Archive for May, 2010

Unemployment Likely to Rise as a Result of Healthcare Reform

With healthcare enacted, it seems that many people are still unfamiliar with the 1000 plus page legislation, including the very people who voted it into law.  While many of the provisions conveniently don’t start for several years, long after most of those responsible for this new mandate will be out of office, there are some important items that everyone should understand. 

Beginning in 2011 the cost of employer provided healthcare must be reported on W-2 income tax statements, setting the stage for this benefit to ultimately be taxed with proceeds being redistributed to those in need to health insurance.  While this new 40% excise tax isn’t slated to begin until 2018, on high-cost health plans, the reality may be far different when the true cost of this legislation comes to light.

The bill also provides for a doubling of the penalty for non-qualified distributions from Health Savings Accounts to 20%, a ban on using this money, despite it being yours, on over the counter medications and a cap of $2500 dollars on what employees may contribute to such accounts.  The penalty and ban being next year with the cap taking place in 2013. 

Starting in 2013, a 0.9% Medicare surtax will apply to wages in excess of $200,000 for single taxpayers and over $250,000 for married couples. Also, for the first time ever, a Medicare tax will apply to investment income of high earners. The 3.8% levy will hit the lesser of (1) their unearned income or (2) the amount by which their adjusted gross income exceeds the $200,000 or $250,000 threshold amounts. The new law defines unearned income as interest, dividends, capital gains, annuities, royalties, and rents. Tax-exempt interest won’t be included, nor will income from retirement accounts.  This provision has the potentially to dramatically impact employment in the United States as most small business owners report business income on a Schedule C filed with their personal taxes.

In an effort to expand coverage, a refundable tax credit will be provided to help purchase coverage for families earning up to $88,000 per year.   One of the more concerning, and most likely unconstitutional, aspects of the healthcare mandate involves a tax on individuals who don’t obtain adequate coverage that begins as 1% of income and rises to 2.5% of income, or $1,250 dollars for a person earning $50,000.  

Penalties aren’t limited to individuals, but impact businesses as well.  A nondeductible fee will be charged to businesses with 50 or more employees if the firms fail to offer adequate coverage. The fee will equal $2,000 times the number of employees, though it won’t count the first 30 workers in that calculation.

In both scenarios, individual or business, the reality is that it may still be far cheaper to opt out of purchasing coverage and simply pay the penalties, especially when one considers the massive increases in premiums that will occur as a result of the new healthcare mandate, which like the cost of most government programs, was vastly understated in the name of political expediency. 

The biggest impact of healthcare will likely be on employment, as employers look for creative ways to avoid the new mandates.   Leading the pack will be outsourcing and independent contractor relationships.  By moving jobs overseas or outsourcing various roles, businesses can simply reduce their workforce, which will pay even greater dividends if other pending initiatives such as card check come to fruition.  

By taking the time to understand what is in not only the healthcare legislation, but other pending bills, individuals and businesses can then make informed decisions and properly prepare themselves for the inevitable double dip of the current economic downturn caused by the various bills being pushed through by Congress. 

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Chris Tidball is the author of Kicked to the Curb and provides businesses with innovative solutions to increase their bottom line with no new money required.   He can be reached at chris@christidball.com.

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May 28, 2010 at 7:49 am Leave a comment

Tips to Doing Business With the Federal Government

So you want to do business with the federal government but think it’s too difficult, cumbersome, or bureaucratic.  Think again.   Did you know that the federal government is the largest consumer in America?  Did you know that they will spend over three quarters of a trillion dollars on services and supplies this year?

Many people are turned off by the perceived bureaucracy and justifiably so.  Even government procurement officers will admit that it can be difficult to navigate through the GSA, CAGE, ORCA, FedBizOpps and the dozens of other websites that can lead businesses to a treasure trove of opportunities. 

The reality is that doing business with the federal government isn’t that much more difficult than doing business with any other large corporation where knowledge holds the key to success and patience is the ultimate virtue. 

First, you have to identify what products you have and to whom would they be sold.  I asked a procurement officer recently if there is anything that the government doesn’t purchase and in a word he said “NO”.   The government has millions of employees in virtually every nation on  Earth.  They need anything and everything that you can imagine.   In fact, they need so much that their procurement site FedBizOpps typically has between two and five thousand RFP’s every day of the year including Christmas and Easter!

