SUMMARY WORKERS COMPENSATION STUDY PROJECT

1
SUMMARYWORKERS COMPENSATION STUDY PROJECT

• Department of Labor and Industry
• Employment Relations Division
• Jerry Keck, Administrator
• Chris Catlett, Safety and Health, Bureau Chief
• Erin Austin, Workers Compensation Analyst
• January 10, 2007

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Reasons for Study Project

• Perception of high premium rates
• Perception of low benefits

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Employers Costs of Workers Compensation
Insurance
4
Employers Costs of Workers Compensation
Insurance
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2006 Oregon Premium Ranking
For the complete study visit http//www.cbs.stat
e.or.us/imd/rasums/2082/06web/06_2082.pdf
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Montanas Premium Rates

• Montana has ranked consistently high in these
  studies over the last few years
• 2006 5th
• 2004 8th
• 2002 10th
• 2000 12th
• Why is Montana ranked this high and what factors
  are influencing this ranking?

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Workers Compensation Study Project

• Governor Schweitzer asked Lt.
  Governor Bohlinger to lead study
• Department of Labor staffs the study
• Project Team
• Regular Status Meetings 7 to date

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Workers Compensation Project Purpose

• According to the project charter, the project
  purpose is to define and conduct a study of the
  Montana workers compensation system - premiums,
  benefits, costs and other factors - as compared
  to selected other states. The study will
  determine and establish accurate means of
  comparison across other state systems and report
  the results in a objective manner.

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Study States Include

• Contiguous states
• Idaho
• North Dakota
• South Dakota
• Wyoming
• Regional States
• Colorado
• Utah
• Oregon
• Washington
• States with similar Benefits
• Arkansas
• Hawaii
• Kansas
• Kentucky
• Tennessee

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Statutory Workers Compensation Benefits
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Statutory Workers Compensation Benefits
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Benefits Provided to Workers
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Benefits Provided to Workers
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Benefits Provided to Workers
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Benefits Provided to Workers
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Benefits Provided to Workers
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Benefits Provided to Workers
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Benefits Provided to Workers
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Current Average Voluntary Pure Loss Costs Using
Montanas Payroll Distribution
Based on the latest NCCI published rates and loss
costs in the various states.
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Results Indexed LC
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Results Occupation

• Seven industrial occupation classes were created
• Classifications were assigned based upon type of
  work performed by individuals in each Class Code
  (CC)
• Example CC 2915 Veneer Products Manufacturing
  Manufacturing

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Cost Drivers

• Frequency of Claims
• Number of injuries in Montana
• Need for focus on Workplace Safety

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Safety Culture Reducing Injury Frequency
Injury Prevention
Managing the risks of organizational accidents
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Agenda
Safety Culture Reducing Injury Frequency

• A 10 Minute Primer highlighting
• The need for safety injury prevention
• Injury rate trends
• The winning formula
• Sources of help

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Why Safety?
Safety Culture Reducing Injury Frequency

• Montana needs to do better at safety!
• Montana injury rate is 43 higher than the
  national average
• Montana 6.6 injuries/100 FTEs
• Nation 4.6 injuries/100 FTEs
• Our injury rates directly impact our workers
  compensation rates
• Prevention will be a major force in our future
  rates

BLS, 2005
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The Need - - Injury Rates
BLS, 2005
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The Need - - Injury Rates
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Safety Culture Reducing Injury Frequency
Why Safety (continued)?

• Safety is good business
• Its the right thing to do
• Protection of our most valuable resource
• 1, 24, 75
• Cost control
• Direct and Indirect
• Its directly linked to business excellence

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Safety Culture Reducing Injury Frequency
Why Safety (continued)?

• Indirect Costs
• Time lost from work by injured employee.
• Lost time by fellow employees.
• Loss of efficiency due to break-up of crew.
• Lost time by supervisor.
• Training costs for new/replacement workers.
• Damage to tools and equipment.
• Time damaged equipment is out of service.
• Loss of production for remainder of the day.
• Damage from accident fire, water, chemical,
  explosives, etc.
• Failure to fill orders/meet deadlines.
• Overhead costs while work was disrupted.
• Other miscellaneous costs (Over 100 other items
  of cost may appear one or more times with every
  accident)

www.OSHA.gov The Business Case for Safety, .ppt
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Injury Rate Trends
Safety Culture Reducing Injury Frequency

• Statistics show
• An overall downward trend during the last 50
  years1
• Downward pressure on injury rates during
  recession1
• Upward pressure on injury rates during robust
  growth1
• Probable cause
• Competitive labor markets force continued
  improvement in working conditions1
• We are an outlier!
• Our ultimate goal must be ZERO workplace injuries
  with milestones of meeting and beating the
  national injury rate

1NCCI Presentation, Harry Shuford, 2006
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The Winning Formula
Safety Culture Reducing Injury Frequency

• Safety culture
• Everyone feels responsible for safety managers
  and employees work together safety is a value
  (not a priority).
• Safety management systems
• Operational hazard identification and control,
• Managerial planning, administration,
  evaluation, training
• Culture management leadership employee
  involvement
• Social marketing Public Policy
• Influencing specific audiences and broad public
  behavior to create voluntary positive change that
  benefits all.

