Ageonomics: Eight Strategies to Achieve Improved …...Ageonomics — Eight Strategies to Achieve...

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Ageonomics: Eight Strategies to Achieve Improved Claims Outcomes for Aging Workers An Aon White Paper

September 2014

Aon Risk Solutions Global Risk Consulting Proprietary and Confidential

Ageonomics — Eight Strategies to Achieve Improved Outcomes for Claims for Aging Workers 1

Contents Understanding the issue 2

Taking the worker as you find them 3

Physiological changes of the aging body 4

Building a thoughtful pre-injury program 4

Executing an effective post-injury response 5

Why are so many workers’ compensation claims litigated? 6

Strategy #1: Be specific on the medical conditions being accepted on the claim. 7

Strategy #2: Facilitate an aggressive integrated transitional duty program 8

Strategy #3: Make investments in the infrastructure of an effective disability management program. 9

Strategy #4: Facilitate accurate investigations of workplace injuries 10

Strategy #5: Don’t assume or allow assumptions! 11

Strategy #6: Insure that the claims administrator has an “80/20” plan and not “frog soup” 12

Strategy #7: Don’t let doctors be lawyers and lawyers be doctors 13

Strategy #8: Coordinate claims strategies for all disability programs 14

Conclusions 14

References 17

Contact Information 18

About Aon Global Risk Consulting’s Strategic Improvement Platform 19



Understanding the issue As was identified in the Aon white paper “Responding to the Needs of an Aging Workforce” (Galusha and Missar, April 2014), there has been a critical shift in the average age of the population in the workforce. According to the U.S. Department of Labor, over the past decade, workers in the 45 year-old and over category have increased by 49 percent and now make up 44 percent of the workforce. The age group over 55 has grown to 21 percent of the workforce. According to three surveys conducted by Gallup on behalf of UBS Financial Services, a significant portion of working adults anticipate that they will work beyond the age of 65. Given this projected “aging” of America’s workforce, America’s employers must be prepared to effectively address the associated increase in workers compensation claims, which is currently being experienced in many industries.

“Ageonomics” is a term to describe a scientific discipline concerned with the interaction of the aging worker in relation to the workplace and work environment within which they operate. Ageonomics incorporates core disciplines of human factors, ergonomics, wellness, benefit program design, health and safety to assess, understand and ultimately optimize the systems for greater individual and organizational impact.

Most people are familiar with the “80/20” rule in workers’ compensation claims: 20 percent of the claims comprise 80 percent of the claim costs. Of course, this is just a general rule. In Washington State, the ratio is more dramatic, with 6 percent of claims accounting for 84 percent of the total cost of claims. However, only a small percentage of these catastrophic claims are initially due to severe traumatic injuries (spinal cord, traumatic brain injuries, severe burns, fatalities, etc.). Many of these high-cost claims arose from fairly benign injuries that eventually evolved into bigger claims over time. This phenomenon is often called “condition creep,” a situation where a single condition from a claimed event morphs into a variety of additional conditions and claims, mainly due to the effects of aging on the individual. For example, a soft tissue sprain/strain in a young, healthy individual will likely be resolved in 6 to 8 weeks, whereas the same injury in an older individual with degenerative disc or joint disease may result in long-term disability, surgery and the involvement of contralateral joints and adjacent body parts.

In a study exploring $2.5 billion in workers’ compensation claims from 2007 through 2012, Aon found a consistently higher average cost for workers’ compensation claims for older claimants across all industry groups. For example, in the manufacturing sector, claimants in the 45–54 year old category experienced average claim costs 52 percent higher than claimants in the 25–35 year old range. When compared with the findings of an NCCI study in June 2011 highlighting co-morbid conditions in workers’ compensation claims, additional light was shed on the complicating factors of claims involving older workers. The key findings of the study on co-morbidity showed:

Of the top four co-morbid conditions negatively impacting workers’ compensation claim outcomes (diabetes, hypertension, chronic pulmonary disorders and drug abuse), only drug abuse is not a condition commonly associated with aging.

Four percent of all claims are reported as having co-morbidity treatments.

Claims involving co-morbid conditions are more likely to be disabling.

For Sprains/Strains and Musculoskeletal Disease claims, 27–29 percent involve obesity as a co-morbid condition contributing to higher claim costs. Twenty percent of the claims involve hypertension.



Taking the worker as you find them One point of tension for employers with an aging workforce lies in the fact that it is difficult to control claim costs associated with the combined effects of a workplace injury and non-occupational factors. In the workers’ compensation system, the employer must “take the worker as you find them.” This means that an employee does not have to qualify in any way to be covered under workers’ compensation other than to be on the payroll in service to the employer. They cannot be denied benefits because of pre-existing conditions or poor judgment. Thus, it may seem there is little an employer can do to address compensable claims where the claim is complicated by non-occupational issues. Even more difficult is successfully denying workers’ compensation benefits entirely, when it is determined that the claimed conditions were not caused or worsened by the worker’s employment. As discussed in the Aon Ageonomics white paper (April 2014), the employer/carrier must make adjustments to its standard employment model to anticipate and proactively respond to the negative impact of aging worker issues in order to reduce program costs for workers’ compensation, as well as other benefits (STD, LTD, FMLA, and Group Health). Examples include:

Recognize the physiological changes associated with aging and co-morbid conditions that can impact work performance for the organization.

