Month: February 2013

Use of Generic Drugs Decreases Workers’ Compensation Costs

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A recent survey conducted by The Hartford revealed that the growing use of generic drugs has resulted in the first annual overall decrease in workers’ compensation pharmaceutical costs for 2005. The research data also showed that the increase in usage was directly related to the greater availability of generic substitutes, especially when it comes to expensive name-brand drugs. The Hartford has been publishing studies analyzing workers’ compensation pharmaceutical costs since 2001. Each of these studies has shown that although costs rose, the increase was becoming progressively smaller each year.

The study noted that the continued use of generic substitutes for OxyContin and Neurontin, which are two of the more expensive and commonly used drugs for treating pain in workers’ compensation cases, is having a positive effect on pharmaceutical costs. In addition, the withdrawal of Bextra and Vioxx, which were often taken to manage pain and inflammation, is helping to cut costs.

However, not all of what the study revealed was good news. According to the data, the overall increase in the use of drugs could slow down cost-cutting efforts. The use of OxyContin declined, but that decline was offset by adoption of its generic version, Oxycodone, which costs about 50 percent less. Total consumption of this painkiller increased by 6 percent.

Neurontin was last year’s second-highest ranked drug. It dropped to number 20 on the list, while its generic version, Gabapentin, took over the number two spot. Gabapentin was not even on the list in 2004, yet its popularity results from it being priced about 35 percent lower than Neurontin. Despite this savings, over the course of just one year, The Hartford survey noted a 25 percent price per-pill increase for both versions of this drug.

The Hartford isn’t the only study to uncover these trends in workers’ compensation pharmaceutical costs. Recently, The National Council on Compensation Insurance (NCCI) reported that the trend of rising drug costs in workers’ compensation cases was slowing in 2004, the most recent year for data. The increased rate in 2004 was 8.2 percent, down from 10.2 percent in 2003.

Many experts believe that drug costs for compensation claims are difficult to reduce because the work force has a growing population of older workers who typically use more medication after an injury.

Survey Shows Inattention to Homeowner’s Insurance Could Prove Devastating in the Event of a Disaster

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For the majority of Americans-even those making six figure incomes-their homes are their single biggest asset.  Furthermore, the value of homes continues to rise with the continuing strength of the real estate market.  Yet, a significant percentage of affluent homeowners are just not paying very much attention to protecting their most valuable personal asset, according to a survey conducted for Fireman’s Fund Insurance Company by Harris Interactive.

According to the survey, 94 percent of the respondents nationwide stated that the value of their home increased during the past five years.  The National Association of Realtors® reports that median existing-home prices in 2004 were 6.6 percent higher than a year earlier.  In some states such as California, a strong real estate market saw home values jump more than 20 percent in some areas from the previous year.

Yet, more than a quarter (27%) of those surveyed said they had not increased their insurance coverage to reflect their home’s increased value. Some of the most common reasons cited were lack of time to look into the need to increase coverage, and simply not knowing that they needed to change the policy’s limits to reflect a home’s change in value.

In addition to the rise of property values, home reconstruction and replacement costs are also climbing at a steady rate. With a healthy rise in new construction, recent hurricanes and ongoing trade disputes, the cost for lumber, plywood and other building materials is continuing to rise. According to the lumber industry publication Random Lengths, framing materials alone, such as 2-by-4s, rose nearly 40 percent in 2004 over the previous year.  Without the right insurance coverage, homeowners who experience a loss could see these higher costs coming straight out of their own pockets.

The survey, based on responses from more than 1,000 affluent homeowners nationwide, uncovered a consistent gap between what homeowners think is included in their coverage, and what actually is covered. Of those polled, 88 percent said they know what their homeowner’s policy does and does not cover, yet further questioning revealed that many respondents also believed that their homeowner’s policy covered more property than would actually be covered in the event of a disaster.  Only 37 percent of respondents correctly answered six of 12 questions about basic coverage on their homeowner’s and auto policies, such as the maximum amount of stolen cash that would be reimbursed if a home were burglarized ($200) or how much a standard policy will pay in temporary living expenses while a home is being rebuilt ($60,000). 

The survey showed that most affluent homeowners spend far more time managing their investment portfolios (an average of seven hours a month) than they do staying on top of the insurance coverage for their homes.  Seventy-six percent of those surveyed had reviewed their financial assets or investments within the last two months, but only half had reviewed insurance for their property assets within the past six months.  The survey found that respondents spend an average of 4.7 hours per year-a fraction of the time spent on their investment portfolios-managing their insurance coverage on their physical assets including their home.  This is true despite the fact that for nearly half (47%) of respondents, the value of their non-financial assets exceeds the value of their investment portfolio.