To put this in perspective for those who focus solely on the private sector; the federal government is bigger than every insurance company combined. They are bigger than every hospital, every manufacturer and every retailer.  If you think that landing a Top 10 insurer, world renowned hospital or Wal-Mart is good for your bottom line, imagine what landing the Department of Defense, Department of Energy or IRS would do for you!

So where do you start?  Like many people I turned to the GSA which according to the very people who purchase for the government isn’t necessary.  What, you don’t have to be on the GSA schedule?  In a word, No.  While it can help, it can also hurt as it publicly lists your lowest pricing which may hinder you in bids where being on the GSA isn’t required.   A word of caution, some bid opportunities will require your company to be on the GSA but others, often far more lucrative, won’t.   To begin bidding on government work simply take the following steps in this order:  

1)      Obtain your DUNS numbers

2)      Complete your Central Contractor Registration.

3)      Obtain your CAGE number

4)      Receive Bid Notifications

5)      READ, READ, READ bids that are of interest

6)      Follow the instructions to submit your bid

Note that when dealing with the federal government they often have set asides and preferences.   If you don’t have a minority or female business partner, find one.   The order of priorities continually changes but suffice it to say that if you are a white male you will always be on the bottom of the list.   Currently the biggest beneficiaries are HUBZones, 8A and women owned businesses.  

HUBZones, or historically underutilized business zones have some very specific requirements which are governed by business location, size, incomes, residence of employees and local unemployment rate.   Just because an area is poor doesn’t automatically qualify it as a hub zone and you have to be very careful as opposite sides of the street may be classified differently. 

Like HUBZones, 8A’s require a qualification by the SBA.   Contrary to what you may believe, they don’t require minority ownership as more than one third are female owned, but they do require lower income qualification.  

There are some other outstanding resources as well, which vary by geographic region.  Your local Small Business Administration or Chamber of Commerce are a great way to start.    Over the past few months the government has increased quotas for small business contracts AND subcontracts.  Now is a great time to solicit their business as the emphasis on small business is one positive step being taken at a federal level to improve our economy. 

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Chris Tidball is the author of Kicked to the Curb and provides businesses with innovative solutions for maximizing their bottom line.  He can be reached at chris@christidball.com

May 27, 2010 at 8:15 am Leave a comment

Stepping into the Abyss: The Unsustainable Debt Crisis

In a concerning economic report by USA Today, paychecks from private businesses shrank to their smallest share of personal income in U.S. history during the first quarter of this year.  

At the same time, government-provided benefits, from Social Security, unemployment insurance, food stamps and other programs, rose to a record high during the first three months of 2010.

The result is a major shift in the source of personal income from private wages to government programs and according to economist Don Grimes of the University of Michigan is not sustainable.   According to this noted economist the federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs while government-generated income is taxed at lower rates or not at all.

 This report comes on the heels of Nouriel Roubini, known in many circles as Dr. Doom, warning that we are in for more troubling times with the potential of a double dip recession.  Just as Dr. Roubini predicted the bursting of the housing bubble and  financial troubles in PIGS (Portugal, Italy, Greece and Spain), he is suggesting troubling times ahead for us. 

None of this should come as a surprise to anyone.  From a historical perspective, one need only look at the Great Depression to be able to predict what is likely to transpire in coming years.   Contrary to common perception, the depression was not a decade long ordeal, but rather two distinct downturns.   Following the stock market crash in 1929, Congress acted in a way that they saw fit in dealing with a problem they hadn’t a clue how to handle.   Since hindsight is 20/20 there is no excuse whatsoever to repeat the errors of their ways.   

They acted by passing such legislation as the Smoot-Hawley tariff act and raising the income tax on the highest wage earners.   As a result, this 1930’s version of what we are seeing today led to a perceived improvement in the years 1933 to 1937, in what can only be categorized as a depression era ponzi scheme that ultimately collapsed.   Valuable lessons that our current leaders aren’t paying attention to today. 

