Travelers' Early Severity Predictor: A way to predict who'll become a drug addict in your workplace.

Allen, 25, works in a Trenton, New Jersey, auto body shop alongside a middle-aged man who’s straining to lift bumpers and fenders. Allen’s co-worker came back after a hip replacement because he feared that he would be fired. Allen knows this guy will turn to “street meds” to ease his pain.

Dr. Adam Seidner knows the same thing -- from his sky-high view as global medical director at Travelers Insurance (TRV). Armed with “big data” on 1.5 million injuries and disabilities, Seidner believes he can predict who’s at risk of becoming an addict -- and how best to treat them. That has led Travelers to develop a system to profile not actual painkiller addicts, but potential ones.

If Seidner is right, it could help address a problem that’s now a plague. Some 2 million Americans are hooked on highly potent prescription drugs like fentanyl, while another 500,000 are “in the clutches of heroin.” In recent years, more Americans have died annually from overdoses, 33,000 of them, than from car accidents - a list that includes celebrities such as Prince and Michael Jackson.

So what’s Seidner’s solution? First, get rid of the addiction fiction claiming that people choose to become junkies. “Perhaps 5 percent of addicts do it for the euphoria,” said Seidner, who spent years detoxing prisoners. “Most take opioids to relieve suffering from chronic pain.”

And that’s scary because it puts an estimated 50 million Americans who suffer from chronic pain in the cross-hairs of potential addiction. They come to doctors’ offices complaining of bad backs, repetitive stress, falls, strains and “soft tissue” injuries. Ever since the 1980s, about nine times out of 10, doctors have traditionally prescribed the most effective remedy for pain: drugstore opioids. They range from the mild, like codeine, to the strong, such as OxyContin (oxycodone) and Percocet (a combination of acetaminophen and oxycodone).

Although opioids curb the pain, they don’t cure the patient. And they have a will of their own. Within a month, these drugs invade the patient’s mind, which then tells the body to “feel” pain, whether it’s real or not, and thus creates a dependency. Patients then demand the opioid -- in stronger and stronger doses -- and if they can’t get it legally or through their medical plan, they may steal prescription pads, use drugs like Imodium that mimic some of opioids’ effects and ultimately move on to street sources, where a $10 bag of heroin is both cheaper and stronger than a $200 prescription.

After years of trying to “just say ‘no’” to an epidemic that kills 46 people a day in the U.S., the medical profession, along with federal and state governments, recognized the danger. “I will not willingly watch another 1,600 of our citizens die,” former presidential candidate and New Jersey Governor Chris Christie told his state legislature this year.
 
On Jan. 19, the mayor of Everett, Washington, also asked the city council to authorize a lawsuit against Purdue Pharma, the maker of OxyContin, alleging that it knew the painkiller was being diverted to the illicit market and didn’t do enough to stop it. But stopping the deadly flow of painkillers is a difficult process. As one doctor in Princeton, New Jersey, who asked not to be identified, said: ”What do you do when a patient comes to you in pain?” Physicians still write more than 200 million opioid prescriptions a year.

The latest data from Maryland, Ohio and New England, where the opioid crisis is most intense, shows an increase in fatalities. Drug companies have promoted medications like fentanyl, a synthetic opioid that can be as much as 50 times more potent that heroin. “It’s like pushing on one side of a balloon,” said Travelers’ Seidner. “It just bulges out the other.”

Travelers has a big dog in this fight. It’s the largest workers’ compensation insurer in a $45 billion business that helps companies manage medical benefits for employees injured on the job. It handles a quarter-million of these claims each year. The longer an employee stays off the job and runs up medical bills, the more the insurer loses. The average claim now runs $40,000 over three years. But with caps on temporary disability now declared unconstitutional in some states, claims could last for decades.

That’s where Travelers’ addict-prediction model comes in, because the first step is to identify a potential addict. To do that, Seidner has assembled “statisticians and brainiacs” to predict which injuries will turn into chronic pain cases and push the patient down the “slippery slope” to opioid dependency.

Travelers developed a program called Early Severity Predictor, which looks at four areas:

Pharmaceutical frequency - What drugs are the patients using and how much. Are they also popping pills on the side?

Co-morbidity - Are they suffering from other conditions, like diabetes or osteoporosis? Do they smoke?

Muscular health - Are they in good condition?

Mental health - Are they angry with their employers? Do they fear going back to work and facing the same injury?
 
Other factors - Sex, socioeconomic status, education and the nature of the injury: shoulder, knee or slipped disk.

A typical person with a chronic injury who might become dependent could be a middle-aged white male factory worker with a bad back. Identifying the potential addict is only part of the problem. Getting rid of the chronic pain and the potential addiction is the other. 

Once such a patient is identified, Travelers can begin to harness resources. It starts by talking to the patient’s doctor. In many states, doctors are under no obligation to talk to the insurer, but nearly seven in 10 will. This is probably because the insurer covers treatments like physical therapy, sports medicine, stimulation devices, yoga, stretching and psychology. “We embrace all modalities, but we don’t do traditional psychoanalysis,” said Seidner. “Instead, we use therapy that will change behavior.”

Seidner and his team have analyzed 20,000 cases of opioid addiction since 2015, identified 9,000 at-risk patients and worked with 2,500 of them. Since then, about 1,400 no longer demonstrate any significant use of opioids, and medical expenses have fallen by 50 percent. Much of that reduction has come from reduced use of opioids, which used to constitute 50 percent of all the prescription drugs that workers comp paid for, according to Travelers Vice President Rich Ives. Now it’s only 23 percent. Vice President Loretta Worters of the Insurance Information Institute, which represents the industry, concurred that “Travelers Early Severity Predictor is certainly helping.”

