Comp Community Has Eyes on ColoradoCare
Coloradans are set to vote on a state ballot initiative that would create the country’s first single-payer health care system – but how would such a system impact employers and their workers’ compensation programs?
Colorado’s Amendment 69 calls for the state to finance health care through ColoradoCare, which would be a new political subdivision of the state governed by a 21-member board of trustees that would administer a coordinated payment system for health care services.
The single-payer system would be paid partly by federal sources, and partly by a new 10 percent income tax that would be shared: two thirds, or 6.67 percent, would be paid by employers and one third, or 3.33 percent, would be paid by employees.
Experts who either support, oppose or are neutral about ColoradoCare spoke to Risk & Insurance® about their perspectives on how the ballot initiative would impact employers and their workers’ comp programs:
Ralph Ogden, senior legal counsel, ColoradoCareYes:
Under the current workers’ compensation system, employers have the right to make an injured worker see the physician of the employer’s choice in the first instance. After that, any physician to whom the worker is referred by the initial treating doctor also becomes authorized. In practice, employers direct employees to physicians who are selected by the insurance company.
Employers and insurers want this control because they are afraid that physicians outside of their networks either don’t understand occupational injuries or are unscrupulous and will keep treating workers long after workers reach maximum medical treatment and the need for treatment has expired.
Workers, on the other hand, believe that physicians in these networks have a bias towards the employers and insurers who select them, and frequently undertreat, force workers back to work before they’re ready, or otherwise give opinions which favor the employer-insurers in order to continue getting business from them.
Also under the current system, any physician can treat an injured worker, and neither certification nor expertise in occupational injuries or illnesses is required.
Workers’ compensation is fundamentally a return-to-work system, not a health insurance system.
The board of trustees has several alternatives for handling job-related injuries and illnesses. It could, for example, require that any physician wishing to treat injured workers be Level I certified, and could further require that employers present employees with a list of these accredited physicians in their locale, leaving the actual choice to the worker. This addresses some of the concerns of employers and insurers as well as those of injured workers.
It could also establish guidelines for initial diagnosis and treatment which would allow employers to direct workers to accredited specialists, depending on the nature of the injury. For example, workers with carpal tunnel injuries could be directed to accredited hand specialists while still leaving the final choice up to the worker.
Another alternative would be to use the worker’s primary care physician as a gatekeeper that the worker sees first and is then referred to the appropriate specialist, or, when the injury does not require specialist care, continues to be treated by their PCP. The advantage to this system is that the PCP would be aware of the worker’s total health picture and could better coordinate their care on a holistic basis.
There may be other, better alternatives for protecting the interests of both the employers and the workers. Amendment 69 intentionally leaves the selection of these alternatives to the board of trustees so they can make the best decisions in light of all information available at the time, rather than having the drafters tie the board’s hands with a system that may later prove inferior to ideas that develop over time.
The amount of money an employer will save under ColoradoCare depends on several factors, including how much, if anything, it currently pays for employees’ health insurance and how much it currently pays for workers’ compensation insurance.
According to the United States Bureau of Labor Statistics, the average employer payment for health insurance is 13.5 percent of payroll. Thus, if total payroll is $100,000, the employer will pay about $13,500 for health insurance. Under ColoradoCare, employers pay only 6.67 percent of payroll, or, in this scenario, $6,670, which saves the employer $6,830.
Computing savings on workers’ compensation insurance is much more difficult because the compensation rates are based on job titles and the risk associated with these positions, with office employees having a low rate and construction workers having a high rate.
Thus, employers with high-risk occupations will save the most on the med pay portion of their compensation premiums, while employers with office workers will save very little. In any event, because med pay accounts for about 59 percent of workers’ compensation payments, compensation premiums should be reduced by that amount.
Edward Pierce, producer, Denver office of Lockton Cos.:
Attempting to accurately quantify the effects that Colorado Amendment 69 will have on any one employer’s bottom line would be far too speculative without more information from the ColoradoCare System Initiative.
The proposed changes in legislation are currently written in an 11-page document, and there a number of issues and gaps from a workers’ compensation perspective. These changes may have ripple effects that are unclear without more insight from those putting the measure forward.