Flash forward to 2010; we are seeing similar over reach by the government which is using the recession as an excuse to increase their size and scope and much like the 1930’s, we will see another more severe downturn in coming years.   Until that time comes, we will continue to see higher unemployment as businesses kick more and more employees to the curb as they downsize and move operations off shore. 

As the government transfers more and more wealth from those who produce to those who do not, we are becoming more like some socialized Western European nations where debt obligations and an entitlement culture have brought them to the brink of an economic abyss. 

America is not too far behind as the path we are on is not sustainable because at some point the government will run out of other people’s money to spend.   Then what?  Print more money?  Get into more debt?  We are practically a wholly owned subsidiary of China as it is which should make each and every American very uncomfortable. 

There are solutions which start with a decrease in taxes funded by a massive reduction in government employees.   By eliminating redundancies and utilizing a far more efficient private sector the government can reduce salaries, civil service employment guarantees and pension obligations that make up a substantial portion of our deficit while contributing nothing to our GDP.  

Reductions in taxes will lead to job creation which will drive down the unemployment rate, increase government revenue and allow to deficit reduction which will hopefully stave off inflation and higher interest rates.    

While this may seem like a simple solution, it will take the wherewithal of elected leaders to set aside their unquenchable thirst for power and allegiances to special interests in order to focus on the needs of the American people which appears to be much easier said than done. 

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Chris Tidball is the author of Kicked to the Curb and provides businesses with innovative solutions to finding new sources of revenue in spite of the economic downturn.  He can be reached at chris@christidball.com.

 

May 25, 2010 at 4:05 pm Leave a comment

Behind Every Accurate Insurance Settlement is an Outstanding Claims Process

 

Behind every great claims investigation is a great adjuster and an outstanding claims process.  The harsh reality for anyone who has ever filed a claim is that not all carriers, adjusters or process are created equal.  While some adjusters dedicate their life to what can only be described as a calling, others go through the motions, often overlooking critical pieces of information.  The same can be said for processes that often leave out critical components of the investigation as carriers push quantity over quality.

Over the years have I have handled, managed, reviewed and critiqued thousands of claims; some outstanding, others horrendous and most somewhere in between.   What many claims executives will tell you is that the find claims to run the gamut from being well handled with accurate liability and damage assessments to those where liability was missed, damages inflated and customers alienated. 

So how do you consistently deliver a quality product?   Easy; hire the right people and train them properly.  When I speak of people, it is not only those on the inside.  It is the IA’s, salvage yards, tow companies,  body shops, glass repair vendors, debt collectors and subrogation providers.

Arguably it starts on the inside, usually with the First Notice of Loss.   Whether it’s the independent agent down the street or the call center in India, gathering accurate information is critical.   From there it goes to the adjuster.   Like any trade, which is what insurance claims adjusting should be considered, apprenticeship is critical to quality.  Think of other trades and consider the rigorous training that is undertaken to obtain a license.    In many states licenses aren’t even required for claims adjusters and in states where they are required it is simply a matter of passing a test comprised of very basic information.   In many cases, external parties play a pivotal role in everything from how fast a totaled car gets moved to how quickly a deductible gets reimbursed.  

As a fiduciary, claims organizations have a strong obligation to policyholders who rely on their expertise to best protect their interests.   To accomplish this a process must be in place that properly facilitates the ability of the adjuster to obtain the facts, investigate, draw conclusions and negotiate accurate settlements. 

So what happens if they don’t?  Industry-wide, more than 15% of all claims are closed with an improper liability decision.   Parties who aren’t at fault are sometimes found at fault and vice versa.   Facts of loss and physical damages sometimes don’t correlate to one another, yet cases get paid anyway.  Witnesses aren’t interviewed.  Statements aren’t obtained.  Pre-existing injuries are often not investigated.  Insured’s owed deductibles may never be reimbursed due to process inefficiencies.  The list of issues that impede quality goes on and on.  

The first part of the equation when driving to the right outcome is hiring the right people.  Who are the right people?  It seems like such a subjective question, but is it?  To get the quality of work required to properly investigate a claim requires analytical abilities, investigative intuition and negotiation skills.   People who are afraid of conflict, won’t ask probing follow-ups and can’t understand the who, what, why, when, where and how of claims won’t make good claims adjusters, nor will they make good business partners.   Yet many get hired anyway in a never ending quest to fill empty seats often caused by turnover which is attributable to hiring the wrong people in the first place.  

