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2

Managing Employee Risk and Controlling Workers' Comp

Panelists: Mary Lynn Curran, Willis, Facilitator Caitlin Franklin, Brookdale John R. Anderson, D.O, Concentra David Hobbs, Elmcroft Senior Living Scott Bertulis, Willis

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Panelists

• • • •

John R. Anderson, DO, FACOEM,

Senior Vice President, Medical Operations, Concentra

Caitlin Franklin

, PHR, Director of Safety and Workers Compensation, Brookdale Senior Living

David Hobbs

, Senior Vice President, Elmcroft Senior Living

Scott Bertulis

, CSP, ARM, Senior Risk Control Consultant, Willis

4

Work Comp

• • •

What is Workers Compensation Why such significant issue for senior living Alarming trends

–

Aging Workforce

–

Obesity Epidemic

•

MMSEA Impact on Claims

5 • • • • • • • •

What is workers compensation

Legal concept to protect and benefit both employer and employee Employer – no liability, no fault, protection from catastrophic legal judgments Employee – compensation for lost time and medical expenses incurred due to work-related injury or illness Governed by the state; not federal laws Not insurance per se but a defined benefit structure per state Covers employees; not visitors, private caregivers, other providers Covers bodily injury, death or disease diagnosed as arising from an occupational circumstance Lost wages (indemnity payments) replace earnings due to injury or illness. Usually a percentage of the employee ’ s average weekly wage less a waiting period and at minimum/maximum benefit rates.

WC Insurers Experience Inflation More Intensely than the Overall CPI Suggests

Price Level Changes, 2011 vs. 2010 8%

Excludes Food and Energy

6%

6.8% 5.1%

4%

4.2% 3.2% 2.7%

2%

2.2% 3.0%

0% Overall CPI "Core" CPI Inpatient Hospital Services Outpatient Hospital Services Physicians' Services Prescription Drugs

Healthcare Costs Are a Major WC Insurance Cost Driver. They Are Likely to Increase Faster than the CPI for the Next Few Years, at Least

Source: Bureau of Labor Statistics; Insurance Information Institute.

Medical Care Commodities 6

Med Costs Share of Total Costs is Increasing Steadily Indemnity 42% Indemnity 54% 1988 Medical 46% 1998 Indemnity 47% Medical 53% 2008 Medical 58%

Source: NCCI (based on states where NCCI provides ratemaking services).

10% 8% WC Medical Severity Typically Rises Faster Than the Medical CPI Rate 8.8% 7.7% 9.1% The average annual growth in WC medical severity from 2002 through 2009 was over 6% vs. the medical CPI (about 4%), which itself was higher than the overall CPI 6.1% 6.1% 6.1% 6% 5.4% 5.4% 4% 4.7% 4.0% 4.4% 4.2% 2% 4.0% 4.4% 3.7% 3.2% 3.0% 0% -2% 2002 Change in Medical CPI Change Med Cost per Lost Time Claim Change in Overall CPI 2003 2004 2005 2006 2007 2008 2009 2010 2011

Sources: CPI and Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states.

WC Indemnity Severity Generally Grows Faster than Wages, 1995-2010p 12% 10% Change in CPS Wage 10.1% 9.0% 10.1% 7.7% 9.2% Change in Indemnity Cost per Lost-Time Claim 8.2% 8% 5.9% 5.6% 5.9% 6% 4% 3.6% 4.2% 5.2% 5.6% 4.7% 6.3% 3.1% 4.6% 4.3% 3.4% 4.7% 4.6% 2% 2.7% 3.5% 2.0% 0.8% 1.7% 2.3% 2.3% 1.6% 0% 1.1% -2%

Annual Change 1991 –1993: Annual Change 1994 –2001: Annual Change 2002 –2009: +1.9% +8.9% +6.7%

WC indemnity severity fell 3% in 2010 even though wages rose by 2% -0.6% -3.0% -4% 1995 1997 1999 2001 2003 2005 2007 2009

2010p: Preliminary based on data valued as of 12/31/2010; 1991-2009: Based on data through 12/31/2009, developed to ultimate. Based on the states where NCCI provides ratemaking services. Excludes the effects of deductible policies. CPS = Current Population Survey.