“The survey findings show a critical need for homeowners to communicate with their insurance agents and learn what their policies actually cover and when they should be updated, to ensure they are fully protected in the event of a disaster,” said Scott Garfield, vice president of Fireman’s Fund. “Homeowners also need to know that all policies are not created equal, and to understand the array of insurance options available in comparison to their current coverage before they are faced with a costly disaster.”

Predictive Modeling Can Lower Workers’ Compensation Costs

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Recent statistics compiled by the National Safety Council revealed that workplace injuries are at an all-time low.  The costs of workplace injuries, however, have escalated significantly over the past five years.  Employers and industry professionals alike are perplexed by this contradiction, and have struggled to find reasons to support such a paradox.

The following are factors that contribute to higher injury costs:

  • Injuries that are typically short-term are dragged out into long-term medical conditions, and often result in larger settlements.
  • According to the report, about 20% of employee injuries account for approximately 80% of claims.
  • There is no consistency in procedure for a claim; two employees with the same injury may see vast differences in claims cost.
  • The occurrence of “catastrophic injuries” is very low, so the problems are resulting from minor, “typical” injuries.

The most common workplace injuries are back and joint conditions, and cumulative trauma.  Statistics show that only three in twenty of these injuries become chronic, and cause a delayed recovery, which occurs when the length and cost of an injury do not correspond with the severity of the illness or injury.  Pre-delayed recovery intervention could be effective in ensuring employees return to work fully after an injury; however, this would not be cost-effective since only three in twenty injuries cause a problem.

The best strategy would be to determine which injured employees are most likely to experience a delayed recovery.  However, a survey to uncover these details would most likely violate an employee’s rights. So how can an employer effectively predict which employees will have a delayed recovery?

Fifty years ago, the banking and credit industries created a way of scoring loan applicants to determine which would be more likely to default. This is called Predictive Modeling, and is still used today. This same system could be applied to predict which employees are most likely to experience a delayed recovery.

There are several factors that could affect an employee’s ability to return to full productivity at work, beyond the medical concern of the injury:

  • Job dissatisfaction
  • History of prior injury or medical issue
  • Education level
  • Length of employment
  • Lack of available modified or transition duty jobs

Based on these common contributing factors, the Institute of Work Comp Professionals developed a database and questionnaire, which an employer answers for each employee after an injury.  Then, a score is assigned to predict the risk level for delayed recovery (Low, Medium, or High). Pre-developed intervention plans are available at each level.

By predicting which employees will be more likely to have a delayed recovery, and by having an established intervention plan, you can protect your company from prolonged absenteeism and lost productivity.

Be Careful to Avoid Aggressive Driving

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Are you an aggressive driver?  The National Highway Safety Administration has outlined certain common aggressive driving behaviors. 

 

  • Do you find yourself speeding up when someone tries to pass you or weaving in and out of traffic? 
  • Have you passed cars on the right or tailgated slower drivers in front of you? 
  • Do you flash your lights at a vehicle, use your horn in a non-emergency situation, or make obscene gestures to other drivers? 

 

If you answered yes to any of the above, you may be an aggressive driver.  Make a concerted effort to avoid those behaviors and set a good example for your passengers.  You never know, avoiding these behaviors might reduce your number of traffic tickets or accidents, and end up lowering your auto insurance premiums!

The Effects on Workers’ Compensation of an Aging Workforce Tapering Off

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Even though the median age of America’s workforce is increasing, its effects on the workers’ compensation system are ebbing, according to Harry Shuford, practice leader and chief economist for the National Council on Compensation Insurance, Inc. This research organization is the oldest and largest provider of workers’ compensation and employee injury data in the nation.

Shuford addressed his remarks to attendees of the annual Workers’ Compensation Educational Conference in a workshop titled “Are Baby Boomers a Bust for Workers’ Compensation?” The session also included Ned Wilson, director of planning and treasury at FCCI Insurance Group. It was one of seven sessions on national trends put on by The National Underwriter Company as part of its partnership with the Florida Workers’ Compensation Institute. The Institute runs the WCEC program, a partnership of the Florida Workers’ Compensation Institute and The National Underwriter Company.

Shuford noted that many workers have been negatively impacted by changes in their retirement systems, which are providing them with less money even though their longer life expectancy has dramatically increased the amount needed for retirement. While older employees in their fifties and sixties are continuing to work, younger workers have been dropping out.

Older workers are injured less frequently than their younger counterparts, but when involved in an accident, they have more severe claims with higher costs and longer recuperation times, Shuford said.One of the reasons for the higher claims costs are replacement wages. Older workers generally receive more compensation because their salaries are higher. In the future, however, differences in average weekly wages may shrink, Shuford added.

