Public Risk October 2015

Published by the Public Risk Management Association

www.primacentral.org

OCTOBER 2015

SCHOOL BULLYING

BEST PRACTICES FOR PREVENTION

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MEASURING RETURN ON INVESTMENT IN RISK CONTROL HEARING LOSS CLAIMS IN WORKERS’ COMPENSATION: A GROWING CONCERN

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Volume 31, No. 9 | October 2015 | www.primacentral.org

The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration.

PRESIDENT Dean Coughenour, ARM Risk Manager City of Flagstaff Flagstaff, AZ

CONTENTS

PAST PRESIDENT Regan Rychetsky, ABCP Director, HHS Enterprise Risk Management and Safety Texas Health and Human Services Commission Austin, TX PRESIDENT-ELECT Terri Evans Risk Manager City of Kingsport Kingsport, TN

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Jani J. Jennings, ARM Insurance & Safety Coordinator City of Bellevue Bellevue, NE

6 SCHOOL BULLYING

Best Practices for Prevention

By John McLaughlin and Darcy L. Proctor

DIRECTORS Lori J. Gray Risk Manager County of Prince William Woodbridge, VA

Scott Kramer Risk Manager Montgomery County Commission Montgomery, AL Amy Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN

10 MEASURING RETURN ON INVESTMENT IN RISK CONTROL

Scott Moss, MPA, CPCU, ARM-E, ALCM P/C Trust Director CIS Salem, OR

Tracy Seiler, ARM-P Director of Risk Management Services Texas Association of Counties Austin, TX

By Ariel Jenkins

NON-VOTING DIRECTOR Marshall Davies, PhD Executive Director Public Risk Management Association Alexandria, VA

16 HEARING LOSS CLAIMS IN WORKERS’ COMPENSATION: A GROWING CONCERN

EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org

By Jon Nau

ADVERTISING Donna Stigler 888.814.0022 • donna@ahi-services.com

16 IN EVERY ISSUE 4 News Briefs | 19 Advertiser Index | 20 Member Spotlight

Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year.

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OCTOBER 2015 | PUBLIC RISK

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Message from PRIMA President Dean Coughenour, ARM

RELATIONSHIPS

“Y

our” PRIMA has been working hard. Here are some of the highlights: The new PRIMA Community has now been up and running for three months. If you have not had a chance to check it out, please take a few moments to do so. Your Board met with the conference planning committee, and the educational sessions for next year in Atlanta have been finalized. You are sure to receive your educational bang for your budget-tight buck at next year’s meeting. PRIMA Institute is set for next month in Albuquerque. When considering your budget requests, please give thought to including funds to attend next year’s PRIMA Institute in Pittsburgh. The educational sessions and the friendships you make are sure to help you excel in your very special career in risk management.

In sharing with you this month, I reflect on what is important in order to be effective in managing our entity’s risk. The number one thing I think of is the critical connection between effective communication and key relationships, both internal and external. As an individual, it is nearly impossible to do anything other than “claims” management. But through people we are able to accomplish the essential function of “risk” management and protect our assets from future losses.

Here are some thoughts on what has helped me in establishing the connectivity that has allowed risk management to thrive.

When I have discussions that I think are going to be more involved than just a minute or two, I like to have those conversations in person. Over the phone is a real timesaver but when issues take time to discuss, it is always best to hammer them out face-to-face. Too often, we utilize the wonderful tool of e-mail or texting but run the risk of having our message misinterpreted or even worse, ignored. I would suggest using the three e-mail rule. If you are on your third e-mail on the same subject, there has been a failure to communicate and it is time to visit in person, if possible; if not, make a quick phone call may be in order.

When I first came to Flagstaff, I needed to roll out training to employees on making the journey of shifting the culture to “we are all risk managers and we are all in this together.”

So I started the process of establishing buy-in with the department directors first and then asking for their support in rolling the training out to their staff in the field at locations where the employees work.

The fire chief told me they had video conferencing and that I could reach all shifts in all stations by simply doing videos. I learned a valuable lesson in that videos are watched in lounge chairs while business is done at the kitchen table. So I declined the video offer and started the journey of teaching shiftby-shift, location-by-location. In the same manner, I went from department to department selling the message of risk management. It didn’t matter if it was in the early mornings or late evenings, teaching and sharing with employees at their work locations makes a more profound impact. Changing the culture takes time and personal involvement. Face-toface, in person communication is essential. You tell me you have 4,000 employees and that is just not practical. Well, I think you are right. But by engaging as many key members in-person, our message becomes more impactful, meaningful and most importantly, personal.

Always remember that we are lucky to do what we do. No two days are ever the same and we get to work with great people every day. Think of each day as an opportunity and not an obligation and great things will happen. Take time to have some fun every day and enjoy the rest of your week.

