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  • 5 factors for fifteen - A solid grasp of past and present industry trends can help you prepare for challenges ahead. Sedgwick’s thought leaders are helping clients by forecasting five primary factors that will impact our industry this year. Learn more.
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zohydro-approvedOn January 30, 2015 the Food and Drug Administration (FDA) approved a reformulated version of Zohydro ER (a long-acting, single-entity hydrocodone product) that is designed to possess abuse-deterrent properties. When the FDA originally approved the medication in October 2013, it was one of the more controversial medication approvals in some time. Yet, despite the objection of over 28 state attorney generals, addiction treatment providers and even the FDA’s own advisory committee, the medication Zohydro ER came to the market in March of 2014.

The new abuse-deterrent formulation is designed to prevent someone from crushing the medication and therefore extracting a large dose of medication to be administered for immediate use as opposed to the long acting effect it was designed for. Zogenix, the manufacturer of Zohydro, developed this new formulation in order to combat the negative image originally created by hydrocodone products. In addition they had to keep up with another long-acting hydrocodone competitor product which just recently came to the market and is already formulated with abuse-deterrent properties, Hysingla (Purdue Pharma).

While abuse-deterrent formulations are helpful in preventing a small population of abusers from inappropriate use, the further addition of more high-cost, long-acting narcotics such as these into the market continues to be a concern for our pharmacy team.

Preventing abuse

What needs to remain in focus is that just because a medication cannot be crushed and abused, doesn’t mean risk for abuse and overdose, and a need for patient safety, do not exist. These high-cost medications do nothing to ensure or prevent a patient from becoming addicted to pain medications, from diverting or misusing, and they do not represent a promising option for getting claimants back to work.

At Sedgwick, we work hard to see that the injured workers we service get appropriate care so they can return to work as soon as possible. These new opioid medication approvals, while they may deter abusers, can also serve to distract us from the real conversations of patient safety, wellbeing, and improved patient function that we continue to have with providers every day. Our complex pharmacy management and pharmacy utilization review teams, made up of knowledgeable pharmacists and nurses as well as an in-house physician, will continue to work hard to address the inappropriate utilization of long-term (and short-term), high-cost opioids such as these. Sedgwick is committed to continue to advocate for clinical solutions that are safe, appropriate and likely to get patients back to work as soon as possible. I would welcome your thoughts on preventing abuse of narcotics.

Paul M. Peak, PharmD, Pharmacist, Complex Pharmacy Management

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ARAWC-screenLast year I highlighted the mission and objectives of the newly minted Association for Responsible Alternatives to Workers’ Compensation (ARAWC) organization that was established by a collaborative group of employers and their provider partners. With Sedgwick as a founding member of this organization, I can report that we moved quickly to stand up the association, hire experienced staff, lobbyists and others with expertise in passing legislation. We are putting in so much effort on behalf of U.S. employers to ensure this organization stays focused and delivers on its mission.

Before I give you the really good news, here is a recap of the central issue. Workers’ compensation is dictated by separate statutes in every state. Only Texas and Oklahoma offer the freedom to “opt out” of the statute, and in each case, the way this is practiced is quite different. In the case of Texas, opting out is known as “nonsubscription” and has been around for more than 100 years. Practitioners have achieved dramatic cost savings and better outcomes for many claims. Over time, nonsubscribers also often experience significant reductions in frequency and length of disability. All of these outcomes are what we work hard to help our clients achieve, but we are often frustrated by the statutory requirements of many states that bring bureaucracy and controversy to the resolution of many claims.

Back in 2013, the state of Oklahoma enacted new workers’ compensation legislation in SB 1062, which allows any employer to exit, or opt-out of, the state’s statutory workers’ compensation system. While not exactly like nonsubscription in Texas, this new statute is a significant move forward in giving employers more options in how they respond to and finance employee injuries and related benefits. Regardless of the mechanical operations in the free market alternatives to WC, the key focus is ensuring injured employees are treated respectfully and compensated fairly in the aftermath of on-the-job injury. Just as there are significant differences between what Oklahoma has done and what has been in place in Texas for over 100 years, there are state-specific opportunities to improve the financing for and response to employee injuries in many other states.