Beyond the internal staff comes the external business partners.   In many situations it is far more efficient and economical to hire people with expertise in areas of specific influence.

Having been on the inside of the insurance industry for more than twenty years I can attest first hand to the challenges of running a claims organization.   Having run auditing departments I can see the frustration of customers who have been wrongfully denied, underpaid or improperly questioned.  Having run vendor management, I have witnessed what happens when “cheap” vendors are brought on board because the decision makers put price over quality.  Most often poor results can be traced to lack of expertise and process inefficiencies proving once again that “you get what you pay for”. 

By leveraging internal staff and external experts carriers can often increase their bottom line enabling them to actually lower premiums, increase revenues and gain a competitive edge in the marketplace. 

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Chris Tidball is the author of Kicked to the Curb and provides businesses, including multiple industry leading insurance carriers, with bottom line process improvements, procedures and solutions that dramatically improve quality and results.   He can be reached at chris@christidball.com.

May 24, 2010 at 3:14 pm Leave a comment

Unemployment On The Rise Again As 25,000 More Get Kicked To The Curb

At times it can get frustrating knowing that the bad news you are predicting is going to come to fruition.   As the government spent the better part of the past few weeks trumpeting reports of new job creation, it seemed that I was the lone wolf in the wilderness warning that we are not out of the woods yet.  Nor will we be for the foreseeable future, at least not until we calm the fears of small business owners.

Yesterday the stock market took a hit, after the number of people filing new claims for unemployment benefits “unexpectedly” rose last week by the largest amount in three months to 471,000, an increase of 25,000 over the previous week.

While many inside the beltway can’t seem to comprehend what is driving unemployment, the reality to those of us on the outside is evident.   Business owners are incredibly concerned about the costs associated with mandates being pushed by Congress, in particular healthcare reform and the inevitable cap and trade tax. 

Our economy is driven by the private sector, in particular small businesses which account for 72% of all new jobs.   Small businesses, those of less than 500 employees, are often owned by individuals and structured as LLC’s or Subchapter S corporations with income often reported on the individual tax returns of the business owner.  

While Congress and the administration are busy emphasizing that nobody earning less than $250,000 or $200,000 or $150,000 or whatever the figure is this week will pay no new taxes, the reality is quite different.   These business owners, who report business income on their personal returns, will be socked with higher taxes which is money that could otherwise be reinvested into their business, which in turn could hire people.  

As a result, the index of leading economic indicators took a dip in April as U.S. residents filed fewer applications to build homes; vendors were slower in delivering supplies to companies; the unemployed filed more claims for jobless aid; and consumers’ confidence dropped.

Instead of looking for solutions, Congress has decided to expand unemployment benefits.  While this may be a politically expedient move in an election year, the reality is that it will do nothing but prolong the misery of those looking for work.  

Compounding matters are the 150,000 temporary census workers whose employment status is actually keeping the real unemployment rate artificially low.  What happens this summer as the census wraps up and those workers are sent out to seek full time employment?  

While there has been some job creation, much of this has been new jobs in the federal government which does nothing more than create additional debt with positions that rarely contribute to the GDP.  

To ignite the economic engine it is critical that steps be taken that will give assurances to small business owners that there is a glimmer of hope.   First and foremost is the need to cut taxes across the board.  There is no surer remedy for an ailing economy than tax cuts which have been shown time and time again to boost economic output, increase hiring and put more money into the government coffers.  

The harsh reality is that many business owners are busy planning exit strategies.  The mass exodus that we have witnessed in states such as New York and New Jersey, where taxes have literally forced people to move out of state, is now becoming a reality across the board with many business owners now contemplating how to leave the country.  

The outsourcing of jobs, investing overseas and moving money offshore aren’t benefiting our economy, yet are occurring at an increasingly alarming rate.  What we need are bold new initiatives to stem this tide.  