Let’s be clear. Travelers will only help the companies that pay its premiums and the people employed by those companies. But its strategy, including how to predict drug addiction, provides a roadmap for governments, doctors or anyone with a chronic injury who wants to escape the curse of opioid dependency. In some instances, it’s as easy as looking in a mirror. If you’re taking drugs for a bad back, consider stretching. If you hate your job, try to find another one before you’re reinjured. If you’re depressed, seek help. Opioids will only make things worse. And when you take an opioid of any kind, the addiction clock is ticking. If taken longer than a month, you may already be addicted and not even know it.
 
Finally, when you see a doctor for pain, ask whether another treatment beside opioids might work - before he or she pulls out the prescription pad. “Probably 80 percent of the time it’s a bad idea to prescribe opioids,” Seidner said. “We need to address the pain, but how we do it is the important thing.”
 
​For more information, Click Here.
 
Dan Zeiler
708.597.5900 x134
dan@zeiler.com
 
Source: http://www.cbsnews.com/news/a-way-to-predict-wholl-become-a-drug-addict/?ftag=CNM-0010aab7e&linkId=33675340&linkId=34113097

 

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Update - NCCI Audit Noncompliance Charge Endorsement

Effective 1/1/2017 the National Council on Compensation Insurance approved a Workers Compensation policy endorsement where an insurance company can charge up to 2x the originally estimated premium when a policy holder is in non-compliance with an audit request. 
 
In addition, failure to cooperate with the audit may result in a cancellation of Workers Compensation coverage. Audit noncompliance will disqualify an employer from obtaining coverage from any insurance company until the outstanding audit is completed.
 
We realize these audits can be time consuming, our staff is available to assist with questions and audit preparation. 
 
Feel free to contact us should you need help.
 
Dan Zeiler
dan@zeiler.com
708.597.5900 x134

 

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Intoxication and a Denied Work Comp Claim

The Illinois Workers Compensation Reform Bill of 2011 allowed for the denial of benefits when intoxication was the primary cause of an employee injury.  Our office recently had the first case where a claim has been denied.   

An employee of a local landscape contractor stuck his hand under a mower guard.  Needless to say the result wasn’t good for the employees hand.   A supervisor, following claim procedures, went to the sight to investigate and document the incident.  The employee was then driven to their assigned occupational health clinic for treatment.  This landscape contractor includes post-accident drug screening in their loss control program.  The employee was tested and a number of illegal substances were found to be in this employees blood system.  A claim was submitted to the workers compensation carrier and with the encouragement of the employer - the claim was denied.  

We ran the numbers through our workers compensation experience modification calculation tool.  The minimum claim cost including treatment and indemnification benefits is estimated to be $15,000.  The effect on the mod was 14% and a three year additional premium cost to the employer of $12,627.

We can help your business establish a drug free program. Options include:

  • Post-Offer (pre-employment) Testing
  • Probable Suspicion / Reasonable Cause Testing
  • Post-Accident Testing
  • Random Testing

Please reach out to us if we can be of any assistance.

Dan Zeiler

dan@zeiler.com

708.597.5900 x134

 

 

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Experience Modification Looks Complicated, But It Isn't

 

Experience modification (experience mod) is a key factor when monitoring workers compensation premiums. Experience mod is a rating factor that determines your workers compensation premium based on loss experience. A 1.0 rating means expected losses equal actual losses that occur. A rating below 1.0 indicates that actual losses occurred are less than expected losses, resulting in a lower premium. A rating above 1.0 means actual losses are higher than expected losses, resulting in a higher premium. In short, your experience mod compares your workers compensation claims to companies of similar size and industry.  

Experience mod ratings are calculated based on certain components. One component is the payroll for the business. Workers compensation claims are highly dependent on payroll numbers being accurate, therefore payroll figures are often audited. A second component is the loss history of the business. The loss history can be determined from analyzing claim data that has been filed. When calculating the premium for the policy, items such as the frequency of claims are essential to provide an accurate premium. It gives an insight as to how the business operates and if there are trends regarding workers compensation claims. The last component is reserves used for claims. Claim data provides information to help compute payments, and reserves are required for claim totals. Reserves are assigned to open claims and represent future payouts. Claim adjusters often handle large amounts of claims, so it is imperative to have open claims reviewed for accuracy to avoid the formulation of the experience mod can become incorrect.  

In the real world injuries will happen, but the response can help keep your experience modification rate from increasing. Having a plan to manage injuries and workers compensation claims is imperative for getting control. An effective safety program that eliminates hazards is the starting point. Also, your experience mod is influenced more by small, frequent losses rather than large infrequent ones. Implementing a Return to Work Program is important for any business. Having a program in place will help lower days off which in turn will keep your experience mod down. For example, if an employee sprains their ankle, what can you do to decrease their days off? Can they input data while sitting at a computer or maybe help out somewhere else? Read our article  Illinois Workers Compensation Insurance - Keep Your Premiums Low  to learn more.

If you have questions or would like more information, call any of our 3 locations in the Chicago-land area today. Our customer service representatives are eager to share their knowledge and speak with you about any insurance related topic. Zeiler Insurance is an independent insurance agency and has been providing quality customer service for 101 years in our Alsip, Chicago, and Gurnee locations. Our goal is to help you understand insurance as well as provide you with the most competitive insurance rates in the industry. Whether you are a customer or just want more information, let us help you with our years of expertise in the insurance business.