The number one thing I think of is the critical connection between effective communication and key relationships, both internal and external. As an individual, it is nearly impossible to do anything other than “claims” management. But through people we are able to accomplish the essential function of “risk”

Dean Coughenour, ARM 2015–2016 PRIMA President Risk Manager City of Flagstaff Flagstaff, AZ

management and protect our assets from future losses.

OCTOBER 2015 | PUBLIC RISK

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News Briefs

NEWS

BRIEFS FTA PROPOSES NEW SAFETY PROGRAM RULES FOR TRANSIT INDUSTRY The Federal Transit Administration (FTA) unveiled a proposed rule to establish a public transportation safety program that would create a framework for the agency to monitor, oversee and enforce safety in the public transit industry.

Based on the principles and practices of Safety Management Systems (SMS), the proposed rule would implement FTA’s authority to inspect, audit and examine public transit agencies for safety; test their equipment, facilities, rolling stock and operations; and take appropriate enforcement actions. Enforcement could include directing the use or withholding of federal funds and issuing directives and advisories, FTA officials said in a press release.

The proposed rule establishes SMS as the foundation for the FTA safety program, which focuses on organization-wide policy and accountability, proactive hazard identification, and risk-based decision-making, officials said. SMS is a comprehensive approach in

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which management and labor come together to address transit systems’ safety problems.

The FTA is implementing its new safety oversight authority, which was established under the federal legislation known as MAP-21.

“Every day, millions of Americans take public transportation to get to work, school, medical appointments and other important destinations,” said U.S. Transportation Secretary Anthony Foxx. “This new program will help us ensure that transit continues to be a safe way to get around, and a safe place to work.”

The proposed rule also defines the contents of a National Public Transportation Safety Plan, which the FTA anticipates publishing in a separate Federal Register notice for public review and comment in the next several months.

The plan will include safety performance criteria for all public transportation modes, safety performance standards for transit vehicles, the definition of “state of good repair,” and a safety certification training program.

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A CAT LIBRARY, JUST FOR GOVERNMENT EMPLOYEES On the ground floor of the Doña Ana County Government Center in Las Cruces, N.M., is a unique kind of library. Instead of checking out books, county employees can check out cats, reports Governing.com. Since 2012, the county has partnered with a nearby animal shelter on the Kitty Kondo, or “cat library” as employees have come to call it. In an effort to help felines find a home, the county installed a kitty condo in the lobby. While the kittens are waiting to be adopted, workers can “borrow” them and bring them back to their desks. Not only does this help the cats acclimate to humans, but, according to county workers, it has also been a morale booster and stress reliever. More than 100 kittens have been adopted since the condo went up.

FEDS PLAN TO GATHER TONS OF SEEDS FROM NATIVE PLANTS TO PROTECT LAND AFTER NATURAL DISASTERS Federal authorities announced a plan to produce massive quantities of seeds from native plants that can be quickly planted to help land recover from natural disasters such as wildfires and hurricanes.

The program will make landscapes more resilient and healthier, especially Western rangelands where massive wildfires have been an increasing problem, the U.S. Department of the Interior said.

“We’ve learned a lot based on where we have had successes and where we’ve had failures,” said Steve Ellis, deputy director for the U.S. Bureau of Land Management, as he announced the plan at the agency’s regional seed warehouse in Boise. “It isn’t as simple as we grab some seed off the shelf and go out there.”

Officials hope to create a national network of seed collectors, growers and storage facilities so enough native seeds are available immediately after disasters to avoid erosion and prevent invasive species from moving in. The window to plant desirable species after a disaster can be less than a week and involve hundreds of square miles.

The strategy targets Western rangelands, where drought-stricken terrain fuels huge wildfires that have destroyed homes and key animal habitat.

Besides wildfires, federal officials also noted the widespread damage that Hurricane Sandy caused in 2012 to native plant habitats on the East Coast that stabilize soil and absorb storm surges. A shortage of native seeds left the area vulnerable to erosion and invasive plants, federal officials said.

“Having the right seed in the right place at the right time makes a major difference in the health of our landscapes,” Interior Secretary Sally Jewell said in a statement.

The strategy unites 12 federal agencies with tribes, states and local and private entities, and a key to its success will be the ability of growers to produce enough seeds.

Risa DeMasi, chair of the American Seed Trade Association and partner of Grassland Oregon, said at the announcement that seed growers are eager to help. But she also said producing the quantities of seeds needed after disasters will hinge on bolstering native seeds with regionally adapted species that do well in specific areas.

“That can be a very effective tool,” DeMasi said. “We can start planning for that because then we can meet the needs in a much broader region.”

OCTOBER 2015 | PUBLIC RISK

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SCHOOL BULLYING BEST PRACTICES FOR PREVENTION

By John McLaughlin and Darcy L. Proctor

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ver the years, schools and school officials have become targets for liability lawsuits by parents and students arising from bullying in schools and school-related activities.

