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September 2009

Sep 01
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CONTRACTORS HAVE CHOICES WHEN IT COMES TO INSURING LOSSES

By Construction Insurance Bulletin

The commercial insurance market can often be a difficult place for contractors. The insurance industry goes through market cycles; companies that are eager to insure contractors today might have no desire to do so when their losses mount and the market tightens. Because of this uncertainty, larger contractors often consider alternative markets for financing their risks of loss. One alternative is a captive insurance company, which is created and owned by one or more non-insurance companies to insure the owners’ loss exposures. Other options include self-insurance (paying losses out of pocket) and insurance options such as dividend plans, large deductible plans, retrospective rating plans, risk retention groups, and purchasing groups.

According to Business Insurance magazine, there were more than 5,200 captive insurance companies operating in 2008, falling into several types. Single parent captives are owned by one company. Group and association captives are owned by multiple entities. For example, groups of contractors could form captives to insure themselves and others.

Businesses that cannot afford the capital requirements of a captive can “rent” one from an insurance company or reinsurer, allowing them to share in the risks and the profits. Captives often use what is called a “fronting” mechanism, where an insurance company or reinsurer issues and administers the policies and handles the claims, and the insured businesses pay for the losses. Captives may insure the risks of their major owners only, or they may also insure other organizations.

Large companies might choose to self-insure; groups of companies in particular industries might band together to self-insure the risks of the group. For example, in some states groups of contractors have formed trusts to self-insure for Workers Compensation losses. Companies can also choose to partially self-insure by purchasing a large deductible program (one with a deductible of $100,000 or greater per occurrence) for Workers Compensation. Retrospective rating plans, while still insurance policies, are closer to self-insurance in that the final premium includes the amount of the business’ losses during the policy term, subject to a minimum and maximum. Dividend plans are types of insurance policies that typically offer the business the chance of receiving a portion of the premium back via a dividend should losses fall below a specified level. Risk retention groups are groups of businesses in the same industry that have created an insurance company for liability coverage. Purchasing groups are groups in the same industry who band together to buy Liability insurance from one insurance company.

Each alternative has advantages and disadvantages. Captives can offer tax advantages, they cut out the portion of the premium spent on insurance company overhead and profit, and they give the owners control over risk management. However, they must meet large capital requirements to comply with state laws, and fronting arrangements still require insurance company involvement. Self-insurance, large deductible, and retrospective plans reduce premium costs, give businesses some control over their loss costs, and provide incentives for safe operations, but they can also be a drain on cash flow and their ultimate costs can be hard to predict. Contractors who can predict their future losses with reasonable accuracy might find these plans advantageous.

Because all of these options require contractors to finance at least some losses themselves, they should have access to significant financial resources before using any of them. Also, the options can be complex. Contractors should consult with our professional insurance agents to investigate each option’s implications for the business. Traditional insurance is no longer the only financial protection option available to contractors, but it would be unwise to jump into an alternative without learning the facts.

Sep 01
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RELY ON YOUR BRAIN POWER FOR ON-THE-JOB SAFETY

By Workplace Safety

Everyone has heard the old adage “Experience is the best teacher.” Although it’s true that you remember what you learned from an experience, especially a bad one, you might not like the other consequences that are part of the learning process.

This is especially true when it comes to on-the-job safety. Learning from a bad experience usually involves injury, and sometimes death. This shouldn’t have to be the case. But unfortunately, not exercising proper caution and not paying careful attention can lead to these outcomes.

You probably hear a supervisor tell you or your co-workers, “Be careful,” or “Pay attention” any number of times during the day. The next time you hear those words, stop a minute and think of all the reasons you should be careful. Then follow that supervisor’s advice, so you can avoid having an accident that might be the last thing you ever learn.

You might be thinking, “I’m experienced, I don’t have accidents.” If you are, you’re setting yourself up for a bad learning experience. Accidents happen when you least expect them, and no worker, no matter how experienced, has any special immunity from having an accident. That’s why it’s so important to follow safe work procedures. They are designed to help you avoid the causes of possible injury while getting the job done correctly. That’s also the reason your employer provides you with personal protective equipment (PPE), because using it prevents or minimizes the probability that you will be injured.