Dan
dan@zeiler.com
708.597.5900 x134
http://www.zeiler.com

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How Workers Comp Experience Rating Can Save You Money

How does safety pay dividends to the business owner? Time and resources spent on developing a culture of safety repays the business in the long run. Safety cultures rely on reducing the number of workers compensation claims, in return, the odds of a disastrous claim are reduced.

Business owners with workers compensation experience modification above 1.25 need to review their safety policies with professionals. It is possible one year or even one claim causes this situation; but it should not be ignored. Discover and repair the root cause.

A 1.01 to 1.25 modification indicates worse than average experience. State rates can be less than adequate for a short period of time. The actuarial or mathematical calculations just incorrectly reflect the average expected claims. Slightly elevated modifications may be caused by these issues; however, review your losses by department in these cases and see if a problem area exists.

For slightly elevated modifications, review the safety program and types of losses. Seek out a professional risk manager for help if needed. Look for patterns in the losses, and consider changes in safety equipment or procedures to reduce problem issues.

Proactively nurturing a safety culture will pay long-term dividends. Experience modifications will decrease with positive results. How?

Each state calculates workers compensation experience modifications independently. Many states do utilize the services of the National Council on Compensation Insurance (NCCI) to gather data and promulgate base rates and experience modifications; but each state regulates its own workers compensation system such as Illinois workers compensation. 

Workers compensation experience rating predicts future behavior by analyzing past performance. It is a consequence of loss control performance, neither a reward for no losses nor a punishment for too many claims.

The generic formula for experience modifications follows some rules:

Just as payrolls are the basis for the standard premium, they form the basis for expected claims. Payroll is multiplied by an average claim factor to produce total expected claims.A discount factor is then applied to predict the potential severity of the claims.The product of this equation is expected losses.Actual medical only (MO) claims combine and report as a number of claims/total amount. Some states designate the MO claims as primary (maximum average) and excess, and then apply a discount rate to one or both of these amounts.Most states set a limit on the value of any one claim, and then discount large claims on a sliding scale.This historical claim experience is divided by expected losses. That quotient is the experience modification.

The insurance industry spends millions of dollars to find ways to predict the future. Loss analysts discovered one important fact: the best predictor of future claims is the frequency with which companies suffer losses in the past.

Frequency reflects the number of claims per employee, usually expressed as claims per payroll unit ($100), claims per year, or claims per time unit. Frequency, however, more importantly, reflects the safety culture of the business.

If the frequency of claims is predictable, how about the severity of an individual loss? No, severity, the magnitude of the loss, is not predictable. With greater frequency, however, comes greater odds that a severe claim will occur. For more information on controlling costs, read Employers: Control Your Workers' Comp Costs.

Experience modifications indicate the status of the safety culture within a business. Good management listens to risk management and loss control experts who ultimately reduce workers' compensation costs and possibly the workers compensation premium. 

If you have questions or would like more information, call any of our 3 locations in the Chicago-land area today. Our customer service representatives are eager to share their knowledge and speak with you about any insurance related topic. Zeiler Insurance is an independent insurance agent and has been providing quality customer service for 101 years in our Alsip, Chicago, and Gurnee locations. Our goal is to help you understand insurance as well as provide you with the most competitive insurance rates in the industry. Whether you are a customer or just want more information, let us help you with our years of expertise in the insurance business.

Dan
dan@zeiler.com
708.597.5900 x134
www.zeiler.com

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Illinois Workers Compensation Insurance ERA Credit

I want to remind you about the importance of taking advantage of the Experience Rating Adjustment (ERA) factor offered in Illinois. 
 
I'm working with a potential client on ways to help control their Workers Compensation insurance expense.  The incidents on the Specific Loss Report shown below are actual claims on the Experience Mod of a Chicago, Illinois business.
 
The report below shows the effect of three claims on the Experience Mod and the additional premium projected (for the three years that it affects the Mod):
1.) A large loss ($113,256). Kind of what you might expect from the mechanics of an insurance policy. The company gets hit with a loss and your premium is affected with paying a surcharge. In this case the three year cost is $28,266 with a 17% effect on the workers compensation experience mod.
2.) A small claim ($2,883) that included “indemnity”.  Indemnity is basically disability payments for time off for the injured worker.  This employee sprained his ankle.  Take a peek at the three year claim cost…Yep!!  $5,519. The Insurance Company actually profits on this one.
3.) A second small claim ($2,083).  This claim was medical only with no “indemnity” paid.  As you can see, the three year cost on this claim is $1,206.
 
The reason for the big difference between 2 and 3?  Experience Rating Adjustment (ERA) factor. Only 70% of the claim cost is used in the experience modification calculation for Medical Only Claims. The purpose of which is to encourage businesses to report small claims.
 
 
Going back to our employee that sprained his ankle - what type of work could you have him do around the office, even though his ankle is sprained, so that his days "off" don't rack up your Experience Mod? 
 
Do you think you might have some safety manuals he could read or better yet maybe even wash a truck or two?
 
From the report, this claim affected the mod by 3.35%.  What if the mod for this business was floating in the 1.00 area?  
 
 
On a side note - If this example involved a contractor, this 3.35% could have disqualified the contractor from the Contractor Classification Premium Adjustment Program (CCPAP). These credits can be 40% of the Workers Compensation premium.
 
Please call with questions.
 
Dan Zeiler
 
708.597.5900 x134
 
dan@zeiler.com
 
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“Primary Causation” Added to Illinois’ Workers’ Compensation Law

 

“Seeking to help Illinois attract investment, create jobs, and end fraud and abuse,” state Sen. Dale Righter (R-Mattoon) filed legislation that would add “primary causation” to Illinois’ workers’ compensation law.

