Bending the Workers Compensation Cost Curve HUB International Limited.

Transcription

1 Bending the Workers Compensation Cost Curve 1

2 Topics of Discussion Current State of Workers Comp Market Non-Work Comp related influences on rates Changes for 2017 Demystifying the Ex-mod Non-conventional programs to affect additional savings Update on Health Care Reform 2

3 Workers Compensation Current State of the California Market Claims are Expensive! Average cost of an indemnity claim is $82,234 Average medical costs of an indemnity claim is $40,678 which includes medical cost containment programs Average cost of indemnity is $29,030 The current trend for medical, indemnity and allocated costs are all increasing The combined ratio for carriers is holding steady ~ 94% Workers Compensation: Benefits, Coverage, and Costs, (2014 data) ; Marjorie L. Baldwin and Christopher F. McLaren. National Academy of Social Insurance. 3

4 Workers Compensation Current State of the California Market Trends Rates are declining Average rate charged at end of 2016 was $2.67 per $100 payroll which is down 12% since 1/1/ Oregon WC Premium Rate Ranking Summary has California as #1 the most expensive state in the nation for workers compensation insurance Recent recommended rate decrease for 7/1/17 is around 8%. (This is only advisory. Carriers will adjust according to their business model. ) As of 1/1/17, the industry average filed pure premium rate is running about 10% higher than the advisory pure premium rate. Despite recent cost trends, rates are still expected to decline in 2017 and possibly Workers Compensation: Benefits, Coverage, and Costs, (2014 data) ; Marjorie L. Baldwin and Christopher F. McLaren. National Academy of Social Insurance. 4

5 Non-Work Comp Related Influences on Rates Premium Increases with no change in exposures Minimum Wage is now up to $10.50 as of 1/1/17 Change in First Aid, Officer Exclusions, and Experience Mod calculations Marijuana and Workers Compensation Employees can still be tested for drug use Illegal by Federal Law which means employers can still prohibit use and possession while working. If tested and found positive for marijuana use, an employee can be terminated if it is clearly written into the company policy. It is recommended that any written policy insert wording that restricts or prohibits all drugs where they are restricted or prohibited by state OR Federal laws. Health Care Reform Move from ACA to AHCA and the removal of employer and individual mandate will put pressure on WC market 5

6 Impactful Changes for 2017 Officer Exclusion Effective 1/1/17 for all in force policies and for new policies on or after 1/1/17 Directors and Officers must now have at least a 15% ownership in the business and must sign a waiver prior to policy inception Includes General Partners of Partnerships and Managing Members of LLC s For In Force policies, there may be additional premium due if currently excluded officers do not own 15% or more of the company First Aid Claims Effective 1/1/17, medical expenses for ALL claims now need to be reported Intended to eliminate the misclassification of claims The definition of First Aid claims has not changed, only the method by which they are reported has 6

7 First Aid and the Experience Modifier Typical savings from a first aid program is 1-3 points off the experience mod A lot of concern now that payments for first aid need to be reported to the WCIRB which will eliminate the potential experience mod savings Obviates First Aid programs where employers pay for their own claims to affect experience mod savings It is up to the employer to first report the amount paid on a claim to the carrier All first aid claims will be lumped together in the Under $2,001 category which means frequency is not the issue, it is cost Only time it may significantly impact the experience modifier is if there is more than one claim on the experience report which obviates the 1 claim rule If there is only one claim on the experience report, the maximum impact on the experience mod is 25 points above the best possible mod. Add a first aid/medical only claim and the 25 point cap is removed 7

8 Secret of the Experience Modifier The X-Mod Myth v Truth o o Myth: The experience mod is not the most critical component to work comp pricing Truth: Since open rating in 1995, premiums are heavily determined by loss rating underwriters already have an idea of what they want to charge before the mod is even applied The X-Mod Reality o o o If you have an experience mod above 100%, you are likely paying more for work comp premiums than your competitors The Experience modifier gives you a very good indication regarding your safety performance and culture Experience modifiers at or above 125% can lead to OSHA inspections and lost business Scheduled Credits o o o All carriers build credits into their rating system. Some are rated for credits as high as 50% or more Scheduled credits can be used to offset a spike or increase in your work comp premium as long as there is a good story to tell Carrier competition can lead to increased credits 8

9 Scheduled Credits They cannot exceed the scheduled credits they have filed with the state Underwriter s silver bullet Programs can result in savings: Return to work Written Safety Program Healthcare program Medical Provider Network Like their rates, carriers also file for credits Non-Traditional Programs where credits can be applied Voluntary Benefits Wellness Programs 9

