This week in comp, October 28, 2016

This week in comp is a weekly roundup of workers’ compensation news from across the country.


Hazard communication: SDS and secondary label compliance following the GHS deadline

OSHA requires employers to train their employees on the revised hazard communication standard.

OSHA requires employers to train their employees on the revised hazard communication standard.

Manufacturers and distributors are working to distribute GHS-compliant safety data sheets (SDS). In the meantime, employers should keep detailed documentation of their efforts to get SDS’ for their products…MORE

Age is more than a number
With more Americans putting off retirement, employers can take steps to help older workers remain healthy and productive…MORE


Why are work comp medical costs decreasing?
About 90 percent of the employed population has health insurance, a 10 percent increase over 2010. That means workers’ comp doesn’t have to pick up the tab for comorbidities and other non-work related conditions, which has led to a decrease in work comp medical costs…MORE

Claims has to up its game to attract new hires
With 25 percent of the claims workforce set to retire in the next few years, insurers are looking for new talent. In-house training and college partnerships are key strategies in filling the gap…MORE

Opioid epidemic

SAMHSA releases app to help treat opioid abusers

There are not enough doctors providing medically assisted treatment for opioid abuse, according to SAMSHA.

In 2015, nearly 2.4 million Americans had an opioid abuse disorder, according to SAMHSA.

The Substance Abuse and Mental Health Services Administration has released a smartphone app that provides essential resources and information to doctors interested in using medication-assisted treatment therapies to treat patients with a prescription opioid abuse disorder…MORE


DWC fraud unit extends its reach
The new in-house fraud unit at the Division of Workers’ Compensation has opened more than 40 investigations and hired additional investigators to extend its reach. The unit exclusively focuses on investigating workers’ comp fraud in Texas…MORE

Racketeering charges detail scam to defraud workers’ comp fund
Prosecutors say between 2008 and 2014, a chain of medical clinics defrauded Ohio’s Bureau of Workers’ Compensation by billing for procedures that were never done and inflating the percentage of disability for injured workers, making them eligible for higher payments from the state…MORE

Deputy nabbed in alleged workers’ comp fraud: Heavy weights, squats, burpees?
A California deputy tripped over a fire hose and claimed he injured his back, left shoulder and left side of his neck during a boat rescue. Despite claiming he was unable to lift heavy objects, do squats or run, the deputy was seen doing box jumps, burpees, squats and other exercises, prosecutors allege…MORE

Cyber security

Cyber-attacks a ‘wake-up call’ for insurers and public

Hackers used millions of Internet of Things devices to launch a major cyber-attack last week.

Hackers used millions of Internet of Things devices to launch a major cyber-attack last week.

Last week, hackers attacked a company that facilitates the loading of web pages, shutting down Twitter, Amazon and other popular sites. A cyber security expert predicts that as individuals and businesses become more comfortable with internet-based and cloud-based storage, we make ourselves more vulnerable to future attacks…MORE

The best of the rest

Industry needs to address gaps in workers’ compensation, AMCOMP panelists say
Legal disparity from state-to-state and the lack of a common compliance standard has led to an increase in litigation and a lack of clarity around which workers’ compensation laws are considered constitutional, according to a panel discussion during the American Society of Workers’ Compensation Professionals fall meeting…




Age is more than a number

Remember when poodle skirts were all the rage, Neil Armstrong walked on the moon and the milkman actually delivered? Some of your employees might. They’re members of the Baby Boomer generation, and many have decided to stay in the workforce well into their twilight years.

Employment of workers aged 65 and older grew 117 percent between 1994 and 2014, according to the Bureau of Labor Statistics (BLS). By 2022, the BLS predicts workers age 55 and older will make up about one-quarter of the workforce.

If you’re an employer, there is mixed news in America’s aging workforce.

Older worker injury trends

Watch this short video to see how an employee overcame a severe injury and remained a productive member of the workforce.