Concerns we have include:
- Currently, workers’ compensation has controls in place for employers and insurers to keep medical costs in check. How medical costs would be controlled under Amendment 69 is not addressed. If medical costs are increased, additional taxes would be necessary to fund ColoradoCare in future years.
- Amendment 69 creates issues for employers in the reporting and tracking of employees’ medical care. Employees may leave work and seek medical attention from government provided health care without informing their employer. How this would be controlled is not addressed in Amendment 69.
- The issue of subrogation for indemnity payments is not addressed in legislation and requires clarification. If the legislation prohibits or weakens the ability for insurers to subrogate, employers would likely bear the burden of increased premiums.
Overall, we do not have a transparent view of how this legislation and the board in charge of these changes will ultimately impact workers’ compensation to affect an employer’s bottom line.
Edie Sonn, vice president, communications and public affairs, Pinnacol Assurance, Denver’s state-chartered workers’ comp carrier:
Workers’ compensation is fundamentally a return-to-work system, not a health insurance system. Amendment 69 would eliminate that crucial distinction — and that’s not good for injured workers or employers. It fails to recognize the important role specialized occupational medicine plays in the recovery of injured workers.
Doctors who have been specifically trained in treating workplace injuries understand exceptional medical care is not simply treating the injury. They recognize how important it is to continually evaluate and facilitate an injured workers’ ability to return to work as early as appropriate.
Our ability to meaningfully contribute to society through our work is as important to the recovery process as providing appropriate medical care. The longer we’re away from our jobs, the more difficultly we face in our recovery process. A “one-size fits all” health insurance system fails injured workers.
In addition, we believe injured workers will be away from their jobs longer if there are no mechanisms to ensure they’re getting appropriate care and helping them get back to work. That will increase employers’ indemnity costs and won’t create value or improve the current workers’ compensation system in Colorado.
Richard Krasner, workers’ comp consultant and blogger:
The ColoradoCare initiative is up for approval by Colorado voters in November, but there has been some pushback because it would create a single-payer system and therefore, take away from the current health care system — including the workers’ comp program. Pushback is from the health care industry. They want to protect employer-provided insurance, as per the Council of Insurance Agents & Brokers, a national trade group.
I contend that the U.S. has unnecessarily created two silos of health care — general health care and workers’ comp health care. We seem to compartmentalize health care in this country, and the separate systems allow for companies to profit from each system. But if it were one system, then very few companies can profit from it. I don’t think there’s any other Western country that has such silos.
There may be certain surgeries, such as knee or back surgery, in which the doctor has no interest in knowing whether the person fell of a ladder at work or while he was putting up Christmas decorations at his home. It may not matter. There may be certain patient-specific precautions and procedures that the surgeon will do for one patient that is not needed by the other patient, regardless of work status, as this is a medical decision, not an insurance decision. Otherwise, the surgery is no different.
Life-saving health care can be unpredictable, controversial and skirt the frontiers of science.
Due to its very nature and the research methods it employs, this vital work sometimes attracts the attention of special interest groups, protestors and even criminals. That’s why health care risk managers need to balance access to care with the security issues some departments pose.
Animal testing, reproductive services and departments that house nuclear materials can all draw attention from those who would shut those operations down if they could, or at the very least, harm a hospital system’s reputation.
Take, for example, family planning.
After a deadly shooting at a Colorado Planned Parenthood office, an abortion doctor named Diane Horvath-Cosper gave several press interviews where she vowed to continue with her services and advocate for family planning rights at her Washington, D.C., hospital.
Soon after the news stories aired, she was called in to see the chief medical officer.
The executive asked Horvath-Cosper to stop talking to reporters because he did “not want to put a K-Mart blue light special on the fact that we provide abortions,” she later said.
Horvath-Cosper did stop her media interviews. And then she filed a civil rights complaint against the hospital. She alleged the hospital discriminated against her for expressing her moral conviction on abortion. The hospital should instead bolster security, the complaint said.
The hospital did hire a security guard and install cameras. Yet it didn’t follow through on many other suggested measures, such as installing shatterproof glass or an intercom system, she said.
The Need to be Discreet
This case highlights the difficulties hospitals face when they need to be protective of their operations to avoid drawing attention from vocal activists or violent actors.
