Insurance groups are watching as states launch workers compensation reform efforts that include allowing employers to opt-out of state systems, helping contain medical costs that drive rates upward, and streamlining state workers' comp insurance administration.
Opt-out legislation in Oklahoma and bills in several states that would contain medical costs, streamline system administration, and prevent state government from raiding funds are getting the most early attention, said officials at the National Council on Compensation Insurance and the Property Casualty Insurers Association of America.
Oklahoma Opt-Out Legislation Expected
The bill with the possibility for the greatest impact is a move to allow businesses to opt-out of Oklahoma's workers compensation package, said Lori Lovgren, NCCI division executive of state relations. A lot of states are following that closely, Lovgren said of the expected bill, which will repeat efforts that failed late in the last legislation session. They're thinking of doing the same thing in their states.
To date, only Texas allows employers to opt out of mandatory workers compensation insurance programs. Lovgren said Oklahoma's bill likely will require some benefits perhaps something along the lines of an Employee Retirement Income Security Plan while Texas does not. The bill would still likely require workers to give up the right to sue in the event of an injury in exchange for limited benefits, Lovgren said.
Last years bill passed through the Senate and died in the House, Oklahoma state Sen. Harry Coates said, noting he would favor any workers comp opt-out legislation as long as it provides a backup provision for companies that go out of business to address claims afterward. I'm good with that language, he said. You can't have it both ways. You can't have exclusive remedy and an opt out.
Sen. Brian Bingman is expected to be the lead sponsor for the bill, said Trey Gillespie, PCIs senior workers compensation director, who said there is some uncertainty about whether an opt-out provision will be included.
Brandon Burton, an attorney with Burton & Banks representing injured workers, said the Oklahoma bill will attempt to maintain an exclusive remedy preventing employees from suing employers. The bill will be similar to last years and would allow employers to unilaterally control benefits without court or state oversight, he said. He also expects the bill to contain administrative changes. If they can get it through here, they're really going to push it elsewhere, he said.
Medical Cost Containment
PCI and NCCI are watching for introduction of medical cost containment initiatives across the nation that provide treatment guidelines and fee schedules. PCI officials are watching to see if state lawmakers act on this front, as medical costs remain the biggest factor behind workers comp rate increases, said Rita Nowak, PCIs vice president of commercial lines and workers compensation. She said Oklahoma, Texas, Florida and other states are considering legislation dealing with drug repackaging as a way to reduce costs.
Workers compensation legislation designed to lower rates for employers by cutting reimbursement rates for physician-dispensed drugs is being considered in Florida's House (HB 605) and Senate (S 662), said Sam Miller, executive vice president at the Florida Insurance Council. If passed, the bills could reduce rates by up to 1.1%, Miller said. He said the drop would serve to ease the overall workers compensation rate increase of 6.1% by nearly 20%. Physicians in Florida are allowed to distribute medication directly, which Miller said increases costs. This issue is likely to be contentious as legislation to preserve physician distribution also is being offered, he said.
Gillespie said similar bills also are expected in states such as Maryland and Hawaii, which will renew earlier efforts to cut reimbursement. Pennsylvania and Minnesota may present bills placing controls on opioid prescriptions for patients, said Keith Bateman, vice president, workers compensation at PCI.
Bills impacting system administration are in play, including in Oklahoma, where lawmakers are expected to switch from court-based administration of workers compensation claims to an administrative model, Lovgren said. Some argue that this is a speedier resolution of disputes, Lovgren said. The idea would be to hopefully streamline the process. The goal would be to adjust claims quicker, get people back to work quicker and ultimately the hope would be that rates would go down.
The bill, HB 1362, would make the insurance department responsible for overseeing workers compensation through a new Division of Workers Compensation to be administered by a commissioner, Gillespie said. Tennessee and Alabama may also offer bills to change their systems in a similar fashion, he said.
In New York, Gov. Andrew Cuomo is pressing forward with legislation that would revamp the states workers compensation system. Among the proposals is one that would create a new pass-through assessment on the self-insurance community to replace the Workers Compensation Board that currently handles workers compensation assessments. And the plan would eliminate mandatory deposits into the state Aggregate Trust Fund and close it to future deposits (Bests News Service, Jan. 24, 2013). The ATF was intended to protect claimants whose carriers defaulted on payments, but the payments are now handled by the Workers Compensation Guarantee Fund, a memorandum issued in support of the budget document said.
The New York Insurance Association backs the reform effort, NYIA President Ellen Melchionni said. Cuomos plan would allow the state to determine a single workers' compensation premium assessment methodology, and allow private insurers to collect the assessment from policyholders and pass it through to the state. Melchionni said consolidating workers compensation premium assessment fees would be helpful because premium assessments in New York carry an 18.8% surcharge, almost five times the national average of 3.8%. That's the cost of doing business in New York, she said. Also, she said closing the ATF and the Reopen Cases Fund would be positive for employers and industry. We look forward to those savings being realized, she said. But she said rate increases in New York were suppressed by state insurance officials, as companies received only half the increase they sought last year. There are plenty of companies writing business in New York, Melchionni said. We should let companies set the price.
The top 10 writers of workers compensation insurance in 2011 nationwide were Liberty Mutual Insurance Co., with a 9.44% market share; Travelers Group, with 7.47%; Hartford Insurance Group, with 7.29%; American International Group, with 7.29%; Zurich Financial Services North America Group, with 4.94%; State Insurance Fund of New York, with 3.46%; State Compensation Insurance Fund of California, with 2.34%; Old Republic Insurance Group, with 2.18%; Ace INA Group, with 2.04%; and Chubb Group of Insurance Cos., with 2%, according to BestLink.
The top five writers of workers compensation insurance in Oklahoma in 2011 were CompSource Oklahoma, with 30.71% market share; Liberty Mutual Insurance Companies, with 12.53%; Travelers Group, with 7.11%; Hartford Insurance Group, with 6.53%; and American International Group, with 5.54%, according to BestLink.