Differences in the types of injuries suffered by older and younger workers are also lessening, Shuford stated. However, there is a difference in the treatment cost between the two groups. Workers who are 45 to 65 years of age usually require 40 percent more treatment for an injury than younger workers, and the drugs older workers are prescribed are more expensive.

Wilson mentioned one statistic he couldn’t explain; that medical costs for the 25-and-under age group have risen 10 percent annually while costs in the 35 to 54 year old category have only gone up 7 percent each year.

Shuford noted that even as older workers remain in the work force, the percentage of people over age 65 still working is extremely small and that over age 65, the average weekly wage drops. For workers over 55, nearly 17 percent of their lost work time results from falls. He attributed this rise in fall-related accidents to older worker’s poor eyesight and an inability to move as well as they used to.To counteract these effects of aging, Shuford suggested that company loss control precautions should include better lighting, marking steps clearly and providing handrails.

Is a Monitored Alarm System the Right Choice for Your Home?

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Residential alarm systems get a lot of attention when talking about home security, but what choices do you have and what benefits are there?  Can you get a discount on your homeowner’s insurance if you have a system installed?  It is possible that just a sign from a security company on your window or in your yard may deter potential burglars, but educating yourself about what security companies have to offer can help you determine if an alarm system is right for your home.

Security companies offer a host of options, including protection against burglary, fire, and carbon monoxide, as well as medical monitoring and mobile monitoring.  In security systems, you have two basic choices:  monitored and unmonitored systems. 

Monitored systems will contact your monitoring company by telephone when activated.  The monitoring company will then dispatch the police, fire department, or other emergency personnel to your home.  The drawbacks, however, could be quite serious, depending on the situation.  The monitored system uses your telephone line to notify emergency personnel.  That means that your phone line will be in use and you would need a secondary phone line or a cellular phone to call for additional help.  If an intruder is bold enough to cut your telephone line before entering your home, the advantages of a monitored system are cut short.  Also, in the case of a false alarm, the police department may charge you for a trip out to your home.

Some monitoring companies will sell you the security system, but will not act as your monitoring company.  They may sub-contract with a monitoring firm who will be handling your monitoring.  You can find a secure monitoring company on your own, but if your company has an Underwriters Laboratory rating, you can trust they will be secure.

Unmonitored systems have advantages and disadvantages as well.  An unmonitored system usually has an audible alarm and possibly flashing lights, which notify neighbors that the security of your home has been breached.  This, however, poses a specific problem:  you must rely on your neighbors to take action if they see or hear your alarm system activated.  Your neighbors may not be at home, or, unfortunately, some neighbors will not want to get involved.  Consider organizing your community by initiating a neighborhood watch program and having get-togethers, so that you become vested in protecting each others safety.

For many, the advantages of a home security system are also financial.  Informing your homeowner’s insurance company that you have certain security measures in place can save you 5% to 20% on your homeowner’s policy.  Insurers will routinely give a 15% to 20% discount for homes equipped with a burglary and fire alarm system that is monitored by a third-party monitoring company.1

Considering an alarm system for your home may provide you with peace of mind, whether you are home or away.  Developing close ties to your neighbors can also provide you that same comfort.  If you are considering a monitored security system, contact your homeowner’s insurance company for details about discounts that may be available to you.  While the financial benefit from your insurance company may be an advantage to a security system, it may be greatly outweighed by the peace of mind you will feel in knowing your home is properly defended against burglary, fire, or other threats.

 

1 See http://homes.wsj.com/buysell/taxesandinsurance/20031202-smartmoney.html.

US Chamber of Commerce Study Reveals Trends in Product Liability Exposures

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The American tort system is still the most expensive justice system for remedying a civil wrong, costing $260 billion in 2004; this according to a recently published paper authored by experts from the legal and insurance sectors and produced in collaboration with the US Chamber of Commerce. One area proving to be extremely sensitive to tort suits is product liability. The paper notes that product liability exposures present serious and unforeseeable problems for American manufacturers and negatively impact their ability to compete in a global market.

The problems resulting from product liability are caused by a number of sources, including new theories of liability, unexpected liability exposures or commonly used substances that are now alleged to be harmful even in trace amounts opening the floodgates to new litigation.

 The paper goes on to discuss five emergent areas of products liability exposure:

  • Lead paint – Suits are once again being brought against lead pigment and paint manufacturers on a large scale. In the earlier cases, these manufacturers were successful in obtaining favorable rulings by arguing that plaintiffs couldn’t prove it was individual manufacturers that caused the alleged illnesses.

Until recently, lead paint and pigment manufacturers have also been successful in stopping actions filed by federal and state government. However, since mid-2005, two new liability theories have been used to argue cases that will prove to be a problem for manufacturers. State and municipal governments have successfully used the concept of public nuisance, as the basis of their cause of action, saying that the lead paint manufacturers’ failure to abate existing lead paint conditions in homes constitutes a nuisance. The other theory is that of market share liability, which spreads liability to manufacturers in proportion to their market share when a product cannot be traced to any specific maker.

