A second notable trend impacting workers' compensation is the increasing diversity of today's workforce. The diversity of the workforce demands a more customized way to address a range of needs associated with varying cultures, languages, ages, and values. For example, we know that people of different cultures and backgrounds have different claims needs and respond differently to the way in which healthcare is delivered. Attitudinal differences can impact the recovery and return to work process and must be considered. Communication should also be taken into account, and any potential barriers removed. Language translation is often required, but beyond that, cultural translation is critical.

Similarly, people of different generations respond to communications differently. While many older workers prefer to communicate by phone and mail, the younger generation is looking for real-time information and prefers to communicate through text and email.

These types of differences must be accounted for when employers consider their workers' compensation programs today. Accommodations must be made in the way that claims services are administered and delivered in order to drive better outcomes and improve productivity.

A third trend impacting workers' compensation is a continuing transition from managed care to quality care. Despite two decades of applying traditional managed care techniques to workers' compensation, medical costs associated with work-related injuries continued to rise.

In recent years, the industry has shown a shift in thinking. Less emphasis began to be placed on negotiating expansive PPO discounts and processing bill review paperwork, and more emphasis was placed on identifying quality healthcare providers and the delivery of appropriate care on a timely basis and at a reasonable cost.

Quality physicians produce better outcomes. They are the ones who consistently deliver desired results and understand the objectives of the workers' compensation system. The introduction of such quality care techniques as provider benchmarking underscores the importance of this approach. This philosophy of quality care is expected to continue and accelerate in the coming months.

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

By encouraging and helping employees lose weight, increase exercise, and avoid adverse activities such as smoking, businesses are not only showing a decline in their healthcare costs but an overall improvement in their workforce productivity. Healthier workers tend to be injured less frequently and recover more quickly than those battling injuries and complications arising from co-morbidities.

How is technology impacting the way employers manage workers' comp claims?

Technology is advancing rapidly, and workers' compensation has been a beneficiary of these advancements. It is widely known that workers' compensation is a high touch system that requires ongoing communication with injured workers.

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

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

Technology is also helping employers comply with increasing governmental regulations and compliance demands. Heavy fines and penalties await those employers who do not adhere to administrative requirements and filings. For example, OHSA has instituted a national emphasis program on record keeping to assess the accuracy of injury and illness data recorded by employers.

Employers who do not accurately record injuries and illnesses face substantial OSHA fines and penalties. Technology can automate much of the record keeping and reporting processes to ensure compliance with these regulatory requirements. By relying on technology to assume much of the manual processes and paper work, employers can focus on managing core operations and improving productivity standards for their businesses.

Additionally, technology is producing information that allows for improved decision-making and more favorable outcomes within the workers' compensation arena. These systems make it possible to identify which claims need immediate attention or corrective action. As more information is compiled and collected, the credibility and certainty associated with such information increases and its predictive capabilities improve. By identifying and understanding trends in the data, action can be taken early on before problems and costs escalate.

Technology has increased the discussion around predictive modeling and its applicability in workers' compensation. One key point to understand is predictive modeling is less dependent on the modeling technique and more influenced by the underlying data on which the modeling is based and the action that is taken after the analysis 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 which they were based. Second, the analysis will only add value if employers take action based on what predictive modeling indicates needs to be addressed. A change in behavior is essential to success.

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

Generational differences have a profound influence on the way workers' compensation programs are managed. Currently, corporate America has four distinct generations in the workplace. Each generation brings different experiences and values to the work setting that impact how its members approach their jobs. These generational differences readily surface when it comes to how people embrace such issues as technology, communication, collaboration, performance, and compensation.

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

The composition of today's modern family also impacts how workers' compensation is managed. The needs of single individuals often differ from those who are married, and the needs of single parents will differ from those in a two-parent household. For example, consideration should be given to the needs of a single individual released from the hospital and a determination made as to 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 and issuing payments. Today, it has evolved into how can the services and outcomes that the TPA provides impact other areas of the business in a positive way. The manner in which claims are managed ultimately impacts workforce productivity, quality of products and services, financial statements and profitability, and stock prices and market share. These are the factors that determine an organization's operational success and long-term sustainability. TPAs help businesses achieve these goals by controlling unbridled medical costs, improving return to work outcomes, and protecting a company's reputation after an unexpected accident.

Additionally, the TPA's role has also evolved to focus more heavily on the needs of injured workers and their families. This occurs by delivering more timely and appropriate healthcare, increasing medical literacy and understanding, and improving communications among all parties with a goal toward recovery. For example, TPAs are at the forefront in developing techniques such as provider benchmarking to improve the quality and timeliness of healthcare delivered to injured workers. They are also helping redefine the role of players such as case managers with a stronger emphasis on medical advocacy. This is intended to foster increased engagement by injured workers in the recovery process. When it comes to technology advancements, TPAs are taking the lead through such activities as expanding the role of push technology from the disability and leave arena to the workers' compensation setting and developing new mobile apps to aid in communications with injured workers.