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Safety Culture Reducing Injury Frequency
The Winning Formula

• Ingredients of Safety Excellence
• Assume all incidents are preventable
• Assume all exposures/risks can be controlled
• Hold management responsible and accountable for
  preventing injuries
• Involve employees
• Make working safely a condition of employment
• Train employees to work safely
• Promote off-the-job safety
• Audit safety
• Montana Safety Culture Act

Adapted from Managing Safety Techniques that
Work for the Safety Pro, DuPont
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Safety Culture Reducing Injury Frequency
Sources of Help

• Safety Programs, Compliance, Training and
  Assistance
• Insurance Companies
• Associations
• Chamber of Commerce
• Labor Unions
• DLI Safety and Health Bureau
• OSHA
• Partnerships among any/all of the above entities

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Safety Culture Reducing Injury Frequency
Contacts

• Safety Health Bureau
• Office 444.6401
• Direct Line 444.1605
• Web www.montanasafety.com

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Montanas Average Lost-Time Claim
FrequencyFrequency per 100,000 WorkersLost-Time
Claims
SD
OR
UT
MT
ID
NE
Based on NCCIs WCSP data.
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Montanas Average Claim FrequencyFrequency per
100,000 WorkersAll Claims
OR
NE
SD
MT
ID
UT
Based on NCCIs WCSP data.
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Montanas IndemnityAverage Claim Severity
OR
NE
UT
MT
ID
SD
OR
NE
UT
MT
ID
SD
Based on NCCIs financial data for lost-time
claims.
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Montanas Average Indemnity Severity
Based on NCCIs financial data for lost-time
claims at current benefit level and developed to
ultimate.
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Montanas Medical Average Claim Severity Compared
With Neighboring States
OR
NE
UT
MT
ID
SD
Based on NCCIs financial data for lost-time
claims.
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(No Transcript)
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Montana WC Medical Fee Schedule Reimbursements
Compared to Study States
Based on Illinois WC Fee Schedule Rates Compared
to Medicare Rates
Selected data from Stacey Eccleston, Illinois Fee
Schedule Analysis 7/06, pp.9-11, in which Montana
is ranked 16th Overall among 42 states.
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Pursuant to Section 39-71-704 (4), MCA, the
department adopted the following conversion
factors, effective January 01, 2006, for use with
the unit values listed in the Relative Values for
Physicians or incorporated in the Medical Service
Rules for workers compensation
services. Conversion Factors were increased by
3.28 in conjunction with the increase of the
states annual average weekly wage.
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Medicine
Office Visit (10 min)
Office Visit (15 min)
Office Visit (25 min)
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Physical Medicine
Chiropractic Occupational Therapy
Physical Therapy
CPT Codes
Hot or Cold Packs
Therapeutic Exercise (15 min)
Neuromuscular Reeducation
Therapeutic Activities (15 min)
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Radiology
CPT Codes
Shoulder X-Ray (2 views)
Wrist X-Ray (3 views)
Ankle X-Ray (3 views)
Chest X-Ray (2 views)
Spine X-Ray (2-3 views)
Spine X-Ray (4 views)
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Surgery
Rates
CPT Codes
Shoulder Arthroscopic Surgery
Carpal Tunnel Release (ligament)
Carpal Tunnel Release (nerves)
Hernia Repair
Knee Cartilage Repair
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Surgery
Rates
CPT Codes
Rotator Cuff Reconstruction
Lumbar Vertebral Procedures
Lumbar Disk Procedure
Spinal Rods
Disk Removal
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Montanas Indemnity Permanent Partial Average
Cost per Case
Based on NCCIs WCSP data.
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Montanas Permanent Partial Medical Average Cost
per Case
Based on NCCIs WCSP data.
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Montanas Permanent Partial Average Total per
Case
Based on NCCIs WCSP data.
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Times Montanas Average Frequency of Permanent
Partial Claims Permanent Partial Frequency per
100,000 Workers
Based on NCCIs WCSP data.
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Gives Montanas Permanent Partial Total
Costs Permanent Partial Costs per 100,000 Workers
Based on NCCIs WCSP data.
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Cost Drivers

• Frequency (Need for Safety Culture)
• Medical Costs (Fee Schedules)
• Duration (Time from injury to Return to Work)