“For years, a higher percentage of Illinois citizens have been out of work, compared to our neighboring states,” Righter said. “We are plagued by people moving for better jobs to neighboring states and new businesses choosing other states. According to my constituents and business owners in Illinois, a significant reason our state isn’t competitive is because we lack ‘primary causation’ in our workers’ compensation law.”

Righter’s Senate Bill 846 would require an employer’s workers’ compensation insurance to pay a claim only if the employee’s injury was caused primarily by a workplace accident. Under current law, any connection to a workplace accident. Under current law, any connection to a workplace accident, regardless of how remote, obliges the workers’ compensation policy to cover 100 percent of the costs associated with the injury, according to a press release from Righter’s office.

“In far too many instances, our law has allowed simply the slightest connection with the workplace to justify a workers’ compensation policy to pay the entirety of the costs related to an injury. It is unfair and an abuse,” Righter said.

“Requiring primary causation would strike a fair balance.”

Righter estimates that adding “primary causation” to Illinois’ workers’ compensation law would save employers $1 billion per year in reduced insurance premiums. By way of evidence, prepayments point to Indiana and Missouri, where premiums are less than half of what employers pay in Illinois. Twenty-nine states have a more stringent causation standard than Illinois.

“I am optimistic with a governor who understands how to make Illinois competitive, we can make this legislation law,” Righter said. “It’s ridiculous our job creators are on the hook for paying millions in bogus claims. It has to end now.”

Senate Bill 846 also states that if an employee is discharged from his or her employer for cause, then temporary partial disability and temporary total disability payments will not be paid.

 

Please call with questions.

Dan 

dan@zeiler.com 

708.597.5900 x134

www.zeiler.com

Source: http://www.dalerighter.com/Media/News/TabId/273/p/27565/v/2000/workers-compensation-reform-legislation-makes-illinois-more-competitive.aspx 

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How a Return to Work Program Can Save You Money on your Workers' Compensation Premium

How a Return to Work Program Can Save You Money on your Workers' Compensation Premium  

A return to work program can help get your employees back to work sooner, but did you know it can also save you money on your Workers' Compensation Premium? Studies have shown that organizations that implement a return to work program can save an average of $2,329 per workers' compensation claim. Watch this short video to find out how you can take advantage of these cost savings by getting your employees back to work sooner and managing your Experience Mod. 

 

 

Please call if you need help setting up a Return to Work Program or if you have any questions.

Dan Zeiler

dan@zeiler.com

708.597.5900 x134 

 

 

 

 

 

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"Workers' Compensation costs are too high." - Illinois Gov. Bruce Rauner

Illinois Gov. Bruce Rauner on Thursday began laying out priorities for his first year in office, saying property taxes and workers’ compensation costs are too high, Medicaid spending is unsustainable and state workers’ salaries and benefits are too generous.

In a speech he said was a preview of the State of the State address he’ll give next month, the Winnetka Republican said Illinois is in “massive deterioration mode.”

He said he will propose a number of reforms to turn the state around, and indicated they would involve making Illinois more attractive to businesses while slashing spending on everything from health insurance for the poor to public-worker pensions and the state’s payroll. 

“This is the critical lesson that we’re seeing: We’re on an unsustainable path,” Rauner told students at the University of Chicago Booth School of Business. “We need fundamental structural change and raising taxes alone … isn’t going to fix the problem, and in a lot of ways it’s going to make it worse.”

While he didn’t outline specific proposals, many of Rauner’s ideas are likely to draw heavy opposition from majority Democrats and even some fellow Republicans in the General Assembly, as well as public-employee labor unions.

He said higher-than-average costs of workers’ compensation and unemployment insurance are driving businesses out of the state, property taxes are “brutally high” and “shenanigans” in the public-employee pension system have made Illinois’ multibillion-dollar pension debt “a time bomb for taxpayers.”

Rauner said public employees’ average salaries are among the highest of any state in the U.S. and the state’s share of health care premiums is too high. Anders Lindall, spokesman for the American Federation of State, County Municipal Employees Council 31, said Rauner was using numbers that are inaccurate and in some cases outdated. He said public union employees are not the cause of the state’s challenges.

AFSCME, the state’s largest public-employee union, is set to begin negotiations with Rauner’s administration on a new contract. “The type of misleading statement and false facts we see today are not an encouraging first step you want to see from someone who is truly trying to work together for the common good,” Lindall said. 

Rikeesha Phelon, spokeswoman for Senate President John Cullerton, said the Chicago Democrat wants to see how Rauner’s statements translate into legislative policy and a proposed budget. Rauner is scheduled to deliver his budget address on Feb. 18, two weeks after his State of the State.

But Cullerton clearly wasn’t pleased after Rauner ripped legislators in his inaugural speech for leading Illinois into a budget disaster, saying afterward that many of the new governor’s comments were inaccurate and that he “is going to have to learn about state government.”

Rauner on Thursday also named new members of what he’s calling his “Turnaround Team” — people he said have experience in budgeting and management. They include former Hawaii Gov. Linda Lingle, a Republican who will serve as senior adviser. - See more at: http://thez.zeiler.com/workers-compensation-costs-are-too-high-illinois-gov-bruce-rauner#sthash.gpILWH1h.dpuf

 

Dan Zeiler

dan@zeiler.com

708.597.5900 x134

www.zeiler.com

Source: http://chicago.cbslocal.com/2015/01/23/rauner-previews-1st-year-priorities-cut-taxes-medicaid/

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Illinois DOI Announces 2 Convictions Resulting from its Workers’ Comp Fraud Investigations

Illinois Department of Insurance (DOI) Director Andrew Boron today announced investigations by the Department’s Workers’ Compensation Fraud Unit have resulted in two convictions.  A former Crystal Lake police officer charged with workers’ compensation fraud in McHenry County and a former business owner charged with forgery in Cook County have both been convicted and sentenced.