Older workers offer institutional knowledge, experience and productive work habits, according to the National Institute for Occupational Safety and Health (NIOSH). NIOSH also notes that older workers tend to respect workplace safety rules. Maybe that’s why they suffer fewer injuries.

In 2014, workers 65 and older experienced the lowest injury and illness rate of any age group, according to BLS data.

Clearly, older workers can be an asset to your team. But if you’re looking to tap into their potential, you need to consider two other statistically grounded truths of the aging process:

  1. When older workers do get injured, they take longer to recover. A BLS study found that the median number of days away from work for all injured workers was eight days. For workers aged 55–64, it was 12 days. For workers aged 65 and older, it was 18 days.
  2. Injury frequency decreases with age, but when older workers do get injured, the results are more likely to be fatal, especially starting at age 60, according to NIOSH.

Productive aging

You can help older workers remain healthy, productive members of your workforce by taking a few simple steps.


Click on the image to see how fatal workplace injuries increase dramatically starting at age 65.

Provide the right tools. If older workers cannot do all of the required tasks, make adjustments. For example, extra lighting and larger computer monitors offset failing vision, and hand trucks and dollies make it easier to lift heavy loads.

Be flexible. Look at your policies and procedures for opportunities to reduce the strain on older workers’ bodies. Flexible schedules, task rotation, stretch breaks and telecommuting can help older workers withstand the rigors of the work day.

Make workstations fit employees. Ergonomics is the science of making the work fit the employee. That is especially important for older workers, who are more susceptible to strains and sprains. For example, sit-stand desks allow workers to change postures during the day, which is a time-tested principle of ergonomics.

Offer a wellness program. Healthy workers suffer fewer injuries, and when they do get injured, they recover sooner. A workplace wellness program fosters healthy lifestyles that help workers avoid injury. Wellness programs also help control chronic conditions such as obesity, diabetes and hypertension that could increase claim costs and extend recovery times.

Focus on falls. Older workers suffer fewer injuries than their younger counterparts, with one caveat. The incidence rate of slips, trips and falls for workers 65 and older is about double the rate for workers younger than 45. You can help employees keep their feet on solid ground by teaching them these four tips.

Launch a return-to-work program. The longer an injured worker is away from the job, the less likely they are to return. Texas Mutual encourages employers to launch a return-to-work program that includes reasonable accommodations to ease employees back into the workforce.

More information

For more information about keeping older workers safe and productive, visit NIOSH’s web pages on productive aging and Total Worker Health.

This week in comp, October 21, 2016

This week in comp is a weekly digest of workers’ compensation news from around the country.


OSHA delays anti-retaliation component of electronic reporting rule
OSHA has delayed enforcement of the anti-retaliation component of its new electronic injury and illness reporting rule until Dec. 1, 2016. The component was schedule to go into effect November 10…MORE

Fall protection again tops list of most frequently cited OSHA standards

OSHA requires staffing agencies and host employers to share responsibility for keeping temporary workers safe.

Texas Mutual encourages employers to follow these 10 tips to survive an OSHA audit.

Fall protection tops the 2016 list of most frequently cited OSHA standards, followed by hazard communication and scaffolds. OSHA recommends employers who want to improve workplace safety use the list as a starting point…MORE

Does your medication affect your driving?
Few would argue that driving under the influence of alcohol, cocaine, marijuana and other street drugs is dangerous. But did you know over-the-counter and prescription drugs can also affect your ability to drive safely? The AAA Foundation launched a website that teaches you how your medications might affect you and your driving…MORE

7 common workplace violence prevention mistakes
Workplace violence policies should be written at an 8th grade level to accommodate all workers. Violence prevention training should be interactive, teaching employees to recognize threats and respond appropriately, according to the CEO of Violence Free…MORE


California, New Jersey register highest workers’ comp rates
Workers’ comp rates in California and New Jersey are 188 and 158 percent above the national median, respectively. North Dakota registers the lowest rates at 48 percent below the median, according to an Oregon Department of Consumer and Business Services report…MORE


Your RX for health care fraud

Doctors, patients, employers and insurance carriers are among the stakeholders who can commit health care fraud.