  • Benzene – Benzene exposure has been associated with numerous illnesses, including blood disorders, central nervous system damage, immune system damage, lung and bladder cancer, and female fertility disorders. Millions of American workers are exposed to benzene on the job daily.
  • Pharmaceuticals – Product liability claims are a constant in the pharmaceutical industry. Anyone who reads a newspaper or watches television is aware of the suits involving Vioxx, Fen-Phen, and Rezulin. Plaintiffs in pharmaceutical cases may seek damages for actual or anticipated bodily injuries as well as any related economic loss associated with the use of a drug.
  • Welding rods – Welding rods are a major focus of litigation, with more than 10,000 current plaintiffs nationwide. The basis for this litigation is whether welding rod fumes containing manganese cause neurological damage.
  • Diacetyl – This is a butter-flavored ketone. The Centers for Disease Control (CDC) believes that exposure to this chemical may result in bronchiolitisobliterans, also known as “popcorn packers lung.” The National Institute for Occupational Safety and Health and the United States Environmental Protection Agency have also been studying diacetyl and its negative affects on pulmonary functions.

Practicing Safe Electrical Habits in Your Home

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A new survey commissioned by the Independent Insurance Agents & Brokers of America (IIABA) has shed considerable light on a serious problem:  electrical hazards in the home. 1  The U.S. Consumer Products Safety Commission (CPSC) says that there are an annual average of 165,380 electrical-related home structure fires, taking an average of more than 900 lives, injuring almost 7,000 people, and causing nearly $1.7 billion in property damage.  Suffice it to say, electrical hazards in your home are a serious concern.

There are several areas in your home that can easily be checked to greatly eliminate risk of electrical hazards.  Wall outlets should be checked for loose-fitting plugs, which can overheat and lead to fire.  Never force a plug into an outlet.  If the plug does not fit into the outlet, it should not be plugged in.  Along those same lines, never remove a ground prong from a three-prong plug so that it can fit into a two-prong outlet, as this can cause electrical shock.  Do not overload plugs or circuits with too many items.  Make sure all switch plate covers are secure and take care to cover wall outlets when children are around.  If you notice any discolored or hot outlet plates, take action immediately, as this may indicate a dangerous heat build up and possible fire threat.

Power cords and extension cords are also a potential safety concern.  Make sure you are only using cords in good condition, with no frayed or cracked housing.  Never nail or staple an extension cord to the wall or baseboard and do not place cords in high-traffic areas, or under items such as rugs, carpets, or furniture.  Keep in mind that extension cords are not permanent wiring and should not be used for prolonged periods of time.  Additionally, use power cords approved by Underwriter’s Laboratory (UL) or another independent testing facility.  Make sure the cord has been rated for the type of application you need it for.

Check your light fixtures and light bulbs.  Does the wattage of the light bulb exceed the recommendation on the fixture?  If so, replace it immediately with a light bulb that does not have higher wattage than what has been recommended by the manufacturer.  Make sure the bulb is screwed in tightly, as loose light bulbs may overheat and can be a potential safety hazard. 

Ensure that all appliances, from kitchen to bathroom, are certified by an independent testing laboratory, such as UL, CSA, or MET Labs, and follow the manufactures instructions carefully.

When it comes to circuit breakers in your home, get familiar with them.  Create a map to outline all outlets, rooms, fixtures, and appliances and where they are on your circuit breaker.  Circuit breakers and fuses should be the correct size and rating for their circuit.  Never replace a fuse with a different size from the one you are removing.

Required in homes since the early 1970’s, consider a GFCI, or ground fault circuit interrupter, on all general-purpose circuits in your home.  A GFCI can prevent accidental shock and electrocution by shutting off a circuit when a “leak” of electric current is detected off the circuit.  GFCIs should be tested monthly and after every major electrical storm.

AFCIs, or arc fault circuit interrupters, help prevent fires resulting from outlets, switches, and frayed or cracked power cords.  The AFCI senses the particular signature of an arc and acts to immediately shut off the circuit.  AFCIs are required in all new home construction in bedroom circuits, but should be considered as a safety measure in all homes and on general-purpose circuits.

In summary, there are many simple steps you can take to ensure safe electrical habits are used in your home.  If you have questions about avoiding electrical hazards or how to further protect your home, consult a trusted electrician who can ensure your home is up to code and safe for you and your family.

 

1  See Independent Insurance Agents & Brokers of America and the Electrical Safety Foundation International’s safety tips at:http://na.iiaa.org/ESSafetyTips_FINAL.pdf.