you wish to contact me, please see the Contact tab on our website. If you want to see a certain subject on Workers Compensation covered, please email me. If you have anything that you think should be posted, please email it to me. I will give you a full tag line of credit, if published.

Our main page is at www.cutcompcosts.com