Source: NCCI

Millions

17

U.S. Employment in Health Care & Social Services, Monthly, 1990–2012* Cumulative growth over 22 years: 86.6%

16 15 14 13 12 11

Employment grew in virtually every month for the last 22 years, unaffected by recessions… …and this growth is expected to continue indefinitely

10 9 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 *As of January 2012 (Jan 2012 and Dec 2011 are preliminary); Seasonally adjusted Note: Recessions indicated by gray shaded columns.

Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.

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Occupations with Largest Numerical Growth, 2008–2018: Health, Services Dominate Occupations

Registered nurses Home health aides Customer service representatives Combined food preparation and serving workers, including fast food Personal and home care aides Retail salespersons Office clerks, general Accountants and auditors Nursing aides, orderlies, and attendants Postsecondary teachers Construction laborers

Number of new jobs

581,500 460,900

Percent change Wages (May 2008 median) Education/training category

22 50 $62,450 20,460 Associate degree Short-term on-the-job training 399,500 18 29,860 Moderate-term on-the-job training 394,300 375,800 374,700 358,700 279,400 276,000 256,900 255,900 15 46 8 12 22 19 15 20 16,430 19,180 20,510 25,320 59,430 23,850 58,830 28,520 Short-term on-the-job training Short-term on-the-job training Short-term on-the-job training Short-term on-the-job training Bachelor's degree Postsecondary vocational award Doctoral degree Moderate-term on-the-job training Elementary school teachers, except special education Truck drivers, heavy and tractor trailer Landscaping and groundskeeping workers 244,200 232,900 217,100 16 13 18 49,330 37,270 23,150 Bachelor's degree Short-term on-the-job training Short-term on-the-job training

BLS projects we

’

ll need 1.7 million new health care workers by 2018 over 2008. Also 700,000 truck drivers and construction and landscape workers.

12 Sources: US Bureau of Labor Statistics:

Occupational Outlook Handbook, 2010-2011 Edition

; Insurance Information Institute

13

The Aging of the Workforce: Looking ahead

• • • • • • In 2010, 16.2 million people age 60-64 In 2015, forecasting 14-15 million age 65-69 If historical patterns persist, 5 million of them will be in the labor force in 2015 compared to 3.5 million employed in 2010 In 2010, 12.0 million people age 65-69 In 2015, forecasting 10 million people age 70-74 If historical patterns persist, 2 million of them will be in the labor force in 2015 compared to 1.5 million employed in 2010

15 10 5 0 35 30 25 20

Older Workers Are More Likely to Slip When Walking, but Less Likely to Overexert Themselves Incidence Rate (2010)

Vehicles 50 Source of Injury: Floors, Walkways, etc.

Overexertion 45 40 20-24 25-34 35-44 45-54 55-64 65+ Source: US Bureau of Labor Statistics, US Department of Labor at http://www.bls.gov/news.release/pdf/osh2.pdf

Table 14 14

Median Days Away From Work Older Workers Lose More Days from Work Due to Injury or Illness Age 65+ workers median lost time is 2-3X that of workers age 25-34 16 2005 2009 2008 2010 15 15 14 12 10 10 11 10 11 12 12 13 12 13 10 8 9 9 8 8 6 6 6 6 6 4 5 5 5 4 2 0 20-24 25-34 35-44 45-54 55-64 There will be more lost time as the workforce ages in the future

Source: US Bureau of Labor Statistics, Nonfatal Occupational Injuries and Illnesses Requiring Days Away From Work, 2010 (Table 10), released November 9, 2011.

65+

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Older Workers Are Much More Likely to Break a Bone

Incidence Rate* (2010) 20 18 16 14 12 10 8 6 4 2 0 5.6

Fractures 3.7

6.2

Multiple Traumatic Injuries 4.4

6.8

5.1

9.5

7.0

20-24 25-34 35-44 45-54 12.6

7.4

55-64 18.4

8.3

65+

*per 10,000 full-time-equivalent workers Source: US Bureau of Labor Statistics, US Department of Labor at http://www.bls.gov/news.release/pdf/osh2.pdf

Table 14 16

The Obesity Epidemic

In 1994, in no state was the percent of adults who were obese as high as 20%.

By 2010, all 50 states had adult obesity rates of 20% or more. In 12 states, 30% of the adults were obese.