“As I have said before, we take accusations of fraud very seriously.  These convictions are a direct result of our investigations and should send a clear message that workers’ compensation fraud will not be tolerated in Illinois,” said DOI Director Boron. 

The Crystal Lake felon, a former police officer for Crystal Lake, was sentenced to one year of probation, ordered to pay $9,588.13 in restitution, and required to pay $730 in fines, fees, and court costs.  He pleaded guilty in October to workers’ compensation fraud. He made statements to create the impression the nature and extent of an injury he claimed to have suffered to his wrist while at work was more extensive than it really was.  Video surveillance showed him lifting weights in the police station in the month following the injury while he was assigned to light duty.  Additional video surveillance showed him not only lifting weights, but working as a personal trainer. He filed a case with the Illinois Workers’ Compensation Commission for his wrist injury in October of 2012, but that case was voluntarily dismissed less than a month later, after DOI’s investigator sought to interview him.

The second fellon from Cook County was sentenced to two years of probation.  As part of his probation, he was ordered to complete drug treatment.  He pleaded guilty to forgery in November. He lacked workers’ compensation insurance after his policy was cancelled for non-payment of premium in 2008 then issued false Certificates of Insurance to a general contractor he performed work for as proof of workers’ compensation insurance.  The general contractor, who relied on the Certificates of Insurance provided, was assessed thousands of dollars in additional premium by his own insurance company to cover the uninsured risk. 

Fraud based upon the issuance of false Certificates of Insurance puts employees and companies such as general contractors at risk, yet it is one of the easiest forms of fraud to detect and prevent.  If there is any question as to the authenticity of the documentation being provided regarding workers’ compensation coverage, the certificate holder should contact the insurance company listed on the certificate directly to verify that a policy is in fact in place. 

Dan Zeiler

dan@zeiler.com

708.597.5900 x134

- Provided by WorkersCompensation.com

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How Are Disability Insurance Policies Taxed?

How are Disability Insurance Policies Taxed?

The general rule for owners and beneficiaries of disability insurance policies is this: If you take a tax deduction for the premiums, then the income from a disability insurance policy is taxable.

For example: If you are the beneficiary of a workplace disability insurance plan, and your employer pays the premiums (and takes a tax deduction for these premiums as an employee compensation business expense), then any income paid to you is taxable as ordinary income.

However, individuals who buy disability income insurance policies generally cannot take a tax deduction for the premiums. Since they do not take a tax deduction, but instead pay their premiums with after-tax dollars, then income benefits paid out to the beneficiary or policy owner are generally tax-free.

The same principle applies if the employer pays a portion of the premiums (taking a business expense deduction) and the employee pays a portion. The employee is not entitled to take a tax deduction on the premiums because the IRS considers the premiums a personal expense to the employee. If the policy pays a benefit, then the employee must pay income tax on a pro rata portion of the benefit. That is, if your employee pays 50 percent of the premium, you must pay income tax on 50 percent of the benefit.

Note: IRS regulations require the calculation to be made based on an average of premium payments going back over three years.

Section 125 (Cafeteria) Plans

If the employer pays a portion of the premium and the employee uses pre-tax dollars to pay for the remainder of the premium then the employee must pay income tax on 100 percent of the benefit. Note that the principle holds throughout - the employee did not pay taxes, in this case, on any of the money used to pay the premiums, and therefore is not entitled to shield the benefit from federal taxes.

In short, if you take a tax benefit on the front end, you have to pay the full income tax bill on the back end - if the plan, in fact, pays benefits.

Owner/Employees of C Corporations

If you are a C corporation owner/employee, you can choose to have your corporation take the tax deduction now or simply own the policy personally. If the corporation pays the premiums, benefits are taxable to the owner/employee.

Sole Proprietors

Like corporation owner/employees, you also have the option of treating premiums as a tax deductible employee compensation expense, or owning the policy personally and paying premiums with after tax dollars. The same basic principle applies as in the above cases, however: If you took a deduction on the premium, benefits are taxable as ordinary income.

Partnerships

Owners of partnerships (partners) are not generally considered to be employees in the same sense that owner/employees of corporations are. The same applies to S corporations that are taxed as partnerships as well as members of limited liability companies. In these cases, while premiums paid to cover employees are deductible (and benefits to these employees are taxable), any costs for insurance for owners gets passed along to their gross income on their personal returns. They don't get to deduct for the premiums, and neither does the partnership. In these cases, benefits are generally income tax-free.

Workers Compensation

Proceeds from workers compensation insurance programs are generally tax-free, if paid under a workers compensation act in your state.

Railroad sick pay under the Railroad Unemployment Insurance Act is generally taxable - unless it is for an injury sustained on the job.

For further information on how disability insurance proceeds are taxed, and see IRS Publication 525 - Taxable and Non-Taxable Income: http://www.irs.gov/publications/p525/ar02.html

If you have questions or concerns on this issue, do not hesitate to call Zeiler Insurance and speak to one of our customer service representatives. As an independent agency, Zeiler Insurance prides itself with quality customer services for the people of the Chicago-land area and the rest of the Midwest. Customer or not, we can review your insurance and see if you are being protected appropriately for the right price.