Today’s health systems are often vast networks offering not only medical care, but also advanced research, retail stores, pharmacy and social services. Each hospital network is searching for ways to prop up revenue while providing cutting-edge care ahead of the competition.
But before adding new business lines, experts caution that hospital administrators weigh all reputational and security risks they may attract, and continually reassess those risks based on a changing environment.
Once risk managers know the risks and plan for them properly, they should be able to weather most storms.
The University of Washington is pressing on with the construction of a new underground animal research facility adjacent to its hospital despite continuous protests by animal rights organizations.
This spring, members of “No New Animal Lab” shut down construction for a day when two protesters chained themselves to an excavator working on the site. Several people were arrested for criminal sabotage.
The protesters even went to the vacation home of a construction company executive in Fort Lauderdale, Fla., and scrawled chalk messages all over his driveway that accused him of killing puppies and kittens.
“Even though you may keep it quiet, the reality is people will know; those interest groups will know and they will target you as far as media and protests,” said Jeff Young, president of the International Association for Healthcare Security & Safety (IAHSS).
“Whether abortion or animal research, there are very active groups out there that protest hospitals on a regular basis,” he said.
Conduct Regular Assessments
The hot-button issues in hospital settings aren’t limited to family planning or animal research.
Today’s state-of-the-art teaching hospitals usually house nuclear materials; they’re conducting gene trials and banking dangerous disease samples while hunting for cures.
That is a whole new risk as far as environmental factors, accidental disbursement or terrorism if the samples get into the wrong hands.
Some hospitals have even quietly set up onsite “forensic” units dedicated to the care of dangerous prisoners and the mentally ill.
Often these ancillary departments coexist unseen in health care complexes. But if promoted, they may attract bad actors seeking to steal valuable items or cause harm to the public.
Hospitals must provide an extra layer of protection for the staff and public who may venture into these high-risk areas, and also make sure high-risk materials or people don’t get out.
“An organization needs to consider that risk even before they decide to go in that area,” Young said.
To properly prepare, risk managers must strategically work with co-workers and service providers to manage these reputational risks. They need to conduct regular assessments to stay ahead of changes in the community and fortify security.
“There needs to be a communication plan and a media plan to respond to those outside groups that will comment or protest against the services that will be provided,” Young said.
Then there must be a thorough security assessment.
The University of Washington is pressing on with the construction of a new underground animal research facility adjacent to its hospital despite continuous protests by animal rights organizations.
“Really good hospitals do their assessment, they find things and they audit that assessment every year to see if there are changes and if they are cost-effective,” said Sean Ahrens, practice leader for security consulting and design at Jensen Hughes.
The risk assessment should account for the hospital’s environment and surrounding community and also anticipate future changes, Ahrens said.
Every employee has to be aware and on the lookout for problems, and know what to say and how to react if they encounter a problem, said Maureen Archambault, regional managing director of health care services at Arthur J. Gallagher & Co.
It’s not just going to be to an administrator or security guard encountering problems, she said. Training needs to reach all employees working in the hospital.
“It’s great to have a plan. But if people can’t follow it and don’t understand it, it’s not going to happen,” Archambault said.
Safety drills in partnership with community first responders are also vital practices to test and teach security procedures, she said.
One challenge in risk prevention strategies is that extra security recommendations are often seen as an increased cost. And the hospital needs to decide if their community is comfortable with the presence of armed guards.
“Security obviously has a benefit, but it’s always seen as a cost,” Ahrens said.
Administrators need to view security personnel as cost savers, he said. If a security guard is added in the emergency room and an attack never occurs, administrators may ask if the extra personnel was a cost or a valuable deterrent.
“Having a security presence in the emergency department potentially precludes someone from bringing a weapon, but we’ll never know for sure,” Ahrens said.
Young, with IAHSS, emphasizes that security personnel also should be viewed as part of the patient care team.
“I’m a health care worker; I just happen to do security,” Young said.
“Everything we do in health care security, we should be able to track back to patient care or patient experience,” Young said.
Every hospital is unique, so there is no generic template to follow. Whether in a city or rural community, the environment inside and outside the hospital dictates the controls that are put in place, Ahrens said.
“There are so many things going on in hospitals, they are no longer safe havens and it seems to be escalating,” Archambault said.