Always remember your brain is your best defense against injury. Let it remind you to:

  • Follow proper work procedures at all times. Never take short cuts, even if you think that they will save time. All of the time you save will be lost if your short cuts cause you to be injured.
  • Concentrate on the task at hand. That means giving it your full attention until it’s completed. Avoid any kind of distraction, such as talking, or joking around with co-workers because they can result in your being seriously hurt.
  • Use PPE whenever appropriate. Be sure it fits correctly, and that you wear it in the manner it was intended.
Sep 01
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SAFEGUARD YOUR HANDS FROM WORKPLACE INJURIES

By Workplace Safety

You probably aren’t aware of how complex a piece of equipment your hands are. There are a total of 27 bones in your hand and wrist. These bones are joined together by ligaments, which also hold the joints in place. Nerves carry messages from your brain to your hands and fingers to help them move. All of this intricate machinery is wrapped up in a layer of skin. The skin provides a barrier against foreign objects, as well as heat and cold. The skin on the back of your hand is thin and elastic, but on the palm, it is thicker to provide traction, cushioning and insulation.

Just like any other delicate piece of equipment, your hands need to be safeguarded while you are working. The most common sources of injury stem from mechanical hazards from tools, equipment, machines, structures and vehicles such as:

  • Chains, gears, rollers, wheels and transmission belts
  • Spiked or jagged tools
  • Cutting, chopping and grinding mechanisms
  • Cutting tools such as knives and presses
  • Falling objects

You can make your hands less vulnerable to these risks by following these safety tips:

  • Work at a pace at which you feel comfortable – The number of hand injuries you will have is in direct proportion to how quickly you work.
  • Keep alert – Stay focused on what your hands are doing whenever you are using tools or machinery.
  • Use a push stick to feed a circular saw.
  • Handle the tools and equipment you work with properly – Never take shortcuts.
  • Use wrenches that properly fit the nuts and bolts you wish to tighten.
  • Use long magnetic poles for retrieving items from places that are too dangerous for hands to reach.
  • Don’t hold the work piece in your hand while using a hand tool because the tool could slip and cause injury.
  • Never try to repair power tools or machinery without first checking that the power is shut off and the machine is locked out.
  • Wear the appropriate gloves when handling chemical substances.
  • Wash your hands thoroughly with soap and warm water or use special cleansers, especially after direct contact with a chemical substance.
  • Don’t wipe your hands with chemically contaminated rags.
  • Don’t operate machinery if you are taking any medication unless your doctor tells you it is safe to do so. Some drugs can slow your reflexes, which makes your hands vulnerable to injury.
Sep 01
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WORKPLACE ACCIDENT PREVENTION: EVERYONE BEARS RESPONSIBILITY

By Workplace Safety

When it comes to accident prevention in the workplace, you are your brother’s keeper. You have a responsibility to make sure that the co-workers around you, or those who use the same tools, equipment or materials that you do, are not injured because of your negligence. Furthermore, to make the workplace as safe as possible for everyone, all workers need to keep their eyes open for any dangerous situations in their midst.

Keep the following in mind to make your workplace as safe as possible:

  • Warn a worker who is in a dangerous position. Sometimes inexperience can cause a worker to perform a task in a manner that might result in injury. If you see this happening, don’t just explain to your co-worker what he or she is doing wrong; demonstrate the right way to do it.
  • Call attention to a task if a worker seems distracted. Conversation and noise can present serious distractions. If a co-worker seems not to be paying attention to the task at hand, go over and try to gently re-focus his or her attention.
  • Set a good example. Always use tools and equipment in the intended manner. Never joke around when handling tools or equipment. Remember, younger co-workers can be influenced by the behavior they see in their older peers.
  • Keep machine guards in place. Machines usually have moving parts that might accidentally come into contact with a worker’s body. When this happens, the worker can be killed or maimed. Machine guards prevent contact with moving parts during the normal operation of the machine.
  • Report tool/equipment defects to your supervisor. Continuing to use a defective tool or piece of equipment instead of reporting it could result in possible injury to you or a co-worker.
  • Encourage co-workers to report every injury. Sometimes an injury that seems insignificant can escalate down the road. If an accident is not reported at the time it occurs, it might not be covered by insurance if it is reported at a later date.
  • Encourage co-workers to wear personal protective equipment (PPE). Your employer provides PPE so that you will be protected. Always wear it if it’s necessary for the task being performed. Ask co-workers to wear it as well.
  • Ask questions if you are confused about what you have been asked to do. Never perform a task unless you are completely sure of the correct way to do it. Ask your supervisor to show you the proper method.
  • Take safety suggestions in the cooperative spirit in which they are made. Co-workers are responsible for each other’s safety. If a suggestion is made about the way in which you are performing a task, don’t respond with anger. Instead, thank the co-worker making the suggestion for caring enough about your personal safety to take the time to correct you.