Gather and analyze absenteeism and other benefit related trending for all programs.

Develop a targeted, age-specific strategy to help not only prevent or reduce the duration days associated with the respective absences, but implement pre-emptive programs to help keep aging workers healthy and optimize their individual work productivity.

By studying the physiological impact of aging on work performance, safety on the job, increased claims costs and consumption of health care services within the organization, the employer can make the



necessary adjustments in workflows, job analyses and assignments, safety training priorities and structuring of benefit programs.

Physiological changes of the aging body A natural result of the aging process includes decreased muscle mass and strength, reduced visual and auditory acuity, slower cognitive speed and function, decreased aerobic capacity and a higher incident rate of age-related health conditions such as diabetes, hypertension, obesity, chronic cardio/pulmonary conditions and osteoarthritis. According to an article by Karen Yotis from LexisNexis Workers’ Compensation eNewsletter, individuals between the ages of 40 to 59 are three times more likely (than 20 to 39 year olds) to develop high cholesterol, high blood pressure, obesity or develop a resistance to insulin. These conditions place them in greater risk of diabetes or heart disease.

Often, the first signs of aging involve changes in the musculoskeletal system. According to Merck Manual, most bodily functions peak shortly before age 30 and then gradually and continuously decline. Bones and joints lose density and become weaker, thus more likely to break, with certain bones being more susceptible to weakening than others. The bones most affected include the femur (the end of the high bone at the hip), the radius and ulna, (the ends of the arm bones) and the bones of the spine.

Cartilage and ligaments also weaken with age, furthering the potential for injury. Over time, joint cartilage begins to thin. The ligaments, which bind our joints together, lose elasticity and start to feel stiff. Around the age of 30, the amount of muscle tissue starts to decrease (which can be exacerbated by disease or extreme inactivity). By the time a person reaches age 75, their percentage of body fat typically doubles than what it was during young adulthood which can increase the risk of diabetes.

The aging process not only impacts bones, cartilage and musculature, but our sensory organs as well. The lenses in your eyes stiffen and become less dense making it more difficult to focus. Pupils also react more slowly to changes in light, thus the increased need for glasses as we age. A 60-year-old person requires three times more light to read than a 20 year old.

Most changes in hearing are attributable as much to noise exposure as to aging. However, age-related hearing loss impacts our ability to hear high-pitched sounds and words become harder to understand. The reason is that most consonants (letter sounds such as k, t, s, p and ch) are high pitched and are also the sounds that help people understand words.

The cells of our immune system fight and destroy foreign substances and bacteria that can harm the body; but, as we age, our immune system slows down, leaving us more susceptible to infections and diseases.

A comprehensive pre and post-injury response to aging worker issues will incorporate effective strategies for anticipating problems, designing effective solutions, and then tracking and measuring the efficacy of remediation efforts.

Building a thoughtful pre-injury program Understanding and responding to aging worker physiology also means understanding the type of occupational injuries older workers are most likely to sustain so that, aside from the loss prevention



benefits, the claim management response can anticipate and quickly address problems delaying return to work and healing.

In a study completed by NCCI in October 2012 (Workers’ Compensation and the Aging Workforce: Is 35 the New ‘Older’ Worker?), older workers are more likely to have higher-cost rotator cuff and knee injuries, and younger workers are more likely to have lower-cost low back strains/sprains. Injuries to older workers can be more severe and take longer to heal. Employers that take steps to gain a thorough understanding of their aging workforce and how they utilize various health and disability benefit programs can customize a post-injury claim management response model to facilitate better outcomes on claims.

By implementing a proactive “pre-injury” strategy to reduce the frequency and severity of claims—both occupational and non-occupational (i.e., group health, STD/LTD)—employers can better prepare and manage absence and benefit management programs. However; it is critical that organizations build a “post-injury” claim management model that is flexible and adaptive to change. Some of these adaptations will be employer-driven, and some primarily involve the claims administrator. Implementation of some proven strategies outlined in this paper will reduce the exposure to “condition creep” and other complications, as well as establish the necessary foundation to defend denials of claims or services where the conditions being treated are not caused or pathologically worsened by a work injury. It is the claims administrator who does most of the heavy lifting on the post-injury management side; however, the employer should still “own the process” to ensure all appropriate measures are implemented to manage the claims and control costs.