Hospitals allow public access 24 hours a day. The halls are teeming with patients, visitors, vendors, doctors, nurses, office workers and students.
“Having a security presence in the emergency department potentially precludes someone from bringing a weapon, but we’ll never know for sure.” –Sean Ahrens, practice leader, security consulting and design, Jensen Hughes
While off-hours visitor restrictions reduce the population, the hospital still needs to remain welcoming to all who need it. Extra security layers should not prevent access to care.
“It used to be a safe haven but now we are seeing more and more of the outside influences coming within the walls of the hospital,” Young said.
Sealed Source Materials for Dirty Bombs
High-risk radioactive material is also stored in hospitals and could be targeted by terrorists.
Medical uses for the material include treating cancer patients, purifying blood, or conducting tests and research.
To prevent dispersal once the material is used, it is typically sealed in a stainless steel, titanium or platinum capsule called a sealed source.
The concern is that terrorists could obtain sealed source containers to make a “dirty bomb.” So hospitals must reinforce security and supervision in the area where the material is used or stored.
The National Nuclear Security Administration (NNSA) identified about 1,500 U.S. hospitals and medical facilities with high-risk radiological sources that contain approximately 28 million curies of radioactive material and are candidates for security upgrades.
A 2012 government survey found that NNSA spent $105 million to help 321 hospitals complete security upgrades, such as remote monitoring systems, surveillance cameras, enhanced security doors, iris scanners, motion detectors and tamper alarms. This program continues through 2025.
While the government encourages extra security and offers some assistance to pay for it, the program isn’t mandatory and some hospitals passed on the offer, leaving potential vulnerabilities.
Many hospitals struggle to obtain the right balance of insurance for these high-risk areas.
The Terrorism Risk Insurance Act (TRIA), created in 2002, is triggered by a government-certified act of terrorism, including use of unconventional weapons, also known as nuclear, biological, chemical, or radiological (NBCR) weapons.
The challenge many hospitals face in terms of TRIA is that an active shooter event may not be ruled a terrorist act by the U.S. government.
That leaves the hospitals without coverage for damage to visitors, patients or staff.
One newer product is stand-alone violence and malicious acts coverage, said Archambault. This is different from terrorist coverage created after the Sept. 11 attacks.
Stand-alone insurance provides a much broader coverage without government certification.
Another solution that has been discussed for a number of years is allowing insurers to accumulate tax-deferred catastrophe reserves.
“We need to be asking, ‘What are the specific differences in exposure and what special insurance products aim to address it?’ ” Archambault said. &
Using Data to Get Through Hail and Back
4,600 hailstorms have rained down on the U.S. as of the end of July according to the National Oceanic and Atmospheric Administration. And these storms have left damage behind, cracking unprotected skylights, damaging exterior siding, dimpling rooftops and destroying HVAC systems.
While storm frequency is almost on par with last year’s 5,400, the rest of the picture isn’t quite the same. For example, the hail zone seems to be shifting south. San Antonio, Texas, a “moderate” hazard hail zone area, typically sees four or five hail storms a year, on average. Year to date, more than 30 storms have been reported. Overall, Texas has suffered nearly 20 percent of all hail storms this year.
Liberty Mutual’s Ralph Tiede discusses the risk hail poses to large commercial property owners.
The resulting damage is different too, with air conditioning (AC) units accounting for more than a third of the insurance industry’s losses, a greater proportion than in previous years. “In some cases, we’ve seen properties that sustained no roof damage but had heavily damaged AC systems. This may be a result of smaller hail stone size coupled with high winds,” noted Ralph Tiede, Vice President of Commercial Insurance and Manager of Property Risk Engineering at Liberty Mutual.
Despite the shifting trends, however, these losses are largely preventable if commercial property owners understand their exposures and take steps to mitigate them. By partnering with the right insurer, a company can gain access to the industry-leading resources and expertise to make it happen.
Understanding the Risk through Data
A property owner might know that his property is located in an area prone to hail, but could underestimate the extent of damage a storm could cause. Exposed skylights, solar panels, satellite dishes and other roof-mounted equipment can translate to serious losses.
Three trends that have emerged this hail season.
This is where Liberty Mutual’s property loss control engineers offer critical guidance for customers with large property exposures.
