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Presented by:Steven M. Bernstein, Esq.

(813) 769-7513

Containing the Cost of Workers’ Compensation

ORIGINS OF WORKERS’ COMP

Instituted by States at Turn of Century• Job safety was a major problem• Employers were constantly in court• Workers' Comp was seen as a way out

– Means of feeding family and paying medical bills

– Means of spreading the risk & reducing litigation

• Employers welcomed the exclusion

A CENTURY LATER

The System Has Turned Into a Monster• By all accounts, it is out of control• Entitlement/lottery mentality• Cottage industries• Talk of legislative reform goes nowhere

THE COSTS

Fastest Growing Labor Cost in the Country

• Estimated at $100 billion/year

• Costs doubling every four years

• Premiums rising 10% every year

• 40% of payroll costs in construction

• 15% of payroll costs in manufacturing

MOST COSTS OCCUR AT BACK END

Where do costs come from?

• 36% for back, spine & other strains

• 26% for slip and falls

• 14% struck by objects

• 5% for machinery accidents

• 5% for vehicular accidents

• 85% could have been avoided with safer practices

HOW DID WE GET HERE?

Attorneys

• More involved now than ever

• Make the case 15 times more expensive

• Contingency fees responsible for 50% of all costs

• Prolonged disability leads to greater hourly return

• Options include caps and ADR mechanisms

RESTORATION OF FEE CAPS• Florida’s system became highly fee driven• Legislature amended statute in 2003

– Provided sliding contingency fee scale– Struck down as ambiguous in Murray case

• In 2009, HB 930 restored attorney fee caps• Amended §440.34(3) to remove ambiguity• Claimant no longer entitled to “reasonable fee based on

hourly rate• Has dramatically reduced state insurance rates• No longer among top 10 in country• Constitutional challenges remain a possibility

HOW DID WE GET HERE?

Doctors

• More "specialists" backing fraudulent claims

• Medical expenses amount to 40% of benefit costs

• Doctor shopping is common

• Encouraged to overtreat patients

• Need more objective definitions for impairment

GOVERNMENT RESPONSE

State Legislation

• Statutory reform

• Settlement mechanisms

• Anti-fraud legislation

• Special investigative units

• Drug-free workplace program

• Anti-Retaliation Statute

GOVERNMENT RESPONSE

Federal Legislation• ADA

– Focus on ability• FMLA

– Focus on minimum leave• OSHA

– Focus on workplace safety• COBRA

– Benefits continuation• HIPAA

– Privacy amendments

EXTERNAL RESPONSE INSUFFICIENT

Employers Are Getting Hit on All Sides• Lack of support from carriers• Lack of concern for long-term interests• Employers increasingly isolated• Need for comprehensive internal program• Bring costs down to manageable levels• Most effective response is a proactive one

SO WHAT CAN YOU DO?• Experience has taught us that it takes commitment

from the top down.• You must commit to a written plan that is tailored to the

needs of your organization.• Cost-containment is a cultural mindset.• This culture must be embraced from the highest levels

within the organization.• It must also pushed down to the lowest levels of

supervision and beyond.• Someone must be accountable for execution.

ESTABLISH A COST-REDUCTIONPROGRAM• Put it in writing• Make someone responsible• Give them time, resources and authority• Implement across company lines• Make cost reduction a top priority• Allocate cost between departments

EVALUATE YOUR CLAIMS HISTORY• Get an overview• Ask why costs are so high• Evaluate claims over 5-year period• Avoid generalizations• Compile objective and accurate information• Look for general patterns• Review files for suspect claims• Review OSHA 200 and 300 logs

GET ACQUAINTED WITH STATEPROCEDURES• Knowledge is essential• State laws may vary• Don't leave it up to your lawyer or carrier• Get personally involved• Provide input on settlement vs. litigation• Don't wait until the claim is filed• Attend educational updates