Where Oklahoma’s SB 1062 offers Oklahoma employers that choose to opt-out of the state system the opportunity to substantially reduce work-injury costs and avoid both the statutory system’s extensive regulation and litigation risk, similar goals for other states are being established by the leaders of ARAWC for the benefit of both employers and employees. Two key statistics reflect a clear basis for why Oklahoma changed and improved their approach to employee injuries:

  • Oklahoma employers cited that WC cost was the #1 reason they were either leaving the state or adding jobs at facilities located in other states such as Texas
  • 2012 NCCI statistics showed Oklahoma loss costs to be 225% higher than neighboring states

Currently, all but these two states effectively mandate workers’ compensation insurance as the sole option for employers to cover employee injuries. ARAWC’s mission is to expand the delivery of better medical outcomes to injured workers by allowing employer choice in other states. Experience under these alternative employee injury benefit platforms has proven to dramatically reduce employee injury costs, while achieving higher employee satisfaction and substantial economic development. Over the past two decades, Texas nonsubscribers have achieved better medical outcomes for hundreds of thousands of injured workers, and saved billions of dollars on occupational injury costs. While ARAWC is not necessarily taking the Texas model forward into other states, it will leverage learning from over 100 years of having options in Texas and what emerges from the changes from Oklahoma’s new statute to drive a strategy for process improvements and lower costs in selected states where change is overdue.

The key core benefits that ARAWC is seeking in these states include, but won’t necessarily be limited to:

  • Delivering better medical outcomes and higher process satisfaction for injured workers without the cost and burden of traditional workers’ compensation
  • Driving state economic development through the attraction of employer savings

Providing employers more choice in financing and responding to employee injuries can positively impact employees, employers and healthcare providers. Experience supports that competition to traditional workers’ compensation insurance can reduce premium rates and improve services. Enabling choice of program design increases employers’ participation in the process, which allows them to hold all service providers accountable for results and outcomes. It also enables employees to access medical providers that do not accept workers’ compensation clients because of low fee schedules and paperwork required. In the absence of statutory mandates, responsible employers create high-quality benefit plans for occupational injuries, enabling improved access to better medical talent leading to higher employee satisfaction, better medical outcomes and lower claims cost.

The member companies of ARAWC aspire to refocus state-based mandates in response to growing gaps in quality medical care, efficient risk financing, effective return to work and other gaps in many current systems. Some of the other expected benefits of ARAWC’s strategy are expected to be:

  • Improved workplace safety and training supporting injury prevention
  • Expanded access to quality medical providers giving exceptional care
  • Opportunity for expanded benefits through custom-designed plans
  • Opportunity for reduced waiting periods for wage replacement with greater benefits
  • More expedient medical treatment and more immediate referral to specialized medical treatment to enhance recovery
  • Early identification of potentially complicating medical conditions and securing appropriate medical treatment to aid recovery
  • Improved communications with injured workers to address benefit questions and assist early return to work

I am happy to bring further news that the strategic plan is moving along nicely, including the identification of the first two target states for option legislation. In fact, on February 12th, a bill was introduced in the Tennessee legislature by Senator Mark Green that will bring a version of the option to Tennessee employers soon if passed by the legislature and signed by the governor. If achieved this year, the speed of change will have accelerated dramatically since it took approximately four years to move similar legislation in Oklahoma.

Several other states continue to be vetted for prioritized change efforts. Even better, we have assisted in drafting legislation in the first state, secured a highly respected bill sponsor, gained the endorsing support of major employer players in the state and begun the formal process of socializing and educating key stakeholders instrumental to passing new legislation in the state. While this state’s legislative session is relatively short, things are moving quickly enough to believe that there is a good chance of getting some form of the bill passed this year. Considering the three to four years it took to pass the bill in Oklahoma, this would be an amazing result if achieved.