“Our property loss control engineers go out and inspect locations to develop loss estimates,” said Tiede. “They’re looking at the age and condition of the roof, the material it’s made of, and whether equipment is exposed or if there are adequate safeguards in place.”
Liberty Mutual can combine this detail with the hail data it has collected for more than 14 years and use this extensive library to help customers understand their exposures. The company’s proprietary hail tool looks at customer-specific factors, such as roof type, age, condition and geocodes, to better identify potential losses from hail. The tool provides a more detailed view of hail exposure on a micro level, as opposed to more traditional macro views based on zip codes.
“This way, we’re not just looking at a location’s exposure, we’re looking at an account’s cumulative hail exposure and providing a better understanding of where the risk is concentrated,” Tiede said.
Having a good understanding of a company’s specific exposure helps the broker, buyer, and insurer develop an effective insurance program. “Two customers may be in the same area, but if one’s building has a hail resistant roof, protected skylights, and hail guards for HVAC equipment and the other’s has unprotected sky lights and no hail guards or screens on rooftop equipment, they are going to have different levels of exposure. In both scenarios, we can design an insurance program that fits the customer’s situation and helps control the total cost of property risk,” said Brent Chambers, Underwriting Consultant for National Insurance Property at Liberty Mutual.
A Liberty Mutual property loss control engineer consults with the customer on ways to reduce or mitigate the exposure from hail so that the customer can make an informed decision as to where to deploy capital. “It’s not just about protecting a building’s roof and rooftop equipment. Roof damage can lead to extensive water damage inside a building and in some cases disrupt service, both of which can be costly for a business. By focusing on locations with the most exposure, a risk manager is better able to mitigate future losses,” said Tiede.
Actions commercial property owners can take to mitigate the risk of hail-related damage.
Liberty Mutual property loss control engineers also provide recommendations specific to each location. “We know that hail guards work, so we encourage clients to use those to protect HVAC equipment,” said Ronnie Smith, Senior Account Engineer for National Insurance Property at Liberty Mutual. “Condenser coils in air conditioning systems are fragile and easily damaged, and units don’t necessarily come with built-in protection. It’s important for property owners to take this step proactively to prevent a loss.”
The average cost to fix a condenser coil is $500, but replacing a coil can run at least $500 per ton of cooling, a measurement of air conditioning capacity that refers to the amount of heat needed to melt a ton of ice over a 24-hour period. As one ton of cooling typically covers about 250 square feet of interior space, replacement costs can quickly add up.
Replacing an entire AC unit can run more than $1,000 per ton of cooling. In a 250,000 square foot property, the replacement could easily reach $1 million. Given the increase in hail-related AC damage this year, these are numbers worth knowing.
Other risk mitigation recommendations include regular roof maintenance, such as inspections and repairs to small damages like blisters and installing protective screens over skylights.
“If a roof needs replacing, we also suggest using materials that have been tested and approved by an independent certification laboratory and are durable enough to fit the location’s exposures,” Tiede said. “The last thing a commercial property owner wants is to replace a roof again six months after it’s installed. Experience has shown that ballasted-type roofs are the most resistant to hail damage.”
Using Data to Develop Solutions
When a property owner has an understanding of the size of its exposure and potential losses, it is better able to work with its agent or broker and insurer to develop an insurance program to manage and mitigate potential risks.
“The data and advice we provide help clients focus on the largest risks and better mitigate that exposure,” Smith said. “The more data you have, the more you can understand your risk on a granular level and manage it.”
This data-driven approach to preparedness makes Liberty particularly well-suited to serve large commercial properties with multiple locations in high risk areas.
Prices for roof and air conditioning repairs and replacements have risen over last year, Tiede said, and are likely to grow more expensive as older equipment becomes obsolete. Property owners will be forced to buy newer, pricier replacements than perhaps they had originally planned for.
And if this year’s storm trends are any indication, hail is sometimes an unpredictable foe.
Amidst these shifting trends, the value of an insurer’s expertise in identifying, mitigating and managing hail exposure will be immeasurable to large commercial property owners.
For more information about Liberty Mutual’s commercial property coverage, visit https://business.libertymutualgroup.com/business-insurance.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.