Archives by: The Lawson Group

The Self-Insurance Difference

In this episode of the podcast we talk about the advantages of self-insurance for workers’ comp for both the price and service as compared to commercial products.

To continue our conversation about self-insurance and why it effectively is a better deal for you to participate in – again I can’t speak to the other five self-insurance groups in the state because we don’t know exactly how they do, but we suspect that they do a lot of the same things that we do that make the groups perfo

rm better. For example, some of the things that we do–and it’s not by design it’s because it produces better results. We end up typically with the claims adjusters that we have in our staff, we don’t have a quota for how many claims they’re supposed to manage.

We try to work it on a basis of how can they professionally manage claims as opposed to processing claims and that number tends to be around 100 claims and depending on their workload it could be as few as maybe 75 or 85 claims it could be as many as 120 or 125 claims but it’s what they can effectively manage. When we say manage we mean you don’t just get the claim accept it and pay it – you manage the claim, you manage any kind of rehab, you manage physical therapy, you manage return to work programs, lost time claims cost a lot more and take a lot more time to actively manage than a medical only claim.

So that’s the second aspect of what we do. We actually spend time with our serious claims or our lost time claims and we only have about 15 percent of our claims that are lost time claims which means the other 85 percent of medical only claims which are pretty much a processing of paper through the collection of bills and the payment of those bills. In the commercial insurance industry we’re told that the ratios can be as much as 35 or 40 percent of their claims are lost time claims which take a lot more time to manage the additional downside to that is in the commercial insurance market we hear numbers of claims that the claims adjusters manage of anywhere from two to five hundred claims at any point in time.

So, if you assume that they have two to three times as many claims as we do, and they have two to three times as many claims as our claim’s adjusters do it’s physically impossible for them to be able to actively manage a lot of those claims. And so, the default position is they tend to process them. Every claim that comes through the door gets accepted. We rarely see claims being denied by commercial insurance companies and they pay those claims and they decide that whatever those claims cost them is just what those claims cost.

They don’t actively manage the cost of those claims because they don’t have the time to do it, so they effectively end up processing claims as opposed to managing claims. Another huge aspect of the workers’ comp system is the use of surveillance on claims that you suspect may be either, fraudulent in the first place or claimants that are not adhering to the either physical therapy or rehab program that they’re supposed to be adhering to. We don’t even question what it costs to use surveillance. If you’re one of our member companies and somebody who’s out on a workers’ comp injury and is supposed to have restricted duty in terms of what they do, and you suspect that they’re not following that.

We’ve had cases before where people have had shoulder injuries and are supposed to be fairly quiet in terms of what their activity level is. And we find out that they’re in a bowling league and they’re bowling two or three nights a week with that bad shoulder. We have surveillance go out to observe what they’re doing, videotape what they’re doing, and try to make book on the fact that they’re not adhering to what they’re supposed to do. And it was much more successful to go to the Labor Department with a claim like that to get benefits denied when you have proof of the fact that they’re not adhering to what they’re supposed to do from a medical standpoint.

What we find in the commercial insurance market and we have many, many, many, many stories that we can talk about – we find that they tend to not like to use surveillance because it’s expensive and if they do they have a very minimal budget number associated with any a claim that happens where they don’t want to spend that money or it’s not significant enough it’s not worth their time to spend the money.

We have one-member company right now that has a very expensive claim it’s well over a hundred thousand dollars. The individual has a very low weight restriction in terms of what they can do if they come back to work and yet they ride a motorcycle and they push that motorcycle around their driveway, and they’ve been seen doing it. And so, they called the insurance company to say you’ve got to come and watch this guy because if he only has a five-pound weight restriction how can he be horsing an eight or nine-hundred-pound motorcycle around. And their answer was “Well there’s only a budget on that case of two hours for surveillance and you’re a 50-minute drive away. So, it’s not really worth our while to put somebody on this individual to watch them because we’d only have 20 minutes of surveillance time.”