As you can see, ARAWC is already fulfilling its mission funded by its current members. Active membership recruitment remains a priority; the nature of this beast is that it will take some time to achieve WC legislative change in the many states that will clearly benefit from giving employers an option that aims to achieve the type of results seen in Texas and hoped for in Oklahoma. More to come soon.

Chris Mandel, SVP, Strategic Solutions

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CDC-chart_measles-cases-616pxThe current measles outbreak has received major news coverage in the United States because this highly contagious disease – declared eliminated in the U.S. in 2000 after decades of childhood vaccine efforts – has begun to spread again.

In January alone, the number of measles cases in the U.S. climbed to 102, almost twice the number for the whole of 2012; in 2014, there were 644 cases of measles, the most reported in 20 years.

What is measles?
Measles is an acute viral respiratory illness characterized by fever, cough, nasal congestion and conjunctivitis followed by a rash. The rash usually appears approximately 14 days after a person is exposed and spreads from the head to the trunk and then to the lower extremities, although some immune-compromised people do not develop the rash.  The incubation period ranges from 7 to 21 days and patients are considered to be contagious from 4 days before to 4 days after the rash appears.  Accordingly, it is recommended that infected people be isolated for four days after they develop a rash.

Measles can be a serious disease for people of all ages, especially those with other underlying medical conditions. Common complications include bacterial middle-ear infection and pneumonia.

There is no specific antiviral therapy for measles, so the medical care provided is supportive and to help relieve symptoms and address possible complications.

How is it spread?
The measles virus lives in the nose and throat mucus of an affected person and it is transmitted to others by direct contact with infectious droplets or by airborne spread when an infected person breathes, coughs or sneezes.  This virus can remain infectious for up to two hours on a surface or in the air after the infected person leaves an area.

Although it is not certain how this year’s multi-state outbreak began, it is assumed that an infected person traveling from outside the U.S. visited the Disneyland theme parks in Orange County, California and spread the disease to others.

The Centers for Disease Control (CDC) estimates there are about 20 million cases of measles worldwide each year, and in 2013 almost 145,700 people died from the highly infectious disease.

CDC-measles-map_multi-state-outbreaks

Is measles compensable under workers’ compensation?
While measles is a public health issue, this disease will not generally be viewed as compensable under workers’ compensation because the exact exposure would be very difficult to pinpoint to the workplace. In fact, most employees are at no greater risk of being exposed to measles at work than they would be out and about in the general population.

Other risks and some things employers can do
Risk managers and safety professionals must consider other risks to their organizations due to a measles outbreak and develop the appropriate responses in advance.

  • Encourage employees to stay at home to avoid spreading illness if sick or believe that they have been exposed to measles. Measles is so contagious that if one person has it, approximately 90%of the people close to that person who are not immune will also become infected.
  • Familiarize yourself and your employees with the signs and symptoms of measles. Because the prevalence of measles has been low since the vaccine was introduced, many may not have encountered a case of measles in their lifetime.
  • Encourage vaccination.The majority of people who have contracted measles were unvaccinated. Although immunization against measles has resulted in a contentious political debate over the past few days, vaccines are proven to provide protection against disease outbreaks at home or abroad.

Organizations at high risk to be impacted by a measles outbreak include healthcare facilities, first responders, schools, public transportation and those with personnel who travel to areas of the world that have an active outbreak of measles.

Healthcare professionals are on the frontlines of disease management and it is important that regardless of presumptive immunity status, respiratory protection consistent with airborne infection control precautions is used.

Finally, the following lessons learned as healthcare providers prepared for Ebola have relevance for measles:

  • Infection controls should be exercised as soon as there is a clinical suspicion of an illness or illnesses that can be spread from an infected patient;
  • A patient’s travel history must be taken into consideration when people present with an illness.

Click here for additional information posted by the CDC on measles.

