SFM Agent Agenda

A recent Minnesota Supreme Court ruling that permits medical providers to continue marking up the cost of expensive implant hardware underscores the need to continue to pursue corrective action by the state Legislature or the Minnesota Department of Labor and Industry to help contain medical costs, according to SFM officials.

The court ruled that an employer and its workers' compensation carrier must pay 85 percent of a hospital's usual and customary charge for spinal implant hardware even if those charges include a significant mark up.

In Ronald E. Troyer vs. Vertlu Management Co., Kok & Lundberg Funeral Homes and State Auto Insurance Company, the court looked only at whether hospital practice is consistent with state law. The ruling did not address the public policy implications of allowing significant mark-ups.

"Large hospitals are often marking up the cost of implants 200 to 400 percent more than the manufacturer's original price," said Scott Brener, SFM vice president and general counsel.

"Usual and customary charges essentially means hospitals can bill insurers whatever amount they want, and the insurer has to pay 85 percent of that," Brener said.

Court is sympathetic
While the court said it was sympathetic to the arguments that the disparity between the amount HealthEast hospitals paid the manufacturer of the implant and the post-surgery price it charged Vertlu and State Auto Insurance is large—"maybe even unreasonably large"—the question of whether the price paid by Vertlu and State Auto Insurance was reasonable was not before the court.

One of the legal issues before the court was whether the manufacturer of the implant hardware should be required to charge directly for the hardware, but the court said the hospital may bill for the charges. The court also said the workers' compensation judge does not have the authority to determine a hardware price less than the lower of 85 percent of usual and customary charges and 85 percent of prevailing charges.

"Minnesota should be more in line with what many other states are doing on this issue—paying an invoice-plus, with usually 10 to 35 percent over invoice," Brener said.

The Minnesota Department of Labor and Industry plans to brief the Workers' Compensation Advisory Council on the high court's ruling at its Sept. 14 meeting, according to department Communications Director James Honerman.

Replied the underwriter to the agent: "Let me show you more."

And with that the underwriter showed the agent an impressive display of online services from SFM. All help control business costs. Many improve productivity. All are available to policyholders, giving them the advantage of state-of-the-art risk management functions.

CompOnline® Risk Management System
The employer's secure access to its workers' compensation data. An exclusive, proprietary online system, recently upgraded, enabling the employer to—

• Custom-build claims and loss reports.
• Receive loss runs weekly, monthly or quarterly via email.
• Receive notice of changes in claims status and reserves via email alerts.
• Customize the dashboard for overviews of claims and other information.
• Track developments on claims.
• Look up premium, e-mod, class code, billing, policy terms and more.

Online injury reporting
To get started, all the employer needs is its SFM policy number. If the employer reports through CompOnline, then he can also save unfinished First Reports and look up prior First Reports.

Premium e-payments
Secure electronic check transactions. The employer can make one-time payments, or set up automatically recurring payments. Installment fees are waived.

Annual payroll reporting and audit
Gives policyholders with premiums up to $10,000 the ease of completing their annual payroll report and premium audit online. Through SFM's "MyPayroll."

Pay-as-you-go wage reporting
Secure electronic check transactions. Ideal for organizations with cash-flows that fluctuate during the year. Report payroll monthly, quarterly or semiannually. Pay premium online. For employers with more than $1,000 in premium.

Resource Catalog
Extensive SFM resources on claims, injury prevention, and managing workers' compensation. Includes forms, posters, handouts, legal advisories and educational information. No charge to SFM policyholders.

Safety training for employees
Nearly 100 interactive online courses on safety, employment law, and healthcare. No charge to policyholders. Arranged through Vivid Learning Systems.

Safety video lending library
Hundreds of safety titles, many in multiple languages. Stream online. Or borrow DVDs for 28 days. No charge to SFM policyholders. Arranged through Aurora Pictures.

Employment practices liability resource center
Model content for employment handbook, employment forms, best practices, employment law resources. Online employee training courses include tracking reports so the employer can demonstrate proof of compliance. Available to policyholders with employment practices liability coverage through SFM. Arranged through SFM's insuring partner HSB.

More information for clients
Detailed information about each of these SFM online services is available—

• On SFM's website.
• In the print booklet, "SFM offers online services to help you control costs, improve productivity." To order copies, visit the marketing section of SFM's agent Resource Catalog and select the title "Online services at sfmic.com."