Executing an effective post-injury response The “post-injury” team is comprised of employer representatives, claim adjusters, medical services and managed care providers, legal and vocational experts all working together to mitigate the loss when an injury occurs. The primary functions of the employer in a post-injury claim response are to:

1. Facilitate an aggressive Transitional Duty Program.

2. Invest in the “infrastructure” of an effective disability management program that responds to worker absences regardless of the financial underwriting (WC/STD/LTD).

3. Facilitate efficient and accurate investigations of workplace injuries, including fact finding, signing of forms and medical releases, and coordinating witness interviews.

4. Ensure that the claims administrator understands the issues driving the claims and is executing an action plan to resolve them.

The size of the organization often determines whether an organization invests in hiring professionals to design and implement the programs listed above, or utilizes a consultant.

In order to accomplish the third and fourth tasks above, and to fully realize the opportunities for a successful denial of non-occupational conditions in a workers’ compensation claim, employers must first understand the medical/legal requirements for a compensable condition, both in general (AOE/COE), as defined below, and for the individual jurisdiction for the claim. The current claim system is challenged by the general lack of experienced claims adjusters, many of whom are managing extremely complex workers’ compensation claims without the necessary experience to manage or direct medical and legal



vendors in resolution strategies. “AOE/COE” is a commonly understood term for the required elements for determining whether a claim should be accepted or denied, but few truly understand the foundation of this industry standard: the doctrine of “EXLUSIVE” or “SOLE” remedy. Few of the younger generation of adjusters have a clear understanding of both the MEDICAL and LEGAL factors needed to properly assign causation.

“AOE” — Arising Out of Employment is the connection between the medical condition and resultant disability to the claimed event.

“COE” — Course (and Scope) of Employment is the connection between the claimant and the employer against which the claim is being made.

For a claim to be compensable, both elements must be proven. In a compensable claim involving an aging worker, the medical condition which was the direct result of an occupational injury can combine with pre-existing and co-morbid conditions to cause or prolong disability and a need for treatment far beyond what would have occurred in a younger employee with the same injury. Additionally, the claimed mechanism of injury may not have caused the underlying condition; but, if the work activities or accident caused or worsened symptoms, responsibility for the claim may be assigned to the employer. In a system which follows the presupposition that the employer “takes the worker as they find them,” it can be difficult to separate conditions to avoid taking on responsibility for unrelated conditions, but failure to do so has significant negative ramifications to the overall cost of claims, such as:

• Increased number of temporary total and temporary partial disability days.

• Increased rate of PPD and Wage Disability awards associated with permanent work restrictions.

• Increased rate of claims requiring some type of vocational assistance or re-training.

• Future medical awards, including MSA’s (Medicare Set-Asides). These are abnormally high, often putting a settlement out of reach financially. Long-term medical reserves will have a long tail unless segregation of non-occupational conditions occurs—particularly when it involves pharmacy services.

• Increased litigation costs to address disputes over compensability of non-occupational conditions.

Proper assignment of work-relatedness or “causation” is a careful analysis of the facts of the case, objective medical evidence and jurisdictional requirements for assignment of responsibility to an employer. The process of establishing medical causation must be based on scientific evidence and medical probabilities, not anecdotes and supposition.

Why are so many workers’ compensation claims litigated? Before we discuss the best strategies for a post-claim response, there is the “elephant in the room” that needs to be addressed. The elephant is the answer to the following question:

“For employers that provide a comprehensive benefit package to its employees, why are so many claimants litigating workers’ compensation claims?”

The quick answer to the question is that employees typically stand to gain more than they lose. Legal representation is usually free to the worker, and disability compensation is not treated as taxable income.



There are neither co-pays nor deductibles, and employees likely have access to medical services they could not otherwise afford. Workers’ compensation also happens to be the best retirement plan in the country!

This is the darker side of the workers’ compensation system. Soft fraud and its $7.2 billion price tag to the workers’ compensation industry (per NICB) can be fueled by greed, or fear, or both. An unfortunate result of the recent economic recession, and a primary cause of workers remaining in the workforce longer, was a staggering amount of lost retirement program benefits and jobs. Middle-aged workers must remain in the workforce longer than originally planned to recover lost savings and retirement accounts. Workers who must remain on the job until an advanced age may find their physical abilities may not be up to the task. Not only can these types of situations contribute to a legitimate injury, it can tempt already stressed workers to leverage the workers’ compensation system as an alternative to retirement benefits, which may be inadequate to meet their needs.

Recognizing that fear can lead a typically responsible and valued employee to manipulate a claim to obtain or prolong benefits helps adjusters to quickly identify elements of “soft fraud” and respond accordingly. Employers can implement fraud deterrence programs and address employee fears by providing access to wellness programs and services to reduce the effects of aging, and financial planning and other services to be well prepared for retirement.

Effective strategies offered through Aon’s Health & Benefits consulting practice include:

Aligning benefit programs with age-specific data trends.