-Dan Zeiler

dan@zeiler.com

(708) 597-5900  X134

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A Brief History of Workers Compensation Insurance Programs

Workers Compensation in the Ancient World

Almost as long as workers have been getting injured on the job, we have had some formal or informal system of compensating workers for workplace injuries. Workers compensation claims management and processing is, if not the oldest profession in the world, at least pretty close! The earliest recorded formal and legally-mandated workers compensation scheme in the world dates back to at least the year 2050 B.C., in ancient Sumeria, in what is now Iraq. Stone tablets recovered from the city of Ur - about 9 miles from Nasiriyah - established a set system of payments to injured workers, itemized by injury.

The Code of Hammurabi later adopted the practice, as did the Greeks, Babylonians, Romans, Arabs and even the Chinese.

Into the Modern Age

The Prussians, under Otto von Bismarck, were the first modern nation-states to adopt a formal workers' compensation system following the Industrial Revolution, with the Accident Insurance Bill of 1884. Originally conceived as a measure to prevent Marxist political movements from making inroads into the Prussian/German working classes, the Bismarck program actually contained two important innovations that are at the heart of the American workers compensation system today: First, claims were separated from the tort system, so that workers seeking remedy under workers compensation rule could not sue their employers for damages in the courts. Second, claims were processed under an early version of today's "no fault" provisions. Claims could be paid promptly, because there was no need for a magistrate to assign fault or blame through a detailed fact-finding.

The system worked so well, and was so popular, that the largely German-American population of Wisconsin, in 1911, enacted the first workers compensation insurance program in the United States - modeled closely after the Prussian system.

Development in the U.S.

While the U.S. lagged a few years behind the United Kingdom in adopting workers compensation plans, there was a very limited program created for workers who were directly involved in projects involving interstate commerce, such as railway workers, established in 1908. It was limited only to this population because the sentiment at that time was that programs like workers compensation to everyone else was properly left to the states.

At the grassroots level, however, there was a growing public awareness of the hazards of industrial age employment thanks to populist, muckraking writers such as Upton Sinclair, who highlighted the plight of slaughterhouse workers in his novel, The Jungle. This awareness of the hazards of modern industrial employment in the unforgiving factories, plants led to a number of failed attempts to pass legislation in the state assemblies, early on - first in New York (1898), then Maryland (1902),  Massachusetts (1908) and Montana (1909).

The "Great Tradeoff"

Ultimately, the first state to successfully enact a broad workers compensation was the largely German-American population of Wisconsin - then very much the heart of the American Progressivist movement. Their program was modeled closely after the Prussian system, though only after a long debate between business and labor interests. In the end, they came up with the same "great tradeoff," in the parlance of the time, that was at the heart of the Bismarckian model: Employers agreed to provide substantial wage replacement for injured workers through an insurance system, without any fault-finding requirement that would cause devastating delays in payouts to workers who depended on their wages to survive. In return, labor interests agreed to give up the right to sue their employers for covered claims. This allowed employers relief from the risk of outsized claims and judgments.

Once Wisconsin broke the seal though, other states quickly followed suit: 11 more states passed plans of their own that year, four more in 1912, and eight more in 1913. By 1935, some 45 of the 48 states then existing had passed workers compensation laws of their own, and By 1948, a similar program had been established in all 48 states in existence at that time, as well as the future states of Alaska and Hawaii.

Today, all 50 states have enacted similar legislation, including these provisions:

•A no-fault approach to claims processing - workers don't have to demonstrate that their employer was negligent for benefits to be paid.
•Employers are protected from lawsuits (a tort exemption) over workers compensation issues.
•Employers fund workers compensation benefits by paying premiums, which vary depending the state and the occupation of the covered worker.

Additionally, 45 of the 50 states delegate responsibility for claims administration to special boards. Five states - Wyoming, Tennessee, New Mexico, Alabama and Louisiana, keep the process within the judiciary, though in each case a state agency exists to help with administration and prompt disbursement of funds to injured workers.

If you have questions or concerns on this issue, do not hesitate to call Zeiler Insurance and speak to one of our customer service representatives. As an independent agency, Zeiler Insurance prides itself with quality customer services for the people of the Chicago-land area and the rest of the Midwest. Customer or not, we can review your insurance and see if you are being protected appropriately for the right price.

-Dan Zeiler

dan@zeiler.com

(708) 597-5900  X134

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Five Ways to Avoid OSHA Penalties

Five Ways to Avoid OSHA Penalties

During the first half of October 2014, the U.S. Occupational Safety and Health Administration announced a dozen citations against employers. A New Hampshire roofing contractor was fined $61,600 for not providing adequate fall protection. A Connecticut roofing contractor faces several citations following a fatal accident in July. A metal parts processor in Ohio was cited for 10 serious violations and $64,000 in fines over the accidental death of a supervisor. A cabinet maker in New Jersey faces a six-figure fine for exposing employees to a carcinogenic chemical. The death of an employee on a conveyor belt has a Mississippi lumberyard facing a $75,000 penalty.

Noncompliance with OSHA regulations can cost employers a lot of money. The good news is that complying does not have to be cumbersome or expensive. These procedures and attitudes can help a company keep its name out of an OSHA news release.

Improve record keeping. Good documentation is an employer's first defense against an OSHA inquiry. Information gaps in the OSHA 300 log (the record of work-related injuries and illnesses) may prompt inspectors to conduct comprehensive safety audits of businesses. Filling in missing information for the past three to five years can save your business a lot of grief and expense. Check personnel files and workers' compensation loss records for details of accidents.