When all workers look out for themselves and others, everyone’s safety is enhanced.

Sep 01
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ENROLLEES SATISFIED WITH CONSUMER-DIRECTED HEALTH PLANS

By Employment Resources

The number of people enrolled in consumer-directed health plans continues to grow, and satisfaction with these plans remains high, according to several recent surveys. Furthermore, many of those covered by consumer-directed plans say they wouldn’t have health insurance coverage otherwise, indicating that consumer-directed plans should be considered a key element of any health care reform proposals.

The Kaiser Family Foundation/Health Research & Educational Trust reports that 13% of firms that offered health benefits in 2008 had a consumer-directed option-a high deductible health plan (HDHP) paired with either a health reimbursement arrangement (HRA) or a health savings account (HSA). This is up from the 10% of employers that offered a consumer-directed plan in the previous year. Enrollment in these plans grew from 5% in 2007 to 8% in 2008, with most of the increase occurring among workers in small firms (three to 99 employees), where 13% of eligible employees now were enrolled in consumer-directed plans.

An annual census of health insurance carriers conducted by the industry trade group America’s Health Insurance Plans shows similar growth. The survey, which focused on HDHP/HSA arrangements only, reported enrollment in these plans in the group market rose to over 4.6 million in 2008, up from 3.4 million in 2007. Almost a third-31%-of new coverage issued in the small group market was for HDHP/HSA products.

The growing number of employees covered by consumer-directed health insurance products report that they are, by and large, satisfied with their coverage, and they also are likely to be actively engaged in their health care. A survey by OptumHealth of individuals enrolled in HSAs found that 82% were satisfied with their accounts. Most of these individuals-80%-had set up HSAs in order to be able to save for future health care expenses, and 70% had an annual income of $75,000 or less. Also, 30% said they would not have health insurance if it weren’t for their consumer-directed plan coverage.

Both the respondents to the OptumHealth survey and those to a survey by HSA Bank reported behaviors indicative of engaged health care consumers. For example, 64% of the OptumHealth survey respondents said they inquired about generic options for medications and 47% said they asked their health care provider about charges for services. Furthermore, a large majority-83%-agreed people should approach purchasing health care services as they do other major consumer purchases, and research their options in an effort to try to get the best price. Among the respondents to the HSA Bank survey who were in a consumer-directed product:

  • 26.2% of those who had visited a doctor in the past 12 months had inquired about the cost of the visit prior to making the appointment.
  • 32.9% of those who had visited a doctor in the past 12 months had asked about lower cost alternatives for recommended treatments.
  • 79.5% of those who were prescribed a prescription drug asked for a generic instead of a brand name product.

With continued growth of consumer-directed plan enrollment, and cost-conscious consumer habits, these types of plans hold great potential for effectively controlling a company’s health plan cost growth.

Sep 01
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TIPS FOR BUILDING NO- AND LOW-COST WELLNESS PROGRAMS

By Employment Resources

Most people and businesses probably accept the logic that companies implementing wellness initiatives must be saving some money as a result. If employees lose weight, stop smoking, become more active, and have tools to detect and begin to manage potentially serious conditions at an earlier, more treatable stage — all of which can result from wellness program initiatives — it seems reasonable to assume that a company’s health care costs should be affected favorably. Yet, data on wellness initiatives’ return on investment (ROI) remains elusive, which can spell trouble for these programs when economic conditions call for justification of every dollar a department spends.

In times of scrutinized budgets and spending cutbacks, wellness programs that require little or no expense outlay, yet address either (or both) disease prevention or early detection — the dual focus of wellness initiatives — might be the best (or only) option for cash-strapped businesses. Here are some ways to bring wellness programs into the workplace without making a significant capital outlay:

  • Use premium incentives and surcharges to motivate employees to engage in healthy behaviors or abandon unhealthy ones. For example, offer employees a credit they can use to offset their required health plan premium contribution in exchange for participating in a health risk appraisal, or charge a lower health plan premium contribution for nonsmokers than for smokers.
  • Take advantage of wellness features that are included in your company’s health care plan and promote them as part of your wellness program. Consult with the health plan carrier to determine what offerings are available. Check to see if the carrier offers additional wellness-related services outside of your health plan and, if so, consider adding some of these to your plan. This might raise the health plan premium somewhat, but remember that employees will help to pay for the cost of the additional wellness efforts through their share of the premium payment.
  • Look for free resources in the community that can be made available to employees as part of a wellness initiative. For example, a local health department might have individuals who could speak to employee groups on seasonal health issues, such as the flu or about resources the community makes available to residents, such as immunization clinics.
  • Explore offerings that might be available through nonprofit organizations that focus on a specific disease. A Calendar of National Health Observances (available at www.healthfinder.gov/nho) lists contact information for hundreds of such organizations, and some of these might be sponsoring activities in your area with a wellness focus (for example, National HIV Testing Day, Melanoma/Skin Cancer Screening and Detection Month).
  • Check to see whether hospitals in your area offer free blood pressure and/or cholesterol screenings.
  • Try to develop partner-type relationships with local hospitals, clinics, and other organizations (for example, the YMCA) to make free or low-cost wellness activities available to employees.

