Study: Calif. workers’ comp reforms are working

Yet risk managers say keeping workers safe and costs down still major concerns

California employers and insurers have started to see — and should continue to see — significant results from workers’ compensation reforms enacted in 2005, according to the “2006 Cost Monitoring Report” released by the Workers’ Compensation Insurance Rating Bureau of California.

Specialty Risk Services, a third-party claim administrator, agrees with that assessment, noting that its customers have felt the sunny side of the reforms.

According to the company, clients have experienced double-digit drops in several key areas:

• Physician costs decreased by 12 percent;
• Combined inpatient and outpatient costs decreased by 19 percent;
• Pharmacy costs decreased by 21 percent; and
• Network utilization by clients increased from 55 percent in 2003 to 72 percent in 2005.

One of the most significant benefits of the California legislation was the ability to direct medical care for the life of the claim into an approved medical provider network, SRS said. Employers also regained medical control of claims that existed before the establishment of the network and experience lower medical costs based on increased network penetration.

“Early indicators from SB 899 were very encouraging, and we’ve continued to see exceptional results with our book of business,” said Pam Rippens, senior vice president of field operations for the company. “This is due, in large part, to our aggressive use of more than 30 certified network filings. We’ve also heavily leveraged the utilization review regulations as well as evidence-based medicine.”

Rippens also cited tighter control of outpatient facility fees and treatment limits as dictated in Assembly Bill 227 and Senate Bill 228 as factors that contributed to success in California.

Another fringe benefit of California’s workers’ compensation reforms was the heightened awareness to the need for prompt claim reporting. According to the California Workers’ Compensation Institute, average reporting time saw a marked declined following the reforms, dropping from 19.3 days to 14.2 days from the injury date to claim administrator notification time. SRS tallied similar results, reporting a time decline from 3.7 to 3 days in California.

“We’ve continued to stress to our clients the benefits of early reporting and our efforts have paid off. The quicker a claim is reported, the better the results in the long run,” Rippens said.

Despite the benefits of the workers’ comp reforms, risk managers still express concern about keeping employees safe. In a SRS survey, risk managers indicated that rising medical costs and the threat of pandemics keep them awake at night.

While 52 percent of the survey respondents said they worry about rising medical costs, 12 percent ranked pandemics as their biggest concern. Privacy issues and unhealthy employees tied for third with 6 percent each. Looking ahead five years, risk managers’ worries shifted to talent management and an unhealthy employee population, which topped the list of biggest future concerns at 37 percent, followed a close second by rising medical costs at 34 percent.

In fact, 59 percent of industry professionals said they considered overweight employees to be at greatest risk for workplace injuries in the future, followed a far second by depressed employees at 20 percent and the aging workforce at 13 percent.

SRS’s surveys were part of a research and education project called, “Workforce 2020: Are You Ready for the Future?,” which is about the challenges risk managers face now and in the next two decades, in terms of immigration trends, population spurts and demographic shifts nationwide.

“Turn on the TV or pick up a newspaper, and you’ll see headlines focused on the graying of America or its expanding waistline. These issues are not just trends that plague health care professionals anymore,” said Ken Martino, senior vice president, account management for SRS. “They are serious concerns to risk managers — something we learned first hand through our survey series. As an industry, we have to ask ourselves what we can do to head off these trends and lessen their impact down the line.”

Interestingly, more than 51 percent of those surveyed expected their workforce to increase in the next 24 months. When asked if they had strategies to tackle workforce challenges of the future, 47 percent said they have some plans. However, only 9 percent strongly agreed that their company was prepared with workforce planning strategies for the future.

“Preparedness is critical,” according to Martino. “Risk managers should really be asking themselves now what their vulnerabilities are both today as well as five, 10 or 15 years from now. Where are your exposures geographically and what are they in terms of the make-up of your workforce? Do you have plans in place for a disaster, such as a natural catastrophe, terrorism event or workplace violence? Are you leveraging technology advances to increase your productivity and effectiveness?

“Simple steps like re-engineering job tasks and sites for older workers or people with disabilities can pay off tenfold in the long run,” Martino continued. “Partner with your TPA and take the time to plan for tomorrow. It will ensure success in the future.”

In terms of return-to-work challenges, survey respondents said motivating an employee to return to work following an injury ties with motivating supervisors who play a critical role in the process. Both received 33 percent of the vote. Lack of transitional duties fell second, at 23 percent.

SRS is currently conducting a survey on return to work and the best practices used by clients. Results are expected by the end of the second quarter of 2007.

For more information on SRS’ Workforce 2020 project or its survey in California, visit www.specialtyriskservices.com