Generally, courts are reluctant to hold schools liable in bullying cases and have set a

high legal standard for school liability. Even with these protections, schools should be proactive and take certain steps, discussed below, to prevent liability exposure to bullying litigation.

WHAT IS BULLYING? Bullying is defined by the U.S. Department of Education as unwanted, aggressive behavior among school-aged children that involves a real or perceived power imbalance, and is repeated, or has the potential to be repeated, over time.

According to the National Center for Education Statistics, 1 approximately 28 percent of students ages 12 to 18 reported being bullied at school during the 2010–11 school year.

Additionally, the U.S. Department of Health and Human Services reports that nine percent of students in middle school or high school experience cyberbullying, but the rate is much higher, 55 percent, for lesbian, gay, bisexual and transgender students. Bullying can include physical, emotional or verbal abuse. It includes actions such as making threats, spreading rumors, attacking someone physically or verbally, and excluding someone from a group on purpose. The most common types of bullying students report is “being made fun of, called names or insulted” and having rumors spread. Courts have interpreted bullying to include student-on-student harassment and intimidation.

School bullying most often occurs in hallways or stairwells, in classrooms and outside on school grounds. But, school bullying is not limited only to bullying that happens during school hours or in a school building. Bullying can occur after hours, during extracurricular activities. It can also occur in other places, for example, on the playground, on the bus traveling to and from school, on the athletic fields and on the Internet through social media.

WHAT LAWS MAY APPLY TO BULLYING? Lawsuits by bullying victims and their parents are most frequently brought against schools under:

• Title IX of the Education Amendments Act, which prohibits discrimination/ harassment on the basis of sex; • Title VI of the Civil Rights Act, which prohibits discrimination/ harassment on the basis of race, color or national origin; • 42 U.S.C. Section 1983 for violations of the equal protection or due process clauses of the Fourteenth Amendment; and • State anti-bullying and tort laws.

DO SCHOOLS HAVE A CONSTITUTIONAL DUTY TO PROTECT STUDENTS? In general, schools do not have a constitutional duty to protect students. This is known as the DeShaney rule arising from the U.S. Supreme Court decision in DeShaney v. Winnebago County Department of Social Services, 489 U.S. 189 (1989). However, there may be liability for “state-created dangers” that require a student to prove that the school took affirmative actions to create or increase the danger that an individual would be exposed to harm by others, and that the school’s actions “shock the conscience.”

This is a very high standard of proof.

WHAT CAN SCHOOLS DO TO PROTECT AGAINST LIABILITY? Far too often, schools are not doing what the law and their own anti-bullying policies and procedures require which risks significant financial liability. For example, a school district in Minnesota had to pay $270,000 for failing to respond to bullying based on the students perceived sexual orientation. That same school district entered into an agreement with the Department of Justice and the Department of Education Office for Civil Rights which requires the district to provide harassment training for all

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School Bullying: Best Practices for Prevention

Education and training of students and school personnel on the anti-bullying policy and reporting procedures is critical to a successful defense. Schools should regularly communicate anti-bullying policies and procedures to students, as well as school administrators and staff responsible for implementing them.

staff, to hire new staff such as an equity coordinator and to supply mental health counseling for students in need. The District estimated that compliance with the agreement will cost an additional $500,000 which will be paid in part by state safety funds and federal Title IX money.

If a bullying incident is reported, the school personnel receiving the report and those responsible for enforcing the policy and investigating the report, should review the anti-bullying policy and procedures so they are fresh in mind and strictly followed.

Further, school districts in Tennessee and North Carolina have had to pay parents at least $100,000 where their students were sexually harassed and assaulted by other students. A successful defense of bullying claims against schools turns on whether the school can prove that it did what it was supposed to do and whether it took reasonable steps to stop bullying and prevent it from happening again. Schools can take the following steps to protect against liability for bullying claims:

• Educate and Train Students and School Personnel Education and training of students and school personnel on the anti-bullying policy and reporting procedures is critical to a successful defense. Schools should regularly communicate anti-bullying policies and procedures to students, as well as school administrators and staff responsible for implementing them. Schools should also document the training and education given and keep copies of the materials used each school year.

• Publish Anti-Bullying Policy/Procedures and Communicate Them At a minimum, schools must publish an anti-bullying policy in the student and staff handbooks in accordance with state statutory requirements. The policy and any related procedures should be disseminated to students, parents and school personnel. It is also good practice to have students, parents and staff acknowledge in writing that they received, read and understood the anti-bullying policy and reporting procedures. Keep copies of the acknowledgments.

• Review Anti-Bullying Policy/Procedures and Follow Them

School officials must be familiar with the anti-bullying policy and all related procedures.