The person has been out of work for over a year and a half and the meter is running on a 175 thousand dollar claim and yet the insurance company doesn’t deem it necessary to come out and observe this worker who appears to have way, way, way more than a five pound weight capacity. And we have dozens and dozens of other stories similar to that so that’s another huge difference between self-insurance and the commercial insurance market.

Then there is the degree of selectivity. Oftentimes self-insurance groups have the wrap of only accepting the best companies with the best safety programs and the best safety records. I don’t know about the other groups, but I wouldn’t say we even think about that. I go back to my earlier comment which is workers’ comp is a highly manageable cost of doing business. You just have to manage it. And so, we’re really good at workers’ comp. You’re really good at making widgets. So we really need a strong management team that will listen to us and work with us on safety programs, return to work programs, and management of claims so that we can work as a team to manage any claims that they do have and get workers back to work as soon as possible as opposed to just letting them fall into the morass of the insurance industry where they don’t follow up on these claims, they don’t come back to light duty or return to work anytime soon and the longer they’re out of work the longer they stay out of work.

It’s just a mindset of difference between self-insurance in the commercial market that goes back to my earlier comment about the loss ratios that we all have of 30 to 40 to 50 percent as opposed to 80 to 90 to 120 percent. So regardless of whether it’s a three self-insurance groups that we run or the other five that are out there in the state we think it’s well worth everybody’s while to take a look at self-insurance as an alternative to a commercial insurance policy.

A gentleman that we knew in the insurance industry used to say he always fights the battle of the cost to buy versus the cost to own. The cost to buy is what you pay for your insurance policy this year. The cost to own it is what you pay over a three to five-year time period. So if you buy a policy from a carrier that doesn’t provide a high level of service, and your experience mod goes like the company we recently talked to goes from a point seven to a one point three even though you get that great deal on what you are paying for comp when you had the point seven mod.

You’re now paying twice as much for comp because of that one claim that they’re poorly managing and that’s going to stick with you for three years. So we would encourage you to call us if you’re a manufacturer, or a wood related company, or a social service nonprofit and have a conversation with us about workers’ comp or if you’re one of the other five groups that are out there, feel free to talk to them because we still think that the self-insurance for workers’ comp is the best deal financially and the best deal from a service standpoint way more so than any of the commercial products that you can buy.

How “Mods” Affect Insurance Premiums

Learn about the effect insurance mods have on your premiums, and how self-insurance groups save money by reducing the number of claims that occur and managing them properly when they do.

To talk a little bit more about workers’ comp self-insurance and why it is a better deal long term. It’s the performance of how you perform within a self-insurance group. With my background on worker health and safety we always say the cheapest claim to pay is the one that never happens because you have a proactive health and safety program and so you just don’t hurt people in the first place. And then the other side of that is if you don’t hurt people it doesn’t cost you a lot of money.

And generally, people start laughing when I say that stuff but it’s a statement of fact. If you don’t have claims it doesn’t cost, you a lot of money if you don’t pay a lot of money in claims then you don’t end up paying as much for your insurance as time goes forward. And it’s worth talking about a few things here. The first one is an experienced modification fact or what everybody refers to as a Mod an M O D and it’s based on your losses compared to everybody else in the world that does the same thing that you do.

And if you do exactly average for what you are supposed to have for claims as calculated by the National Council on compensation insurance or NCCI your experience might a 1.0. So, if you have a fifty-thousand-dollar premium and you’re expected to have twenty-five thousand dollars in losses if that’s the way the numbers work for your type of industry and that’s exactly what you have then your experience might will be a 1.0.

If you perform worse than everybody else that’s in your industry, then your mod becomes higher than a 1.0. If you perform better than everybody else in your industry, your experience mod is less than a 1.0. So, an experience mod can become a huge factor in terms of calculating what your premium is because once you take your payroll and the rate for every class quote of payroll that you’ve got if you’re multiplying it by 1.

