Medical losses paid for California workers compensation claims remained relatively flat from 2012 to 2013, but payments for Medicare reimbursement and medical cost containment programs saw an uptick during that period, according to a new analysis.
California workers comp insurers and self-insured employers paid $5.2 billion in medical losses in 2013, up from $4.8 billion in 2012, the San Francisco-based Workers’ Compensation Insurance Rating Bureau of California said Thursday in a statement. Of those losses, payers placed $129 million into Medicare set-aside accounts in 2013, up from $92 million in 2012.
The Medicare Secondary Payer Act requires self-insured employers and insurers to act as primary payers for workers comp and liability claims involving Medicare beneficiaries. The U.S. Centers for Medicare and Medicaid Services advises workers comp payers to set up Medicare set-aside accounts to pay for future medical costs for a beneficiary’s injury.
California comp payers also reimbursed $6 million to Medicare in 2013 for treatment that had been already provided to workers comp claimants for their occupational injuries, up from $3 million for such reimbursements in 2012, according to the WCIRB report.
The bureau noted that insurers and employers paid $446 million in 2013 for medical cost containment programs related to California workers comp claims, up from $414 million in 2012. Costs for such programs have increased every year in California since 2009, the report showed.
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To be in business means to sign contracts – and every one of those contracts requires that you agree to provide some guarantee. A common question is “will my insurance back me up on those guarantees?”
The answer can be complicated. For one thing, it’s essential to determine if the contract is one of the types that your Liability coverage specifies as an “insured contract.” Although other policy provisions can also apply (such as exclusions and limitations), if a particular contract isn’t considered an “insured contract,” look no further – your policy won’t apply.
Standard Commercial Liability policies usually define “insured contracts” to include:
- Leases.
- Sidetrack agreements (made with a railroad if you have tracks crossing your property).
- Easement or license agreements.
- Obligations required by ordinance to indemnify a municipality.
- Elevator maintenance agreements.
Almost all Liability policies also include a broader provision that covers contracts under which your businesses assume the “tort liability” of another party for bodily injury or property damage. “Tort liability” is defined as liability that would exist in the absence of a contract or agreement. In other words, the liability you’re assuming must arise from the negligence of the other party to the contract. If the injured person can sue this other party without reference to any contract or agreement (“tort liability”), then a contract under which your business agrees to assume this liability will be considered “insured.”
Although it’s important, the definition of “insured contract” is only the starting point for determining if Liability coverage applies. Instead of assuming that your policy covers your contractual agreements, give one of our specialists a call. We can review the specific provisions of your current coverage as they might apply to your proposed contract and advise you about possible gaps.
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Keeping in mind that there are many types of coverage and each individual consumer will have different specific insurance needs, there may be several reasons to consider consolidating your various policies with a single carrier. For most people, the pros of consolidation usually outweigh the cons, but here are some points from both sides:
Cost. Consumers often find there’s a cost benefit in consolidating their coverage with a single carrier. While the exact number will vary from company to company, it’s very possible to save 15% or more. Specialist companies still exist, but many generalist insurers have diversified their product lines to include an array of business and personal insurance and financial products. Since an insurance carrier is gaining customer loyalty and reducing their marketing costs when an existing customer purchases additional products, they’re usually willing to pass a portion of their savings on to their consumers.
Gaps. Depending on the types of coverage you’ve purchased and your unique situation, certain coverage gaps could be reduced when you consolidate your insurance portfolio. Take purchasing General and Professional Liability through the same carrier as an example. An accountant, for example, would have little risk of their professional services leading to property damage or bodily injury, but a travel agent, for example, routinely makes professional recommendations that could have physical consequences for their clients. The travel agent might be unaware that a lodging they recommend to a client is undergoing renovations. The client slips and falls due to unsafe conditions and sues the travel agent for not knowing the condition of the lodging before recommending it. If the travel agent has General and Professional Liability through two different carriers, then he/she may find the two carriers pointing the finger in opposite directions and disclaiming coverage. Whereas, if the travel agent has both coverages under the same carrier, then the disclaiming concern is moot since there isn’t another company to point the finger at.