MONITOR COMPLIANCE WITHAPPLICABLE LAW• Audit your plan for compliance• Select employees carefully, but legally• Train supervisors on ADA, FMLA

and other laws• Observe State drug testing and

retaliation laws• Observe bargaining obligations

NETWORK WITH AREA EMPLOYERS

• Seek out employers in your area/industry• Develop sources of information• Explore risk sharing possibilities• Participate in local, State and national

business associations/chambers

PARTNER WITH YOUR INSURANCEBROKER• Require periodic file reviews• Work towards resolution• Attend mediations and hearings• Treat all claims as a significant concern• Demand timely disposition• Question reserve amounts and practices• Consider unbundled services• Obtain access to on-line claims systems• Access adjuster notes and follow progress• Weigh in on case strategy

KNOW YOUR INSURANCE POLICYINSIDE-OUT• Don’t just accept the policy in front of you• Read it with a critical eye• Follow the money• Correlation between current experience and future

premiums• Who pays for safeguards?• Who picks the attorneys?• How does adjuster get paid?

LOOK OUT FOR CONFLICTINGINTERESTS• Develop working knowledge of your policy• Claim handlers may have different interests• Discuss any concerns with adjusters and attorneys• Inviting competitive bids every 3-5 years• Ensure the most competitive pricing.• As organization's representative, always look out for

its best interests...alone

CONSIDER SELF-FUNDING• Employers are returning to this• Willing to live with more risk for

reduced cost• Self-funding -- pay benefits directly• Self-insurance pools• Individual self-insureds• Must have net worth of $250,000• Wrap-up policies• Retrospective rating plans

MAKE SAFETY A CONDITION OFEMPLOYMENT• Enforce a “zero-tolerance” safety policy• Drive the right incentives• Use the “carrot and the stick”• Change the mindset• Apply safety rules uniformly and consistently

DEVELOP EFFECTIVE SAFETY PROGRAMS• Safety and health management programs• Periodic self-audits• Safety committees• Accident/Incident investigation• Training• Disciplinary procedures

USE MEANINGFUL REPORTING FORMS• Avoid canned forms• Devise personalized documents• Use them consistently• Pin down the employee's story• Attach witness statements• Obtain signature of management

CHOOSE MEDICAL PROFESSIONALS CAREFULLY• Choosing from a panel or going outside• Choose primary care providers carefully• Develop trusting relationship• Give doctor a workplace tour• Battle of doctors• Get the best one you can• Controlling primary care = controlling cost• Set up claim management protocols• Develop relationship over time

RETAIN AGGRESSIVE ATTORNEYS AND ADJUSTERS• Retain the right to choose• Negotiate into policy• Insist on prompt communication• Shop around• Look for creative ideas/strategies• Insist on individualized attention• One who puts your interests first• Avoid contingency fees on gross billing• Make sure they actually process the bill

TAKE ACTION ON EACH FILE SEPARATELY• Every file is different• Review every file on its own• Don't assume it is getting individual attention• Select a separate course of action• Negotiate for unilateral authority• Move quickly and be proactive• Look for indications of fraud• Use counsel to obtain privilege• Be a “squeaky wheel”• Recognize OSHA, multi-employer and civil litigation

exposure

VIGOROUSLY CONTEST FRAUDULENT CLAIMS• Avoid a "soft touch" reputation• Fraudulent claimants file other claims• Warn employees of the consequences• Go on the offensive• Look for delayed notice• Get a full release of all claims• Get personally involved• Report suspected fraud

– 1-800-378-0445• Be prepared to try the case

HIRE DEFENSIVELY• Use a comprehensive application• Conduct thorough reference checks• Consider credit checks• Interview effectively• Terminate for falsifying information• Focus on pattern absenteeism• Avoid prohibited inquiries• Use introductory period aggressively

