Your Work Comp & Benefits ON DRUGS! BEYOND INSURANCE

Agenda Who is effected What is the problem Who can help solve it What is the plan Taking action

Effects the Entire Team CEO How do we grow? CFO What it the cost? HR What problems will I need to deal with? Plant Manager How will we get the work done? Quality Control How do we avoid production errors? Safety Manager How do I keep workers safe? Employee team members I can count on (that can carry their own luggage and they won t put me in danger)

Our Challenge Potential Change in Law In Our Companies In Our Communities

Change in Law - Election Day November 6, 2018 Legalize the possession and sale of up to 2.5 ounces of marijuana for personal, recreational use for people over the age of 21. An individual could keep up to 10 ounces of marijuana at home. Tax marijuana sales with a 10 percent excise tax at the retail level as well as the state's 6 percent sales tax.

Change in Law - Election Day November 6, 2018 Split those revenues, with 35 percent going to K-12 education, 35 percent to roads, 15 percent to the communities that allow marijuana businesses in their communities and 15 percent to counties where marijuana business are located.

Change in Law - Election Day November 6, 2018 Allow communities to decide whether they ll allow marijuana businesses in their towns. Require testing and safe transportation of marijuana in the state. Effective 10 days after election Nov 16, 2018

Times are Changing Public Opinion Should the use of marijuana be legalized? 1969 12% Americans said yes 2017 64% said yes October 2017 Gallup poll

Times are Changing Public Opinion 70% say marijuana s less risking than alcohol 76% say marijuana s less risky than tobacco 67% say marijuana s less risky than opiates

U.S. Public Opinion

Michigan Recreational Marijuana Poll Detroit Free Press, Sep 21, 2018

How Illicit Drug Use Affects Business and Economy Economic Costs The economic cost of drug abuse in the United States was estimated at $192 billion in 2007, the last available estimate. This value includes: $120 billion in lost productivity, mainly due to labor participation costs, participation in drug abuse treatment, incarceration, and premature death $11 billion in healthcare costs for drug treatment and drug related medical consequences; and $61 billion in criminal justice costs, primarily due to criminal investigation, prosecution and incarceration, and victim costs.

In Our Companies Create dangerous behavior (safety issues) Shortage of qualified workers Employees testing positive Productivity issues Discipline

Zero Tolerance Just like with employees that carry a medical marijuana card if they test positive for THC you CAN fire them. That DOESN T change.

Worker Shortage

Pot Debate

In Our Communities Attract organized crime Our kids Destroy lives

Attract Organized Crime

Black Market Los Angeles - April 2018 one of the largest residential drug bust in American History. 74 home grow houses Underwritten by Chinese organized crime Legal recreational marijuana states like CA, CO and WA have provided cover for organized crime.

Marijuana Impact on Colorado Arrests are up Increase in marijuana related traffic deaths Poison control calls Emergency room visits Black market has increased Numerous Colorado regulators indicted for corruption Schools have increase in marijuana USA Today (Aug 7, 2017)

Our Kids

Increased Access

Peer Pressure

Think Beer vs. Tequila 1969 2018

Destroy lives

Insurance & Risk Management Perspective

5 Steps of Risk Management

Identify Risk Employee Interviews Safety Opinion Survey Walk Around Safety & Well-being Committee Health Risk Assessments IQRM Risk Management Checklist

Analyze Data Drug Policy Drug Tests EAP Usage Absenteeism OSHA logs recordable and close calls Claim Data Work Comp Experience Mod Benefit Plan Health Mod RX Drug Use

Control Risk Drug Policy Zero Tolerance Last Chance Whatever

Job Applicants?

Control Risk Employee Awareness Safety & Wellness Health Coach

Communicate Your Drug Policy

Attendance Policy Time to tighten it up? Let bad actors de-select themselves

Control Risk Employee Assistance Plan (EAP) Use for last chance bad actors de-select

Safety at Work

Safety at Home

Productivity

Quality

Control Risk Work Comp Claims Management Eagles or Turkeys

Work Comp Claims Management When it comes to workers comp since the mid-1990 s, a number of states have amended their statues to deny worker s comp benefits to workers who were injured while using or because they have been using illegal drugs. Michigan has no such specific statutory provision, and cases involving drugs or alcohol use are generally resolved under the misconduct statute. But to deny benefits, the injury must be a result of the alcohol or drug use. When the link is not established, benefits are still payable. The fact that an injured employee was found to have marijuana in his bloodstream at the time was not enough to prove that he was actually intoxicated.

Work Comp Claims Management

Zero Tolerance Is this a Good Idea?