Tailoring. Many carriers have learned to anticipate the common problems associated with coverage gaps, such as in the example discussed above. These carriers have created tailored packaged policies or programs with multiple different coverage options. These options interlock, but don’t unnecessarily duplicate coverage or dangerously leave gaps between coverages. Umbrella policies perform best when written by the carrier of your primary coverage(s).
Cons. As with most everything in life, there are cons to consolidation. It’s important that you look at the financial strength of the insurance carrier. If an insurance carrier is poorly rated by any of the rating services that monitor insurers, then the increased risk of going with an insurer that has questionable financial strength might outweigh any of the cost, gap, and tailoring pros. Another con is that the insurer might quickly change their hunger for a certain product and leave you having to find replacements for multiple policies. Research the company’s track record – have they typically stuck it out during bad and good times or have they timed the market to make a quick dollar and exit? Although most generalist insurers have diversified their offerings, it’s possible to miss out on some coverage benefits still only being offered by specialists.
In closing, consider the above points and how each could or wouldn’t meet your needs. In most cases, you’ll find that coverage consolidation and the right carrier creates a winning scenario for all parties involved.
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Is everything possible being done to protect your company from the costly impacts of Workers Compensation claims? As an employer, you know that injuries will happen. However, this doesn’t mean you shouldn’t try to prevent them by knowing the dynamics and some of the solutions recommended by the experts.
Minor Injury, Major Claim. It’s the small injuries that often result in big claims. Some statistics show that 80% of workplace injuries are inconsequential, meaning they just require first aid or a trip to a physician. Eight percent of such claims are sprains and strains to the neck, back and various joints. However, these types of injuries account for an estimated 80%-90% of the system’s costs. Major claims are likely to follow if the frequency of such seemingly inconsequential injuries isn’t addressed.
Falsified/Exaggerated Claims. Claims that didn’t actually occur or that occurred outside the workplace are only representative of a small fraction of claims. However, employers can implement tip lines, video surveillance, drug screenings both before employment and after accidents, and so forth to reduce false claims:
The larger problem is from exaggerated injuries. Employers can take these steps to address exaggerated claims:
- Get injured employees immediate and appropriate treatment.
- Even if duties need to be temporarily modified, get injured employees back to work as quick as possible.
- Ensure supervisors communicate with injured employees and convey their concern and support.
- Do as much as possible to reduce the disruption employees may face post-injury.
- Assess and address behavioral issues that could be driving an injured employee’s disability.
Observing Patterns. Experts have recognized that there are patterns of reoccurring claims within groups, such as among certain industries or particular groups of employees. For example, more injuries may be seen in equipment operators that don’t receive proper eye screenings. Overweight employees tend to have more injuries than those of an average weight. The healing of injuries may be longer and more difficult among diabetic employees. Overexertion, meaning doing too much; too fast; and/or too frequently, is one of the primary causes of sprain and strain injuries. This often comes from an employee demanding more of their body than it’s capable of doing. The challenge is that this is a human behavior. Studies have shown that the majority of workplace injuries are from unsafe acts, not unsafe conditions. In other words, even in the absence of workplace hazards, injuries will happen. Additionally, there are also patterns of reoccurring fraudulent and exaggerated claims, such as an employee that seems to repeatedly have accidents.
Claim Reduction. Begin at the hiring process, ensuring that potential employees are capable of doing the physical and mental demands you’ve listed in the applicable job description. It’s important to understand that injury prevention must be embraced at the leadership level to be effective. Statistics show employees are most likely to have injuries when they feel their management doesn’t care. You might also consider:
- Excellent workplace safety programs.
- Efficient communication programs that allow you, injured employees, and insurance adjusters to easily communicate.