Focus on ergonomics. Preventing repetitive motion disorders can help businesses avoid citations and penalties. It also reduces workers' compensation insurance premiums in the long run. Analyze how workers are performing their tasks and look for ways to reduce the strain on their joints, necks and backs.

Fix the routine violations first. Some safety issues are simple and cost little or nothing to correct. For example:
•Blocked exits
•Lack of protective equipment, such as gloves and safety goggles
•Poor housekeeping
•Improper storage of materials such as flammable liquids

These problems can accumulate over time. OSHA has penalized businesses with large numbers of violations like these, so it pays to monitor and correct them.

Have a plan for disasters. The weather has become more volatile, as the tornadoes of recent years and storms like 2012's Superstorm Sandy have shown. Contagions such as the Ebola virus can come seemingly from out of nowhere. Businesses must be ready for the unexpected. Disaster plans should include:
•Training for employees on what to do in the event of an emergency
•Procedures for safe evacuation from the building
•Workplace hygiene
•Stockpiling of emergency supplies such as first-aid kits
•Training for employees on how to administer first aid and CPR
•Arrangements for operating from remote locations
•Communications with employees, their families, customers and vendors

Although OSHA is not concerned with some of these aspects of the plan, having them in place will help the business survive the event.

View safety as a profit driver, not a cost center. Preventing workplace injuries costs money, but it also can improve a business's profitability. Some project owners and general contractors will consider bids only from contractors with workers' compensation experience modifications lower than 1.0. Firms with a reputation for safe operations will attract better workers. Also, insurance does not cover many of the costs from workplace accidents, such as time spent on investigating the incident, reduced employee morale, lost productivity, reporting costs, and the cost of OSHA penalties. Money saved on prevented accidents goes straight to the bottom line.

Some workplace injuries occur despite an employer's best efforts to prevent them. However, reasonable steps to improve workplace safety reduce the frequency and severity of injuries, make the business more competitive, and avoid problems when an OSHA inspector visits. To learn more, speak with us!

If you have questions or concerns on this issue, do not hesitate to call Zeiler Insurance and speak to one of our customer service representatives. As an independent agency, Zeiler Insurance prides itself with quality customer services for the people of the Chicago-land area and the rest of the Midwest. Customer or not, we can review your insurance and see if you are being protected appropriately for the right price.

-Dan Zeiler

danz@zeiler.com

(708) 597-5900  X134

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Illinois Workers Compensation rating and why does it matter?

What Is a Workers Compensation Rating and Why Does It Matter? 

Most business owners and executives understand the value of workers compensation insurance not just to protect the worker, but to protect the company as well. Fewer, however, are aware of the mechanics of how premiums are arrived at, and how their own company's safety track record figures into their rating.  Understanding the process, however, may well enable you to qualify for lower premiums down the road, saving your business money and making you more competitive.

Industry underwriters set workers compensation premiums using a process similar to how most companies price group health insurance: They look at the actual claims experience for similar workers in your area, and if there is a history of claims, at your company specifically. Where there is insufficient local claims experience to look at, underwriters turn to the National Council on Compensation Insurance, a clearing house of workers injury and compensation data.

Generally, underwriters will take your payroll and multiply it by an average claim factor for that type of worker. This produces a baseline average of the total number of expected claims, which they subdivide as claims per $100,000 of payroll, claims per year, or claims per time unit. The frequency of claims is considered to be a close proxy for the safety culture of the individual business. They then account for the average severity of claims for that type of worker in your industry and combine the two to arrive at a baseline prediction for expected losses.

Underwriters must then try to assess your business and answer the following question: Given the policies and procedures in place at your business and your claims history, is your company likely to produce losses that are higher than the industry baseline or lower?

Over time, underwriters have discovered that the most likely future claims predictor is a past history of claims at your company. Therefore, to save money on workers compensation premiums, it behooves the company to invest aggressively in preserving the safety of the work environment, both in terms of resources and management focus.

Your workers compensation agent and underwriting team will assign your company an insurance rating, with 1 deemed equal to the average claims experience in your industry for the area.

Any rating higher than 1 indicates a worse-than-average risk for workers compensation claims. If your rating comes out higher than 1, you may be able to qualify for lower rates in future years by reviewing your safety program and the types of losses your company has incurred. Identify any patterns and refcurring themes. You may benefit from bringing in a risk management consultant for an outside set of eyeballs. Some investment in equipment or improved training may be needed, or you may need to be more vigilant for workers compensation fraud in a few cases.

Best Practices

In the long run, your safety record is a reflection of your overall safety culture. That's not something limited to the rank and file worker and shop foremen, though. The most important link in the safety culture chain is at the top.

 

  • Invest in training your workers in all aspects of safety relevant for their jobs.
  • Appoint a senior manager with clout to monitor your safety and OSHA compliance, and empower him or her to enforce it throughout the company.
  • Empower any worker to halt work activities if he or she becomes aware of an unsafe work condition, until that condition can be corrected.

 

Everyone is part of your workplace safety culture - but senior management is the most important link in the chain, because management sets the tone throughout the organization.

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Understanding How Illinois Workers Compensation Experience Rating Works

Understanding How Illinois Workers Compensation Experience Rating Works  

Many people wonder why it is necessary to use experience rating to predict future losses if workers' compensation rates are designed for this purpose. Experience rating can benefit employers. The prospects of both bad credits and debits are implicit in the majority of risk-specific programs dealing with experience rating. Since it gives an employer some influence in how much the final premium will be, this gives an incentive for them to develop their loss prevention strategies. It is also good for them to form incentives that encourage injured employees to return to work as soon as they are able. When this happens, experience rating can be beneficial to employers by increasing occupational safety and health.

