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.
In this era of rigid and sometimes rancorous political disagreement, it’s notable when members of opposing political parties publicly agree with one another.
It’s even more notable when those leaders both shouldered the responsibility of leading the State of New York, home to one of the most vital economic and cultural centers on the planet.
That’s precisely what former New York Governors George Pataki and Mario Cuomo did.
They penned a letter to the “Wall Street Journal” expressing their dismay that the Attorney General’s Office of the State of New York was still pursuing a civil case, using the powers granted by 1921’s Martin Act, against Hank Greenberg and another former AIG executive, Howard Smith, for reinsurance transactions that took place more than 15 years ago.
The case was initiated by former NY State Attorney General Eliott Spitzer and is being carried on by the current AG Eric Schneiderman.
The AG office’s aim, to “continue to seek, among other remedies, several forms of injunctive relief [against Greenberg] including but not limited to a ban on participation in the securities industry and a ban on serving as an officer of a public company,” struck both former governors as absurd.
“Mr. Greenberg has never worked in the securities industry and he hasn’t been an officer or director of a public company in eight years,” — Former Gov. George Pataki, a Republican, and former Gov. Mario Cuomo, a Democrat, in their letter in the “Wall Street Journal,” published May 12, 2013.
It is absurd. Hank Greenberg never worked in the securities industry. He has no intentions of working in the securities industry.
“Mr. Greenberg has never worked in the securities industry and he hasn’t been an officer or director of a public company in eight years,” Pataki, a Republican, and Cuomo, a Democrat, wrote in their letter in the WSJ, published May 12, 2013.
Now here we are, more than three years past that date and Greenberg is still being harassed by the government.
Cuomo and Pataki also cited a 2007 study commissioned by then NY Mayor Michael Bloomberg and Sen. Charles Schumer that the “unpredictable nature of the legal system” in the U.S. is a major factor in undermining New York’s competitiveness as a financial center.
“New York’s ‘attractiveness to international companies’ is diminished by the ‘perception that penalties are arbitrary and unfair,’” the study, as cited by Pataki and Cuomo, concluded.
In an opinion piece in the “Wall Street Journal” in June of this year, Thomas Donohue, the president and CEO of the U.S. Chamber of Commerce, referred to New York’s case against Hank Greenberg as a “vendetta.”
We can only ask for what?
Hank Greenberg is without question one of the greatest of the “Greatest Generation.”
He was among those that stormed the beaches of Normandy in 1944 when Allied Forces rose to wrest Europe from the grip of a murderous tyrant.
In his lifetime, he’s created, literally, tens of thousands of jobs. That’s a lot of taxes being paid to cover the salaries of a lot of politicians.
In the four years alone before Spitzer brought enough pressure on AIG’s board to push Greenberg out, from 2000 to 2004, AIG grew from a company with $81.3 billion in identifiable assets to one of $131 billion in identifiable assets.
At an age when most men are either in the grave or on the golf course, Greenberg is pressing on, continuing to build as chairman and CEO of the Starr Cos.
Greenberg’s attorney, David Boies, is more than capable of defending him. What we are about here is decrying a waste of taxpayer money in a nakedly pointless pursuit.
Politicians don’t create jobs. Business leaders do.
It’s high time the politicians left this one alone.
Think You Don’t Need Environmental Insurance?
“I don’t work with hazardous materials.”
“My industry isn’t regulated by the EPA.”
“We have an environmental health and safety team, and a response plan in place.”
“We’ve never had an environmental loss.”
“I have coverage through my other general liability and property policies.”
These are the justifications clients most often give insurers for not procuring environmental insurance. For companies outside of sectors with obvious exposure — oil and gas, manufacturing, transportation — the risk of environmental damage may appear marginal and coverage unnecessary.
“Environmental insurance is not like every other insurance,” said Mary Ann Susavidge, Chief Underwriting Officer, Environmental, XL Catlin. “The exposure is unique for every operation and claims don’t happen often, so many businesses view coverage as a discretionary purchase. But the truth is that no one is immune to environmental liability risk.”
Every business needs to be aware of their environmental exposures. To do that, they need a partner with the experience to help them identify exposures and guide them through the remediation claims process after an incident. The environmental team at XL Catlin has been underwriting these risks for 30 years.
“Insureds might not experience this type of claim every day, but our environmental team does,” said Matt O’Malley, President, North America Environmental, XL Catlin. “We’ve seen what can happen if you’re not prepared.”
Susavidge and O’Malley debunked some of the common myths behind decisions to forego environmental coverage:
Myth: My business is not subject to environmental regulations.
Reality: Other regulators and business partners will require some degree of environmental protection.
