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Work Comp: When Good Is Bad

Updated: Mar 12, 2023

My wife always warns me that she can see eyes glaze over when I start speaking about insurance. So, when asked what I do for a living, I always respond "I save businesses money" and change the subject. Saving money is sexy, isn't it?!

Nevertheless, I'm going to risk it to write about two recently posted NCCI studies that I linked to below in case you are interested. And, assuming you won't read them, give me a minute to summarize because there is one big take away important for business owners and executives.

Last month NCCI published a study about The Use Of Networks To Care For Injured Workers. There is a chart from this article that lists, by state, utilization rates of Medical Provider Networks from best to worst. Missouri is at the top of the list (I'm just picking on Missouri for now because it's where I live. There's a larger point for everyone).

Theoretically, that is good news for Missouri employers because networks, Managed Provider Networks save money, help control costs, etc. Right?

But, just two months ago, in February, NCCI published another study comparing Costs of Workers Compensation and Group Health in every state. And, guess what? Missouri was dead last in the country with work comp prices 304% the cost of general health costs in the state!

The question in Missouri is how much additional benefit is there from our high work comp network utilization rate? Probably nominal at best. But, no matter the savings level of in-network care, treating work place injuries in the work comp system is really expensive!

I can think of numerous reasons for this situation, and there are probably many more that I haven't considered. Here is the take away for everyone: No matter where you operate, the cost of care in the Work Comp System is more expensive (most likely much more) than in the General Health Care system; anywhere from 11% more in West Virginia to three times the cost in Missouri.

This hurts everyone: self-insureds, guaranteed-cost programs, and everything in between.

Self-insureds and those with large-retention programs can take certain steps to minimize certain costs (e.g. referral fees between providers, bill repricing fees, etc.) within the system that others can't since they have, or should have, more control.

Those on guaranteed cost policies have less flexibility to control costs since their work comp carrier is paying the bills. Less control is particularly frustrating because the situation within the Work Comp system hurts these organizations through experience modification rates and higher premiums.

The good news is there are certain steps everyone can take to mitigate much of the financial burden work comp places on our organizations. And, outside of safety, most cost little or no money to effect large cost savings.

  • Enhanced safety program and procedures to prevent injuries.

  • Injury Triage service to keep many incidents out of the system and reduce claim duration.

  • Implement or improve return to work program to reduce duration.

  • Independent premium audit to review pricing and eliminate overcharges.

  • Run an RFP to make sure you're getting the best pricing, program, service, coverage, etc available.

I can tell you from experience that work comp is a good place to look for savings opportunities due to the needlessly complicated pricing system. If you have any questions or want to bounce some ideas off of somebody, feel free to reach out to me.

Stuart Cytron, MBA has been published in trade journals such Construction Forum St. Louis and St. Louis Business Journal among others. You can read more about Stuart and how he developed a passion for helping businesses reduce work comp expenses on his website.

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