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MARINA DEL REY, Calif. -- American Airlines is reaping cost savings from a workers compensation program overhaul that emphasizes the importance of worker satisfaction.
The airline, which employs more than 90,000 people in 44 states, achieved a 17% reduction in overall losses associated with workers comp in the first year of its new program, said Jerry L. Thomas, managing director of workers compensation for the airline based at the Dallas/Fort Worth International Airport. Mr. Thomas spoke at the Sixth Annual Conference on Workers Compensation in Marina del Rey, Calif., sponsored by Business Insurance.
Achieving these dual goals was but a dream in 1996, when American scrapped its existing workers comp program and developed "an intricate patchwork of policies and procedures, all of which are woven together with the common threads of concern for our employees' well-being and a desire to deliver it at the lowest possible cost," he said.
The company continues to use employee surveys to measure satisfaction levels, which have consistently improved, he said.
American Airlines' accomplishment is particularly important given the "very challenging environment" in which it operates, Mr. Thomas said. American has:
* Operations in 44 state jurisdictions, though 90% of costs are driven by injuries in six states.
* Multiple and differing labor union agreements that "significantly" affect the process.
* Contractual pay continuance programs, whereby an employee earns his or her full regular salary while off work due to injury, with no statutory waiting period.
* Operations in one of the most competitive industries in the United States.
American began revamping its workers comp operations by holding "rap sessions" with employees from a variety of geographic locations to solicit their opinions about how to improve the program. "They gave us a lot of good feedback" and some usable ideas, Mr. Thomas said.
Executives then visited several large corporations that had achieved significant success in improving workers comp programs and lowering costs; they found more usable ideas.
American then did a version of a Request For Proposal for a new third-party administrator. However, American called it a "Request for Partnership" to better indicate that the company was seeking a relationship that would promote the evolution and ongoing improvement of American's workers comp process. Essentially, "we wanted an agreement that there was no agreement and that many things would change as we gather experience and momentum in developing our new program," Mr. Thomas said.
"We made it clear that consistent execution and ongoing improvements were the two keys to our new TPA's success," he said. American chose Specialty Risk Services of Hartford, Conn., as its TPA. Its broker, Lockton Cos. in Prairie Village, Kan., also helped develop the program, he said.
"To ensure our mutual success, we asked SRS to enter into a unique guarantee, whereby they would either earn additional money at the end of each contract year or they would be required to return some of the claims-handling fees they had earned in the prior year," Mr. Thomas said. "The determining factor for which way that money would flow was SRS' overall claims-handling quality, as verified through an extensive claims auditing process, as well as by their overall support of our program objectives."
One challenge was to carefully integrate the roles of claims adjusters with that of American's new "injury counselors," who helped lift the burden of workers comp responsibilities off the shoulders of airport supervisors.
Essentially, adjusters' activities were limited to ensuring statutory adherence, bill processing and other standard tasks, while injury counselors were expected to help accelerate the treatment and return to work of injured workers.
"Now, because injury counselors have no formal medical training, we recently issued another RFP for a new nurse case management partner," Mr. Thomas said. That proposal also contains a performance guarantee.
Perhaps the most significant cultural change American imposed is a requirement that every injured employee return to the workplace in a transitional duty assignment as he or she progresses through the recovery process, Mr. Thomas said.
While a few employees did not like it, all benefited physically by staying active and mobile during recovery periods. They also benefited psychologically by remaining connected to their day-to-day work lives and relationships. There is strong research support for this approach as key to avoiding physical and psychological debilitation as a result of injury.
Another significant component of this program was a strong preferred provider network, which was developed with the help of CONCENTRA Managed Care Inc., based in Boston, Mr. Thomas said.
The final important component of American's program is the ongoing measurement of program data through weekly and monthly reports.
"It's not rocket science, but it is just a carefully designed program which is highly tailored and customized to our unique needs, and it's designed to do the right thing for our people and for our company," Mr. Thomas said.