The 68th Annual Workers' Compensation EducationalConference and 25th Annual Safety & Health Conference isscheduled for Aug. 18-21 in Orlando, Fla. Sedgwick President and CEO David A. North will presentthe industry keynote address on Monday morning, Aug.19. Here, Northshares his comments and observations on a variety of workers'compensation issues as a preview of his keynote.

What are the major trends impacting workers'compensation today and how can employers prepare for and capitalizeupon them?

While there are a number of trends impacting workers'compensation today, one of the most significant is an increase ingovernmental regulations and compliance requirements. These havenotably made workers' compensation a more complex environment inwhich to operate.

Government as a whole is underfunded with many agencies at everylevel operating in deficit situations. Employers need to be readyfor increased scrutiny from these agencies as states look for waysto raise revenues by charging employers and their administratorsfines and penalties for non-compliance. From OSHA to ADAAA and fromFMLA to Medicare, employers need to ensure that their exposure tothese fines and penalties is mitigated.

A second notable trend impacting workers' compensation is theincreasing diversity of today's workforce. The diversity of theworkforce demands a more customized way to address a range of needsassociated with varying cultures, languages, ages, and values. Forexample, we know that people of different cultures and backgroundshave different claims needs and respond differently to the way inwhich healthcare is delivered. Attitudinal differences can impactthe recovery and return to work process and must be considered.Communication should also be taken into account, and any potentialbarriers removed. Language translation is often required, butbeyond that, cultural translation is critical.

Similarly, people of different generations respond tocommunications differently. While many older workers prefer tocommunicate by phone and mail, the younger generation is lookingfor real-time information and prefers to communicate through textand email.

These types of differences must be accounted for when employersconsider their workers' compensation programs today. Accommodationsmust be made in the way that claims services are administered anddelivered in order to drive better outcomes and improveproductivity.

A third trend impacting workers' compensation is a continuingtransition from managed care to quality care. Despite two decadesof applying traditional managed care techniques to workers'compensation, medical costs associated with work-related injuriescontinued to rise.

In recent years, the industry has shown a shift inthinking. Less emphasis began to be placed on negotiatingexpansive PPO discounts and processing bill review paperwork, andmore emphasis was placed on identifying quality healthcareproviders and the delivery of appropriate care on a timely basisand at a reasonable cost.

Quality physicians produce better outcomes. They are the oneswho consistently deliver desired results and understand theobjectives of the workers' compensation system. Theintroduction of such quality care techniques as providerbenchmarking underscores the importance of this approach. Thisphilosophy of quality care is expected to continue and acceleratein the coming months.

A fourth trend having a positive influence onworkers' compensation is an increased emphasis on creating andmaintaining a healthier workforce. In an attempt to curb risinghealthcare costs and improve productivity, employers are becomingmore proactive and creative in the ways they address obesity,exercise, and lifestyle choices among their workers.

By encouraging and helping employees lose weight, increaseexercise, and avoid adverse activities such as smoking, businessesare not only showing a decline in their healthcare costs but anoverall improvement in their workforce productivity. Healthierworkers tend to be injured less frequently and recover more quicklythan those battling injuries and complications arising fromco-morbidities.

How is technology impacting the way employers manageworkers' comp claims?

Technology is advancing rapidly, and workers' compensation hasbeen a beneficiary of these advancements. It is widely known thatworkers' compensation is a high touch system that requires ongoingcommunication with injured workers.

Today's information age society demands real-time informationaround the clock. The same holds true for workers'compensation. As a result, push technology has become another meansof communicating with injured workers. Using push technology,injured workers can be notified of claim updates via text or emailas soon as that information becomes available.

Further, technology makes it possible for injured workers toaccess websites and check their claims information any time of dayor night. Mobile apps are being developed that can deliver thisinformation directly to an injured worker's smart phone ortablet.