Doctors, patients, employers and insurance carriers are among the stakeholders who can commit health care fraud.

The Coalition Against Insurance Fraud estimates health care fraud steals tens of billions across all lines of insurance annually. Employers can protect their business from fraud by following a few simple tips…MORE

Ten Texans added as defendants in
$100 million compounding drug scheme
A superseding indictment alleges that from approximately May 2014 to mid-February 2016, 12 defendants conspired to run a scheme to defraud TRICARE in connection with the prescription of compounded pain and scar creams. The scheme involved kickbacks to TRICARE beneficiaries, prescribing physicians and marketers by the owners of compounding pharmacies…MORE


New Texas ‘two-step’ program aims to simplify workers’ comp disputes
Under a new Texas Department of Insurance, Division of Workers’ Compensation program, hearing officers can decide the most far-reaching disputed claim issues first, clearing the way for secondary issues to be resolved sooner. Hearing officers will only use the two-step approach if both parties agree…MORE

Cyber security

Cyber claims continue to be costly

The average data breach costs $665,000.

The average claim payout for a data breach is $357,000, and insiders are involved in 30 percent of cases.

The average data breach claim for a large company is almost $6 million, according to a new study. While large companies continue to be targeted, the majority of claims are for organizations with less than $2 billion in revenue…MORE

Opioid epidemic

DEA cuts opioid production 25 percent
The Drug Enforcement Administration (DEA) has reduced by 25 percent the amount of almost every Schedule II opiate and opioid medication that may be manufactured in the United States in 2017. The DEA sets manufacturing quotas to ensure adequate supply for legitimate medical purposes while limiting the amount available for diversion. A recent study found that 6.5 million Americans used controlled substances for non-medical purposes during the past month…MORE

A look inside the workers’ comp market’s opioid problem
Opioids are costly and addictive, and research suggests they could exacerbate pain. Alternative therapies, such as occupational therapy, physical therapy and nerve blockers can be safer and more effective from a cost and treatment perspective…MORE




Your RX for health care fraud

Imagine visiting a clinic for a work-related injury and being treated by a foreign medical student who is not authorized to practice medicine in the United States. That’s what happened to patients at Rose’s Houston Healthcare Clinic.

Rosemary Phelan, the clinic’s owner, pleaded guilty to insurance fraud-related charges in the wake of a joint investigation between Texas Mutual Insurance Company and the Texas Department of Insurance.

“Fraudulent behavior not only harms the individual company but also places an unnecessary financial burden on all participants in the workers’ compensation system.” Tim Riley, vice president of special investigation at Texas Mutual

Phelan was sentenced to seven years’ deferred adjudication and ordered to pay $88,000 in restitution. But the fallout from fraud can be far-reaching and far more serious than any penalty levied by a court.

Most importantly, Phelan jeopardized patients’ health by staffing her clinic with unlicensed physicians. And then there are the monetary costs of fraud, which affect everyone in the form of higher premiums.

State regulators and insurance carriers are working hard to stop health care fraud. In fact, Texas Mutual maintains a team of investigators who specialize in protecting our policyholders’ premium dollars from the trickle down effects of health care fraud. You can do the same for your business if you learn what to look for and how to respond.

Common schemes
The National Health Care Anti-Fraud Association estimates the financial losses due to health care fraud are in the tens of billions of dollars each year. Here are some common fraud schemes Texas Mutual investigators have seen:

  • Up-coding involves submitting bills for more serious or expensive diagnoses or procedures than were actually performed.
  • Unbundling means marketing or charging for items or services separately rather than as a package.
  • Prescription drug diversion is increasingly common in the midst of America’s opioid epidemic. Diversion means abusing or illegally distributing prescription drugs, or using them for purposes not intended by the prescriber.
  • Unnecessary treatment, supplies and tests, also known as overuse, is particularly egregious because it also affects patients’ health. The Lowe Institute estimates overuse accounts for between 10-30 percent of U.S. health care spending.