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

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

There should be continuous review cycles with audits scheduled earlier in the claims lifecycle. Performance reviewers should evaluate the performance of key claim metrics in three distinct categories—communication, proactive engagement, and result. The objective of such a review is to determine whether a claim is on the path to the best possible outcome. It is then possible to implement performance score carding to ensure claims are moving toward resolution and achieve the best financial result.

Predictive modeling is used to improve quality. By segmenting claims into tiers based on their likely exposure as well as the anticipated effort required to resolve the claim, it is possible to better focus the bulk of effort on the claims that will most benefit from increased supervision.

What changes do you anticipate in the role of the claims adjuster in the future?

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

Claims adjusters must also exhibit exceptional communication and negotiation skills. Each day they must interact with individuals or family members who have suffered an unexpected loss or injury. Claimant emotions run the gamut, and such dealings require the utmost sensitivity while attempting to determine a fair and reasonable solution for the injury that occurred. Few situations demand a higher degree of professionalism.

Quality claims professionals will remain in demand. They are and will continue to be an integral part of the risk management equation as they are responsible for the largest component of an employer's total cost of risk—loss costs. It is anticipated that as industry demands increase, claims adjusters roles will evolve to a point where less emphasis is placed on repetitive activities and more focus is directed to those areas that will have the greatest impact on the claim and improve overall outcomes.

How is the growth of PEOs and staffing companies impacting the workers' compensation market and processes?

With the uncertainty of the economic environment and anticipated changes to health insurance, there has been an upswing in the temporary staffing industry. Employers are seeking more part-time workers' from temporary staffing agencies and PEOs in place of what are perceived to be more expensive permanent workers. As workers' compensation exposure decreases, as reflected by reduced employee counts and payroll, workers' compensation premiums can also be expected to decrease. However, with the transfer of this work-related exposure to temporary staffing agencies and PEOs, the cost of their services may rise to account for this added exposure.

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

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

Additionally, employers should establish strong partnerships and effective working relationships with their service providers. This includes 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 be harnessed and managed for the benefit of the program. Carefully defining service standards and clearly communication service expectations improve the odds of successful performance.

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

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

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

Employers have had a noticeable impact on the legislative debate, and they should continue to make their voices heard in the future. Industry groups and associations offer excellent opportunities for organizations to become more active in this arena.

With the passage of Senate Bill 863, California employers contend with many legislative changes. As an example, injured workers will now be eligible to request an independent medical review to dispute a utilization review denial of a medical treatment request.

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

New York is another state that has seen notable legislative changes in recent years. Recent changes there are expected to increase workers' compensation costs paid by employers. For example, as of May 1 of this year, the minimum temporary disability rate increased from $100 to $150 per week. Also, the fund for re-opened case will be closed to new claims as of Jan. 1, 2014. As a result, unfunded liabilities could be transferred from the fund to carriers and employers.

The most notable change in workers' compensation legislation occurred in Oklahoma in this past May. A new law there now allows for workers' compensation alternate coverage provisions.

In the new Oklahoma option, employers that choose an alternative benefits plan must follow a series of requirements. Employer protection under exclusive remedy is preserved by Oklahoma law and benefits provided to injured workers under an alternative benefits program must be equal to or better than those currently provided by the State's workers' compensation system. While it is anticipated that the Oklahoma Supreme Court will review certain parts of the provisions in the new workers' compensation law, it will be interesting to see what impact it will have on other states looking to improve their workers' compensation systems.

It is important to remain abreast of key factors driving these legislative changes, evaluate the scope of changes being considered, and consider ways to influence future legislative discussions.

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

There is much speculation surrounding the Affordable Care Act and its impact on workers' compensation. The potential size and scope of change dictate close and continuous monitoring of the landscape. Three issues that employers should watch and consider as the new legislation unfolds are: access to care, consolidation of providers and facilities, and the use of accountable care organizations.

First, the Affordable Care Act will prompt employers to consider access to care for injured workers. As more Americans are provided healthcare coverage under the Affordable Care Act, demand for healthcare services is expected to increase and the system is likely to become over populated with patients. As a result, maintaining access to care may mean that employers must consider alternatives such as the expanded use of nurse practitioners and physician assistants to treat injured workers or onsite medical programs.

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

Third, the Affordable Care Act will result in the establishment of accountable care organizations. These organizations are designed to keep all care within such an established system. Industry observers are waiting to see if quality care initiatives, medical provider networks, and administrative processes can be incorporated into the accountable care organization model or whether a model specific to workers' compensation is needed.

Additionally, there is speculation that the Affordable Care Act could lead to an increased emphasis on creating and maintaining a healthier workforce. Many employers are already placing a renewed emphasis on wellness programs aimed at reducing obesity, promoting exercise, and decreasing smoking. These strategies are designed to mitigate rising healthcare costs and related health insurance premiums.

David A. North serves as president and CEO Sedgwick CMS Holdings, Inc. and Sedgwick Claims Management Services, Inc. Under his leadership, Sedgwick has grown to become the largest third party administrator in the industry. A frequent speaker at national and regional industry conferences, North has more than 32 years of experience in risk management services.