It’s exactly what you should pay if you’re multiplying it by a 1.2, or 1.5, or a 1.8, or a 2.0 you can be paying as much as a 50 to 100 percent penalty effectively for having bad losses. The flip side is also true. If your experience mod becomes less than a 1.0 you can end up paying 10 or 20 or 30 percent less than what everybody else in your industry is paying who is average because your performance is pretty good.

What we’ve seen actually happening in the marketplace in the last two or three years is that people who used to have mods of .7 or .8 are now having mods of 1.3, 1.5, 1.8 or even a 2.0 because they’ve had poor claims performance and with the heavy discounting that’s going on in the insurance market so effectively they end up paying more than they used to pay even though they’ve been getting discounts. We just recently talked to a company who had one of the best mods for a three-year period that I’ve seen in 25 years of doing this and their mod was under .7. It was a .67, .68, and .69 for three years running.

They had one claim that was expensive. It was not a legitimate claim that was accepted by their insurance carrier and paid extensively. It was a four-hundred-thousand dollar claim and in 2 mod cycles the mods gone from that that .7- ish up to a 1.33 so without a calculator sitting in front of me that mod has almost doubled.

So the premium that they’re paying now which is over eighty-thousand dollars should be about forty thousand dollars and is all being driven by their mod and it’s all being driven by that one claim that probably isn’t a legitimate claim in the first place that never should have been accepted but not only has it been accepted but the meter’s running and they’re paying four-hundred-thousand-dollars on that claim.

That typically doesn’t happen in self-insurance in any of the groups. It certainly doesn’t happen in the groups that we have because if we do it determined that a claim is not a legitimate claim in the first place it gets denied it ever even gets accepted and we see a significant number of claims that come through the door where they are not legitimate claims get denied and they disappear and go away. And that makes a huge difference for the majority the companies are out there. There are a bunch of other things that go on in self-insurance that make it work better and therefore cost you less money. And we’ll talk about them in the next podcast.

How to Save on Workers’ Comp with Self-Insurance

Learn how self-insurance groups save money on workers’ compensation by reducing costs over the long run.

One of the things we do at the Lawson Group is provide third-party administrative services for workers comp self-insurance groups of companies and then also individual companies who are self-insured for workers comp. The quick overview is that in the state of New Hampshire you can buy a workers’ comp policy for your employees in one of three ways.

If you’re a very large company or a nationwide or international company, you can be self-insured were essentially you end up writing checks to cover the cost of the claims that you have. The second way of doing it is you buy what they call a guaranteed cost policy – where you buy a product from any one of the major insurance carriers where you pay a premium on an annual basis and they cover whatever your losses are, and then next year you get a calculation of what your premium is going to be based on your payroll, the class codes of your payroll, and what the rates are for those class codes and then you multiply all that by a thing called an experience mod and that calculates what you actually pay for a premium.

The third way of doing this is through a self-insurance group and the state of New Hampshire allows self-insurance groups of like businesses. There are nine self-insurance groups right now. One is cities and towns and then the other eight are what I call commercial groups and five of them are affiliated with commercial business groups if you will. Things like New Hampshire Motor Transport Association, New Hampshire Automobile Dealers Association, and we manage three separate individual self-insurance groups. And three of those groups are a group of manufacturing companies and that’s everything from widgets, to precast concrete, to electronics, and beyond.

The second group is a group of lumber industry companies and that’s everything from tree cutters, mechanized loggers, to sawmills, retail lumber yards, and companies that make products out of wood: doors, windows, cabinets, millwork, that type of thing. And then the third group is a group of non-profits, health care facilities, and social service companies that’s across the state in those unique industries or businesses. The simple part of it is you have to decide what you want to get out of your workers’ comp insurance policy. And what we say is that workers’ comp is a highly controllable expense and cost of doing business. But you just have to choose to be able to try to control those costs. And it’s a myriad of ways to do that. I’ll talk about that in a in a different podcast but in this particular case one of the things that we fight against all the time is the notion that a workers’ comp insurance policy should be purchased based on price because everybody is equal and the same, versus buying it on the best cost of that policy over time.