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• Effective Response and Corrective Action Schools should take immediate and appropriate steps to investigate a bullying report. Do not delay. The investigation and action taken in response should be well-documented. If the report is substantiated, the school must take action to stop the bullying and protect the student victim. Schools are required to take steps reasonably calculated to end any bullying, harassment or intimidation. It is also good practice for schools to follow-up with the student periodically to ensure there is no continuing bullying or retaliation.

Following these suggested practices should prove to be a school’s best defense to bullying lawsuits.

John McLaughlin is the managing director of Arthur J. Gallagher & Co.’s Higher Education Practice.

Darcy L. Proctor is a litigation partner with Ancel Glink in Chicago.

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MEASURING RETURN ON INVESTMENT IN RISK CONTROL

By Ariel Jenkins

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eturn-on-investment (ROI) measurement validates the value of proposed and implemented risk control efforts. Risk managers and risk control professionals in the public sector can expect their role to expand, if it has not already, to provide feedback that influences the financial health of their organization. Opportunity exists within this expanded role to demonstrate returns on investment in risk control interventions that are intended to impact the magnitude of losses experienced. Public entities will probably be facing more scrutiny in the near future. The public will want to know why their local governments, school and public service districts are spending alarming amounts of money on workplace injuries, auto crashes and multi-million dollar liability settlements. By analyzing and estimating the financial impact, you can make wiser investments in risk control and be less subject to risk control budget cuts.

Generally, the work of risk control inherently reduces risk and, if we are effective, we have the potential to bring economic value. After we conduct all of our training and re-training, we hope that year-to-year our losses will improve and, if they do, we would like to think that it can be attributed to the safety training that was completed. In order to take credit for loss reductions, we have to be able to show the minimum benefits of our risk control efforts. This article will examine a few public and private sector cases to demonstrate how ROI concepts have and can be applied in a risk control context.

According to The Institutes, (American Institute for Chartered Property Casualty Underwriters), “The optimal level of risk control exists where marginal costs equal marginal benefits.” This is an economic statement but implies that, as risk control professionals, we could be measuring the minimum economic impact of what we do. Therefore, if I am able to realize a minimum benefit of a $100,000 loss reduction savings in one year, any additional savings above that $100,000 is “icing on the cake.” You may now be asking yourself, “Why wouldn’t you show or measure the maximum benefits?” You could estimate the maximum benefits, but doing so would be more volatile, subject to more inaccuracies, and increase potential to overstate the benefits of a particular risk control intervention. Therefore, the measures that I am going to present the remainder of this article are based on the outcomes of goals set to achieve the minimum benefits for the minimum cost.

In the strongest safety and risk management cultures that I have experienced, safety committees set time-oriented loss reduction goals using forecasting methods (See the hypothetical table example in Figure I). For example, if our incurred workers’ compensation costs were $1 million in 2014, our goal in 2015 could be to reduce our incurred costs by 20 percent or to $800,000. Pure forecast uses only historical data and status quo trends to predict future outcomes. If your goal is to accept the results of the forecast, in some cases you are accepting worse loss outcomes. Ultimately it is best to use forecasting data to set realistic loss reduction goals that will show improvement quarterly or year to year. Setting loss reduction goals sends a powerful message to all stakeholders that you are committed to the success of your risk control efforts.

FIGURE I A 1 2 3 4 5 6 7 8 9 10 11 12

=FORECAST (C11, B2:B10, C2:C10)

B INCURRED LOSSES $1,000,023 $987,000 $990,520 $1,018,523 $895,423 $1,053,267 $1,023,000 $998,562 $942,300 $981,805 4.2%

C YEAR 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Increase from 2014 to 2015

When projecting or measuring the ROI or to cost-justify risk control efforts, several assumptions need to be established and understood. First, loss reduction savings are cash inflows. Second, your organization has established a minimum acceptable rate of return. You will need this piece of information when calculating Net Present Value (NPV), Internal Rate of Return (IRR), and Modified Internal Rate of Return (MIRR), which will be reviewed in upcoming sections of this article. Third, to project ROI, you

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Measuring Return on Investment in Risk Control will need to either set loss reductions goals and/or forecast losses. Also, if you set loss reductions goals, your organization will need to invest time, money and resources into achieving these goals. Finally, you will also need access to first-dollar incurred loss data to forecast ROI and measure the outcomes of ROI in risk control. At least 48 months of data is recommended.

ROI,1 in its simplest and most direct form, can be expressed as a percentage or ratio. It measures every dollar invested, the amount of money recouped, plus a gain or loss from the investment. ROI is a very popular metric because it is versatile and simple. If an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment probably should be not be undertaken and you should look at alternatives.

A simple percentage change2 comparing two years is another, simple, straightforward way to measure ROI or the general impact of risk control, year to year. The new value is in the time period that you expect a decrease in losses. The old value is in the time period that you are trying to improve upon.