Red flags
Employers can help fight fraud if they know what to look for. Here are some common red flags for health care fraud:

  • The employer receives a notice that a claimant has changed his/her treating doctor and is then taken off work after receiving a release to return to modified or full duty. Usually, the claimant also seeks attorney representation.

    Employers who commit premium fraud get an unfair advantage over honest competitors.

    The Coalition Against Insurance Fraud estimates health care fraud steals tens of billions across all lines of insurance annually.

  • The treating doctor extends off-work status without treating the claimant for an extended time. For example, the doctor documents that the claimant should remain off work until the next office visit, which is scheduled one to two months after the date of service.
  • The health care provider uses templated documentation, which means using the same language on medical reports for all patients. You may notice that the report does not have the claimants’ correct name or that the gender references do not match. This is a red flag because it could signal that the physician is not truly evaluating patients or spending the amount of time they billed for.
  • The health care provider uses rubber-stamped signatures on DWC-73/office visit reports. This indicator could point to a provider billing for services he/she did not actually perform.
  • The claimant complains about the health care provider’s services or the treatment facility’s conditions. For example, the claimant might report that the office clerk performed the treatment or the clinic was dirty and did not have the appropriate therapy equipment.
  • Claimants complain that they are ready to return to work, but the doctor keeps them in an off-work status and continues to order treatment such as physical therapy.

Reporting suspected fraud
Investigators acknowledge three types of workers’ compensation fraud: claimant fraud, premium fraud and health care fraud. All steal money from the workers’ comp system and honest stakeholders. If you suspect fraud in a claim, contact your insurance carrier and/or the Texas Department of Insurance fraud unit.

This Week in Comp, October 14, 2016

This Week in Comp is a weekly digest of workers’ compensation news from around the country.


5 tips to help prevent fires

The National Fire Protection Association encourages everyone to replace their smoke alarms every 10 years.

The National Fire Protection Association encourages everyone to replace their smoke alarms every 10 years.

In recognition of National Fire Prevention Week, follow these five tips for preventing workplace fires: Have a plan, train your staff, be careful with combustibles, keep it clean and safely store flammables…MORE

Study finds Ebola treatment ZMapp holds promise
A clinical trial to evaluate the experimental Ebola treatment ZMapp found it to be safe and well-tolerated. But because of the waning Ebola epidemic, the study enrolled too few people to determine definitively whether it is a better treatment for Ebola than the best available standard of care alone…MORE


Medical ID theft continues to rise
Nearly 2.5 million medical identify theft cases were reported in 2014, an increase of 20 percent from the year before. A stolen medical identity can ruin your finances, compromise your medical treatment and cause you legal problems…MORE

Recycling company admits $600,000 premium fraud scheme

Employers who commit premium fraud get an unfair advantage over honest competitors.

Employers who commit premium fraud get an unfair advantage over honest competitors.

The owner of a New Jersey recycling company misclassified his employees and cheated his workers’ compensation carrier out of $600,000 in premiums. The man told his carrier that all but a handful of his employees did clerical work. An investigation revealed that most of the employees were warehouse workers doing higher-risk tasks…MORE

Medical costs

New report examines impact of reforms on medical costs
From 2010 to 2013, medical payments per claim increased 6 percent per year in Texas, double the rate in the median state. However, Texas medical costs per claim remain lower than the typical study state, according to a new Workers’ Compensation Research Institute report. The report examines how workers’ comp system reforms in 18 states have affected medical costs…MORE

Opioid epidemic

WCRI offering free webinar on latest opioid studies
Opioid abuse has touched every aspect of the health care system, including workers’ comp. On Thursday, October 20, the WCRI will host a free webinar based on its recent study examining the prevalence of longer-term use of opioids among injured workers in 25 states…MORE


U.S. workers’ compensation delivers underwriting profit despite rate deterioration 

Net written premiums in 2015 totaled $48.2 billion, second-highest level since $49.7 billion in 2006.