Integrating all disability programs (WC/STD/LTD) including implementation of an aggressive return to work program.

Promoting wellness programs and encouraging participation to reduce the negative impact of age-related co-morbid conditions. Aligning wellness programs with injury trends on the WC side.

Providing financial and retirement planning services to the workforce.

Aligning traditionally siloed programs into a synergistic, thoughtful approach to optimize any program impacting an aging worker. This holistic approach is a methodology Aon uses with the Strategic Improvement Platform.

For any organization seeking to implement a proactive post-injury management response to aging worker claims, they must accept that standard “best practices” for administering workers’ compensation claims are not sufficient for establishing the med/legal framework to defend claims involving age-related complexities. Aon’s industry-first Ageonomics approach leverages the differentiated expertise of professionals spanning such disciplines as ergonomics, wellness, benefits, safety and claims case management to provide powerful solutions for these challenging and costly claims.

Following are the basic essentials to reducing the total cost of complex workers’ compensation claims:

Strategy #1: Be specific on the medical conditions being accepted on the claim. Some jurisdictions do not require formal notices identifying the specific conditions being allowed on the claim, just the affected body part. This can result in treatment for non-occupational conditions to sneak into a claim. The most effective remedy for what the industry calls “condition creep” is to be very precise



in the specific physiological conditions being allowed on the claim, even if the state or legal jurisdiction does not require it. Accepting body parts without identifying the specific condition creates an opportunity for creative addition of unrelated conditions to a treatment program, and often allows for complacency on the part of the adjuster (they stop asking important questions about the causal connection between a claimed condition and the original injury). By having a discipline that requires identification of specific conditions being accepted (by ICD9 Code), adjusters are better able to use online tools and resources such as ACOEM, and MDGuidelines, to make sure that only those services that are reasonable and necessary to treat the allowed conditions are paid. It makes clear to the attending physician and ancillary medical providers what has or has not been approved on a claim. Finally, it provides a solid legal foundation to start from when requests for treatment involving pre-existing or co-morbid conditions are received.

Elements of an effective investigation for identifying compensable conditions include:

A detailed description of the accident/mechanism of injury. The employer should be precise in describing the environment, physical demands of the position, as well as gather and provide witness contact information.

A thorough PDA (Physical Demands Assessment) for the job at injury. Basic written job descriptions to capture all physical requirements of a particular job such as weights, heights, cycle times, posture, force and repetition (including rotations).

A complete medical history and prior medical records (as is possible). We recommend medical record searches be completed on all indemnity claims, questionable claims involving multiple conditions, and all occupational disease/cumulative trauma. Historical information and medical records provides the baseline from which medical professionals allows for more accurate diagnoses and causation opinion.

It is the adjuster’s responsibility to ensure that there is sufficient causal connection under the laws of the jurisdiction from both a medical and a legal relationship with the employment exposure.

Strategy #2: Facilitate an aggressive integrated transitional duty program Depending on the size and structure of an organization, there may be many different functional roles that interact when an employee is absent from work. Supervisors, Benefits, HR, Payroll, Risk Management, and Claims personnel may all be involved in the process of identifying temporary restrictions, evaluating the work place for ability to accommodate restrictions, and communicating to the necessary partners to ensure the appropriate and timely delivery of benefits occurs. Ideally, it should run like a Swiss timepiece. A broken cog that slows down or stops the movement can create leakage. The first place to look for areas of leakage is in the lag-time it takes to get an injured or ill employee back to work. This is true for all disability programs, not just workers’ compensation.

Application of the scientific disciplines surrounding the interaction among aging humans and the systems in which they interact (Ageonomics), helps carriers and employers utilize predictive modeling tools to identify work tasks better suited physically for aging and injured workers to be accessed on a temporary basis (transitional duty program) or a permanent basis (ADA). The best cost containment tactic for employers is simply to get workers back on the job. However, integrating absence management activities between different leave and benefits programs can be daunting, especially for large organizations with multiple locations. Employers should endeavor to create a consolidated transitional duty program (as



opposed to multiple, separate disparate programs) to manage employee absences, regardless of the cause. Just as a baker can start with one basic dough recipe and make many varieties of cookies, employers can use a single, well-structured transitional duty program to respond to any type of absence with minor adjustments in processes relative to documentation. This streamlines the work process for HR and Benefit program staff to process appropriate legal and benefit-related documentation.

Strategy #3: Make investments in the infrastructure of an effective disability management program. This strategy applies to both the employer and the carrier/claims administrator. The elements of the infrastructure may contrast between the employer and the adjuster, but each of the elements are equally critical to driving an effective post-injury claim management response to aging worker claims.

