At the 2019 SAWCA Annual Convention, Mark Walls from Safety National moderated a panel discussion featuring large employers who all retain risk on their workers’ compensation programs.
The panel featured:
- Brenda Ratcliff – Shaw Industries
- Connie Chandler – United Postal Services
- Elizabeth Bailey – Waffle House
- Marc Salm – Publix Supermarkets
- Melisa Yopp – Tyson Foods
All these employers have blended programs with a mix of high deductible and self-insured. Some of these programs are self-administered but most utilize a Third Party Administrator for claims review.
The session was done in question/answer format like a talk show, so this blog attempts to capture some of the responses to the questions.
Why do you retain risk?
No one understands our people, our jobs, and our culture better than us. Having a higher level of control over our claims lowers litigation rates and helps to ensure that injured workers receive the best possible medical care. We are passionate about taking care of our team members.
We have best in class safety and return to work programs and retaining risks allows us to benefit financially from these efforts rather than having a first dollar carrier insure us fully.
We believe in taking care of the customer and our associates. By having more control over our program we can ensure they receive the best possible medical care and also help to facilitate timely return to work.
We value our employees and have a team in risk management that helps them navigate the workers’ compensation system. We take care of our associates like we would want to be taken care of if we had a workplace injury. It’s important for our claim handling partners to have a good understanding of our business. Many of these companies have in-house staff on their risk management team that work directly with injured workers to assist them in navigating the workers’ compensation system.
Why Deducible vs. Self Insurance?
Obtaining approval to self-insure claims in multiple jurisdictions can be very challenging. The application process in some states is extremely daunting and time consuming. It can involve not only a review of the companies financials but also reviews of their safety programs including on-site inspections. Keeping up with the annual financial reporting for multiple states is very time consuming. One employer shared an example where they had three claims open from 20 years ago and they still have to complete an annual actuarial report which costs several thousand dollars.
Many large employers have switched to large deductible programs instead of self-insurance because there is less regulatory complexity involved. In a high deductible program you answer to the carrier, not the states. The carrier monitors all claims and requires the employer to post collateral for the losses below the deductible. Having single source of collateral with the carrier instead of having to manage self-insured collateral in multiple states is seen as an advantage.
Getting approval for self-administered claims has been extremely complex for the employers that do this.
Even high deductible employers still need to self-insure in the monopolistic states such as Washington and Ohio.
The regulatory community has expressed discomfort about the lack of regulations around deductible programs. They have tremendous degree of oversight with self-insureds but not over deductibles as a high deductible policy is simply a guaranteed cost policy with a deductible endorsement. The employers felt that additional regulation of high deductible programs was unnecessary as they already answer to their carriers who monitor their financials and their claims very closely. In addition, the states already have extensive regulations in place to monitor the compliance performance and solvency of carriers.
What are the challenges of Electronic Data Reporting?
Regulators don’t realize the financial costs that EDI reporting has on employers, carries and TPAs. When a state decides to add a single field to their EDI layout, that means every claims administrator and vendor partner operating in the system has to reprogram their systems and retrain the adjusters to capture the additional information. All this costs millions of dollars in staff time to capture that one data element.
Although groups like IAIABC work to bring consistency to EDI reporting, states use a wide variety of EDI release formats. This requires all payers to report across multiple formats. Again, this adds costs and complexity.
Before adding new EDI components, states need to strongly consider why they need this additional data and what will they do with it. The time and effort spend on this does nothing to provide timely and appropriate benefits to injured workers. There is already so much data collected that is not used significantly.
Regulators also need to take a hard look at whether their regulations make financial sense. Every year the industry issues millions of checks for $5 or less because an underpayment was identified by EDI. It costs the payers more than $5 to issue those checks and it costs the vendor receiving the payment more than $5 to process it. No one wants to process those checks, yet the regulatory system requires it which ultimately adds lots of unnecessary costs to the system.
What makes a workers’ compensation system healthy?
It is important for the workers’ compensation system to maintain a balance between benefits to injured workers and costs to the employers. The workforce is the most valuable asset of these employers and ensuring they receive the best possible care is of the utmost importance. However the system also needs to take steps to prevent abuse and fraud which drives up costs unnecessarily.
Employers and workers need to work together in good faith to ensure injured workers have access to top quality medical care, and that timely return to work is provided. The system must be fairly adjudicated and legislation balanced. The system is not sustainable if it is ultimately not fair to both employers and carriers.
The speed at which you can move a claim through the system is also important.
Some states incentivize plaintiff attorneys to create conflict in order to collect fees. This is not beneficial to anyone but those attorneys.
Some states make return to work more difficult than it should be. States that allow injured workers to refuse an offer of employment without repercussions drive costs.
There are four stakeholders whose interests must be considered:
- Injured worker benefits must be sufficient so that they don’t push to seek benefits outside of workers’ compensation.
- Employer costs and complexity must be perceived as fair or employer will push for system change like opt out in Texas.
- The system must be fair to carriers so that they will provide the coverage. If systems are out of whack carriers will pull out of the market driving up employer costs significantly.
- System must provide fair reimbursement to medical providers so that they are willing to participate in the workers’ compensation system.
States need to be mindful of the impact that their workers’ compensation system has on economic development. States like New York and California with very high costs discourage manufacturing facilities from locating in those states.
The system needs neutrality from regulators. Judges also need to keep in mind that what they see is a very small piece of the overall picture. The vast majority of claims proceed through the system without disputes and it functions as intended. Some judges get the impression that employers are disputing most claims and issues which is simply not true.