According to the Alliance for Wellness ROI, an intercompany cooperative formed to standardize the terminology and measurement of wellness return on investment, published ROI resulting from wellness programs ranges from $1 to $20 for every dollar spent on wellness initiatives. Unfortunately, since this is such a dramatic range, questions arise as to what exactly is being measured. Arguably, measurement of wellness ROI should include not only reductions in health care costs, but also Workers Compensation cost savings, reduced absenteeism and disability, productivity gains, and improvements in employee morale and retention. However, until reliable measures of wellness ROI become standardized-enabling benefits departments to clearly justify program costs-no- and low-cost wellness opportunities are likely to be necessary staples of corporate wellness initiatives.

Sep 01
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EMPLOYERS REAP GREATEST SAVINGS FROM FULL REPLACEMENT CONSUMER-DIRECTED PLANS

By Employment Resources

Consumer-directed health care plans can lead to savings for employers, according to two recent studies. Savings are greater for full replacement plans, or when the consumer-directed plan offered as an option is implemented in conjunction with strategies that foster engaged consumerism, education, and wellness initiatives.

One of the studies, from Aetna, reviewed health care claims and utilization data from 2.6 million plan members, 410,000 of whom were enrolled in a consumer-directed plan that included a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA). Cost savings were reported as follows:

  • For full replacement plans, employers saved $21 million per 10,000 members over a five-year period.
  • Employers that offered the consumer-directed plan as an option to a traditional health care plan saw $7 million in savings per 10,000 members over a five-year period.
  • Employers that offered the consumer-directed plan as an option, but additionally implemented certain identified strategies, recorded $23 million in savings per 10,000 members over a five-year period. These strategies included nurturing a workplace culture that encouraged employees to be engaged health care consumers; implementing a focused and ongoing education program; offering wellness programs and incentives for healthy behavior; fully covering preventive health care services; and designing the consumer-directed plan to create the appropriate amount of employee responsibility. This type of high-level plan savings also was achieved by employers offering the consumer-directed plan as an option, when they also encouraged enrollment in the plan through low employee premium contributions and/or increased employer contributions to the HSA or HRA.

Research from the University of Minnesota funded through the Robert Woods Johnson Foundation and the Department of Health and Human Services found that full replacement consumer-directed health care plans achieved a level of savings not seen in previous studies in which employees had the option of choosing another type of health plan. Data from this study came from four large employers covering more than 61,000 plan members, and examined claims and enrollment data for the year prior to and the year following consumer-directed plan implementation. One employer saw a 4.1% decrease in total plan expenditures and another saw a decrease of close to 1%. The other two firms both saw increases, but only of 1.3% and 3.6%, both well below reported national health care cost trends for the year.

Both studies also looked at consumer-directed plan members’ use of preventive care services. The Aetna study found that, compared to PPO members, consumer-directed plan members sought preventive care more often, and accessed screenings for diabetes and breast and cervical cancer at the same or higher levels. The Minnesota study, in contrast, found that total replacement consumer-directed plans led to a decrease in use of preventive care services, even though such care was covered at 100% with no cost sharing in the studied plans. The authors speculated that because patients sometimes are reminded of the need for preventive care when seeing a doctor for other reasons, a decline in the frequency of non-preventive care visits could be leading to the observed reduction in use of preventive care. Since regular use of preventive services is important in the maintenance of good health, these latter study findings would indicate that communications and education about the availability of preventive care services under the consumer-directed plan will be needed in order to sustain savings over time.

Sep 01
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EMERGENCY PREPAREDNESS: GET YOUR DUCKS IN A ROW

By Risk Management Bulletin

Your level of preparation for emergencies will determine how well your workers and your facility survive these incidents.