- A post-injury protocol, specifying the immediate reporting of an injury to appropriate personnel.
- Routing injured employees to seek medical care from a provider specializing in occupational injuries.
- Staying in touch with both the injured employee and their medical provider, making sure that you communicate your concern and care to the employee as they recover and accommodate any physical restriction recommended by the provider upon their return.
Cost Mitigation. Employers can take several routes to reduce the financial impact of claims. Transitional duty programs that enable an injured employee to continue some capacity of working as they recover would be one example. Research shows that around 40% of employers don’t currently have a transitional duty program. Another example would be referencing treatment guidelines to determine typical recovery times for various injuries. This information can be used to approximate how long it should take an injured employee to be treated and recover. Employers may consider having an on-site clinic for employees to go for both acute injuries and everyday health issues. Partnering with a physical therapy network may be a consideration. Research has shown that companies affiliated with physical therapy networks see injured employees returning to full-duty work 30% faster.
Wellness, Don’t Be Afraid. Lastly, some employers are apprehensive about implementing wellness programs because they’re concerned that participation itself may cause injuries. However, the risk of such is far outweighed by the many benefits of a wellness program, including claim-related benefits like healing faster and being able to resume work sooner. Remember, the success of any program comes from it being accepted from the top down.
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Most medium-sized and smaller companies protect themselves against their property and liability exposures by purchasing Commercial insurance, while large corporations and government agencies prefer to use some type of alternative risk financing. However, businesses of any size can employ this tool to enjoy such benefits as improved cash flow and a lower total cost of risk.
Insurers have developed a number of colorful terms for alternative risk financing techniques. These methods include:
- Excess insurance
- Reinsurance
- Guaranteed cost
- Retrospective rating
- Large deductible
- Self-insurance
- Captive insurance
Using alternative risk financing requires management discipline and a willingness to commit resources. Size isn’t that important. The main criterion is losses. As a rule of thumb, alternative risk financing makes sense for a business whose claims have these characteristics: (1) Reasonable predictability; (2) moderate volatility; (3) minimal exposure to a catastrophic event; and (4) high frequency and low severity. For example, a large hotel or bank would probably experience a number of small Workers Compensation claims, but few large claims.
Casualty insurance products (such as Workers Comp, General Liability, and Auto Liability) are the best candidates for alternative risk financing. Because Comp and Liability claims tend to be paid over one to five years or more, insurance companies that write these policies generate substantial investment income on their premium reserves until losses are paid fully. By using alternative risk financing, your company can invest your funds elsewhere, rather than paying premiums.
Our specialists would be happy to review your business and see if alternative risk financing make sense for you.
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In today’s “litigation society,” you face lawsuits that could cripple your bottom line – or even put you out of business – based on anything from a fire on your premises to an allegation of libel by a competitor.
Commercial General Liability (CGL) insurance provides financial protection against damage or injury caused by something that your business did, or perhaps didn’t do.
Your CGL policy covers a variety of exposures:
- Premises and Operations Legal Liability pays for injuries or property damage on your premises, as well as those that occur outside your place of business.
- Products and Completed Operations Legal Liability covers injury or property damage resulting from someone using your products, or real or alleged faults as a result of work your business has completed.
- Fire Legal Liability pays for injuries and damage from fires for which your business is responsible or that started due to your negligence.
- Personal and Advertising Injury protects your business against litigation alleging libel, slander, or invasion of privacy.
- Host Liquor Legal Liability will pay for lawsuits from hosting a party or special event at which you serve alcohol and intoxicated people cause injuries or property damage.
- Medical Payments covers bills when your customers, suppliers, or visitors suffer bodily injury on your premises, or resulting from your operations offsite.
To learn more about this essential coverage, just give us a call at Scurich Insurance Services today!
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Medical losses paid for California workers compensation claims remained relatively flat from 2012 to 2013, but payments for Medicare reimbursement and medical cost containment programs saw an uptick during that period, according to a new analysis.