A dialogue in Washington to this end would go a long way towards allaying the fears of those who are hesitant to hire.   Rather than debating the merits of a VAT, an inevitable economic calamity, perhaps the debate should be flat tax versus Fair Tax.   Rather than force through healthcare mandates that will only encourage employers to lay off workers or change them to independent contractors how about allowing us to buy insurance across state lines or tort reform to end the rampant fraud and frivolous lawsuits that cost us billions each year?  

Coming down the pike will be financial reform which gives the government more control over business and will only lead to owners moving more of their operations overseas.   Cap and Trade will lead to an increase in costs which comes at a time when inflationary pressures are becoming a concern.   All in all there is not a lot to be heralding from the status quo.   If there is a silver lining it is that American’s may be waking up to the fact that, while much of our economy is in shambles, it is not yet irreparable.  Yet. 

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Chris Tidball is the author of Kicked to the Curb and provides businesses with new and innovative ways to improve their bottom line.  With his proven B2B methods, businesses can benefit from reduced headcount and increased profitability which will give them a competitive edge in the marketplace.  He can be reached at chris@christidball.com.

 

May 21, 2010 at 6:05 am Leave a comment

Ancient Chinese Secret, Huh?

Call me skeptical but there is no way this thing works, right?.   A little ball that uses natural minerals to oxidize water and clean clothes?  No way; but with three kids and a dozen loads of laundry a week, why not give it a try.   Between detergent with bleach, detergent with no bleach, fabric softener and Clorox my wife estimated that we spend about $300 a year in laundry cleaning products. 

Aside from the price, there have long been risks associated with what is actually in detergent and absorbed by the body when “clean” clothes are worn.   Many detergents have petroleum distillates which have been linked to cancer, phenols which cause toxicity throughout the entire body, fragrances that have toxic effects on fish and wildlife and phosphates which contribute to an unbalanced ecosystem. 

In 2008, the University of Washington did a study on leading detergents and found substantial evidence of cancer causing agents, most of which were not on the label.   The most lethal of the chemicals is nonylphenol ethoxylate, a major ingredient in pesticides which poses such substantial risks that  it has been banned in Canada and Europe.  

But what is the solution?  With three kids and lots of laundry the cost of organic or chemical free alternatives is cost prohibitive at best.   But what about the Bio Washball, a Swiss developed, chemical free product that utilizes Mother Nature to ionize your water and clean your clothes for 90% less cost than traditional detergents.

It’s long been known that compounds such as silver can be used as a cleaning compound.   While silver’s importance as a bactericide has been documented only since the late 1800s, its use in purification has been known throughout the ages. Perhaps the real ancient Chinese secret is that many early civilizations such as the Phoenicians used silver vessels to keep water, wine and vinegar pure during their long voyages. In America, pioneers moving west put silver and copper coins in their water barrels to keep it clean.

In fact, “born with a silver spoon in his mouth” is not a reference to wealth, but to health. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.

Silver is one of the many natural compounds in the Swiss created Bio Washball which allows it to be used without detergent, bleaches or other harmful chemicals.   O.K., so the sales pitch was enough to get me to try it, but the proof is in the results which were amazing. 

First, we tried it on the everyday clothes which came out clean and will no longer succumb to the fading caused by your average detergent.   Second came the clothes after a few hours working in the year on a 90 degree day; again clean with no odor.   Then came the real test with lacrosse uniforms, pads and gloves fresh off a three hour practice in the heat and humidity.  After a cleaning in cold wather with the Bio Washball they came out clean and odor free.

This weekend we will be testing some of the harder surfaces of the lacrosse equipment with a luminometer and actually measuring the before and after counts of germs.   The voluminous research on silver and other natural oxidizing agents typically reflects the ability to kill 99.99% of all germs and bacteria which is claim that can’t be made my many.  

But this certainly has my vote and I would encourage anyone who wants to save money, improve their health and look out for the environment to check out the video here.   Remember, a big part of finding millions is to do it a few dollars at a time, and the Bio Washball is a great way to start!.

May 20, 2010 at 7:58 am Leave a comment

Taking A Bite Out Of Insurance Fraud

As I was reading through some Claims Magazine blogs I couldn’t help but notice a report from the National Insurance Crime Bureau (NICB) showing that staged accident  claims increased 46 percent from 2007 through 2009.