Employer investment: Detailed physically based job descriptions or PDAs (Physical Demands Assessments) for each position with a high volume of claims is essential. A job description goes beyond the hiring process by:

1. Describing the physical stressors of the job for causation

2. Identifying obstacles for early return to work

3. Clarifying wage disability factors on PPD awards

A detailed job analysis can make all the difference in defending against a questionable claim by providing medical and vocational reviewers with more factual and precise information on the demands of a specific job. It can also make a significant impact on wage disability calculations by showing an accurate picture of the job at injury in comparison to the physical capacities of the worker demonstrated at the time of closure.

Another essential infrastructure investment to strongly consider is a well written Transitional Duty Program. Aon Global Risk Consulting provides valuable assistance in putting together procedures and protocols to coordinate the efforts of employer, carrier and medical provider in implementing a Transitional Duty Program. In addition to creating the program components, consultants will assist in tracking and measuring the benefits of the program to ensure a positive return on the investment.

Carrier/Claims Administrator investment: The insurance industry is feeling the pinch as a result of an aging workforce. There is a critical shortage of experienced property and casualty adjusters, which is due to several factors. “Baby-Boomers” retiring from upper-level management positions are succeeded by claims and underwriting professionals, without an effective plan to hire and train the next generation. According to the U.S. Department of Labor and a study completed by Deloitte Research, more than 70 percent of adjusters today are over 40, and it is estimated that 84,000 new hires are needed to meet what the industry describes as a “critical shortfall” of trained adjusters. Offices administering workers’ compensation benefits should ensure that selected adjusters have the skills, abilities, tools and equipment for the job. While compliance and legal training is required for adjuster licensing and certification, too often training on the medical issues associated with



industrial injuries is not incorporated into the mandatory training requirements. When one considers that 65–75 percent of all workers’ compensation claim dollars are directed to medical services, it is critical that adjusters have a solid foundation in basic medical terminology, anatomy, physiology, and common injuries and illnesses in an industrial setting, otherwise they are reliant upon other people and systems to bridge the gap in their understanding of the medical cost drivers on a claim.

It is not a cost-effective strategy to assign a medical professional to every open claim. Instead, Risk Management Information system (RMIS) triggers and alerts are set to identify claims meeting criteria for assignment of a nurse case manager and the adjuster is notified to make a referral. The standard triggers used by the industry are based on length or extent of disability with a primary focus of facilitating early return-to-work activities. The decision to assign a medical professional on a “disability” model may be too late to reverse a compensability decision, rescind approval of invasive procedures or prevent an extended period of disability. Training adjusters on how to quickly recognize when a condition is failing to respond appropriately to treatment, or when a condition or treatment plan is inconsistent with the other facts of the injury, will improve response times for deploying medical and legal methodologies to control costs on a claim.

In addition to training, tools and resources are another sound infrastructure investment that a claims organization can make to assist adjusters in managing disability and medical services. Several companies provide online medical and disability decision-making tools that an adjuster can leverage to research a claimed condition, treatment protocols, diagnostic criteria and return-to-work timeframes. Such information can give an adjuster a starting point for determining which type of treatment plan is appropriate, and when they need to seek another opinion. Claims organizations should identify a supervisor to ensure these tools are being implemented and used properly. Aging workers have a much higher degree of co-morbid conditions negatively impacting workers’ compensation claims. By empowering adjusters to understand the physiology of older workers — and helping them understand their physical needs, as well as limitations — they can help them respond to the most common age-related conditions affecting claims (diabetes, obesity, hypertension, and arthritis) and equip them to employ proactive strategies for early resolution of these claims.

Strategy #4: Facilitate accurate investigations of workplace injuries Employers should facilitate thorough investigations of all workplace injuries claims, not just those involving aging workers. They must be prepared to provide an accurate account of the exact mechanism of injury, work environment and physical demands of the job.

As most investigations conducted by an adjuster are done via telephone or e-mail, questions or concerns often arise during or after a formal field investigation or statement or deposition occurs. Compensability evaluations are made by physicians and adjusters who may not be fully aware of the true nature of the claimant’s job requirements, and are thus dependent on the claimant’s own description of the accident.

Many companies employ photo and video documentation that provides an accurate and detailed visual accounting of machinery and equipment, tools and state of cleanliness and give medical/legal reviewers and other key decision-makers clear and objective data from which they postulate theories on causation, severity, and work ability.



All too often claims are assigned to defense counsel who must spend significant time and resources gathering additional discovery and records needed to bolster defense strategies. A simple poll of several defense attorneys was conducted with responses to the following questions:

1. What percentage of the cases referred to you for defense or settlement required additional investigative or factual work-up?

2. As a general practice for you or your firm, do you offer assistance in directing the investigation of a newly filed claim regardless of assignment of a case to you, without charge?

Most attorneys indicated that they are happy to provide a quick analysis of a case to advise and direct additional investigation or strategies to determine appropriate causation. Additionally, the average percentage of cases requiring additional investigation and bolstering of defenses was 96 percent! In short, 96 percent of the claims being referred for legal assistance have not been sufficiently investigated prior to issuing a decision of compensability. This results in additional expenses when investigation activities are directed by an attorney.