Net written premiums in 2015 totaled $48.2 billion, the second-highest level since $49.7 billion in 2006.

Premium growth, technological advancements, declining frequency trends and favorable levels of reserve development propelled the U.S. workers’ comp industry to a combined ratio of 96 in 2015, a 5.5 percent improvement over 2014, according to an A.M. Best report. Three of the four largest companies in the workers’ compensation composite, including Texas Mutual, are state funds and have accounted for over 20 percent of the composite’s overall premium volume…MORE

State fund news

NM Mutual starts work on new $17M headquarters
New Mexico Mutual broke ground this week on a 58,000-square-foot headquarters situated on five acres in Albuquerque. The new office will include common areas where employees can plug in their laptops and do short-term tasks…MORE

IVMS drives fleet safety
In-vehicle monitoring systems can help employers change the unsafe habits that drive traffic accidents. Read the third-quarter edition of the AASCIF newsletter for more information on IVMS, prescription drug monitoring programs and state funds’ contributions toward managing work injury risk…MORE

Prevent Heart Disease with Life’s Simple 7

There’s something about a bright-orange sunrise that can motivate even the most industrious among us to stop what we’re doing and simply soak up nature’s splendor. Dan Merritt is no exception, but he’s come to appreciate sunrises as much for their promise as their beauty.

“I love sunrises because they say, “Hey, you made it to another day.’”

Not that long ago, Dan wasn’t sure he’d live to see another sunrise.

Maintaining a healthy weight is critical in preventing heart disease. This 1-minute video offers five tips for making smart choices when eating out.

“We threw a Halloween party for my grandchildren,” remembered Dan. “I was sitting there drinking a glass of punch, and I noticed I was drooling down the side of my face.”

Dan couldn’t talk, but his frantic motioning told Barbara, his wife of 43 years, something wasn’t right.

At the hospital, doctors discovered Dan had suffered his second stroke of the day. As is often the case, the symptoms of the first stroke subsided quickly, so Dan ignored them.

Doctors couldn’t definitively diagnose Dan’s strokes that day, but they suspected an irregular heart rhythm. When he suffered a third stroke months later, they implanted a cardiac monitor and uncovered the cause: atrial fibrillation.

Dan’s doctors immediately adjusted his medication, and he’s been stroke-free ever since.

You don’t emerge from a serious health scare like a stroke without learning a few things. Dan is eager to share one simple piece of advice with all of us.

“Pay attention to your body. It’s always trying to tell you something. It could be things you’re doing great or things are going a little off kilter.”

Heart disease by the numbers

Strokes, heart attacks and heart failure are just a few conditions that fall under the cardiovascular disease umbrella. Collectively, these conditions represent the leading global cause of fatalities, claiming 17.3 million lives per year.

Here are some other eye-opening statistics about heart disease, courtesy of the American Heart Association:

  • Cardiovascular diseases claim more lives than all forms of cancer combined.
  • Someone in the U.S. dies from heart disease about once every 84 seconds.
  • About one in every three U.S. adults reports participating in no leisure time physical activity.
  • About 69 percent of adults in the U.S. are overweight or obese.
  • Worldwide, tobacco smoking (including secondhand smoke) was one of the top three leading risk factors for disease, contributing to an estimated 6.2 million deaths in 2010.

Heart-healthy tips

Dan’s advice is consistent with the American Heart Association’s (AHA)proactive approach to preventing heart disease. Here are some more heart-healthy tips we can all follow every day:

Learn the signs: Heart attacks, cardiac arrest and strokes are life-threatening emergencies, so every second counts. Call 9-1-1 immediately if you experience any of the warning signs.

Follow Life’s Simple 7: The AHA recommends seven easy-to-embrace tips for reducing your risk of heart disease. Life’s Simple 7 include getting active, controlling your cholesterol, eating better, managing your blood pressure, maintaining a healthy weight, reducing your blood sugar and giving up smoking.