10 There are also incentives for workers and/or medical providers to over-report injuries or illnesses as work related. The 100% coverage of medical costs under workers compensation creates incentives for both groups to identify a work-related cause when the etiology of an injury or illness is uncertain. Workers Compensation: Benefits, Coverage, Costs (October 2016) National Academy of Social Insurance Workers Compensation: Benefits, Coverage, and Costs, (2014 data) ; Marjorie L. Baldwin and Christopher F. McLaren. National Academy of Social Insurance. 10

11 Non-conventional ideas to bend the cost curve Voluntary Benefits HUB International Limited.

12 Adding Voluntary Benefits Voluntary Short Term Disability & Accident Insurance can help! Research Now & Aflac conducted an online survey with 945 Employers of all group sizes 40% of all companies providing access to voluntary Accident insurance experienced declines in their workers compensation claims 31% of all companies providing access to voluntary Accident insurance experienced declines in worker absenteeism 36% of all companies providing access to voluntary Short Term Disability insurance experienced declines in their workers compensation claims 30% of all companies providing access to voluntary Accident insurance experienced declines in worker absenteeism Impact of Voluntary Accident Insurance and Voluntary Disability Insurance on Workers Compensation Claims and Worker Absenteeism Study ; July Aflac. 12

13 Why It Works Those hurt off-the-job have protection Reduced Monday Morning/Friday Afternoon claims Employee has funds to pay for treatment Small off-the-job injuries are treated minimizing risk of larger injury occurring on-the-job Ease of filing voluntary insurance claims rather than workers comp Important Note: Accident & Short Term Disability are not replacements for workers compensation coverage and should not be provided in lieu of workers compensation coverage 13

14 Bending the curve with Workplace Wellness HUB International Limited.

15 2017 Workplace Wellness Trends FINANCIAL WELLBEING DIVERSE WORKFORCE IMPACT MENTAL HEALTH AT WORK LINKING SAFETY & WELLNESS CULTURALLY RELEVANT PERKS HUB International Limited.

16 Financial Stress & Wellbeing of U.S. employees are distracted at work by financial stress* Of employees say they spend 3+ hours/ work week thinking about or dealing with issues related to their personal finances 29% 32% 37% 80% of Americans report financial stress prevents them from living a healthy lifestyle of employers are creating or expanding their financial wellbeing programs to improve employee engagement *Source: American Psychological Association. (February 4, 2015.) Stress in America : Paying With Our Health, retrieved from HUB International Limited.

17 Financial Stress & Wellbeing Stress is the number one driver of lost productivity. Finances are the top driver of stress. Employees overwhelmed by their financial situation are less likely to prioritize healthy behaviors like eating well, exercising and not smoking. Employers are responding by including a financial component within their wellbeing programs. WHAT YOU CAN DO: 1. Communicate the link between financial wellbeing and overall health & wellbeing. 2. Provide multiple types of financial resources: 1. Health care & benefits education 2. Financial planning 3. Saving for life events 4. Budgeting 5. Debt management 3. Provide access to a personal investment advisor to assist employees with needs based on specific financial stage HUB International Limited.

18 Diverse Workforce Impact: Generational Differences PERSONAL WELLNESS PRIORITIES BY GENERATION Physical Emotional Spiritual Intellectual Social Occupational Millenials ( ) Gen X ( ) Boomers ( ) Environmental 0% 20% 40% 60% 80% 100% HUB International Limited. Source: Global Wellness Institute & Everyday Health Inc., Unlocking the Power of Company Caring, Workplace Wellness Survey, 2016

19 Diverse Workforce Impact: Generational Differences Many employers struggle with how to meet the needs of today s multigenerational workforce. Positioning initiatives in a broader and integrated fashion with a focus on employee s overall wellbeing helps engage a diverse workforce. WHAT YOU CAN DO: 1. Consider your workforce demographics and do not take a one-sized fits all approach with communications or programming. 2. Ensure that physical, mental and emotional wellbeing is included in the solution. 3. Look for associations in data sets (claims, health screenings, focus groups, employee surveys) to determine priority HUB International Limited.

20 Mental Health at Work 69% of employees report that work is a significant source of stress 67% of employees want more emotional/mental health 35% of employees lose 1+ hrs. of productivity per day due to stress 64% of employees with high levels of stress feel extremely fatigued & out of control resources from their employers HUB International Limited. Source:Aon Hewitt (2016). Consumer Health Mindset Survey, Virgin Pulse (2015). 4 Simple Ways to Help Employees Beat Burnout.

