Program Can Trim Workers’ Comp Costs
Get ready for more bad news the next time you sit down to discuss workers’ compensation coverage with your insurance broker. Premiums are up sharply this year, and all the signs point to more increases.
You can, however, find some relief in a little-known wrinkle in California workers’ comp law giving employers long-term control over the medical treatment given to an injured worker--an important element in controlling workers’ comp costs over the long haul. The strategy isn’t a cure-all for the employer already facing a big increase in premiums, but it can soften future shocks.
The premium increases reflect the fact that workers’ comp insurers lose pots of money in California. In 1999, they paid out $1.49 in claims for each dollar they collected in premiums, up from $1.47 the year before, according to Ron Markson, executive vice president of the California Workers’ Compensation Institute, a nonprofit research organization based in Oakland and supported by workers’ comp insurers and self-insuring employers. And the cost of the average claim rose from about $27,000 in 1998 to more than $31,000 last year.
“It isn’t getting any better this year,” Markson said. “I don’t know what the numbers will look like for this year, but from everything we hear, they’re going to be worse.”
A lucky few will see premium increases of 20%, but others will see 100% or even 200%. Just as disturbing, some carriers refuse to renew coverage at all, forcing employers to shop the market.
But the state offers an alternative in the Health Care Organization program. Launched in 1993 as part of the state’s big overhaul of the workers’ comp system, the HCO program seeks to bring the cost-control benefits of managed care to the creaky and expensive world of workers’ comp. HCOs contract with health-care professionals specializing in the treatment of workplace injuries and in back-to-work rehabilitation and training.
The attraction of the HCO program lies in one simple fact: It gives the employer control over the injured employee’s treatment for up to a year, versus 30 days. If you control treatment, you control costs, and you get your injured worker back on the job as soon as possible, Markson said.
“What you’re trying to do in workers’ comp is to get the injured employee to physicians who know what they’re doing,” he said. “You want to make sure the employee gets the medical care necessary to solve the condition and get back to work.
“If you don’t do that, in the long run it’s going to cost you. The longer the employee is off the job, the less job attachment there is and the more problems arise. Giving the injured employee the best medical care you can find is the kind of investment you need to make to control costs.”
The HCOs licensed to operate in California include Priority CompNet, Torrance; MedEx Health Care, Santa Monica; Medical Group at City Center, Oakland; CompPartners Direct and CompPartners Access, Irvine; and CorVel Corp., Concord. Kaiser Foundation Health Plan expects to launch a statewide HCO in about a year, beginning with its own employees.
Some insurers offer premium discounts of up to 10% to employers who opt for HCOs, and those savings, added to the value of controlling the treatment for injured workers, make HCOs increasingly attractive for employers.
The state Division of Workers’ Compensation estimates the number of employees enrolled in California’s HCOs at 100,000, up from about 40,000 in January, but its count may be low. Newcomer CorVel, which had no enrollees at the beginning of the year, now counts 5,000 and expects 40,000 by year-end. Bruce Carlin, chief executive of CompPartners, has seen enrollment go from 15,000 at the end of 1999 to about 65,000.
“Insurance brokers need an answer when they present employers with big premium increases,” Carlin said. “And with rates where they are now, I expect our numbers will at least triple within the year and maybe go higher than that.”
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Recent Financing and Insurance columns are available at https://www.latimes.com/finin. Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.