Another measure of projected ROI in risk control is payback period.3 This is the length of time required to recover the cost of an investment. Longer payback periods are typically not desirable. The main problem with payback period is that it ignores the time value of money. For this reason, other methods of capital budgeting, like net present value (NPV) and internal rate of return (IRR) is generally preferred.

Although NPV and IRR (See the hypothetical table example in Figure II) are established measures of ROI within the finance community, in my opinion, these measures are still underutilized and widely misunderstood in public sector risk control. NPV tells us the value of our investment today in dollars based on cash flows projected in the future. NPV tells you, over the course of a time period, if your investment is projected to bring value or not based on your pre-established goals. Projecting NPV illustrates if your goals are too aggressive and need to be adjusted or if the pricing of a service or equipment is too high to reach your goals. In the context of risk control, think of IRR as the rate of loss reductions savings that an investment in risk control is expected to generate in a given time period. IRR factors in the time, value of money, and the risk or uncertainty of future cash flows. For this reason, IRR is a widely-accepted method of ROI. While IRR assumes the cash inflows realized from risk control efforts are reinvested at the IRR, the modified IRR assumes that positive cash flows are reinvested at the organization’s minimum required rate of return, and the initial cash outlays are financed at the organization’s financing cost. Therefore, MIRR more accurately reflects the ROI of risk control efforts. MIRR is only a viable measure of ROI in risk control if an organization tracks cash flows in a risk control context and reinvests cash inflows from loss reduction savings back into risk control efforts.

FIGURE II 1 2 3 4 5 6 7

A Year 2015 2016 2017 2018 2019 2020

B Required Return 2015 Cash Outlay 2016 Cash Inflow 2017 Cash Inflow 2018 Cash Inflow 2019 Cash Inflow 2020 Cash Inflow NPV IRR MIRR NPV = NPV(C1,C3:C7)+C2 IRR = IRR(C2:C7) MIRR = MIRR(C2:C7,C1,C1)

C 12 percent $(50,000) $48,500 $36,955 $26,364 $16,625 $7,646 $56,432.92 68 percent 30 percent

Statistical measures, such as correlation coefficient, are also an effective way to measure ROI in terms of risk control efforts’ relationship with loss outcomes. Correlation is not causation, but it does demonstrate how the directions of two measures are related. Correlation is on a scale or range from -1 to 1. Negative correlations are the most common in risk control because, as the magnitudes of our efforts go up, we want the numbers we track to go down, such as loss cost, raw numbers of injuries, cost per claim, and indemnity days. We would expect the year-to-year incurred workers’ compensation or liability cost to go down as the number of people trained goes up. For positive correlation, we would expect for employee retention to rise as safety program assessment scores rise in a given time period. This follows the premise that, the safer the operation, the less injuries and the less opportunity for injured employees to turn over if they are injured badly enough.

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Spearman’s Rank Correlation Coefficient (SPCC) is another measure of correlation between two different measures of ranking. For example, you can compare the rankings of your operations’ safety assessment scores and how they compare to their ranking for incurred costs per claim or some other measure of loss outcomes.

A public entity could set a one-year goal to reduce ergonomic related injuries by 20 percent and invest about $145,000 in the same year. If the incurred cost of injuries were reduced by over $240,000 by the end of the year, financially this would appear to be a good investment. The reality is that, unless goals of 25, 26 and 27 percent reductions were achieved in incurred cost the next three years after the initial year, the outcome would be a negative Net Present Value, and a zero or less IRR and MIRR. This is the case despite the annual expenses dropping from the initial year. The point here is that you have to consider how the cost of an investment affects your ability to achieve realistic loss reduction goals in multiple years.

In order to validate that a public entity’s health and safety process is having an impact on losses, you could use Spearman’s Rank Correlation Coefficient (See the table in Figure III) to see how the rankings of operations’ safety and health assessment scores correlate to the rankings of operations’ actual outcomes of the frequency and severity of injuries. In this example case, there is a very strong positive relationship between safety assessment scores and the frequency and severity of injuries, which probably means that the content in the safety assessment is very relevant to preventing injuries.

FIGURE III Operation F H F C B I E A J G Spearman’s Rank Correlation Coefficient =CORREL (D2:D11, E2:E11) =CORREL (D2:D11, F2:F11)

IF R =

Frequency Rate of Injuries Ranking Correlation to Safety Assessment Score Severity (Cost Per Claim) Ranking Correlation to Safety Assessment Score

Safety Frequency Severity Assessment Rate of Injuries (Cost Per Claim) Score Ranking Ranking Ranking 1 3 2 2 1 3 3 2 1 4 5 9 5 4 4 6 8 6 7 10 10 8 6 8 9 7 5 10 9 7