The employer should develop and implement post-accident response strategies to ensure claims adjusters, defense counsel and medical providers are in possession of all the information necessary to make informed decisions and assign proper responsibility on the claim. This process will also provide value in risk control activities, not just claims administration.

The employer can assist in:

Identifying witnesses and providing contact information.

Assisting the adjuster in scheduling an appointment for the claimant or witnesses to be interviewed by the adjuster. This is especially important for claimants working odd hours.

Providing important paperwork to the claimant and getting medical release authorizations signed to speed the claims process.

Assuring the efficiency of the “fact gathering” stage of a claim investigation by making sure that the right contacts are being made and the quality of the information is sufficient to make the right decisions on a claim.

By identifying a person (or persons) to assume the role of “WC Coordinator” to assist in new claim investigations and facilitating early return to work, employers can make a solid investment that may reduce their total cost of claims significantly.

Strategy #5: Don’t assume or allow assumptions! There are some common assumptions made every day in workers’ compensation claims that the employer can address:

1. Longevity in the workers’ employment relationship precludes the ability to defend against occupational disease or cumulative trauma injuries.

2. An inability to identify prior medical treatment records or diagnostic studies means that a claim for a medical condition must be accepted.



3. Settling questionable claims for defense costs makes good business sense.

4. Adjusters and attending physicians have a thorough understanding of job requirements and work environment before making decisions on a claim.

One of the most disturbing assumptions evidenced in claim notes is “Employer does not question the claim.” That statement in a claim file is often accompanied by a lack of follow through on the part of a busy adjuster to complete the often exhaustive work of independently verifying the facts of the claim, the worker’s employment and medical history, gathering of witness statements, follow-up on ISO findings, medical records searches for pre-injury historical records and corroboration of the facts.

Strategy #6: Insure that the claims administrator has an “80/20” plan and not “frog soup” A lot of damage can occur when a single standard model for basic claims administration is applied to a claim with multiple layers of complexity. Aging workers, especially those over 50, often have co-morbid conditions complicating claims, unless they have lived an exceptionally healthy lifestyle. Adjusters must be trained and prepared to identify and respond appropriately to co-morbid and pre-existing conditions in a claim. The claims administrator should have quality assurance protocols in place to identify complex claims that do not appear to have the right strategies being employed.

The “80/20 plan” As was mentioned earlier in this paper, the “80/20” rule describes how a large percentage of the total claims spend is associated with a much smaller percentage of the total number of claims. An “80/20” plan identifies what Aon Consultants call “ECIs – Early Claim Indicators”. ECIs are claim metrics that fall under specific categories of an early-warning system for claims that are predisposed to develop into problem claims. “Advanced Age” is an early claim indicator for complications due to aging and the related co-morbid conditions. Other ECI metrics that further complicate claims are: terminations or lay-offs, multiple prior claims, obesity, drug use, etc. The “20 percent claims” have complex medical conditions and/or psychosocial factors that require an action plan different from the standard model. Several recommendations for investigating and managing these claims have been presented in this white paper; however, strategic and expert problem-solving and case-management skills are by far the most effective means of segregating occupational from non-occupational conditions.

A claims discipline to avoid “frog soup” For the 20 percent of the claims that drive the majority of the costs, the majority of these claims began as standard workers’ compensation claims which, over time, developed to mammoth proportions. This is primarily due to a failure to recognize early warning signs of a problem. For a “normal,” healthy individual, a soft tissue injury such as a lumbar sprain/strain should be resolved within six to eight weeks with minimal disability. Adjusters must quickly respond when medical services or disability extend beyond industry guidelines, such as ACOEM, MDGuidelines, etc. This must become a part of their work process to keep claims from escalating into the top 20 percent of an organization’s claims costs.

This is the case of “frog soup”. If you drop a frog in boiling water, it recognizes the danger and jumps out of the pot. If you drop a frog into a pot of cool water and slowly turn up the heat the frog becomes part of



the soup, not realizing until too late that it was unfortunately an ingredient in the recipe. To avoid the frog soup conundrum, it’s critical that you recognize early warning signs and respond quickly and appropriately before you reach a point of no return.

By building a claim-management infrastructure to address the complexities of claims with co-morbid conditions as described above, and then quickly applying those strategies to claims that are predisposed to adverse development, you can help to reduce the negative impact of these claims to your bottom line. Understanding the physiological changes of the aging process to anticipate and respond to complications can move claims to closure and reduces benefits being directed to non-industrial conditions. How many large PPD awards could have been reduced by making sure that physicians evaluating a worker for residual impairment took into consideration physiological deficits related to the age of the worker?