And I can’t speak to the other self-insurance groups although we hear anecdotal information about them, but all of the self-insurance groups perform substantially better than the commercial insurance companies out there and that’s compared by a thing called a loss ratio. If you take a look at a loss ratio it’s basically the dollars that you pay out for claims divided by the premium that you pay. So, if you have a fifty thousand dollar claim and a hundred-thousand-dollar policy your loss ratio is 50 percent.

That’s pretty simple math, but if you only have a ten-thousand-dollar policy and you have that same fifty thousand dollar claim you’ll end up with a 500 percent loss ratio which is not good. What you find for the majority of the commercial insurance industry since we started doing this in 1995 the loss ratios have been only been as low as 80 to 90 percent and as much as 120 or 130 percent what we hear about the other self-insurance groups is that the typical loss ratios run between about 40 and 60 percent and we know that anecdotally the two groups that we’ve run the manufacturers group since the 1990s and the lumber group since 2001 their lifetime loss ratios with us run about 50 percent their loss ratios for the last six to eight years are about 40 percent and their loss ratios for the last couple of years are closer to 30 percent. The new trust that we just started; the health care trust which we started in February of 2018. It’s very new but its loss ratio last year was only about 15 percent and so far, this year it’s only running about 12 or 13 percent.

So the bottom line is that self-insurance groups as a whole tend to perform much better because you have much better control over the cost of claims because there’s more preventive effort put forward in terms of loss control and there’s a whole lot more effort put forward in terms of managing the claims and for more information about this you can feel free to get into our contact with our office we’re happy to come and talk to you through your broker and explain a whole lot more to you about how workers comp self-insurance works.

Asbestos: Costly to both your health and your pocketbook!

Check out our latest podcast to learn about the dangers of asbestos and the steps necessary to properly abate it. 

Hi this is Scott Lawson. I want to talk a little bit about asbestos which is one of our favorite topics. We’ve been involved in the asbestos industry – if you want to call it that – since about 1980. And for the first 10 or 20 years of the asbestos industry I guess the rule of thumb was that all the asbestos in the world was going to be gone from circulation and it won’t be an industry anymore, sometime around 2010.

And here it is 2019, and I would say a significant amount of the consulting work we do still involves asbestos in buildings or people who are working with asbestos containing materials. And we run into the same issues, problems, whatever from a business standpoint today that we have been for the last 20 or 25 years. It’s amazing to me that it’s still a topic that most people don’t understand. Very simply, very fundamentally, asbestos is a recognized carcinogen. And what that means is it can cause cancer. It does not necessarily mean that it will cause cancer.

There’s a known correlation between smoking and asbestos exposure, that you have a significantly greater risk of developing lung disease if you’re a smoker exposed to asbestos than if you’re just a smoker or just somebody exposed to asbestos. In the world of asbestos, there’s what’s called a single-fiber-theory which some people suggest that it can take a single fiber or exposure to a minimal amount of asbestos to cause lung disease.

Typically, an accumulation of asbestos fibers in the lung causes a disease called asbestosis. And what that actually means is the asbestos fibers get deep into the lungs into the alveolar sacs. They give the same rigid performance of the alveolar sacs that asbestos does because of its high-tensile strength and a lot of building products and what it does is it just it minimizes the body’s ability to actually expand and contract the alveolar sacs and bring oxygen or air into the lungs. The theory also is that a lesser exposure to asbestos fibers causes a disease which is a cancer of the plural lining of the chest cavity which is called mesothelioma and mesothelioma can only be attributed to asbestos exposure.

You find a lot of asbestosis and or mesothelioma in people who worked in shipyards, people who were in the Navy where they were onboard ships because it was a ton of asbestos used in the boat building industry back 20, 30, 40, 50, 60 years ago. You find a lot of people involved in the brake industry, automobile brake industry, in installing changing brakes and clutches and cars and trucks. There was a significant exposure to asbestos again back 30, 40, 50 years ago and you find it in a whole bunch of building trades plumbing, heating, ventilation.