0.82

Very strong positive relationship

0.60

Strong positive relationship

CORRELATION SCALE RANGE +.70 or higher +.40 to +.69 +.30 to +.39 +.20 to +.29 +.01 to +.19 -.01 to -.19 -.20 to -.29 -.30 to -.39 -.40 to -.69 -.70 or higher

Very strong positive relationship Strong positive relationship Moderate positive relationship Weak positive relationship No or negligible relationship No or negligible relationship Weak negative relationship Moderate negative relationship Strong negative relationship Very strong negative relationship

A public entity organization in New Jersey was an early adopter of an innovative driving training program designed to train first responders to safely navigate roads while driving with lights and sirens on. Approximately 600 officers were trained in less than a 12-month period in 2012. The one-year result was a 13.9 percent reduction in the frequency of auto liability claims. There was also approximately a 14.7 percent reduction in the incurred cost of auto losses in a two-year period. This equated to over $350,000 in real savings and an ROI of about 4,089 percent.

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Measuring Return on Investment in Risk Control So far, I have given a number of examples of financial ways and reasons to invest in risk control. Measuring utility is an economic concept, but it looks beyond considering just the financial numbers in establishing the value of what risk control solutions to pursue. Community policing, for example, could make no financial sense, but may be perceived by the local community as the right thing to do to create and sustain a safer community for officers and the general public.

In the public sector arena, political environments can influence or even misguide time, energy, and resources. If you decide to forego one risk management intervention for another, then it would be prudent to ensure that opportunity costs are not too high to where you have to sacrifice risk control for some other risk management tool that does not bring enough value to your organization. As mentioned earlier, public entities are or will be facing more financial scrutiny these days.

Risk control is sustained by its ability to execute, produce financial results and bring value to the organization. We all get preoccupied with the daily grind and sometimes lose sight of what we are trying to, ultimately, accomplish.

Any investment is a gamble to some degree, but we don’t have to take huge risks. Once we measure the projected ROI based on goals set, we are actually investing in achieving goals. Let’s raise the bar and be more consistent with measuring our projected and achieved successes in risk control.

Ariel Jenkins is the director of risk control for Safety National.

FOOTNOTES 1 (Gain from Investment-Cost of Investment)/Cost of Investment 2 (New Value – Old Value)/ Old Value 3 Cost of Risk Control Project/Annual Cash Inflows

Everyone else is doing it. WHY AREN’T YOU?

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N OV E M B E R 1 8 | 1 2 P M – 1 : 3 0 P M E ST

EMPLOYMENT PRACTICES LIABILITY: MITIGATING RISKS SPEAKER: Paul Cunney, Vice President, ACE Westchester DESCRIPTION: Employment practices liability (EPL) insurance ranks as one of the biggest insurance expenses for public entities, costing more than general liability insurance. Public entities have seen the cost of EPL rise even further in recent years as a result of an uptick in claims frequency and the defense costs associated with them. By focusing on loss control and implementing a well-structured insurance program, public entities can manage their EPL expenses while meeting federal and state regulatory requirements. This Webinar will help participants understand EPL risks and how they can protect themselves from future exposures.

AT T E N D E E TA K E AWAYS :  Discuss and review current EEOC updates  Review and identify jurisdictional updates, claims trends and coverage availability  Learn ways to mitigate employment claims and implement strong loss control capabilities W H O S H O U L D AT T E N D :  Risk managers  Human resources professionals  Claims managers  Underwriters  City/county counsel

For more information, or to register, visit primacentral.org/webinars.

Hearing Loss Claims in Workers’ Compensation:

A GROWING CONCERN

By Jon Nau

D

id you know that approximately 34.25 million Americans, more than 1 in 10, are currently experiencing some level of hearing loss? With those kinds of numbers, it is important for risk and claims professionals to familiarize themselves with how to evaluate, identify and

respond to hearing loss claims and to understand the impact they have on the workers’ compensation (WC) industry.

There are many complexities within audiology and hearing programs, which can be difficult to understand for those who are unfamiliar with hearing loss and many WC professionals may find the range of options and significant variation in pricing to be overwhelming. This is why it is important to consider working with a partner to help navigate the complicated maze of choices. In this article, we will discuss audiology and hearing programs that are specifically geared to meet the needs of the WC industry and how they can help the WC professional.

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TYPES & CAUSES OF HEARING LOSS To grasp how hearing impairment occurs, it helps to understand a brief anatomy of the ear. At its simplest form, the ear is comprised of three main parts—the outer, middle and inner ear. There are two primary types of hearing loss: • Conductive: This hearing loss is generally not workrelated. It is typically temporary in nature and can usually be remedied by medication or surgery. It is usually caused by obstruction to, or damage of, the outer or middle ear, which prevents sound from reaching the inner ear.

• Sensorineural: WC-related cases generally fall into this category representing the majority of hearing loss. Most commonly, noise-induced hearing loss occurs within the inner ear where the cilia within the cochlea are damaged.