Desiree Tolbert, Director, National Technical Compliance

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building_blocks-successImportant things in life are not easily reduced to 10 steps. Nevertheless, this article pro­vides a list of 10 key elements to achieving long-term success in risk management from someone who has spent more than 25 years striving to carve out the most satisfying career possible, while trying to never lose sight of the bigger picture. To be clear, I’ve made plenty of mistakes, but tried to learn from each of them. While a basic tenet of good life learning, I don’t enumerate this principle in the list of 10 as it is one of hundreds of general principles we hopefully learn and adopt along our career journeys.

The 10 topics covered are those I believe deserve the most emphasis and which will have the most impact on your career as it moves along the spectrum of accomplishments and contributions. In essence, you can‘t lose when keeping these elements in mind as you develop the tactical and strategic approach to managing your career. Yes, I strongly urge you to have both a strategic (long-term) and tactical (short-term) plan for what you want out of a career in risk management. As a lifelong initiative, it deserves that kind of attention, care and feeding. It is no less important than the performance you deliver to each employer each year of your service.

I want to share with you a few critical things recently posted by Jack Welch, former CEO of General Electric (now head of the Jack Welch Management Institute). These are his list of career pitfalls for all seeking success in business. It offers a great supplement to this series on risk leader success. Here they are:

  • Misfiring on performance or values — overcommitting and under-delivering
  • Resistance to change — failing to embrace new ideas
  • Being a problem identifier vs. a problem solver
  • Winning over your boss but not your business peer group
  • Always worrying about your next career move versus focusing on the present
  • Running for office – it’s totally transparent to everyone but you!
  • Self-importance — exhibiting a humorless, rigid attitude
  • Lacking the courage and conviction to push back on the system
  • Forgetting to develop your own succession plan for when you get promoted
  • Complacency — you’ve stopped growing

So combined with Welch’s pitfalls to avoid, here are the building blocks to risk leader success. I hope you find them helpful as you navigate your career path in our exciting industry. To read the full article, click here.

  1. Many good places to start: Breaking into a career in risk management isn’t exclusive to those inside the industry. Risk leaders come from all stripes, with a large variety of different starting points.
  2. Educational strategy: In thinking about your continued education, consider what group of skills and knowledge make risk managers successful. In my experience, those skills include various levels of acumen in finance, law, audit, compliance and operations.
  3. Industry background: The new risk management realm requires greater breadth of knowledge to be successful. Broad understanding is gained by spending time in the trenches, building relationships with those in many areas of the enterprise and learning from mentors who can pave the way.
  4. Getting involved outside the organization: While showing leadership internally is job one, demonstrating leadership in the broader discipline is also important to long-term success. Getting involved beyond their own organizations allows risk managers to have leadership experiences that deepen knowledge and hone political skills to higher levels.
  5. Racking up creditable points with senior managers: The points risk managers offer up are not always creditable “points” in the eyes of senior managers. To be so, they should be tied to the things that matter most to the organization and that can be traced, at least indirectly, to mission accomplishment.
  6. Establishing yourself as essential to others’ success: Risk management stakeholders can’t succeed without the right risk strategy and, most particularly, the right risk leader who understands their priorities and knows how to build relationships of mutual benefit.
  7. Developing the bench: While all managers are expected to develop their employees, this aspect of management is harder in risk management than in many other disciplines or functions, if only due to the often smaller-sized teams that are the reality for the majority of risk leaders.
  8. Supplement value preservation with value creation: While it is certainly true that protecting and preserving is job one for risk leaders, the bigger opportunity for this profession is helping others understand what it means to exploit risk for gain.
  9. Advance the profession by finding or creating personal vision: By crafting risk strategy, framework and models around the continuously evolving needs of a firm, a risk leader’s vision for risk management will take shape. As it is successfully implemented, this vision will also drive the risk profession forward, through benchmarking, networking and professional external collaborations.
  10. Give back: Giving back to the next generation and to communities and nonprofit organizations (some of which can’t afford the cost of risk expertise, e.g., churches and civic organizations) is essential to developing a well-rounded leader and person.