I can remember when we first started doing this. They actually were dumping bags of asbestos into machines that actually put asphalt curbs in place because the asbestos mixed in with the hot asphalt would actually give it that high-tensile strength. So, when it came out the other end as curbing in a parking lot it would actually retain its shape. So, there’s a whole bunch of tasks or whatever where you can become exposed to asbestos a lot of it decades ago.

In today’s world where we encounter an awful lot of cases is in building materials and it’s two different ways that we encounter on a regular basis. One is in schools and there is a specific EPA regulation dealing with schools called a HERA and that stands for asbestos hazard Emergency Response Act. And what that basically says is back in the 1980s you were supposed to identify all the suspect asbestos containing building materials ACBM.

Which are things like pipe insulation, floor tiles, mastic ceiling tiles, and on, and, on, and, on to determine where you had asbestos and if it was in horrible condition or friable which means it can get airborne. You were supposed to try to abate it if not you could manage it in place and the whole concept behind that was that you would leave it there until you needed to remove it because you were actually replacing Heating and Ventilating equipment. You were demolishing the building you were renovating the building, but somehow you were going to impact the asbestos containing materials.

But as long as you kept them covered with paint or kept him well insulated so they couldn’t become friable you could leave them in place. The problem with the regulation was it made it more and more expensive from a testing and management standpoint over time to leave it in place and deal with it down the road. So, it created the asbestos abatement industry where not only were consultants in demand to come in and evaluate all the asbestos but then you hired abatement companies to come in and remove all the asbestos now because it was going to be significantly more expensive later.

Here we are again in 2019 and we’re still removing asbestos on a daily basis. The other regulation is called NESHAPs and that stands for the national emissions standard for hazardous air pollutants and that also deals primarily with asbestos. But what it basically says is whenever you’re going to impact asbestos containing materials via demolition or renovation in a building you have to first identify the asbestos and abate it so you don’t release that asbestos into the general air outside of the building as a result of that construction effort. So, what we still end up doing is in a lot of cases we’ll get calls from a homeowner or business or a school that says we’re adding on a room we’re tearing down a building we’re getting rid of this garage or whatever and we think it contains asbestos. NESHAPS requires that you do a building survey before you can even touch any material that might contain asbestos.

So, we probably do 10 to 15 of these surveys a week still to go in the buildings where there’s either going to be renovation or demolition taking place. Once you identify all the asbestos containing materials that will be impacted by the renovation, if you’re only going to knock a hole in a wall to build an addition on you only need to worry about the materials where you’re going to knock the hole in the wall, if you’re going to tear down the entire building then you need to worry about the entire building. But then once we determine how much is best in the building where it is we come up with a work plan to abate it. We typically work for the building owner and will then bring in contractors to take a look at the building and decide what it will cost and what the work plan would be to abate all the asbestos in the building.

Once we then oversee them removing and abating all the asbestos we provide a three ring binder for people that’s all the documentation of the work that was done, waste manifest, licenses, certifications of everybody that was involved in the job and then decide what they want to do with the building. And we’ve even gotten to the point now where we actually can oversee and manage the destruction of the building by hiring a demolition contractor. In schools it’s a little bit different because the schools typically have to manage this stuff over a much longer period of time as they do renovations. The process is sort of still the same. We did building surveys back in 1988. We update those surveys on a timely basis in accordance with what the HERA standard calls for, and then work with the schools as they get ready to do renovations – typically in the summertime.

To either take up floor tile, or remove a bunch of insulation, or change out a boiler or do whatever and then go through the abatement process with the same project documentation when we’re done. I guess the bottom line in all this asbestos regulatory environment is that if you are going to impact asbestos containing materials, whether you’re going to demolish a building, renovate a building, or you’ve got damaged material contains asbestos.