ADMINISTER AGILITY TESTS• Job-related and consistent with business

necessity• Can applicant perform essential functions?• Have them show you how they would

do task• Administer to employees in same

classification

ADMINISTER A SUBSTANCE ABUSE POLICY• Legal program to remove current users• Correlation between drug use and

increased cost• Statistically lose more time due to accidents• Florida actually provides incentives for those

who test• Carriers often do as well

DRUG FREE WORKPLACE PROGRAM• Compliant programs qualify for 5% discount

on compensation premium rate• Requirements set forth under §441.102• Must test except on a random basis• May provide for immediate discharge• May also require completion of evaluation,

counseling and rehabilitation assistance• Beware of second chances for safety-

sensitive or customer contact positions• Lab must be approved by State Agency for

Health Care Administration

MAKE LEGAL POST-OFFER INQUIRIES• Take advantage of window of opportunity• Consider mandatory post-offer exam• Condition offer on exam results• Inquire into pre-existing conditions that may

qualify for subsequent injury trust funds• Reduce chance of injury/increase

effectiveness

ASSIGN WORKERS TO JOBS THEY CAN PERFORM• Determine essential functions of each job• Identify job-related qualification standards• Ascertain physical requirements• Consider specific, updated job descriptions• No need to create new position• Consider reassignment to vacant position• Stress safety at orientation

APPLY A UNIFORM MEDICAL LEAVE POLICY• Consider medical authorization prior

to return• Put it in writing, disseminate and train

managers• FMLA need not interfere• Run FMLA leave concurrently• Consider termination on leave expiration• ADA accommodation issues• Give COBRA notice

PERIODICALLY EXAMINE CURRENT EMPLOYEES• Job-related and consistent with business necessity• Fitness for duty exams• Determine whether employees remain able to

perform essential job functions• Mandated DOT, OSHA and other testing

CONSIDER MANAGED CARE ARRANGEMENTS• Must be approved by Agency for Health Care

Administration• Coordinates medical care to reduce

unnecessary treatment or cost• Programs must include written statement of

objectives and procedures for dealing with sub-standard medical services

• May request utilization review by Division of Workers’ Compensation at (850) 413-3100

ENCOURAGE OPTIONAL TESTING PROGRAMS• Adopt a voluntary health program• Provide opportunities and reminders• Consider wellness programs, blood

pressure screening, cancer detection, etc.

PROMPTLY RETURN EMPLOYEES TO WORK• Bone of contention• Light duty implications of FMLA/ADA• Consider temporary light duty• Explain terms at outset• Designate a coordinator to assist in return• Show genuine concern• Reassure employee• Keep them involved• Eliminate incentives not to work

CREATE TRANSITIONAL DUTY PROGRAMS• Establish firm time-tables• 90-day programs are the norm• Provide additional 90 days at mgmt. discretion• Enforce the time frame uniformly• Don't create long-term under-classes

TRAIN MANAGERS TO BECOST-CUTTERS• Front-line supervisors have greatest impact• First line of defense• Educate them on true cost of insurance• Respond immediately/report accidents• Refer to appropriate physician• Train on accident investigations• Know safety procedures• Accident diagnosis and prevention• Show personal concern for employee• Recognize fraudulent claims• Reinforce good behavior

TRAIN EMPLOYEES TO WORK SAFELY

• Implement a comprehensive safety program• Consider a safety committee• Continuously publish/update safety rules• Require prompt injury reporting• Enforce all safety rules• Respond with appropriate discipline• Consider safety bonuses, gain sharing and other

incentives

MANAGE INJURIES BEFORE THEY MANAGE YOU• Follow up with worker by telephone• Adopt a pro-active approach• Involve supervisor in return process• Emphasize prompt treatment and

early return• Consider a "transitional work center"• Re-design jobs to improve ergonomics• Computerize claims data

WHAT STRATEGIES WORK BEST FOR YOU?

Fisher & PhillipsLLPATTORNEYS AT LAW

Solutions at Work®

Final Questions

Steven M. Bernstein

Fisher & Phillips LLP2300 SunTrust Financial Centre

401 E. Jackson StreetTampa, Florida 33602

smb@laborlawyers.com

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