Zero Tolerance? You Just Lost Control of Claim

Incident Reporting Report Claim within 1 Hour Provide Employee with Prompt and Aggressive Medical Treatment Drug Test Occ Med Utilize Independent Claims Advocate Maintain Constant Communications until Employee Returns to Work Complete, Post and Maintain OSHA 300 Forms Secure Back-on-the Job Authorization Form from Doctor. Electronic Reporting of OSHA300A Data

Incident Reporting OSHAlogs.com OSHAlogs.com Report Claim within 1 Hour Complete, Post and Maintain OSHA 300 Forms Electronic Reporting of OSHA 300A Data Provide Employee with Prompt and Aggressive Medical Treatment Drug Test Occ Med Utilize Independent Claims Advocate Maintain Constant Communications until Employee Returns to Work Secure Back-on-the Job Authorization Form from Doctor.

Control Risk Benefit Plan Management Claims and RX

Finance/Transfer Risk Insurance Transfer

Insurance Underwriter

Finance/Transfer Risk Who gets a better rate?

Measure How Did We Do? Do We Need To Make Adjustments

Cost Calculation - ROI

Cost of Abuse Here is a way to clarify the impact: Number of employees - 100 Average number of abusers (17%) - 17 Cost per abuser per year - $7,000 Total annual cost to company - $119,000 And, this does not include the cost of: Turnover Poor Morale Major law suit or workers compensation claim Unemployment claim Potential for litigation-increased chance of having the company sued

Cost to Test Examples of the costs for a testing program (100 employees) Many organizations believe a program is cost prohibitive. Below is an example of the cost to an organization over a one year period that has six types of tests for 100 employees. It does not include program development or administration, but makes very clear that with one substance abuser costing approximately $7,000 per year, a properly structured program is a terrific ROI. Type test Number of tests Pre-employment 20 (20% turnover- drug test only) New Hire Evaluation 20 (drug test only) Reasonable Suspicion 5 (drug and alcohol test) Post Accident 10 (drug and alcohol test) Random 35 Follow-up 0 105 tests at $30 or $44 per test = $3,150 or $4,620

Work Comp Experience Mod Cost Good -.60 e-mod Average 1.00 e-mod Poor 1.40 e-mod

Benefit Plan Claims Experience Surcharge

General Liability & Auto

Property

We Must Take Action

Time to Decide

Success

Case # 1 Machine Operator The Scenario: Employee got his hand caught in machine The Outcome: Tested positive for Marijuana medical only ($10,000) no indemnity payments ($20,000) released to work with restrictions (one handed work) - savings to employer $80,000. He quit after being released to work without restrictions.

Case # 2 Material Handler The Scenario: Employee hurt her back while lifting at work. Failed drug test. Worked with EAP and given last chance agreement The Outcome: Came back to work with restrictions and no lost time vs. firing and $100,000 reserve on work comp. Medical was only $1000. Good long time employee now.

Case # 3 Saw Operator The Scenario: Pallet Manf guy cutting board hit in head rushed to occ med then ER no drug test because he went to ER The Outcome: Off work on pain meds but got him modified work within his restrictions (work at home) Medical cost was $12,000 avoided indemnity saved $24,000.

Failure

Case #1 Exxon: Should have known The Scenario: In the case of the Exxon Valdez, the court ruled that although there was no indication that Captain Hazelwood was drinking while in treatment for his alcoholism and in command of the Exxon Valdez when it ran aground, the company should have known. The Outcome: Because the court held Exxon responsible, the company was fined, separate from compensatory damages, $5.5 billion in punitive damages.

Case # 2 Carroll Air Systems: Within the Scope of Employment The Scenario: A salesman and his boss took two clients to dinner during a convention. While driving back to his hotel after dinner, the salesman had an accident, killing someone. He tested positive for alcohol and the courts determined that: He was conducting company business. There were not any company rules telling the salesman how much he was allowed to drink while representing the company. The company actually encouraged drinking by picking up the tab. Since the salesman was not violating any rules, the court reasoned that he was acting within the scope of his employment. The company was held responsible. The Outcome: The company ended up paying $85,000 in compensatory damages, $800,000 in punitive damages and went Chapter 7. Punitive damages are not covered by most insurance policies.

Case # 3 A-Able Rents Company: Should Have Known The Scenario: An employee of A-Able Rents, who was assigned to remove rental furniture, assaulted and attempted to rape a customer while on duty. He admitted to smoking crack cocaine before the attack. The employee had been terminated from his prior employment as a truck driver due to his admitted crack use and his refusal to submit to a drug test. The rental company never contacted the previous employer. The Outcome: The court expressly stated that failure to conduct the preemployment investigation directly contributed to the violence. It also ruled that punitive damages may be proper.

Conclusion USA 5% of population use 60% of illicit drugs Substance abuse cost $7,000 per abuser/yr. Choose one of three categories Zero tolerance Last chance What ever Review substance abuse policy Communicate your policy Attendance Policy Partner with an EAP Work Comp Claims Management

Randy Boss Ottawa Kent Insurance rboss@ottawakent.com 616-437-7557