Strategy #7: Don’t let doctors be lawyers and lawyers be doctors

“Medical and legal causation arise from two different sources; medicine from science and legal from a desire for social justice (or gain of certain stakeholders). Courts do not have their origins in science and science changes, therefore the laws developed are not scientifically derived.” ~ Christopher R. Brigham, MD, Chairman, Impairment Resources, LLC

Complex medical cases are rarely won in the workers’ compensation courts. If they are, it often comes with a very large price tag. Administrative Law Judges are not medically trained, and often err on the side of caution in favor of providing necessary medical care to a claimant. A favorable legal opinion may occur at some point in the process, but a significant amount of money may be needed to secure it and then protect it on appeal. If additional attention is paid in developing a solid scientific and factual foundation for the complete or partial denial of claimed conditions, the greater the likelihood of an early resolution to the claim.

Doctors Physicians and medical providers are often asked to provide legal opinions that expand beyond the scope of their practice or experience. Doctors should not be put in a position to interpret or respond to the law. Caution should also be taken when asking a medical professional to be your investigator or vocational expert. Medical professionals are trained in patient advocacy and will likely err on the side of caution when it comes to important decisions involving patients. By staying focused on objective medical evidence, standards of care and industry guidelines such as the AMA Guides or ACOEM, physicians can be held more accountable for their decisions.

Lawyers/Judges (and Adjusters) The physiological changes related to aging and co-morbid conditions, and their impact on claims decisions are best addressed in the clinic, not the courthouse. Most state workers’ compensation dispute resolution systems are administrative, not civil. Just as you do not want doctors interpreting law, neither do you want lawyers and judges diagnosing medical conditions and what caused them.

The Ageonomics approach to reducing litigation claim costs is to anticipate the issues based on early claim indicators and interviews with the injured worker and employer and develop a comprehensive action



plan to remove any guess work from physicians in properly assessing causation and segregating non-occupational conditions; and from lawyers/adjusters in defending decisions made on a claim.

Strategy #8: Coordinate claims strategies for all disability programs When an employer’s disability benefit programs function independently or in a siloed manner, there can be a distinct lack of coordination and communication between the different benefit claim administrators, i.e., workers’ compensation versus short-/long-term disability, as well as FMLA. Employers need to closely monitor all benefit programs simultaneously to avoid leakage in the area of overlapping benefits. If the workers’ compensation claim is denied, benefits cease and the worker may begin receiving disability and medical benefits under the employer’s group plan (while the claim is going through the appeals process). If the denial is overturned and statutory benefit payment is ordered, a careful accounting of what has been paid by other benefit programs will assure that differences in co-pays, fee schedule amounts and managed care network savings are properly reconciled and recovered. Thus begins the classic “Whack-A-Mole” game of disability management for the employer who must insure that all disability programs are working together.

The “mole” in the game is some form of disability compensation or job protection (FMLA, ADA, etc.) program of the employer. It is very common for a disability claim to start out as workers’ compensation or personal health condition and then change mid-stream to another type of claim resulting in various types of leakage. Higher cost medical services, such as surgeries, may be put on hold while a claim dispute is being adjudicated, leaving the claimant in a holding pattern for receipt of medical services. As payment of workers’ compensation benefits are statutorily required, if a denial is overturned, the claimant may be doubly compensated by receiving retroactive workers’ compensation indemnity benefits after having received short-/long-term disability payments for the same period. In such a circumstance, the employer can reduce leakage by:

Being familiar with STD/LTD policy provisions for recovering overpayments.

Making sure that all disability compensation programs/carriers are receiving claim notices needed to recover duplicate benefits.

Making sure that appropriate actions are being taken to secure reimbursement of all overpaid benefits in compliance with the laws and rules of each jurisdiction. When resolving disputes and negotiating settlements, conduct a “cost / benefit” analysis of each type of disability to ensure the right perspective for settlement purposes.

Encouraging each benefit administrator (WC and LTD/STD) to take an active role in reducing disability through early intervention by disability management professionals — even during the dispute resolution process.

Conclusions A primary goal of a casualty consultant is to advise and assist clients in reducing leakage in their programs. Aon’s Ageonomics approach involves three disciplines designed to reduce leakage associated with claims involving aging workers and co-morbid conditions:



Aon Analytics Aon’s Actuarial & Analytics practice leverages precise methodologies and approaches for calibrating absenteeism trends for the aging workforce, regardless of the cause (occupational or non-occupational). The Aon analytical team also employs advanced data mining and predictive analytics to uncover key trends in loss and claims data. Claims and legal data is also reviewed in comparison with aging workers and other demographics to understand the claim volume, duration, average cost per lost day, average cost per claim, total costs and ultimate cost projections. This is important for the claims decision-making processes of setting appropriate reserves and settlement valuation.

Aon Hewitt Every claim manager knows that the best way to reduce claim costs is to not have claims! Aon’s Health & Benefit Consultants apply theoretical principles to design age-specific systems to optimize the wellbeing of the aging worker while improving overall system performance. Through “Aging Worker Benefits” consulting and the “Aging-Worker Wellness Program” consulting, Aon Hewitt assists clients in identifying key performance indicators related to an aging workforce and implementing pre-emptive programs to help keep aging workers healthy and optimize their individual work productivity.