Know your heart score: AHA medical experts designed the My Life Check tool to help you assess your heart health and move closer to your personal health goals. Simply provide some basic information about yourself, answer seven questions and get your heart score.

Focus on workplace wellness: We spend most of our waking hours at work. If we want to follow Life’s Simple 7, we have to learn to do it on the job, as well as at home. Employers can help by offering a workplace wellness program. The AHA offers a free suite of evidence-based tools to help you get the most out of your program.

Life is why

austin-mhml-lockupThe AHA is on a mission to improve the cardiovascular health of all Americans by 20 percent and reduce deaths from cardiovascular diseases and stroke by 20 percent, by the year 2020.

In support of that mission, the AHA will host its annual Heart Walk fundraiser on Saturday, October 15. Approximately 1 million people in 300 cities across the country will participate. In fact, Texas Mutual will be well-represented at the Austin event, and we hope you will join us.

This week in comp, October 7, 2016

This week in comp is a weekly digest of workers’ compensation news from around the country.


Don’t delay – Get your flu shot before flu season strikes

Each flu season, Americans miss nearly 111 million workdays. That equals approximately $7 billion per year in sick days and lost productivity.

Each flu season, Americans miss nearly 111 million workdays. That equals to approximately $7 billion per year in sick days and lost productivity.

With flu season ramping up this month, health officials urge everyone over the age of 6 to get a flu shot. Flu vaccination is particularly important for pregnant women, young children, older adults and people with chronic health conditions…MORE

DSHS issues Zika alert to South Texas
The Texas Department of State Health Services (DSHS) considers South Texas to be at greater risk of supporting local mosquito transmission of Zika virus. This week, DSHS recommended health care providers test pregnant women residing in Cameron, Hidalgo, Starr, Webb, Willacy or Zapata counties who are experiencing two or more of the major signs and symptoms of Zika disease and have no travel history or sexual exposure…MORE

Dear drivers: Please use caution this fall
Collisions between drivers and animals increase 67 percent in the fall, according to a study. We should all follow a few simple tips to share the road safely with our fellow four-legged travelers…MORE

What’s your most important in-vehicle safety feature?
Traffic accidents are consistently the leading causes of workplace fatalities. Many fatalities could be avoided by following basic safe driving principles. During Drive Safely Work Week, safety experts urged employers to remind their employees that they are the most important safety feature when they get behind the wheel…MORE


Contractor convicted in $5.4 million fraud scheme

Employers who commit premium fraud get an unfair advantage over honest competitors.

Employers who commit premium fraud get an unfair advantage over honest competitors.

A California contractor under-reported payroll and cheated his workers’ comp carrier out of $5.4 million in premiums. The contractor’s sentence includes 270 days in jail, five years’ probation, 1,500 hours of community service and restitution exceeding $5.4 million…MORE


2016 report card shows networks working as expected
When the Texas Legislature introduced health care networks into the workers’ compensation system in 2005, one of its goals was to improve injured worker outcomes. TDI’s 2016 report card shows networks are working as expected. Network claims produce higher return-to-work rates, fewer weeks off work and better physical functioning scores than non-network claims…MORE

Is grammar still important?
Remember the basics of grammar and punctuation you learned in school? Many of those rules are obsolete, thanks to the emergence of Twitter, text messaging and other digital communication. And that’s okay; communication evolves, and its governing principles must also evolve. But sometimes, poor grammar results in litigated or overpaid claims…MORE


Hackers target small businesses

Approximately 64 percent of businesses have experience more than six hacking incidents in the past year.

Approximately 64 percent of businesses have experienced more than six hacking incidents in the past year.