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Most Obese Workers File Twice as Many WC Claims as Healthy-Weight Workers 200 180 160 140 120 100 80 60 40 20 0 5.53

The most obese have twice as many claims and 13 times more lost workdays than healthy weight workers 8.81

5.80

BMI <18.5

(Underweight) 14.19

18.5-24.9

(Healthy Weight) 7.05

10.80

11.65

25-29.9

(Overweight) 30-34.9 (Obese 35-39.9 (Obese Class I) Class II) 40+ (Obese Class III)

Lost Workdays Claims

12 10 8 6 4

Source: Ostbye, T.,

et al

, “ Obesity and Workers Compensation, ”

Archives of Internal Medicine

, April 23, 2007

.

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WC Medical Claims and Indemnity Costs are 5-10x Higher for the Most Obese Workers

$70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0

Indemnity costs are 11 times higher for the most obese workers than for healthy-weight workers.

BMI <18.5

(Underweight) 18.5-24.9

(Healthy Weight) 25-29.9

(Overweight) Medical Claims Costs 30-34.9 (Obese Class I) 35-39.9 (Obese Class II) Indemnity Claims Costs 40+ (Obese Class III) 19 Source: Ostbye, T.,

et al

, “ Obesity and Workers Compensation, ”

Archives of Internal Medicine

, April 23, 2007

.

Additional (to WC) Costs of Obese Workers

Estimated Per Capita Costs $6,000 $5,000

The most obese workers cost employers for greater medical care and by being less productive (by being absent more and being less productive when at work.

$4,000 $3,792 $3,000 $2,000 $1,000 $0 $1,010 $1,026 $657 $391 $277 $475 $824 $1,269 $148 25-29.9 (Overweight) 30-34.9 (Obese Class I) Medical Claims Costs 35-39.9 (Obese Class II) Absenteeism 40+ (Obese Class II) Presenteeism Source: Finkelstein, E.,

et al

, “ The Costs of Obesity in the Workplace, ”

Medicine

, Volume 52, No. 10 (October 2010), pp. 971-976

.

Journal of Occupational and Environmental

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21 • • • • •

MMSEA Impact on WC claims

Willis estimates MSAs for WC are up anywhere from 150% to 400% from those completed 2 years ago for the same injuries/same type of claims Most of increase in last 2 years id due to CMS calculating lifetime pharmacy needs The pace of the hardening of the wc market will escalate as claim closure rates fall due to inability to settle these cases and the inflated settlement amounts caused by MSAs.

Willis estimates that MSAs will increase the overall cost of claims by 8 12% in the next 3-5 years. Medical inflation is at same rate of 8-12% per year Delays in getting an approved MSA from CMS are costing employers millions each year…both additional indemnity and medical costs

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MMSEA Impact on WC claims

• • • • Employers have to start developing protocols NOW to deal with employees that will be MSA eligible over the life of their claim.

More utilization review: the use of explicit criteria to determine the medial necessity of treatment.

Management of PBMs (Pharmacy Benefit Managers): a third party that contracts with pharmacies to negotiate discounts and rebates with drug manufacturers.

Settling claims before an MSA is required.

Reluctance to Close-out Future Medical

   

Injured workers are not as willing to close out medical costs. With the increasing costs of prescriptions, workers are fearful of settling the medical portion of the claim.



CA, TX, KY are all considered high-cost states



High-cost states are estimated to have an ultimate per-claim Rx cost of more than 1.5 times the median estimate Claimant lawyers are now trying to partner with carriers/adjusters to find out ways to bring medical under control so they can get claims settled We

’

ve even seen plaintiff attorneys pulling workers off a pro employee doctor back to the employer

’

s doctor in order to get the treatment stopped.

In many jurisdictions, the courts/states are making employers hold open medical longer and preventing the settlement of the medical portion of the claim.

Safety and Risk Control

• WC Pre-Loss Activities • Focused Risk Control Activities • Safety Program Rollout • Focused WC training programs: – Return to Work Program – – WC Accident Investigation Medical Management – – Back Injury Prevention WCIMP Refresher – Resident Handling Safety • WC Post-Loss Activities • WCIMP (Workers Compensation Injury Management Program) Updates • • Functional Job Analysis Return to Work Program • WC Accountability Program

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Panelists

• • • •

John R. Anderson, DO, FACOEM,

Senior Vice President, Medical Operations, Concentra

Caitlin Franklin

, PHR, Director of Safety and Workers Compensation, Brookdale Senior Living

David Hobbs

, Senior Vice President, Elmcroft Senior Living

Scott Bertulis

, CSP, ARM, Senior Risk Control Consultant, Willis