Magazine article Risk Management

Beyond Compliance: On the Road to Controlling Workers' Compensation

Magazine article Risk Management

Beyond Compliance: On the Road to Controlling Workers' Compensation

Article excerpt

Many of the nation,s business leaders are losing sleep over their inability to control workers, compensation costs. A 1992 Alexander & Alexander poll revealed that chief executives listed reducing workers' compensation expenditures as a top management priority. In an era of escalating costs associated with work place disability, most employers claim they want to control disability payments and medical expenses. And company decision-makers can accomplish these goals if they adopt a proactive philosophy of collaboration rather than simple compliance.

Reflecting the concerns of employers and their insurance carriers, Douglas Stevenson, executive director of the National Council of Self-Insurers, wrote: "Workers' compensation has provided invaluable benefits to millions of persons in need. But the system as we have known it is not what is currently evolving. Its soaring cost is breaking the system; once it breaks, legislators will face a severe scramble for whatever can replace it."

Scramble they have. Among states marshaling legislative reform in the past three years are Colorado, Connecticut, Florida, Maine, New Mexico, Oregon, Texas, California and Pennsylvania. What reformers have sought, among other changes, are ways to regulate benefits, streamline administration, establish workplace safety and identify fraud in the system. What the vast majority of employers in these and other jurisdictions fail to realize is that legislative reform is seldom sufficient and occasionally regressive. For example, despite recent reform in California, a state appellate court still found it necessary to rule that employers can sue their workers, compensation insurer if the carrier,s inefficient claims handling and reserving practices increase the employer,s premiums.

True workers, compensation reform takes place within work organizations that aim to move beyond compliance to collaboration. proactive organizations have ceased giving their power away to lawmakers and instead have begun "owning" the problem of disability in the workplace. These companies have come to realize that reforms external to their organizations have limits, and in some cases, questionable applications. For example, the 1991 Colorado reform was held by many to be ground-breaking, and yet it has been challenged repeatedly over the last two and one-half years as unconstitutional. The real incentive for Colorado employers seems to be cost-reduction programs that the state effected before the July 1991 reform. According to John Berger of the Colorado Department of Labor and Employment, in return for a 5 percent discount in premium, 519 Colorado companies have created safety and risk assessment committees and loss prevention procedures. Management, labor and claims administrators have had to work together to implement these programs. By offering certified programs that guarantee premium discounts, the state has encouraged individual company solutions of the workers, compensation problem, for which collaboration, not simply compliance, is the answer.

Successful Colorado companies such as Coors have decided to tackle the problem of employee health care costs regardless of the political climate. At Coors, a staff case manager leads a team approach to resolving workers, compensation claims and ensuring that employees do not fall through cracks in the treatment process. Furthermore, the case manager orchestrates a collaborative effort to reemploy the Coors worker as soon as possible.

Of course, economics has incubated the newest approaches to resolving the perplexities of disability cost control. Insureds spent more than $63 billion in 1990 on this nation's workers, compensation system. A 1989 study, funded by UNUM, found that the full cost of workplace disability was 4 percent of the GNP - $170 billion in 1986, the last year preceding the study in which the data were available. The U.S. General Accounting Office recently determined that each work injury costs in excess of $26,200. …

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