Approximately 90 percent of businesses reported at least one data breach during the past year. Because many big businesses have beefed up their cyber defenses, small businesses make attractive targets for hackers. Risk managers should identify data that hackers might find valuable, prioritize what data to protect and decide how to maximize their resources…MORE

Opioid epidemic

New workers’ comp opioid prescribing rule takes effect in Ohio
Under a new Ohio law, the Bureau of Workers’ Compensation (BWC) only reimburses for opioid prescriptions when the physician followed best prescribing practices. The BWC also provides treatment for dependence that arises from the use of opioid medications covered by BWC…MORE

The best of the rest

TDI tops list of 20 most helpful state insurance websites
Update-to-date rate comparisons, comprehensive complaint information and prompt customer service propelled the Texas Department of Insurance website to the top in a recent evaluation of state insurance websites…MORE

AIA responds to DOL workers’ comp system report
The nation’s state-based workers’ compensation system is grounded in the economies of the individual states. The system is, therefore, sensitive to those changing economies, as well as to system imbalances. That was the American Insurance Association’s response to the Department of Labor’s State Workers’ Compensation Report…MORE

10 reasons to stop using e-mods to evaluate safety

We live in a world where bigger is better. There are of course exceptions, such as taxes and a company’s workers’ compensation experience modification factor (e-mod).  Generally, the larger the e-mod, the higher the premium.

But e-mods were never intended to reflect a contractor’s commitment to safety and, by extension, its eligibility to work on a job site. Here are 10 reasons anyone using e-mods in the contractor hiring equation should reconsider.

One of the best ways to reduce an e-mod is to prevent workplace accidents. Visit for free safety training resources.

One of the best ways to reduce an e-mod is to prevent workplace accidents. Visit for free safety training resources.

E-mod is a pricing modifier – The Texas insurance industry is limited to fewer than 400 base rates for business classification groupings. So it is impossible to accurately price policies for thousands of different kinds of business. E-mods adjust the base rate to help insurance companies accurately price policies, but e-mods are not a report card on safe practices

E-mod data is old – E-mods look back as many as four years, but they ignore a company’s current safety practices. Project owners should assess what contractors are doing today to reduce accidents.

Reserves change – Reserves on open claims change, sometimes dramatically. A reserve that is too high or low can cause an e-mod to be inappropriately high or low.

E-mods can be artificially lowered – Some employers pay claims out of their pocket. By not reporting claims to their carrier, employers artificially lower their e-mod without improving workplace safety.

Subrogation takes time – Subrogation recoveries offset reported claim amounts, but these cases are often litigated. By the time the carrier recovers the funds, the recovery is not reflected in the e-mod.

The e-mod formula changes – The National Council on Compensation Insurance (NCCI) promulgates e-mods used by workers’ compensation insurers. In 2015, NCCI increased the split point in their formula (Texas) from $5,000 to $15,000.  This resulted in dramatic increases/decreases at the employer level, without real changes in underlying safety.

The bar keeps getting higher – Technological and safety improvements in business have resulted in decreasing claim frequency. Some contractors, even if they have no losses, may see an increase in their e-mods driven primarily by the drop in claim frequency, not by deterioration in their safety practices.

Business models change – Companies are merged, sold and acquired every day. And it is not uncommon for companies to dispose of unprofitable business segments and/or venture into new segments. E-mods react slowly to changes in the underlying business model. For example, a bakery could add a trucking component to its distribution system. The bakery might operate safely, but the trucking exposure does not. In this case, the e-mod would be artificially low, reflecting only the safe bakery operations.

Stuff happens – Consider an electrical contractor traveling from between job sites. Another driver dozes off, crosses the median and hits the contractor. Because the contractor was injured in the scope and course of employment, he is entitled to workers’ comp benefits. Neither the contractor nor his employer did anything wrong, but this claim will adversely the e-mod.

Fraud affects everyone – Most claims are legitimate, but some employees fake injuries, exaggerate injuries or otherwise cheat the system. When they do, they drive up claim costs and e-mod values for even the most safety-conscious employers.

Agents: Arm your clients
If we put too much stock in e-mods, we unfairly disqualify safe contractors from bidding on jobs. Risk managers should instead focus on a company’s current safety and business practices. And agents should begin working with their contractor clients to arm them with knowledge to face the changes ahead. For more information about e-mods, visit Texas Mutual and NCCI online.


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