Technology is also helping employers comply with increasinggovernmental regulations and compliance demands. Heavy fines andpenalties await those employers who do not adhere to administrativerequirements and filings. For example, OHSA has instituted anational emphasis program on record keeping to assess the accuracyof injury and illness data recorded by employers.

Employers who do not accurately record injuries and illnessesface substantial OSHA fines and penalties. Technology can automatemuch of the record keeping and reporting processes to ensurecompliance with these regulatory requirements. By relying ontechnology to assume much of the manual processes and paper work,employers can focus on managing core operations and improvingproductivity standards for their businesses.

Additionally, technology is producing information that allowsfor improved decision-making and more favorable outcomes within theworkers' compensation arena. These systems make it possible toidentify which claims need immediate attention or correctiveaction. As more information is compiled and collected, thecredibility and certainty associated with such informationincreases and its predictive capabilities improve. By identifyingand understanding trends in the data, action can be taken early onbefore problems and costs escalate.

Technology has increased the discussion around predictivemodeling and its applicability in workers' compensation. One keypoint to understand is predictive modeling is less dependent on themodeling technique and more influenced by the underlying data onwhich the modeling is based and the action that is taken after theanalysis is completed.

In order for predictive modeling to be useful,the analysis has to be based on a substantial set of credible data.The results will only be as good as the underlying data on whichthey were based. Second, the analysis will only add value ifemployers take action based on what predictive modeling indicatesneeds to be addressed. A change in behavior is essential tosuccess.

How are the changing workforce demographics impactingthe way employers manage workers' compensation?

Generational differences have a profound influence on the wayworkers' compensation programs are managed. Currently, corporateAmerica has four distinct generations in the workplace. Eachgeneration brings different experiences and values to the worksetting that impact how its members approach their jobs. Thesegenerational differences readily surface when it comes to howpeople embrace such issues as technology, communication,collaboration, performance, and compensation.

How organizations manage these generational differences willhave a notable impact on how claims are prevented and managed.Those businesses that learn to recognize and manage thesedifferences will vastly outperform those who cling to outdatedapproaches from the past. This is particularly important toemployers and claims professionals who must deal withorganizational team members of all ages on a daily basis.

The composition of today's modern family also impacts howworkers' compensation is managed. The needs of single individualsoften differ from those who are married, and the needs of singleparents will differ from those in a two-parent household. Forexample, consideration should be given to the needs of a singleindividual released from the hospital and a determination made asto whether additional home health care is needed.

How is the TPA's role evolving within the workers'compensation industry?

Historically, the TPA's role was about administering claims andissuing payments. Today, it has evolved into how can theservices and outcomes that the TPA provides impact other areas ofthe business in a positive way. The manner in which claimsare managed ultimately impacts workforce productivity, quality ofproducts and services, financial statements and profitability, andstock prices and market share. These are the factors that determinean organization's operational success and long-term sustainability.TPAs help businesses achieve these goals by controlling unbridledmedical costs, improving return to work outcomes, and protecting acompany's reputation after an unexpected accident.

Additionally, the TPA's role has also evolved to focus moreheavily on the needs of injured workers and their families. Thisoccurs by delivering more timely and appropriate healthcare,increasing medical literacy and understanding, and improvingcommunications among all parties with a goal toward recovery. Forexample, TPAs are at the forefront in developing techniques such asprovider benchmarking to improve the quality and timeliness ofhealthcare delivered to injured workers. They are also helpingredefine the role of players such as case managers with a strongeremphasis on medical advocacy. This is intended to foster increasedengagement by injured workers in the recovery process. When itcomes to technology advancements, TPAs are taking the lead throughsuch activities as expanding the role of push technology from thedisability and leave arena to the workers' compensation setting anddeveloping new mobile apps to aid in communications with injuredworkers.

How do you think the definition of quality should changein the TPA industry?

Quality should be rooted in a more outcomes focused approach.The emphasis should be placed on program performance as well asconventional compliance principles. Currently, theestablished industry standard for compliance auditing consists of aretrospective review of claims handling activity. But to be able toeffectively impact the outcome of a claim and use available data toimprove current claim files, the auditors need to evaluate the workas closely as possible to when it was performed.

