NEW ERA OF WORKERS’ COMPENSATION

1. NEW ERA OF WORKERS’ COMPENSATION Max Koonce

2. AREAS OF CONSIDERATION • EMPLOYEE BASE • HEALTHCARE (“Medical Management”) FOCUS • DISABILTIY MANAGEMENT • REGULATORY ENVIRONMENT • INSURANCE PROGRAMS

3. 1. EMPLOYEE BASE • Aging Workforce: “It is estimated that by the year 2014, the 55 and older age group will make up 21.2% of the workforce.” Donald S. Jones Sr., President of the American Society of Safety Engineers • Retiring “boomer” generation • Knowledge gap? • Productivity challenges. • Creates more pressure for success. • People working into their later years • Are job tasks appropriate? • Potential increase in frequency due to job demands • RTW challenges

4. 1. EMPLOYEE BASE, con’t. • New Generation Entering the Workforce: “Some 64 million skilled workers will be able to retire by the end of this decade, according to the Conference Board, and companies will need to go the extra mile to replace them, even if it means putting up with some outsized expectations.” Fortune Magazine, May 28, 2007 • Generation Y • Expectations • Technically sound but with very different work habits • Cultural Diversity

5. 2. HEALTHCARE FOCUS • Health and Wellness Programs: According to the American Association of Occupational Health Nurses, “worksite wellness programs – including weight management and tobacco cessation initiatives – have proved successful in helping employees stay healthy while also benefiting employer’s bottom line.” • Company incentives for healthy lifestyles • Additional resources for information on health • Preventive care • Support services • Retail Store Clinics

6. 2. HEALTHCARE FOCUS, con't. • Pandemic Preparedness A pandemic event will stress critical functions, business continuity, and the health care industry. • Determine the risks • Develop a plan to manage and respond to the safety and health issues that will arise.

7. 2. HEALTHCARE FOCUS, con't. • Workers’ Compensation Medical Management: • Prescription Management: “The number of Americans abusing prescription drugs nearly doubled from 7.8 million in 1992 to 15.1 million in 2003.” Narcotics Control Board. • Utilization • Pricing • Generic encouragement • Medical Treatment Utilization: “Greatest” challenge in today’s environment? • Evidence Based Medicine / Disability Guidelines • PPO Networks / Fee Schedules

8. 3. DISABILITY MANAGEMENT • RTW / SAW: “The fundamental reason for most medically-related lost workdays and lost jobs is not medical necessity, but the non-medical decision-making involved in and the poor functioning … of the stay-at-work / return-to work process.” 2007 Cornerstone Summit, March 2007 • Adopt a disability prevention model. • Address behavioral and circumstantial realities that create and prolong disability. • Acknowledge the contribution of motivation on outcomes and make changes to improve incentive alignment. • Invest in system and infrastructure improvements.

9. 3. DISABILITY MANAGEMENT, con’t. • Integrated Benefits Management: Focus on taking care of the employee promoting their recovery and return to work in a functional manner. • Consistent practices across occupational and non-occupational injury programs. • Establish a culture that encourages RTW regardless of the type of injury.

10. 4. REGULATORY ENVIRONMENT • Electronic Data Interchange • Consistency in application across state lines • Electronic Medical Information • Medical Bills • Medical Reports • Medical Data • Continuation of Statutory Changes • Balancing Employer and Employee Concerns • Safety • National Ergonomics Standard?

11. 5. INSURANCE PROGRAMS • High Deductible Plans • NAIC Recommendations • Recent TX Legislative Changes • Captive Utilization • Guarantees coverage availability • Stabilizes insurance market pricing • Evaluation of cost effectiveness? • Control over coverage issues and expectations