Bermuda Triangle of Risk

For decades a 500,000-square-mile zone in the Atlantic Ocean triangulated between Puerto Rico, Florida, and Bermuda has been dubbed the Bermuda Triangle. This area has been linked to the mysterious disappearance of ships and aircraft dating back to 1945 when five U.S. Navy aircraft vanished without a trace. What happened is a matter of speculation ranging from supernatural forces to human error. No one knows.

In business, there is a Bermuda Triangle of Risk. It’s triangulated between workers’ comp, benefits, and compliance. It can suck a business into a storm of trouble that can be tough to handle, cause countless hours of time and money, and in some cases a loss of the business itself.

Imagine your employee, we’ll call him Max. He was just diagnosed with Parkinson’s Disease. He claims he fell in the parking lot at work injuring his wrist and went to his family doctor who told him he couldn’t work. Max informs his supervisor that he is on his way to Florida using his time off to visit his sick mother. What do you do? You might call your workers’ comp company, where they ask you to turn in the claim and an adjuster will be assigned and they will contact you. When the adjuster calls, you are told they will dispute the claim because the employee was already having therapy on their wrist for Parkinson’s Disease.

You inform your employee to use your group insurance but when they do, they are told the injury was work-related, and their health insurer is denying the claim. You just realized they don’t qualify as an “active full-time employee” because they haven’t returned to work, so you send out a COBRA notice. The employee never returns to work and run out their COBRA. Shortly after the COBRA runs out their spouse, who was on the health plan, has an accident while hiking and is severely injured, with medical bills totaling over $500,000. You inform them their benefits ran out. They said the hospital billing department mentioned something about FMLA. Oops, you forgot to trigger FMLA because you just went over more than 50 employees for more than 20 weeks last year. Who is going to pay the spouse’s $500,000 medical bill? Unfortunately, you the employer, are.

How could something as simple as a slip and fall turn into such a nightmare? One reason is the silos that exist between Human Resources, Finance, and Supervisors. HR might be involved with the workers’ comp, benefits, and compliance, while finance and supervisors might have information or take action that would affect the outcome without even knowing it. The reality is that once the error is made it can be tough to control the outcome. For example, does the line supervisor know that Max communicated information to them that triggered a potential FMLA event? As you may recall: “Max informs his supervisor he is on his way to Florida by using this time off to visit his sick mother in Florida.” How many supervisors would know they should inform HR when they hear this? Not many! In fact, some might retaliate against Max, which would pile on more trouble. Courts have even ruled that managers and supervisors can be held personally liable for FMLA violations.

Another problem is that in midsize companies’ employees wear many hats, and very often the focus is on the burning issues of the day, all while issues that might affect them tomorrow get shoved to the back burner. For example, one person may be doing office management, HR, compliance, and accounting. What gets done first is what gets noticed first, like getting payroll out on time or wrapping up year-end accounting to meet a deadline. Compliance is often put off as something to do tomorrow but tomorrow never comes.

Riding out a storm in the Bermuda Triangle of Risk requires a strong ship with a good crew working together to avoid trouble. There needs to be a captain in charge with the first mate stepping in to steer the ship while the captain is tending to other business. Companies should consider enlisting the services of a real risk advisor with knowledge in workers’ comp, employee benefits, and compliance to be that first mate. It should be someone versed in checking compliance with COBRA, FMLA, ADA, HIPAA, and any other labor laws that might apply. This is best accomplished by doing a compliance checklist.

Just like an airplane pilot going through their preflight checklist before they take off even though they have flown for years, regular communication between HR, Finance, and Supervisors, along with training to recognize what and when to communicate issues that occur, is critical. Adding to the problem for employers is the way the insurance industry has siloed itself. One agent might focus on workers’ comp while another focuses on benefits, leaving HR to deal with compliance. When this happens, workers’ comp claims and benefits are handled separately by different people with no knowledge or concern how one might affect the other. It’s disjointed, inefficient, and can leave your business with huge gaps without you even knowing it. This is why your insurance agent must make you aware of the Bermuda Triangle of Risk, so that they are your company’s bridge over these troubled waters.

Randy Boss is a Certified Risk Architect at Ottawa Kent in Jenison, MI. He is a Master WorkComp Advisor (MWCA).