WORKERS’ COMPENSATION & RETURN TO WORK PROGRAMS: 3 REASONS FOR FAILURE AND HOW TO OVERCOME THEM (PART 1)
Gary Jennings, CPCU, ARM, ALCM, AIC, ARe, SCLA
Principal of Strategic Claims Direction, LLC
Running a successful Return to Work Program (RTW) is hard work. However, it is critical to reduce workers’ compensation claims costs. I have worked with public entities with superior RTW programs while simultaneously working with other public entities who said they couldn’t set them up. These were sometimes public entities with similar operations and employee characteristics with widely varying attitudes and outcomes.
If RTW programs are beneficial, then why aren’t more public entities using them? There are three primary reasons why many Return to Work programs are not successful, the first of which will be discussed in this blog. The three reasons are:
- The leaders who can make it happen are not willing to lead,
- The program lacks incentives and rewards for the people most responsible for its success, and
- It is treated as a “shiny object” program rather than a behavior change.
REASON # 1: THE LEADERS WHO CAN MAKE IT HAPPEN ARE NOT WILLING TO LEAD
To avoid RTW program failures, leaders must be willing to make the hard decisions and require the hard work needed.
Why wouldn't they make the hard decisions? Some will say:
- “We won’t save that much.”
- “Our jobs or circumstances are different / too strenuous.”
- “Our supervisors don’t have time for this.”
- “The doctors won’t go along with it.”
- “Human Resources doesn’t think we can do it.”
- “The unions won’t allow it.”
- “We don’t have the people or expertise required.”
- “Our claims people/TPA should already be doing this.”
While it is safe to say that a Return to Work program cannot eliminate all lost time (LT) claims payments, the Pareto principal, also sometimes referred to as the 80/20 rule, applies in workers’ compensation also. In my experience, 15 to 25% of the claims will generate 80%, 85%, 90% or even more of the claims costs. The following pie charts display this data:
If you sort your claims by highest total incurred cost, you will probably see that the most costly claims are not those that had the most severe injuries, although these obviously can be very costly, but those in which the employees’ time off from work has continued on and on. If these costs are allowed to linger, then the current and subsequent budget years will have a growing layer of costs on top of new claims costs that must be budgeted and funded into the future.
This data will clearly show that you need a RTW program. When this is understood, senior management must work on understanding and overcoming the typical objections mentioned earlier and utilize creativity to unearth solutions. Senior management, once it is willing to lead, will then realize that many of these objections are simply barriers erected by people who do not understand the importance of addressing this issue or who are reluctant to change the status quo.
We all work hardest on the things that will benefit us, so Part 2 will focus on the benefits to different people and departments that will help drive success.
By: Gary Jennings, CPCU, ARM, ALCM, AIC, ARe, SCLA
Principal of Strategic Claims Direction, LLC
Summary of Qualifications
Gary Jennings, CPCU, ARM, ALCM, AIC, ARe, SCLE, is a property/casualty claims consultant with over 40 years of claims experience. He has worked over 20 years as a claims consultant and has served many public entity clients. Since forming Strategic Claims Direction (SCD) over 7 years ago, most of his clients have been in the public entity sector. Prior to forming SCD, Gary worked for insurers, third party administrators, corporations, independent adjusters, and two of the "Big 4" consulting firms (PwC LLP and KPMG LLP). His employment experience allows him to bring a wide range of expertise to his clients to help them develop their claims programs. Gary is a frequent speaker at professional conferences and has authored numerous articles, some of them being included in PUBLIC Risk magazine. His next PUBLIC RISK article is scheduled for October 2016.
Reponsibilities
SCD performs a wide variety of claims-related engagements. Gary leads and performs all engagements. He works throughout the United States performing:
1. Claims audits, to compare the program to leading industry practices and/or contract requirements, These audits may be to meet statutory requirements, to meet AGRiP certification, or to meet requirements set out by the board of directors or commissioners.
2. Reserve reviews to evaluate the reasonableness of reserving procedures and the estimates. This may be needed when public entity risk management programs merge, when a concern arises about reserving by a TPA or self-administered program, or to support a casualty actuarial evaluation.
3. Claims efficiency studies, which include an analysis of the claims processes to identify redundant or unnecessary steps, to determine if the claims personnel should be realigned to optimize Return on Investment (ROI), to determine if system enhancements are necessary to improve efficiency, or if other steps are needed.
4. Assistance in TPA selection, including development of the claims-related requirements, creation of a grading methodology, identifying TPAs that meet the clients' needs regarding expertise and geographic spread, evaluating proposals as received, and working throughout the TPA selection process to select the TPA that best meets the clients' needs.
5. Developing claims manuals or other procedural documentation to provide direction for public entity risk management staff, TPAs, medical management organizations, and others.
6. Provide expert testimony relative to claims handling, reserving, and excess insurance reporting.
Business Experience
Prior to forming SCD Gary worked for the following firms:
Crawford & Company - Director Technology & Process Management
KPMG LLP - Manager, Claims Consulting
PwC LLP - Director, Claims Consulting
International Paper - Supervisor, Workers' Compensation Claims
Travelers Insurance - Claims Supervisor
This broad experience from several different perspectives provides Gary with the ability to provide his clients with "real world" answers to improve their programs.
Professional Affliliations
CPCU
Georgia PRIMA
Education
BS BA - University of Tennessee, Knoxville