Chris Mandel, SVP, Strategic Solutions

Full article first published on IRMI.com and is reproduced with permission. Copyright 2015, International Risk Management Institute, Inc.

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As employers and individuals look for alternatives to smoking tobacco, the use of e-cigarettes is on the rise. Unified Investigations & Sciences, part of Sedgwick’s family of companies, recently took a closer look at the emerging risks associated with these devices.

UIS_e-cig

Fires caused by malfunctioning e-cigarettes are on the rise

By now, most people are familiar with electronic cigarettes, or e-cig. This rapidly advancing technology first came from an invention in China in 2003 by Hon Lik. The basic design has remained virtually unchanged; however, the accessory market has driven e-cig sales to a whole new level. As of November 2014, the e-cig market in the U.S. alone was over $1 billion and continuing to grow due to its attractiveness to younger users and those who want to quit smoking traditional cigarettes.

The e-cig has been marketed as a safer alternative to traditional cigarettes and for those looking to avoid the harmful effects of traditional cigarettes. However, in addition to the inherent health dangers of e-cig, here is another harmful factor emerging related to these devices. If you can’t guess, it’s a fire hazard. A majority of you have probably never heard of the fire hazard e-cigs have the potential to cause. When you take into consideration the number of units sold throughout the U.S. from product-specific dealers to street corner convenience stores, the probability of e-cig failures increases every day.

The simplicity of these devices makes them more alluring for their perceived convenience, portability and charging methods (USB). According to a white paper published by the U.S. Federal Emergency Management Agency (FEMA), 80% of e-cig fires occur while charging. Documentation has shown fires resulting from charging e-cigs in vehicles, homes, bars, convenience stores and numerous businesses (by employees). The risk of loss to the business is much greater when the aspect of lost time comes into play.

When you stop and think about someone charging an e-cig, whose equipment and electricity are being used to charge the device? If it is at a place of business – your workplace – they are using company equipment and power for personal use which may result in a fire, especially if left unattended for an extended period of time. This makes no difference as to how new the e-cig is or how well it has been maintained.

The most prominent failure observed has been from battery venting (like an explosion). When this occurs, pieces of the e-cig and battery can be discharged in different directions creating more than one fire, especially in the presence of lightweight combustible material. This leads to not only a fire hazard but personal injury risk, as well. The fire hazard stemming from this failure event can be very minimal or catastrophic for varying factors. The risk of high-level damage and lost time in the business environment is much greater considering the place, people and equipment involved. The result of one of these devices malfunctioning is shown in the photos above.

This instance (see above right) occurred while operating a motor vehicle. Now imagine if this was your office building.

The bottom line is there is an increase in the number of fires and accidents resulting from e-cigarettes. As an employer, you should look at your policies regarding their proper use, if at all, in the workplace. Where does the risk lie – to those in the workplace as well as to property – if a fire occurs?

No matter where the e-cig is charging or how many eyes may be upon it, the potential for these devices to fail and become ignition sources is always present. If you have questions about preventive steps or how you should approach e-cig use in your office, please let us know.

Mathew Cooper, IAAI-CFI, Senior Investigator
Unified Investigations & Sciences | a Sedgwick company

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blog-slider_5for15

Sedgwick forecasts top risk and productivity management trends

As the leading global provider of technology-enabled claims and productivity management solutions, Sedgwick helps clients prepare for difficult changes, look for new ways to control costs, and ultimately improve outcomes. I am pleased to introduce our 5 factors for fifteen, forecasting major industry trends that we believe you should watch in 2015.

We are committed to helping our clients prepare for this year and beyond by highlighting emerging trends and risks likely impacting their businesses and their people. Technology and healthcare advancements, changing workforce demographics and legislative, political and climate changes, among other factors, contribute to the challenges we expect this year. It’s important for us to stay at the forefront of these shifts so we can continue achieving the best outcomes for our clients and their employees and stakeholders.