Aon Global Risk Consulting Aon’s Risk Control, Claims and Engineering Division technical consultants are trained to respond to all issues negatively impacting costs, including those associated with aging workers. Aon consultants provide the following:

Aging Workforce Safety Consulting

Aging Workforce Ergonomic Consulting

Aging Workforce Claim Consulting

Aging Workforce Accelerate Claim Closure Consulting



Aon’s Safety and Ergonomic Consultants offer age-specific pre- and post-injury consulting services to help reduce the exposure of workers’ compensation claims through prevention, as well as aid in safe return to work of an injured worker with a reduced risk of re-injury through redesign of the work environment or position. The Claim and Accelerated Claim Closure Consultants assist in resolving the problems associated with the “80/20” rule by assisting the employer and claims managers in managing and creatively resolving the 20 percent of the claims creating the most costs.



References “Comorbidity in Workers’ Compensation: Preventing and Identifying Comorbidity to Reduce the Impact on Workers’ Compensation Claims” — Michael W. Giusani, BSPharm, RPh; et al

“Workers’ Compensation and the Aging Workforce” — NCCI Research Brief — Dec. 2011 — by Tanya Restrepo and Harry Shuford

Workers’ Compensation and the Aging Workforce: Is 35 the New ‘Older’ Worker? — October 2012 — Tanya Restrepo and Harry Shuford

“Thinking About an Aging Workforce — Potential Impact on Workers’ Compensation” — May 2005 by Harry Shuford, NCCI Chief Economist and Tanya Restrepo, NCCI Assoc. Economist

“Comorbidities in Workers’ Compensation” — NCCI Research Brief — Oct. 2012 — C. Laws and D. Colon

Factors That Influence the Amount and Probability of Permanent Partial Disability Benefits. Phil S. Borba and Mike Helvacian. June 2006. WC-06-16

“Ageonomics — Responding to the Needs of an Aging Workforce” — Aon White Paper — April 2014 — V. Missar and J. Galusha

“Causation and Apportionment Analysis: Science vs. Myth” — Christopher R. Brigham, MD — Feb 2012

“The Aging Body: Merck Manual Home Health Handbook for Patients and Caregivers“ — Richard W. Besdine, MD — Sept. 2013

“The Aging Workforce: How to Manage Workers’ Comp Costs for the Silver Bunch” — Karen Yotis — May 2014

“Property-Casualty Claims Management: Adjusting to New Realities” — Conning & Company — Gerri Riley — July 2001

“It’s 2008: Do You Know Where Your Talent Is? Why Acquisition and Retention Strategies Don’t Work,” Deloitte Research 2004.



Contact Information Joe Galusha Managing Director Risk Control, Claims, and Engineering Property and Casualty Risk Control Aon Global Risk Consulting 1.248.936.5215 [email protected] Vicki Missar Associate Director Casualty Risk Consulting Aon Global Risk Consulting 1.469.867.6196 [email protected] Kris L. Kennet Casualty Claim Consultant Risk Control Claims & Engineering Aon Global Risk Consulting 1.503.306.2835 [email protected] Carol A. Zeneberg Casualty Claim Consultant Risk Control Claims & Engineering Aon Global Risk Consulting 1.616.336.0402 [email protected] Rudy Koenig Marketing Leader, US Aon Global Risk Consulting 1.312.381.2670 [email protected]



About Aon Global Risk Consulting’s Strategic Improvement Platform AGRC's Casualty Risk Consulting team is dedicated to providing clients with innovative and sustainable solutions for their risk management needs. The differentiating factor is the Strategic Improvement Platform, a continuous improvement model leveraged to assess, plan, implement solutions, and measure success for our clients.

The Five Phases of the Aon Strategic Improvement Platform 1. Calibrate: A critical understanding of our client’s vision to ensure we deliver solutions that are

consistent with long-term business plans.

2. Diagnose: Establish baselines and benchmarks to identify strengths and prioritize opportunities for improvement. Then, by assessing the current state of the casualty program from a risk management, culture and prevention perspective, we help client build a program that drives measurable impact.

3. Strategize: Team with clients to build a proactive, metric-driven plan to drive near-term milestones and long-term and sustainable successes. The objective is to help clients build SMART goals, so sustainable and replicable success for your organization can be managed.

4. Execute: A hallmark of our consulting approach is “execution through client service”. Planning with poor execution will not drive results, therefore, Aon’s global resources are ready to support, compliment or directly manage portions of the strategic plan.

5. Measure: The purpose of designing a strategy and then committing time and resources to its implementation is to drive results. Part of our planning sessions will be to identify how our clients will measure success.



About Aon Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon’s global partnership with Manchester United.

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