Metrics: Quiz Part 1

Hint

Knowing what metrics to use and how to calculate these metrics is only a small percentage of the value. The key to using metrics is the ability to tell a story. What is common in organizations is to have hundreds of reports, pages of spreadsheets, and mountains of data, but very little meaning.

Tips for telling a successful story include:

-Summarize the data on 1-2 pages

-Use graphs or other visually pleasing tools to present the data

-Make the information relevant to your audience using their language

Hint

The most common reason for a program to decline before or after workers’ comp reform is lack of meaningful tracking and monitoring of workers’ compensation’s impact on the organization.

Hint

– The three subcategories that are tracked in for each # of Claims, and Average Claim Cost are Total, Medical Only, and Lost Time.

– The main limitation of tracking only these metrics is these numbers only tell a part of the story, and leave the actual performance of your workers’ comp management program open to misinterpretation.

Additional reasons include:

– The numbers are solely retrospective

– A change in average cost of the total number of claims which would appear negative could be caused by the program moving in a positive direction, such as more claims being reported; or average lost time claim cost increasing due to an improved return to work program.

Hint

• The main reason for organizations with less than approximately 50 claims to focus more on controllable premium than Cost Per FTE is due to the volume of numbers in the calculation to tell an accurate story and show an accurate trend.  In the Cost Per FTE formula, for an organization with a smaller claim volume, only a few claims could have a too great effect on the solution.  *Note: it’s possible that a claim volume of 20 or 30 claims annually could still make sense to look at Both Cost Per FTE and Controllable Premium to compare solutions and trends.
• Controllable premium is the primary financial metric in a lower claim volume, or any Guaranteed Cost insurance structure.  It is calculated as follows:
  • Calculate minimum mod from the experience mod worksheet = Stabilizing Value / Expected Total
  • Multiple ‘minimum mod’ x manual premium. (manual premium = payroll x class code rate)
  • Subtract ‘current premium’ – ‘minimum premium’ = controllable premium