Experience rating shows a refinement in processes of premium determination. It creates a net premium cost for employers, which means their costs will be appropriate for the provided coverage. Experience rating shares or spreads the cost of a loss with all group members who are likely to go through similar losses. Although the probability and cost of injuries for an entire group as a whole may not be accurately predictable, it is not possible to decide which member of the group will ultimately be responsible for costs.

This is why there is insurance. If it were possible or easy to predict, group members who do not experience loss would not have any incentive to purchase coverage. Meanwhile, the premium charge for members experiencing losses would need to include the loss costs. Serious injuries to individuals are usually rare, but the totals can be minor amounts or reach well into the millions. For workers' compensation, the easiest rating method is manual rating. With this system, employers are categorized according to business classifications or operations. Group losses are estimated and then added as an average.

Employers are assigned to specific classifications to make sure the rates they receive are reflective of the costs all similar employers have. While each classification comes with similar risks, individual ones are different in some ways. However, experience rating is designed to reflect individual differences. Insurance providers would be able to look for employers with lower costs and avoid ones with higher costs if the rating system were only manual. The system needs to be refined to avoid such a scenario, and experience rating falls under that category.

With workers' compensation experience rating, individual employers' loss and payroll data are analyzed over time. The most recent three years of data is reviewed against similar groups' risks to determine the experience modification. An employer that has better experience ratings will be given credits, but those with less will be given debit ratings.

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Real Life Case: Underreporting Payroll for Workers Comp

Real Life Case: Underreporting Payroll for Workers Comp

Some business owners think they can hide or under-report payroll data as a way to save money on taxes and workers' compensation premiums. There are several different ways they can hide payroll data, but it is still a crime that very few prosecutors will turn down. Although this is done to save money, the price of self defense in criminal court and the repercussions of having a criminal record are both costly. In addition to this, the risk of ending a business career can compromise a person's long-term income. The following is a case where a business lost about $100,000 by trying to dodge workers' comp premium obligations.

The owner of a building company was convicted of workers' compensation insurance premium fraud for not reporting some of his employees to his insurer or the Employment Development Department. The owner's daughter was convicted of misdemeanor insurance fraud. Another member of the owner's family who worked there was convicted of felony insurance fraud.

Experts say fraud is an enterprise that brings in billions of dollars, but it provides artificial inflation costs to insurance companies and consumers. In a collaborative effort by the local district attorney's office and the Department of Insurance, the investigation on the business owner started after an employee was injured. The owner paid his workers in cash in order to avoid paying insurance premiums. However, the investigators found evidence that all three of the convicted parties had worked together to convince workers to take cash payments.

The employee who was injured required surgery, but the business owner tried to dispute the worker's claim. Instead, the owner offered the injured worker a disability application form for state assistance, and he instructed the worker to claim the injury occurred at home. The company was ordered to pay more than $45,000 in premium restitution, about $30,000 in EDD back taxes and more than $35,000 in restitution to the injured worker.

It is not easy to hide payroll information, and employees will be vocal if they are injured. In addition to this, there are other ways to track this type of fraud. If an employee is injured, employers should remember that any under-the-table agreements will likely be exposed. Injured employees must look out for themselves and their families. Many other cases are worse. Employees may accumulate higher bills for hospital stays and rehabilitative services. The cost of paying their bills could be much higher than $100,000, and the cost of business disruptions and legal fees would run into the hundreds of thousands. Recovering from an incident such as this is also difficult, and most business owners have to start over from scratch. In comparison with the cost of such a mess, the cost of workers' compensation insurance premiums is minimal. Every employer should remember that it is not worth the risk.

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Questionable Illinois Workers' Compensation Claims are on the Rise

Questionable IL Work Comp Claims are on the Rise  

Researchers analyzed past workers' compensation claims that were considered questionable by referrals, and the reports were submitted over the span of about six months. Although the total number of workers' compensation claims submitted had dropped, the number of claims considered questionable had risen. Questionable claims are ones that experts at insurance companies refer to the National Insurance Crime Bureau for review. When the reports are submitted for review, they are closely analyzed for indications of fraud. In some cases, one report may have several red flags that put it in the questionable category.

The state with the highest number of questionable workers' compensation claims was California, which had more than 2,250. Illinois followed with almost 700, and New York was close behind with nearly 690. In 2011, there were more than 3.3 million workers' compensation claims in a major database. The number decreased to about 3.2 million within the span of one year, and it decreased again in 2013. There were about 3,475 questionable workers' compensation claims reported to the NICB in 2011, and that number increased to more than 4,450 in 2012. This means that claims increased by more than 25 percent. During the first half of 2013, there were about 2,325 questionable claims submitted.

When it came to further describing questionable workers' compensation claims, there were several reasons experts said they referred them. The main reasons were claimant fraud, prior injuries not related to work and malingering. There were more than 6,100 claimant fraud cases, more than 2,300 non-work-related prior injury cases and more than 1,375 malingering cases. Non-work-related injuries pertain to people who claim injuries during days off or recreational days but do not report the incident until they return to work. When they return, they claim the injury happened while they were on the clock. Malingering occurs when a claimant sustained a legitimate injury but kept pretending to experience symptoms in order to collect benefits much longer than necessary after recovering.

Insurance fraud is a growing issue for both consumers and insurers. Many companies are taking steps to prevent it from happening and are also working on ways to improve identification of signs of fraud. If fraud can be prevented before claims are paid, this helps keep premiums more affordable for consumers. When consumers suspect or know of someone committing insurance fraud, it is important to report it.

 

 

 

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