Sensorineural hearing loss is typically permanent in nature and the primary treatment is with a hearing aid.

THE IMPACT ON INJURED WORKERS We often take for granted the ability to hear what is being said around us, that is, until we are no longer able to communicate and interact effectively with peers, coworkers, family or friends.

Untreated hearing loss can lead to a lower quality of life, with symptoms such as depression, decreased social interaction, fear, paranoia, and isolation for the person experiencing hearing loss.

A SPECIALIZED WORKERS’ COMPENSATION HEARING & AUDIOLOGY PROGRAM According to a study published in Hearing Industry Association (HIA), the hearing aid industry generated $5.3 billion in retail revenue in 2014, with $361 million being attributed to WC. WC professionals tend to lack familiarity with how to manage hearing loss claims because until recently, these cases have been relatively uncommon. As a result, there is a lack of awareness of the many moving parts that must be managed when navigating a hearing loss claim.

across the country and many of these providers are independently owned and operated. As a result, it can be difficult for adjusters and NCMs to know where to send an injured worker on their own. A specialized program can serve as a resource, since it has already identified highly qualified and credentialed providers across the country, and has verified licensing and insurance.

WC professionals

• Compensability: How do you determine if a hearing loss claim is work related?

In 1986, OSHA began requiring worksites to test and record noise levels. Furthermore, OSHA mandated pre-employment hearing tests to establish a baseline for employees with ongoing annual tests to continually monitor the employees’ hearing. However, many people who are retiring today worked in environments during a time when these recordings were not required, so it’s difficult to determine compensability. In these situations, an Ear, Nose and Throat (ENT) physician can help make the determination. Today, there are hundreds of ENT physicians located across the country, who work with specialized programs and are highly experienced in determining WC compensability.

these cases have

with how to manage hearing loss claims because until recently,

been relatively uncommon. As a result, there is a lack of awareness of the many moving parts that must be managed when navigating a hearing loss claim.

• Pricing & Cost Containment: The majority of states do not have a fee schedule for hearing aids, which causes a lot of inconsistency and variation in price. How can you determine what’s reasonable in terms of cost?

Since there is no uniform regulation for hearing aids, prices can be very inconsistent. For example, a set of hearing aids could be priced at $3,000 or a set of hearing aids could be priced at $12,000. There are thousands of products and providers to choose from with a staggering number of options.

Some of the most common challenges WC professionals will face are outlined below:

A specialized program offers a turnkey hearing and audiology solution, an extensive network of quality hearing professionals for accurate testing, and an ENT physician network to ensure the hearing loss is work-related. Ideally this program should provide cost containment, alleviate administrative burdens, and ensure the right provider and product is utilized.

• Quality Providers: How do you ensure injured workers are referred to quality hearing and audiology providers when there are so many to choose from?

There are thousands of audiology and hearing clinics

For example, the program could help an adjuster understand that a particular hearing aid is costly because it includes Bluetooth

Today, there are hearing and audiology programs specifically geared to meet the needs of the WC industry and help guide the WC professional through the variety of options and complexity of care. An employer, claims administrator, or insurance carrier can simply partner with these programs, and by doing so, their claims adjusters or nurse case managers (NCMs) can refer all hearing-related claims to these program experts.

tend to lack familiarity

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Hearing Loss Claims in Workers’ Compensation compatibility. Although this is a nice feature, which allows a hearing aid to connect directly to a cell phone or other device, the feature may not be medically necessary.

CALENDAR OF EVENTS PRIMA’s calendar of events is current at time of publication. For the most up-to-date schedule, visit www.primacentral.org.

WEBINARS 2015 • November 18 – Employment Practices Liability: Mitigating Risks

PRIMA ANNUAL CONFERENCES June 5–8, 2016 PRIMA 2016 Annual Conference Atlanta, GA Hyatt Regency Atlanta June 4–7, 2017 PRIMA 2017 Annual Conference Phoenix, AZ Phoenix Convention Center June 3–6, 2018 PRIMA 2018 Annual Conference Indianapolis, IN Indiana Convention Center

ENTERPRISE RISK MANAGEMENT: APPLYING THE ISO 31000 STANDARD Intro Workshop Dates & Locations September 29 – Savannah, GA Implementation Workshop Dates & Location November 18 & 19 – Savannah, GA

PRIMA INSTITUTE November 4–6, 2015 Albuquerque, NM

• Care Management for Injured Workers: How can you guide injured workers through a process with which you may be unfamiliar?

Since work-related hearing loss is usually permanent (sensorineural), claimants will require ongoing and proactive care management for the rest of their lives. For example, claimants may experience increased hearing loss over time, and as a result, they may need a new hearing aid or need an existing hearing aid to be reprogrammed. At other times, their hearing aids may require cleaning, warranty repairs, or replacement batteries.