The key trends that Sedgwick’s thought leaders believe will most significantly affect employers in 2015 include:

1) Redefining healthcare

  • An evolving U.S. healthcare market
  • Patient engagement
  • Mental health

2) Technological advances

  • User-centric solutions
  • Hyper-connectivity
  • Cyber risk

3) Market and economic forces

  • Economic improvements
  • Focusing on the customer experience
  • Political landscape

4) Workforce challenges

  • Integration
  • The growing need to groom new adjusters
  • Diversity and inclusion

5) Weathering disasters

  • Addressing resiliency
  • Understanding exposures
  • Preparing for the ripple effect of climate change

We predict that the aforementioned issues will be significant in 2015 and join other industry experts in closely monitoring the legislative impact of the recent shift in power in the U.S. Senate—and the potential political impact of the 2016 presidential election—on the Affordable Care Act.

For more on the 5 factors for fifteen and Sedgwick’s perspective, visit sedgwick.com/5forfifteen and follow our blog for ongoing thought leadership.

David-North-Sedgwick-CEO-Sedgwick-Connection-Blog - 180

 

 

 

Dave North, President and CEO

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What if I told you that you could save $185,000 at no cost to you? No, I am not advertising for some late night TV infomercial where the offer is too good to be true. I am talking about the world of Medicare set-asides (MSA). It is well known that prescription drugs are the leading cause of high MSAs. Why is that? The reason is simple: The Centers for Medicare & Medicaid Services (CMS) require drugs to be priced for the lifetime of the claimant (if we are seeking CMS approval of the MSA). In addition to a lifetime allocation of the drugs, CMS also uses what is called Average Wholesale Pricing, or AWP, to determine the price per pill of each drug. Very often the AWP is much higher than the workers’ compensation price, the drug store price or the discount price we receive from a pharmacy vendor.

Many clients and examiners have asked the Sedgwick Medicare compliance team about the highest-costing drugs. So we have put together a chart showing the top 10 most expensive, commonly prescribed drugs. In the chart below we have listed the drugs along with their common costs over various life expectancy timeframes. We have also listed generic alternatives where available to illustrate possible cost savings by getting the treating doctor to prescribe generic alternatives.

Let’s go back to my introductory statement about what if you could save $185,000 dollars. Looking at an example for a claimant with a life expectancy of 15 years, Percocet will add almost $200,000 to the cost of the MSA. But if the doctor prescribes the generic alternative, this amount is reduced to $15,400; a savings of approximately $185,000 to the employer or carrier on the MSA allocation. That is the kind of savings I believe everyone can agree is significant and still provides the same level of treatment for the patient.

We are providing this list as a reference only. Drug prices do change frequently, so don’t rely on this chart to price a drug. However, if a claimant is taking one or more of these drugs, it may be beneficial to have the case reviewed by a pharmacy utilization review team before making an MSA referral. By doing so, the utilization reviewer would have the opportunity to analyze the prescribed drugs and perhaps get the claimant off of these expensive drugs or move the claimant to a generic alternative. In either case, the MSA would be significantly reduced.

If you have questions or concerns about any Medicare compliance topic or issue, please contact our Medicare concierge desk at medicarehelp@sedgwick.com.

Michael Merlino, VP, Medicare Compliance

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TRIA-renewedAs shown by news reports from France last week, terrorism continues to be a real threat.

Perhaps this reminder prompted the U.S. House of Representatives to vote 416-5 on Jan. 7, 2015 followed by a vote of 93-4 by the U.S. Senate on Jan. 8, 2015 for renewal of the Terrorism Risk Insurance Act (TRIA) through Dec. 31, 2020. President Barack Obama signed the bill, H.R. 26, into law on Jan. 12, 2015.

The renewal of TRIA is welcome news to the insurance industry, including the workers’ compensation line.

In 2002, Congress enacted TRIA following the terrorist attacks of September 11, 2001, in response to terrorism insurance becoming unavailable or, when offered, extremely costly. Extended first in 2005 and again in 2007, the last session of the Senate in 2014 allowed the program to expire on Dec. 31, 2014.

