The Public Option for Health Care

A conversation I took part in the other day reinforced my conviction that we need a "public option" in whatever health care reform comes out of Washington, even though the conversation was about Workers Compensation insurance.

The conversation was with an acquaintance of mine who had formerly been a high level manager at a major Workers Comp insurer. We were discussing why some Workers Comp audits at this insurer had been billed out so late--more than a year after being completed. His comments were revelatory.

The short version of his comments is that this major insurer was absolutely riven with "confusion and delay" as Sir Topham Hatt would put it (my grandson is the world's greatest fan of Thomas the Tank Engine, so I have learned about Sir Hatt's railway.) All audits were processed out of a particular unit of this insurer, in reaction to the demands of the legendary tyrant then in charge of the insurer to improve their effficiencies.

The resuls were not what the legendary tyrant would have wished, I suspect. The processing of audits at this unit was, according to my source, the ultimate Chinese fire drill (which would be appropriate, I guess, given the attachment of the company's legendary tyrant for all things oriental.)

What does this have to do with health care reform? Only that today, the headlines are that major health insurers are insisting that they cannot compete with a "public option" health insurance source--a government sponsored plan. And these major insurers further insist that to introduce such a public option will mean that they inevitably must wither and die.

And in the face of such dire threats, I think back on this major Workers Comp insurer that couldn't shoot straight when it came to processing audits (and I'm sure the situation is likely worse there now, given recent events.) And I have to wonder how much of the cost of health insurance reflects similar "confusion and delay" scenarios. My deep suspicion is that there is a fair chunk of premium that goes to cover the various CFDs at health insurers, on top of the fair chunk that has to be allocated for profits.

I know that a government plan isn't likely to be much more efficient than these insurance company operations--but I suspect it wouldn't be much worse, either. And the competition could be healthy for everyone in the system. Might even clean up a few of those CFDs.

Twitter

In what some folks will surely interpret as a sign of the coming Apocalypse, I am now on Twitter at Twitter.com/edpriz. Just what the world needs--140 character "tweets" about Workers Comp and any other thing that crosses my mind. What hath blog wrought?

The South Carolina Scandal

Back in 2006, my company (Advanced Insurance Management) was commissioned to perform a study looking at how effectively the reimbursements paid by the South Carolina Second Injury Fund translated into lower premiums for employers there. What we found in that study was shocking: over 50% of the time, insurance companies did not perform the needed corrected reporting to NCCI so that the experience modifiers of employers would be reduced to reflect the reimbursements the insurance companies had received.

So in over 50% of the cases examined, employers ended up being overcharged for Workers Compensation insurance, because their insurance companies were taking the reimbursements from the Second Injury Fund and not reporting it to the appropriate rating bureau.

South Carolina enacted new legislation in 2007, in response to our findings, that required insurance companies to certify that they have made the appropriate reporting to NCCI before they actually get the reimbursements. But we wondered what had happened to those employers who had already been overcharged.

We're now working on that, and finding that the insurance industry has done nothing to address the overcharges that occurred. In partnership with the South Carolina Small Business Chamber of Commerce, we're working with individual employers whose insurers received Second Injury Fund reimbursements. So far, we're finding an even higher percentage of overcharges than we found in our original 2006 study.

This leads us to strongly suspect that the problem is not confined just to South Carolina, but instead is likely to have occurred in other states that have Second Injury Funds.

South Carolina employers can find out more here about how to check if they've been overcharged.

Employers in other states can contact us here to find out about how we can check if they've been overcharged. If your company had had any claims reimbursed by a Second Injury Fund in the past five years, it appears likely that you may have been overcharged on your Workers Compensation insurance. If that's the case, we can help correct that.

Our South Carolina Project

Our new South Carolina recovery project is going great guns. This is a followup to a study we performed a couple of years ago, where we found that significant percentages of employers in South Carolina had not received the experience modifier adjustments they were due over Second Injury Fund reimbursements their Workers Comp insurers had received. We're finding significant recoveries for South Carolina employers so far, and this project is just in it's early stages.

Interested South Carolina employers can learn more about this project at www.cutcomp.biz, by the way, or by calling 800-288-9256 and choosing extension 6.

You can also read the original report we published here.

The New Book

The new updated book is done, at last. It took longer than I thought it would, but Workers Compensation Insurance: A Field Guide for Employers & Others is now complete. It's a revised and updated version of my earlier book, Ultimate Guide to Workers Compensation, which went out of print earlier this year. The publisher of Ultimate Guide wasn't interested in publlishing an updated edition, so we took it on ourserlves (along with Amazon's BookSurge publishing arm.)

The actual book version will be available shortly from Amazon, but the new book is available now as a CD-ROM or pdf via email at www.cutcomp.com/ultimate/htm.

I saw reports that folks were offering their used copies of Ultimate Guide online for over $100! Sorry to deflate that market, but the new updated publication is available for a lot less than that now. So if you liked Ultimate Guide, or the even earlier (1995) book CompControl, I think you'll love Field Guide.

The new book updates a lot of the information from Ultimate Guide, and adds some expanded new material as well. So if you need a book that can help you learn to control your Workers Compensation premiums, the Field Guide is for you.

California Comp Increases Proposed

WCIRB, the California rating bureau for Workers Compensation insurance, has called for a nearly 25% increase in California Workers Compensation rates. This would be a nasty coup-de-grace for California employers, who are already stressed to the breaking point by the current economic crisis (which has hit the Golden State particularly hard.) The crisis in California Workers Compensation costs had abated a bit in recent years, after some much-publicized changes in their benefits rules, but things appear to be changing again for the worse.

California can be a tough state to do business in even in good times, but the past year or so has been anything but good times for a lot of employers there. And the state's Workers Compensation system has never been particularly employer-friendly--the State Compensation Insurance Fund, or SCIF (the state fund that competes with private insurers) can be a difficult and demanding agency to deal with, and SCIF writes about half the Workers Compensation coverage in the state. Combine that with high rates and rules that make it more difficult for employers to recover overcharges, and you have a recipe for encouraging employers to set up shop somewhere else if possible.

And now, if WCIRB has its way, the Golden State may be about to become even more tarnished as a place to do business.

South Carolina Has a Very Bad Idea

Legislators in South Carolina have come up with a truly bad idea. They are proposing to reduce the Workers Compensation benefits for illegal aliens. While the bill would still have the WC system pay for medical costs for injured illegals, it would deny them disability payments.

"I think the attempt is to punish a company that hires illegal aliens," said Senator Brad Hutto. But it wouldn't punish them, it would reward them.

By making serious claims less expensive if they happen to illegal immigrants, the bill would reward such employers by reducing future experience modification factors (and thus reducing future Workers Compensation insurance premiums.) It would penalize those employers who don't hire illegals because their Workers Comp insurance would not be so reduced, all other things being equal.

Perhaps even worse, it would reduce the financial incentive for employers who maintain safe workplaces. If the financial impact of workplace injuries is lower if you hire illegals, it reduces the incentive to avoid such injuries. That eventually leads to more dangerous work environments at employers who hire illegals--more dangerous for the illegals, and for those who work alongside them.

All in all, a very bad idea.