Since my earliest days as a field adjuster in the streets of Los Angeles some twenty years ago, I have been attuned to the costs of insurance fraud on our society.  According to the Insurance Research Institute, more than 10% of annual premiums are the direct result of fraud, while an even higher percentage can be attributed to exaggerated claims.  Insurance fraud, in particular staged accidents, are such a concerning issue to me that this topic plays a large part in the plots in two of my forthcoming books, one fiction and the other a fact based guide to help insurers take steps to increase bottom line revenue.

In layman’s terms a staged accident is precisely that.   Typically two vehicles, either previously damaged or purposely rammed together, are involved.   The organizers of such scams are called “cappers” and will utilize people off the street as “pawns” who will be paid a sum of money for their time.   In return, the pawns will complete sign in sheets at medical clinics which will get a cut of the final settlement.   The capper then brokers the case to the highest bidding attorney who presents injury claims to the insurer of the at fault vehicle.    The medical clinic doctors up bills for each of the dates that the pawns allegedly treated at the clinic and the attorney uses the bills to present a demand for “pain and suffering”.

There are number of variations on the traditional staged accident, with some ploys such as swoop and squats being used to target innocent drivers of high dollar vehicles who typically have large policy limits.   The most common scenario involves two vehicles, the swooper and the squatter.   The squatter will position themselves in front of the target while the swooper cuts off the squatter, forcing them to suddenly stop which causes the target to rear-end them. 

The scenarios and creativity are endless.  As a young adjuster investigating claims in South-Central Los Angeles, an area known for crime, gangs and illegal immigrant opportunism,  it was often estimated by law enforcement that more than 50% of auto claims were fraudulent.   According to a number of District Attorney’s, this percentage holds true be it L.A., Brooklyn, Miami, Chicago or Detroit.  Despite the prevalence of fraud, most of these claims end up being paid. 

This is due to several factors that range from adjuster work load, lack of expertise and cost of litigation to the unbridled power that trial lawyers often wield over the judicial process and lack of meaningful punishment for committing insurance fraud.   Unfortunately, our society ends up paying more than $80 billion dollars annually in the form of higher insurance premiums.

The foremost authority on insurance fraud remains the National Insurance Crime Bureau, or NICB, who state that staged accidents are becoming more common and are often targeting innocent drivers.   It is important that anyone involved in an accident relate to their insurance company if they are in any way suspicious of the circumstances that gave rise to the crash.  Even then, without absolute proof of an intentional scam, insurance companies may be forced to pay which often leads to further increases in your premiums as you get charged with an at fault accident. 

There are a number of opportunities for insurance adjusters to aggressively investigate potential frauds.   Arguably the best ways involve face to face interactions with those who were allegedly injured.   When pressed, claimants often cannot relate what happened in the accident or will pull out a “script” provided to them by the capper.    Others won’t be able to describe their doctor or the clinic at which they are allegedly treating.  From my own experience, I always kept an array of pictures of friends and co-workers dressed in scrubs and asked the claimants if they recognized anyone.  Invariably the answer was yes.  Having claimants draw a map from their home to their clinic is another creative way to determine the level of integrity of the party with whom you are dealing.  But getting to this level of detail will require the initiative of the claims adjuster to do the due diligence expected of any fiduciary, and may take some coaxing on your part.  

Not all insurers are equal when it comes to investigating claims.  While some have extensive resources, special investigation units and top of the line training, others have very limited expertise resulting in many claims being paid that, had they been thoroughly investigated, could have been denied.  But with some training, guidance and established procedures by which suspicious claims are investigated, any carrier has the potential to not only fight back and kick the bad guys to the curb, taking a bite out of crime which will improve their bottom line while reducing policyholder premiums. 

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Chris Tidball is the author of Kicked to the Curb and has spent more than twenty years in the insurance industry as an claims adjuster, manager and director.   He currently provides businesses, including several industry leading insurance carriers, with no nonsense, bottom line solutions to maximizing profitability.  He can be reached at chris@christidball.com or to learn more, please visit chris@christidball.com.

May 19, 2010 at 7:13 am Leave a comment

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Chris Tidball is a claims and revenue management consultant and author of the "20 Essential Rules" series of self and organizational improvement books. You can ask him a question at chris@christidball.com

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