21 Mental Health at Work Wellbeing strategies often focus solely on physical health, but for a happier, more productive team, integrating mental and behavioral health initiatives is crucial. This integration serves to meet a growing need. Employees report wanting more emotional and mental health resources from their employer such as mindfulness and resilience training. WHAT YOU CAN DO: Consider measures to support and protect employee wellbeing such as: 1. Flexible work schedules and time management procedures 2. Raising awareness and creating an open culture to discuss mental health and stress 3. Integrating mental health and wellbeing throughout workplace policies HUB International Limited.

22 Linking Safety & Wellness Smoking quit rate of workers in integrated interventions compared to stand alone cessation programs High risk individuals are 3 times more likely to file a workers comp claim Of companies outperformed the S&P 500 when providing exemplary safety, health, and environmental programs Source: Fabius R, Thayer R, Dixon BA, et al The Link Between Workforce Health and Safety and the Health of the Bottom Line: Tracking Market Performance of Companies That Nurture a Culture of Health. JOEM 55(9): HUB International Limited.

23 Linking Safety & Wellness Traditionally viewed as separate initiatives, more and more companies are recognizing that health impacts safety, and safety impacts health. By breaking down the silos that exist between these two programs, employers are experiencing the magnified impact that comes from aligning safety and wellness strategies. WHAT YOU CAN DO: 1. Create a cross-collaborative team of safety and wellbeing champions with a shared vision and goals to integrate health & safety initiatives. 2. Aggregate & analyze different types of data: health screenings workers compensation absenteeism rates medical claims 3. Engage Risk Management and Absence Management Teams HUB International Limited.

24 Culture and Perks 56% Organizations that create a culture defined by: meaningful work deep employee engagement job & organizational fit strong leadership outperform the S&P 500 by 325% and have a competitive advantage over their peers when attracting and retaining top talent. 1 of employees said they would trade a standard salary increase for certain perks HUB International Limited. Source: 1. Everett_Koop_Award.3.aspx 2. Technology Advice Research: 2015 nationwide internet survey of 486 working aged adults.

25 Culture and Perks Research shows that happy workers are more productive! Companies are continuing to focus on cultivating a culture of health and wellbeing. In an effort to further enhance culture and employee engagement, many employers are offering unique employee perks in addition to traditional benefits. Finding the right perk means identifying what employees value. A perk that s great for one company might not be as valued at another. WHAT YOU CAN DO: 1. Analyze relevant data to determine the perks your employees will value the most. For example, millennial employees may be more attracted to companies with student loan repayment programs while baby boomers may place more value on long term care options. 2. Looking for a low budget perk? Bring concierge services to your employees that remove barriers and increase productivity such as: discount programs onsite services elder/child care support Caution: Some perks or services may be considered taxable income to an employee. Consult your corporate tax professional for more guidance on taxable benefits HUB International Limited.

26 Health Care Reform 26

27 The Latest on Healthcare Reform HR /4/17 Pay or Play mandate- Repealed as of 1/1/2016 ACA reporting- partial repeal of Employer reporting requirements for ALEs (IRC 6056 as of 1/1/16), but retains reporting on offer of MEC coverage (IRC 6055) Repeals Myriad of ACA taxes: PCORI, Health Insurance Tax, Exchange surcharge in small group coverage, medical device manufacturer tax, annual limits on health FSAs, Medicare taxes for high-income earners, etc. Cadillac Tax plan- Delayed until 2026 Individual mandate penalty- Repealed and replaced with a 30% surcharge on premiums when individuals experience a break in coverage greater than 63 days within a 12-month period Insurance marketplaces/exchanges: Modifies rating methodologies from a 3:1 to a 5:1 ratio; modifies the provision of subsidies to individuals in exchanges as of 1/1/2019 Medicaid Expansion: Repeals expansion as of 2020 and grants states discretion ability to establish eligibility criteria for Medicaid eligibility Market reform changes: Provides state discretion to define essential health benefits as of 1/1/2020 and allows for the creation of high-risk pools for individuals with chronic conditions, prohibits pre-existing condition exclusions Passing H.R in the House is the first step of the legislative process. The Senate must also pass H.R before the bill is sent to President Trump for signature. 27

28 Thank you! Neal Stehly, SVP, Benefits Division Jon McPheters, Workers Comp Claims Advisor 28