There should be continuous review cycles with audits scheduledearlier in the claims lifecycle. Performance reviewers shouldevaluate the performance of key claim metrics in three distinctcategories—communication, proactive engagement, and result. Theobjective of such a review is to determine whether a claim is onthe path to the best possible outcome. It is then possible toimplement performance score carding to ensure claims are movingtoward resolution and achieve the best financial result.

Predictive modeling is used to improvequality. By segmenting claims into tiers based on their likelyexposure as well as the anticipated effort required to resolve theclaim, it is possible to better focus the bulk of effort on theclaims that will most benefit from increased supervision.

What changes do you anticipate in the role of the claimsadjuster in the future?

The claims world is becoming increasingly complex and so are thedaily demands that claims adjusters face. Each claim is differentand represents a unique set of circumstances. Each requires thatclaims adjusters apply differing jurisdictional, legal, andcultural concepts, and these concepts change on a continual basis.Technical expertise and attention to detail are essential tosuccess.

Claims adjusters must also exhibit exceptional communication andnegotiation skills. Each day they must interact withindividuals or family members who have suffered an unexpected lossor injury. Claimant emotions run the gamut, and such dealingsrequire the utmost sensitivity while attempting to determine a fairand reasonable solution for the injury that occurred. Fewsituations demand a higher degree of professionalism.

Quality claims professionals will remain in demand. They are andwill continue to be an integral part of the risk managementequation as they are responsible for the largest component of anemployer's total cost of risk—loss costs. It is anticipated that asindustry demands increase, claims adjusters roles will evolve to apoint where less emphasis is placed on repetitive activities andmore focus is directed to those areas that will have the greatestimpact on the claim and improve overall outcomes.

How is the growth of PEOs and staffing companiesimpacting the workers' compensation market andprocesses?

With the uncertainty of the economic environment and anticipatedchanges to health insurance, there has been an upswing in thetemporary staffing industry. Employers are seeking more part-timeworkers' from temporary staffing agencies and PEOs in place of whatare perceived to be more expensive permanent workers. As workers'compensation exposure decreases, as reflected by reduced employeecounts and payroll, workers' compensation premiums can also beexpected to decrease. However, with the transfer of thiswork-related exposure to temporary staffing agencies and PEOs, thecost of their services may rise to account for this addedexposure.

What is the most important action an employer can take to manageworkers' compensation costs? The most important action an employercan take to manage workers' compensation costs is to beengaged. Employers should be active in the creation,promotion, and improvement of their workers' compensation programs.It is a continual cycle that demands persistence andcreativity.

Employers should also leverage all available resources on bothan internal and external basis. Successful workers' compensationprograms depend on the ability to collaborate with otherdepartments within the organization including operations, safety,human resources, marketing, legal, and finance. Each of these areascan and will impact a workers' compensation program's success.Those who master this particularly well sometimes establish anintegrated disability management program aimed at preventing andmanaging both occupational and non-occupational injuries.

Additionally, employers should establish strong partnerships andeffective working relationships with their service providers. Thisincludes carriers, brokers, TPAs, consultants, actuaries,attorneys, medical providers, and others who service the program.Each of these parties offers a degree of expertise that can beharnessed and managed for the benefit of the program. Carefullydefining service standards and clearly communication serviceexpectations improve the odds of successful performance.

Finally, employers should embrace technology. Effective use oftechnology can improve decision-making, produce more positiveoutcomes, and increase communications among all stakeholders.However, in order for these activities to take place, employersmust be engaged at every step along the way and be willing to takeaction.

How will the 2013 workers'compensation legislative initiatives in California, New York, andother key states impact employers?

Many states in the U.S. are currently debating workers'compensation legislative reforms, and many organizations arecontending with reforms that have already been passed. It isimportant that employers be able to anticipate and prepare forupcoming legislative reforms and understand how they will impactbusiness operations.Those who embrace these changes will thrive,and those who don't will lose ground.