On May 7, 2014, the Rand Corporation announced the release of a new study, “The Impact of Eliminating the Terrorism Risk Insurance Act on Workers’ Compensation Insurance Markets.”

The study noted that losses in workers’ compensation could be “more than $10 billion from a large conventional attack (10-ton truck bomb) and more than $300 billion from a nuclear attack.” The study noted that the workers’ compensation losses caused by the 9/11 attacks were “approximately $2.6 billion (in 2013 dollars).”

This study pointed out that because workers’ compensation coverage is mandatory for most employers and defined by each state’s statute, strategies available for other lines of insurance such as changing the insurance contract; imposing policy limits; excluding coverage of terrorism; or excluding losses from nuclear, biological, chemical or radiological (NBCR) attacks are generally not an option.

According to this report, some of the possible effects of TRIA expiration on workers’ compensation absent a dramatic increase in the provision of affordable reinsurance included:

  • A reduction in the amount of workers’ compensation capacity provided by the insurance industry, thus making it harder for businesses to obtain coverage, likely to be most pronounced for large employers, landmark buildings and businesses in dense urban areas
  • Redistribution of risk such that the burden of catastrophic losses would be confined within the state that is attacked to a greater extent, whereas TRIA spread those losses across the country
  • High-risk businesses paying more for their workers’ compensation coverage and the likelihood that those costs would be passed onto to workers in the form of reduced wages and/or benefits, thereby reducing labor income and economic growth

The bill makes the following changes to TRIA:

  • Increases the total loss program trigger total loss amounts, with respect to insured losses, from the current $100 million to $200 million, over five years beginning in calendar year 2016
  • Decreases the federal share of the compensation for the insured losses of an insurer during each program year by 1% until it equals 80% of the portion of the amount exceeding the annual insurer deductible
  • Over five years, starting Jan. 1, 2016, the mandatory insurance marketplace aggregate retention amount of $27.5 billion is increased by $2 billion each year to $37.5 billion
  • For all events, the bill raises the private industry recoupment total from the current 133% of covered losses to 140% of covered losses
  • Requires consultation with the Secretary of Homeland Security for certification of an act of terrorism and no longer requires concurrence of the Secretary of State

This legislation also includes the National Association of Registered Agents and Brokers (NARAB II) provision intended to streamline insurance producer licensing on a multi-state basis, which the insurance industry wanted.

It is true that the backstop created by TRIA in 2002 has not been used to date. The dollar amount of damage caused by the Boston Marathon bombing attack in 2013, the most serious terrorism incident in the U.S. since 2001, was not large enough to meet the U.S. Treasury’s threshold of at least $5 million in property and casualty claims in conjunction with certification. However, TRIA has been credited for providing important stability for the commercial insurance and real estate markets against another terrorist attack.

TRIA is one more of those things that it is “Better to have and not need, than to need and not have.”

Desiree Tolbert, Director, National Technical Compliance

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OSHA-010615New OSHA reporting requirements in effect Jan. 1, 2015

The U.S. Department of Labor announced revisions to the Occupational Safety and Health Administration’s recordkeeping rule, including an expansion of the list of severe work-related injuries that employers must report to OSHA beginning Jan. 1, 2015.

OSHA has long required employers to, at minimum, report the death of any employee and the hospitalization of three or more employees within eight hours of the work-related occurrence. (Some jurisdictions have stricter, state-specific reporting requirements.) Under the existing rule, a multiple hospitalization event is defined as occurring within 30 days of the work-related incident.

The requirement to report work-related fatalities within eight hours remains unchanged. However, the new regulations reflect some significant changes to the longstanding requirements. Beginning Jan. 1, 2015:

  • Employers will need to report to OSHA the work-related hospitalization of an individual employee (as opposed to three or more employees) if the hospitalization occurs within 24 hours (as opposed to 30 days) of the incident.
  • In addition to hospitalizations, employers will also need to report all work-related amputations and enucleations (losses of an eye) if they occur within 24 hours of work-related incidents.
  • These cases must be reported to OSHA within 24 hours of employer knowledge.