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(No Transcript)
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Return to Work Time and Wages
Lost Time Duration and Return to Work
Pre-injury Wages
Post-injury Wages Paid Benefits
Injury Occurs
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Return-to-Work Study

• Data
• 4309 lost time claimants in 2000
• Injured workers demographic, injury and benefit
  information extracted from WCAP
• Injured workers wage information provided by
  Unemployment Insurance
• Objectives
• Measure wage outcomes and return-to-work
  durations
• Identify and evaluate trends and cost drivers

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Example
Est. Lost Wages
Benefits
RTW Wages
1996
2006
2000
Injury
RTW
Benefits
End
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Population Results

• Workers compensation benefits and actual wages
  totaled 59.5 of the injured workers predicted
  wages from the date of injury until 6/30/06.
  Therefore, injured workers lost 40.5 of the
  wages they would have earned if they had not been
  injured.

• The median time until an injured worker
• returns to work was 11.4 weeks

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Single Injury Results

• Subpopulation
• Studied injured workers with only one lost time
  claim in the WCAP database
• Represented 75 of the original population
• Findings
• Median percent of wages lost was 38.8
• Median lost time duration was 8.5 weeks

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Breakdown of wage loss relative to date of
Maximum Medical Improvement (MMI)
The maximum medical improvement date is the date
a physician has determined that the worker has
reached maximum healing. The physician has
determined that the worker will not further
recover from his or her injury.
Injury Date
MMI Date
6/30/2006
Healing
Lost Earning Capacity
Permanent Total Disability benefits were not
included in this analysis to isolate only those
injured workers able to return to work.
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Median Wage Replacement Rates relative to the MMI
Date

• Workers compensation benefits and actual wages
  totaled 62.6 of the predicted wages prior to the
  MMI date. Alternatively, wage loss while healing
  was 37.4
• Workers compensation benefits and actual wages
  totaled 48.1 of the predicted wages after the
  MMI date. Alternatively, wage loss after healing
  was 51.9

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Wage Loss by RTW Time
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Breakdown of wage loss by injury type and cause
Not Otherwise Classified
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Interpreting Preliminary Findings and Identifying
Future Research Topics

• An injured worker is not returning to pre-injury
  earning capacity
• Increased lost time durations have a significant
  negative effect on the wages an injured worker
  loses
• In Montana specific categories of injuries are
  both common and indicative of larger wage losses
  and longer lost time durations

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A Look at Future Research
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Reported number is the median
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Other Factors

• Average Annual Wage
• Multiple Job Holders
• Median Age
• Average Hours Worked
• Average Unemployment Rate
• High School Education
• College Education
• Health Care Coverage
• Private Employment by Size of Employer
• Private Business by Size of Employer
• Industries by Total Payroll

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Average Annual Wage - 2004
Colorado had the highest Average Annual Wage in
2004, while Montana had the lowest.
Source Bureau of Labor Statistics
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Multiple Job Holders - 2004
In 2004, 10.1 of the workforce in North Dakota
held more than one job.
Source Bureau of Labor Statistics
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Median Age 2004
The Median Age in the Montana population in 2004
was 39.5 years of age and the state of Utah had
the youngest of 27.9.
Source Bureau of Labor Statistics
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Montanas Median Age Is Increasing Slightly
Faster Than That of the U.S.
Montana
United States
Source U.S. Census Bureau
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Private Employment by Size of Employer by State
March 2005
N/D Not Disclosable
Source Bureau of Labor Statistics
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Private Business by Size of Employer by State
March 2005
Source Bureau of Labor Statistics
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Return to Work

• It is more difficult for small employers to
  provide return to work opportunities for injured
  workers.

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CONCLUSIONSIssues to Investigate

• Frequency of Injuries (SAFETY)
• Medical Costs
• (Fee Schedules)
• (Utilization and Treatment Guidelines)
• Duration (RETURN TO WORK)
• Incurred Costs (SETTLE FUTURE MEDS)

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Labor-Management Advisory Council on Workers
Compensation

• Agency Order
• Created by Commissioner of Labor
• Chaired by Lt. Gov. Bohlinger
• 2 year period may be renewed
• Provide advice and counsel

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Members of Labor-Management Advisory Council on
Workers Compensation
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Labor-Management Advisory Council on Workers
Compensation

• Review data and information from Study
• WCRI Administrative Inventory
• Montana Briefing January 10, 2007
• Published Report March, 2007
• INGENIX Medical Fee Schedule Study
• Montana Briefing January 10, 2007
• Final Report March, 2007
• Seek additional data and information
• Make Recommendations

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QUESTIONS?
Department of Labor and Industry Employment
Relations Division Jerry Keck, Administrator (406)
444-1555 jkeck_at_mt.gov