Regulatory agencies like OSHA are more diligent than ever about indoor air quality and water systems testing after several outbreaks of Legionnaires disease.
“The regulators often set the trends in environmental claims,” Susavidge said. “In the real estate area it started with testing for radon, and now there’s more concern over mold and legionella.”
Multiple hotels have been forced to shut down after testing revealed legionella in their plumbing or cooling systems. In addition to remediation costs, business interruption losses can climb quickly.
For some industries, environmental insurance acts as a critical business enabler because investors require it. Many real estate developers, for example, are moving into urban areas where their clients want to live and work, but vacant lots are scarce. Those still available may be covering up an urban landfill or a brownfield.
“We’re able to provide expertise on those sites and the development risks so the contractor can get comfortable working on it. It’s about allowing our clients to stay relevant in their markets,” O’Malley said. “In this case, the developer is not an insured with a typical environmental exposure. But if there is a contaminant on the worksite, they could inadvertently disperse it. In a high-population urban area, the impact could be large.”
Banks also quite often require the coverage specifically because developers are turning to these locations with higher potential environmental risk.
“Though it’s not a legal requirement, insurance is a facilitator to the deal that developers really can’t operate without,” Susavidge said.
Myth: The small environmental exposure I have would be covered under other polices.
Reality: Environmental losses can result from exposure to off-site events and are excluded by many property and casualty policies.
Environmental risks on adjoining properties can lead to major third party losses. Vapor intrusion under the foundation of one property, for example, can unknowingly underlie the neighboring properties as well. The vapor intrusion can then seep into the surrounding properties, endangering employees and guests.
In other words, your neighbor’s environmental exposure may become your environmental exposure.
O’Malley described a claim in which a petroleum pipeline burst, affecting properties and natural resources 10 miles downstream even though the pipeline was shut off two minutes after the rupture. The energy company that owns the pipeline might have coverage, but what about the other impacted organizations? Many other property policies exclude environmental damage.
Sometimes the exposure is even more unexpected. In 2005, for example, a train carrying tons of chlorine gas crashed into a parked train set sitting in the yard of Avondale Mills — a South Carolina textile plant. The gas permanently damaged plant equipment and forced the operation to shut down.
“It’s not always obvious when you have an environmental exposure,” Susavidge said.
“When there is a big loss or a pattern of losses, the casualty market will typically move to exclude it,” said O’Malley. “And that’s where the environmental team looks for a solution. Environmental coverage has been developed to fill the gaps that other coverages won’t touch.”
Myth: We already have a thorough response plan if there is an incident.
Reality: Properly handling an environmental event requires experience and expertise.
In addition to coverage, risk managers need experience and expertise on their side when navigating environmental claims.
“For many of our clients, their first environmental claim is a very different experience because the claimant is not always a typical third party – it’s a government agency or some other organization that they lack experience with,” Susavidge said. “Our claims team is made up of attorneys that have specific domain experience litigating environmental claims issues.”
Beyond its legal staff, XL Catlin’s claims consulting team and risk engineers come with specialized expertise in environmental issues. 85 to 90 percent of the team members are former environmental engineers and scientists, civil engineers, chemists, and geologists.
“Handling environmental claims requires specialized expertise with contaminants and different types of pollution events,” O’Malley said. “That’s why our 30 years of experience makes a difference.”
Thirty years in the business also means 30 years of loss data.
“That informs us as a carrier how to provide the right types of services for the right clients,” Susavidge said. “It gives us insight into what our insureds are likely to experience and help us determine what support they need.”
Insureds also benefit from the relationships that XL Catlin has built in the industry over those 30 years. When the XL Catlin team is engaged following a covered pollution event, the XL Catlin claims team can deploy seasoned, experienced third party contractors that partner with the insured to address the spill and the potential reputational risk. And they receive guidance on communicating with regulatory bodies and following proper reporting procedures.
“The value of the policy goes beyond the words that are written,” O’Malley said. “It’s the service we provide to help clients get back on their feet, so they can focus on their business rather than the event itself.”
For more information on XL Catlin’s environmental coverage and services, visit http://xlcatlin.com/insurance/insurance-coverage/casualty-insurance.
The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details. XL Catlin, the XL Catlin logo and Make Your World Go are trademarks of XL Group Ltd companies. XL Catlin is the global brand used by XL Group Ltd’s (re)insurance subsidiaries. In the US, the insurance companies of XL Group Ltd are: Catlin Indemnity Company, Catlin Insurance Company, Inc., Catlin Specialty Insurance Company, Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions. Information accurate as of September 2016.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with XL Catlin. The editorial staff of Risk & Insurance had no role in its preparation.