Employers have had a noticeable impact on the legislativedebate, and they should continue to make their voices heard in thefuture. Industry groups and associations offer excellentopportunities for organizations to become more active in thisarena.

With the passage of Senate Bill 863, California employerscontend with many legislative changes. As an example, injuredworkers will now be eligible to request an independent medicalreview to dispute a utilization review denial of a medicaltreatment request.

Additionally in California, providers can now request anindependent bill review if they disagree with the amount reimbursedby the employer or administrator. The decision of the independentbill review is binding and cannot be litigated. Until this change,providers that disputed reimbursement would traditionally file alien on the Workers' Compensation Appeals Board, and these types ofliens became an epidemic in the state. Defending these liens poseda huge expense to employers. Providers will no longer be able tofile liens under this provision.

New York is another state that has seen notable legislativechanges in recent years. Recent changes there are expected toincrease workers' compensation costs paid by employers. Forexample, as of May 1 of this year, the minimum temporary disabilityrate increased from $100 to $150 per week. Also, the fund forre-opened case will be closed to new claims as of Jan. 1, 2014. Asa result, unfunded liabilities could be transferred from the fundto carriers and employers.

The most notable change in workers' compensation legislationoccurred in Oklahoma in this past May. A new law there now allowsfor workers' compensation alternate coverage provisions.

In the new Oklahoma option, employers that choose an alternativebenefits plan must follow a series of requirements. Employerprotection under exclusive remedy is preserved by Oklahoma law andbenefits provided to injured workers under an alternative benefitsprogram must be equal to or better than those currently provided bythe State's workers' compensation system. While it is anticipatedthat the Oklahoma Supreme Court will review certain parts of theprovisions in the new workers' compensation law, it will beinteresting to see what impact it will have on other states lookingto improve their workers' compensation systems.

It is important to remain abreast of key factors driving theselegislative changes, evaluate the scope of changes beingconsidered, and consider ways to influence future legislativediscussions.

What impact will the Affordable CareAct likely have on workers' compensation?

There is much speculation surrounding the Affordable Care Actand its impact on workers' compensation. The potential size andscope of change dictate close and continuous monitoring of thelandscape. Three issues that employers should watch and consider asthe new legislation unfolds are: access to care, consolidation ofproviders and facilities, and the use of accountable careorganizations.

First, the Affordable Care Act will prompt employers to consideraccess to care for injured workers. As more Americans are providedhealthcare coverage under the Affordable Care Act, demand forhealthcare services is expected to increase and the system islikely to become over populated with patients. As a result,maintaining access to care may mean that employers must consideralternatives such as the expanded use of nurse practitioners andphysician assistants to treat injured workers or onsite medicalprograms.

Second, the Affordable Care Act could foster a consolidation ofproviders and facilities. The question then becomes how thisactivity will affect the availability of occupational health andits use in the treatment of work-related injuries.

Third, the Affordable Care Act will result in the establishmentof accountable care organizations. These organizations are designedto keep all care within such an established system. Industryobservers are waiting to see if quality care initiatives, medicalprovider networks, and administrative processes can be incorporatedinto the accountable care organization model or whether a modelspecific to workers' compensation is needed.

Additionally, there is speculation that the Affordable Care Actcould lead to an increased emphasis on creating and maintaining ahealthier workforce. Many employers are already placing a renewedemphasis on wellness programs aimed at reducing obesity, promotingexercise, and decreasing smoking. These strategies are designed tomitigate rising healthcare costs and related health insurancepremiums.

David A. North serves as president and CEOSedgwick CMS Holdings, Inc. and Sedgwick Claims ManagementServices, Inc. Under his leadership, Sedgwick has grown to becomethe largest third party administrator in the industry. A frequentspeaker at national and regional industry conferences, North hasmore than 32 years of experience in risk management services.