A hearing and audiology program will assist the injured worker in scheduling an evaluation and follow-up appointments, as well as walk them through the testing and fitting process, which can take up to 30 days. After the injured worker has received their hearing aids, a specialized program will also typically provide a warranty, repairs for loss and/or damage, and batteries.

• Medical Necessity: There are thousands of different products to choose from with many new features and capabilities. How will you know what’s necessary, given the injured worker’s level of hearing loss and lifestyle?

A hearing program will review every audiogram to ensure the evaluation was thorough, and that the right hearing aid is being fit, according to the claimant’s level of hearing loss and lifestyle. In fact, to ensure medical necessity, the program will provide a peer review service. For example, a hearing aid may be recommended with features that are not medically necessary, but significantly drive up cost. A hearing program can help evaluate and provide feedback to the adjuster, which could provide significant savings.

• Comprehensive Hearing Aid Package: How can you ensure injured workers are receiving the best, most comprehensive hearing aid package? What other options should be considered and included?

A hearing program should ensure a complete and consistent hearing aid solution, which includes the best options in all areas, such as warranty, loss and damage coverage, battery replacement, and ongoing servicing for hearing aids.

In this way, both the payer and patient have peace of mind in knowing a hearing aid is covered in case it is lost, stolen or damaged—and the coverage is comprehensive, so it allows the injured worker access to any credentialed audiology partner within a specified network across the country.

THE FUTURE OF HEARING SOLUTIONS AND HOW IT IMPACTS WC With the aging population and workforce, an increased incidence of hearing loss is inevitable, and within WC it will be important to have a process or solution in place to determine if the hearing loss is work-related. Partnering with a specialized program provides guidance on how to navigate the complex variables and decisions that are involved in each hearing loss claim. Chief among them is the dramatic variation in pricing.

A hearing program will also review audiograms to ensure injured workers are being fit with the appropriate product based on hearing loss and lifestyle (medical necessity). In this manner, the future of hearing loss claims “sounds” bright—with guidance on cost containment, product quality, and use of the right provider each and every time.

Jon Nau has been a member of One Call Care Management’s hearing aid program since joining the team in 2013.

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Has your entity launched a successful program? An innovative solution to a common problem? A money-saving idea that kept a program under-budget?

Each month, Public Risk features articles from practitioners like you. Share your successes with your colleagues by writing for Public Risk magazine!

For more information, or to submit an article, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

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Member Spotlight

HILLSBORO’S SUPERVISOR DEVELOPMENT PROGRAM BUILD COMMUNITY AND TEAMWORK Each month, Public Risk features a member who has

T

he City of Hillsboro, Ore., in conjunction with this risk management department, created a supervisor development program in order to provide consistency across departments.

handled throughout the entity,” said Cockeram. “Providing ongoing, in-house training builds strong managers and supervisors and over time can change the operational culture of an entity.”

“Inconsistency in policy and implementation was a common theme within our entity, specifically in hiring practices and performance management,” said Risk Manager Tami Cockeram (Cockeram now holds the title of community services manager with the City of Hillsboro.). “When done incorrectly, it can lead to complaints and in extreme cases, law suits.”

Cockeram also believes that using in-house instructors gives Hillsboro’s training an edge over other leadership training programs.

gone above and beyond “Member Spotlight.” Do you know someone who deserves recognition, has made a contribution or excelled in their profession?

If so, we’d like to hear from you for this exciting column, as PRIMA shines the spotlight on its members.

To be considered for the Member Spotlight column, contact Jennifer Ackerman at jackerman@primacentral.org

The goal of the training is to provide managers and supervisors with necessary knowledge, skills and tools for successful and continued professional growth. The two-day program focuses on the challenges supervisors face daily and provides programing that includes a strong risk management component, including workers’ comp 101 and performance management. The courses explain to attendees their legal responsibilities under federal and state laws, as well as moral obligations for the health, safety and well-being of their staff.

or 703.253.1267.

“By providing our leadership with a common language, understanding and application of policies, it helps develop a common culture on how people and work processes are

“

“It can be difficult marking the connection to organizational standards and values when using outside instructors,” she said. “In-house presenters provide validation to what the city expects of their supervisors and managers.

Cockeram says that Hillsboro’s training is easily transferrable to other entities. Organizations can adapt the context of the training modules making it specific to their policies and procedures. Since the program is taught by in-house instructors, it can be modified as needed.

Hillsboro offers the Supervisor Development Program every six months. Currently, there is a wait list to participate in the training in Hillsboro.

For more information, contact Tami Cockeram at tami. cockeram@hillsboro-oregon.gov.

By providing our leadership with a common language, understanding and application of policies, it helps develop a common culture on how people and work processes are handled throughout the entity.

“

in a feature column titled

Tami Cockeram, community services manager with the City of Hillsboro

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