Incident reports can be made by phone to OSHA’s 24-hour hotline at 800-321-OSHA (6742) or to the nearest OSHA area office during regular business hours. Additionally, OSHA is developing an online reporting form, which has not yet been released.

These reporting requirements will apply to all employers under OSHA jurisdiction, including those who are exempt from routinely keeping OSHA records due to company size or industry. Additional information about the new regulations is available on the OSHA website.

Sedgwick is aiding our clients in ensuring compliance in the following ways:

  • We are adding to all of our first report notifications a reminder about OSHA’s expanded reporting criteria.
  • We are offering an OSHA-specific application through our viaOne® suite of technology solutions to help employers ensure full compliance with all OSHA recordkeeping requirements; click here to learn more.

I invite you to contact us, should you have any questions about these changes. Let me be one of the first to wish you a happy and prosperous 2015.

Malcolm Dodge, VP, Risk Services

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Mandel-121514-graph

Figure 1: The actuarial loss curve

There are many definitions of risk, with most coming pretty close to each other with minor nuances as distinctions. Interestingly, most all of these definitions put “risk” well beyond the point of “expected losses” on the actuarial loss curve (think high point on the curve that trails off into infinity as loss becomes less and less likely to occur but more and more severe; see figure 1). For the purposes of this discussion I’ll focus exclusively on the downside of risk or the potential for loss versus the upside where risk can be exploited for gain and value creation (another subject worthy of separate treatment). So are expected losses, and those that that fall to the right of this point on the loss curve below, really “risks?” If risk is the effect of uncertainty on objectives (one common and simple view of risk) then, by that definition, “expected losses” would not be materially “uncertain;” they would be “expected” (though not certain).

This dichotomy has perplexed many risk professionals, especially those who lean into the traditional insurable risk realm, as these sources of loss are the primary focus of most of the responsibilities of traditional insurance-based risk management. All good then, as that is what they were hired to do; a very necessary function for the successful operation of organizations. And yet this may be the one thing that limits the influence – and in some cases the upward mobility – of many traditional risk managers. After all, senior managers are typically interested in the unexpected and uncertain potential for disruption to the organization, its strategy and its plans that defined success. As one CEO I worked for would say: “tell me what I don’t know and can’t foresee.” An understandable interest since the CEO is the ultimate accountable person for the successful achievement of the plans, both short- and long-term, of the organization he or she leads.

Can expected losses prevent successful execution of operational or strategic plans? The answer is generally “no” assuming these losses have been accounted for in budgets, whether they’re funded as retained losses or transferred to others through insurance or contract. Now, budget shortfalls do occur and some claims may not be paid under certain insurance or contract conditions, but these are typically one-off variances that are typically well within risk appetite (whether defined formally or not) and thus usually wouldn’t prevent accomplishment of most objectives.

So the obvious questions are two: 1) how does your organization define risk and is it the right definition that all stakeholders understand, agree upon and can manage to? and 2) where on the loss curve do you want to manage risk to? Other questions will emerge in trying to get to the second question in particular. For example, do you assign more importance to likelihood or impact? I would suggest they are not of equivalent import and get their relative importance from a well-defined risk strategy and the risk culture that undergirds it. Another question that quickly becomes critical is: how far out on the likelihood axis to you may be relevant to your risk strategy? This is the penultimate question that will define where you focus along the x-axis (likelihood or frequency), what your resource needs are, the level of sophistication of tools and techniques necessary to manage risk effectively, etc. I urge you to get your key risk stakeholders together and vet these issues to ensure you have the right priorities and focus for managing risk within your organization. Absent this, you’ll be flying blind along a curve that presents an infinite number of combinations of likelihood and impact. Can you afford to fly blind in the face of the potential of catastrophic uncertainty?

Chris Mandel, SVP, Strategic Solutions