May 16, 2005
California WC Reform
A Self Insured Perspective
CA – Claims Management
• Costco TPA is SCMS. Dedicated team of
25 claims professionals in Orange, CA.
• We receive 2100 claims per year; 500 IN &
1600 MO.
• One Costco Regional Manager is responsible
for CA results. She provides direction to
claims team and oversees 2 claim reviews
per year with the Costco locations.
CA Reform Legislation
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Loss of presumption of correctness for AP
TTD capped at 104 Weeks
Permanent Disability – Based on AMA 5th
Apportionment
RTW Incentives
Medical Provider Networks – Approved 4/8
ACOEM Guidelines
Response to Reform - Claims
• Added 6 Bunch Nurses (In-House with
SCMS)
– Utilization Review
– Complex Claims Consultation
– Peer Reviews
• Prospective Bill Review
• 8 Weeks of TTD
Response to Reform - Claims
• Reserving Practices in 2004/2005
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Elimination of presumption
No reserve for voc rehab ($16K)
ACOEM Guidelines
Caps on Chiropractic and PT
PD reserves based on AMA Guides
What Do I Know?
• WC costs affect the Bottom Line of
Costco.
• Ultimate is a big number that takes 5
to 8 years to develop.
• Key is to control the ultimate cost
each policy year.
• You can only manage/control what you
can measure.
What Do I DO?
• Break down ultimate loss costs for
each policy year to a yearly target.
• Set clearly defined financial goals.
• Communicate goals appropriately.
• Implement a feedback loop.
• Reward your team.
Break Down Loss Costs
Fiscal Ultimate Paid To
1 Yr.
Year
Date
Expected
FY03 47,573 4,106
15,194
Target
11,088
FY02 43,509 13,896 22,296
8,400
FY01 32,846 16,832 21,434
4,602
Total
24,090
Set Financial Goals
• Financial Goals = Payments
– Develop payment goals for each policy
year.
• Manage the Money
– One adjuster can spend $60K to $250K
per month without knowing it.
• Reserves are Important too
Manage Your Cash Flow
• Payments by Policy Year
• Payments by Bucket
– Indemnity
– Medical
– Expense
• Payments by Pay Code
Communicate Appropriately
• Financial Goals for Program
Management.
• Correct Analysis is Critical.
• Translate to expectations that
supervisors and adjusters can
execute and control.
WC Goals
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Open IN over $100K Incurred
Closing Goal for IN Claims by PY
Closing Goal for IN Claims over 2 Yrs
Investigation Expectations
Medical Management Expectations
Claim Handling Expectations
Additional WC Goals
• Manage Expenses
• Expectations for Utilization
Management
• PPO Penetration
• Bill Review Savings Percentage
What Does Costco Expect?
• Highest Quality of Claims Handling
• Use Current Laws to Our Best
Advantage
• Use the Resources Costco is Providing
• Excellent Customer Service
Feedback Loop
• Share Information with your Team
• Don’t just Hope for the Best
– Develop a Report!
• Manage what you Measure
– Dig into the Details
• Continuously Train your Team
• Be Firm but Fair
Reward Your Team
• Notice the team members that work
hard for you.
• When expectations are met, Say
Something.
• When expectations are exceeded –
Do What you Can.
Conclusion
• This approach is different than how I
used to manage a WC program.
• Means no actuarial surprises.
• ACOEM Guidelines – Most Important
CA Reform.
• FY04 loss rate was 7.08%. Now
5.56%.