Of course, the nature and scale of your emergency planning and compliance effort depend on the kind of business you’re in and the types of workplace emergencies you and your employees are most likely to experience. However, every employer needs a plan that anticipates the worst and prepares employees to survive any possible event — even the most catastrophic.

Your level of preparation will also establish how OSHA views your compliance with emergency action requirements. OSHA standards often refer to workplace emergencies. For example, subparts E, H, K, L, and Z of the general industry standards all mention emergency preparedness and list a number of mandatory rules.

Checklists can enhance your emergency action plan and help keep your workplace and your employees safe and in compliance with OSHA regulations. Here are a few of the critical questions you need to ask:

  • Do you have a written emergency action plan that spells out the what, when, how, and who of emergency response?
  • Are all your employees familiar with your emergency action plan?
  • Do workers have assigned evacuation routes and designated gathering places outside your facility?
  • Have you established and tested effective communications systems for use during workplace emergencies?
  • Do employees understand how to carry out any emergency duties they’ve been assigned?
  • Do they know how and to whom to report workplace emergencies?
  • Are your alarm systems in compliance with the requirements of 29 CFR 1910.165 (Employee Alarm Systems)?
  • Do you have functioning emergency equipment such as fire extinguishers and sprinkler systems?
  • Do you hold regular fire drills, evaluate performance, and retrain as necessary?

For a free consultation on your emergency action plan, please get in touch with our risk management professionals.

Sep 01
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STEER YOUR WORKERS TOWARD SAFER DRIVING

By Risk Management Bulletin

Vehicle accidents on or off the job can create serious problems for you, your organization, your employees, and their families.

Consider these facts:

  • Motor vehicle accidents are the nation’s most common cause of both accidental death and workplace fatalities (causing one in four fatal work injuries).
  • There’s a motor vehicle-related injury every 10 seconds — and a fatality every 12 minutes. Many of these accidents occur during the workday or during commuting time.
  • Motor vehicle crashes cost employers $60 billion a year. The average crash costs $16,500, and if an injury results, the tab can reach $74,000 or higher. When a worker dies in a traffic accident, costs can top $500,000.

More than 40% of traffic-related deaths involve alcohol, and another 20% result from the use of illegal drugs. Unfortunately, all too many workers grab a quick drink or smoke a joint on their lunch hour, including those who drive on the job — and even more employees stop off for a few cold ones on the way home.

You’re in an ideal position to help prevent many of these deaths, injuries, and costs by making sure that your employees understand the risks and take the proper precautions whenever they get behind the wheel — whether it’s in a company vehicle or their own car.

Use statistics, photos, or videos of traffic crashes, stories from your own experience, and other “shock” tactics to shake employees out of complacency about driving hazards. Reinforce the message that highway accidents can, and often do, have a tragic impact. Each day, these mishaps hurt not only drivers who cause accidents, but also passengers, people in other vehicles, and the families of all those injured or killed.

Sep 01
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ALTERNATIVE RISK FINANCING: SIZE DOESN’T MATTER

By Risk Management Bulletin

Most medium-sized and smaller companies protect themselves against their property and liability exposures by purchasing Commercial insurance, while large corporations and government agencies prefer to use some type of alternative risk financing for this purpose. However, businesses of any size can employ this tool to enjoy such benefits as improved cash flow and a lower total cost of risk.

Using alternative risk requires internal management discipline and a willingness to commit the appropriate resources. Size isn’t that important. The main criterion is losses. As a rule of thumb, alternative risk financing makes sense if a business has approximately $1 million of annual losses in a single line. The claims should have these characteristics:

  • Reasonable predictability
  • Moderate volatility
  • Minimal exposure to a catastrophic event
  • High frequency and low severity – meaning that a business should have at least several dozen losses a year, most of less than $50,000. For example, a large hotel or bank would probably experience a number of small Workers Compensation claims, but few large claims.

Casualty insurance products (such as Workers Comp, General Liability and Auto Liability) are the best candidates for alternative risk financing. Because Comp and Liability claims tend to be paid over one to five years or more, insurers of these lines generate substantial investment income on their premium reserves until losses are fully paid. By using alternative risk financing, you can invest your funds elsewhere, rather than paying premiums to the insurance company.

Insurers have developed a number of colorful terms for what amounts to a handful of alternative risk financing techniques. These methods include:

  • Excess insurance
  • Reinsurance
  • Guaranteed cost
  • Retrospective rating
  • Large deductible
  • Self-insurance
  • Captive insurance

Our risk management professionals would be happy to work with you in developing an alternative program that’s tailored to your needs. Just give us a call.

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