Employers in Iowa, Nebraska, South Dakota and other states that operate under the rating bureau services of the National Council on Compensation Insurance will be affected by the change. Minnesota and Wisconsin are not NCCI states, but they typically follow the NCCI's lead on changes like this.

Two tiers to losses
Currently, the e-mod calculation puts losses into two buckets. The first $5,000 of a claim is the primary amount. Above that is the excess amount. All of the primary amount for each lost-time claim is included in the e-mod calculation. Excess amounts are given partial weight depending upon the size of the policyholder.

The change
The NCCI's $5,000 threshold was put in place about 20 years ago. Since then, the average claim cost has tripled, according to the NCCI.

To update the threshold, the NCCI plans a phased-in increase. The current $5,000 will rise to $10,000 in 2013, $13,500 in 2014, and $15,000 in 2015. After that, the threshold will adjust annually to a national claims cost index.

The change requires approval by regulators in each NCCI state and is slated to be effective upon the normal rate filing change date in 2013.

Working with clients
While the details may be more than some employers care to know, their impact on e-mods may present an opportunity for you to discuss the value of injury prevention with certain clients.

As you know, workers' compensation job classifications are administered by a rating organization. The general idea is to assign to each employer a governing classification that accounts for the employer's greatest amount of payroll and best describes its overall operation. Note that some common job classes are automatically excluded from determining the governing class, such as the NCCI's exclusion of clerical and outside sales.

Wrong classes, wrong mods
In this economy, many employers are undergoing some level of change in business operations, and that may offer opportunities for you to consult with them.

In situations where portions of payroll appear to be inaccurately assigned to job classes, you should be asking questions and helping the employer understand that such misclassifications are likely to result in inaccurate experience mods and therefore possibly higher premiums as losses occur over time.

Split jobs
One situation that generates questions is when an employer has employees who split work time between different types of jobs.

Rating bureau rules address that. In Minnesota, for instance, the employer may divide payroll among the job classifications that most closely fit work that is performed in time blocks of four or more hours. The employer must be able to show payroll records supporting the multiple classifications.

If you have questions about classifications, contact your SFM underwriter.

For additional sources of information, or to look up classification codes, contact the rating bureau for your state:

• Minnesota Workers' Compensation Insurers Association, (952) 897-1737, www.mwcia.org.
• Wisconsin Compensation Rating Bureau, (262) 796-4540, www.wcrb.org.
• In Iowa, Nebraska and South Dakota: the National Council on Compensation Insurance, (800) 622-4123, www.ncci.com.

These are in addition to the "Sample wellness activities," "Wellness Works emails," and "Wellness web links" sections.

SFM sent a Wellness Works email in late July to large and medium-size policyholders in Minnesota, Wisconsin, Iowa, Nebraska and South Dakota. The email encourages policyholders to jumpstart their wellness programs and directs them to the wealth of resources available on SFM's newly updated Wellness Works webpage.

An email on smoking cessation is scheduled to be sent next week to the same audience. Emails to policyholders are planned in coming months on nutrition, obesity and physical fitness.

If you're interested in receiving Wellness Works emails, subscribe on SFM's website.

Encourage your clients to take advantage of this new option. It is more convenient with faster, next-business-day online availability. There is no waiting for UPS delivery or concern for damaged or lost DVDs.

Through the program, DVDs can still be borrowed and mailed as they have in the past—or streamed live over the internet through Aurora's latest enhancement. Up to three streaming or DVD videos may be borrowed or accessed at a time.

The program, managed by third-party vendor Aurora Pictures, is free for SFM policyholders, Risk Solutions clients, and agency partners.

The experience rating adjustment approved by the Iowa Department of Insurance earlier this year takes effect Oct. 1, which means Iowa employers will see a 70 percent discount for medical-only workers' compensation claims in their experience modification factors.

Employers who return injured employees to work within the state prescribed three-day waiting period and don't sustain indemnity payments now will have only 30 percent of those costs factored into their e-mods.

For information on e-mods, search keyword "e-mod" in SFM's Resource Catalog.

The maximum rose to $1,457 for temporary total disability, healing period, permanent total disability and death benefits, and rose to $1,340 for permanent partial disability.

The SDIA is a property and casualty insurance trade organization and an active participant in insurance-related legislative and educational efforts in South Dakota.

The association is comprised of nearly 600 insurance companies across many states.