It all has to be repaired fixed removed or abated so that you can then use the building in an asbestos-free manner regardless of whether you’re going to continue to use it, whether you’re going to renovate it, or whether you’re going to demolish it. And if you need help with any of that you can certainly get in touch with our office at the lawsongroup.com or call us at 603-228-3610 and we have an abundance of folks who can actually go in and determine what you need to do and give you an idea of what it would take to get your project successfully completed.

Think Before You Start!

Check out our latest podcast to learn how work plans can be used to prevent injuries.

Hi this is Scott Lawson, and today I want to talk about something that a lot of people get hung up on – the regulatory aspect of worker health and safety, and this is an issue where we find in the workers comp field where we’re pretty large in the state in New Hampshire that a significant number of the actual injuries that we see happening on the job have nothing to do with the regulatory environment and it’s people making poor decisions about how to do their job or poor decisions about how to work safely.

I always condense it down to a couple of things I call unsafe acts, and unsafe work practices that are predicated upon the fact that they’re doing a job that they don’t do all the time. And those fall into two categories. We call them routine tasks, and non-routine tasks. There’s a wide variety in what those two things mean – a routine task can be something that you do every day and it can be something that you do 400 times a day. And it is as repetitive as attaching a nut and a bolt together. It can also be something that you do once a week or once a month or once a quarter or once a year. But it’s something that you do every single time it needs to be done.

During a plant shutdown for example in the summertime, you can rebuild a boiler or you can pull a motor apart non-routine tasks are things that you have never done before and it’s something that you’re asked to do with a skill set that you have but it’s not necessarily a specific task that you’ve done before. And this is where the problem comes in. In both of those cases, if it’s a routine or a non-routine task in terms of skill set but it’s something that you haven’t done in a while or have never done before we always suggest that people sit down and develop a work plan before they even attempt to do those tasks that they’re not familiar with.

What we find is in a lot of cases that the routine task is something that’s only done once a month or once a quarter ends up being done the way they best remember it as opposed to having a specific work plan before they start. So, they don’t have the right tools for the job, they don’t have the right replacement parts to finish the job completely, they don’t have enough people to physically pick up, and move equipment and materials around, so you end up with one person trying to lift or move something that’s way too heavy for them. So, they don’t have that work plan in place they haven’t gone through and reviewed all the steps to the process. So therefore, they’re not adequately prepared to do it, and then that leads to somebody making a poor decision about how to do the job and end up getting hurt.

We have a very specific example lately of a tree cutter that we do some work with and they were in yard A actually taking down some trees in the neighbor in yard B came along and asked them if they could take down some trees for them. The work that they were doing in the yard was fairly small and not very elevated. And they did not have a crane on site which is typically the way that trees are taken down.

They decided to not wait and come back a different day and wait for the crane to come and help them take those trees down and decided to try to take the trees down using the limited equipment that they had which included a guy in a bucket or man lift that was halfway up the tree. Long story short, in an effort to get the job done and not have to wait and get their proper equipment the guy cut the tree down, it came backwards, landed on the lift, drove him into the ground, and it probably is going to result in a half-million-dollar worker’s comp claim. Severe head injuries, severe brain injuries, multiple surgeries are planned and all for the lack of actually sitting down and taking the time to come up with the proper work plan which ultimately is as simple as saying you do the job right and you do the job right the first time. As simple as all the tools that are required to be in place you walk through the process and decide exactly how you’re going to do it before you do it incompletely or do it inaccurately and end up with somebody getting hurt.

So in the future when you have to do anything that is not routine and rote and done every day and done to perfection, take the time to sit down and come up with a work plan and make sure that you have all the right pieces, and parts, tools, training etc., to be able to make sure that you could do the job properly and work safely.

We work with companies all the time to help them come up with work plans and devise systems in-house for determining what are routine and non-routine tasks. So, if you need help with this go to our website, www.thelawsongroup.com, or call us in New Hampshire at (603) 228-3610.