By DAN REYNOLDS, senior editor of Risk & Insurance®
As an effective net to serve the purpose for which it was designed, the healing and compensation of injured workers, workers' compensation has no equal in the insurance industry.
Granted, for insurers the coverage is one of the riskiest out there. And with the recent rise in healthcare costs, that risk has become even greater. Witness earlier this year the statements by a Chartis executive that the company had exited more than $2 billion in workers' comp business in the past couple of years. The price is too low, for the risk, at least it has been for Chartis.
It's not the nature nor the spirit of workers' comp that makes it so risky, it's the capacity for greed and fraud to corrupt the purpose of the coverage which is the concern.
In his September column, one of our online workers' comp columnists, Safety National's Mark Walls, points to a January study from Johns Hopkins that said that 72 percent of the workers' comp medical costs in Louisiana are coming from 3.2 percent of the physicians. Walls also points to a May California Workers' Compensation Institute study that shows us that 3 percent of the physicians in that state are ringing up 55 percent of the state's Schedule II narcotics costs in workers' comp.
Only a small number of players are corrupting the intent of not only workers' compensation insurance. And let's not only blame corrupt doctors. According to Walls, attorneys, who make more money from more expensive cases, are steering business to these doctors.
The fact that workers' comp has become a costly place for insurers isn't an argument for the death of workers' comp. It does indicate the need for vigilance in maintaining its integrity, however.
You also hear the argument that since we have sent millions of our manufacturing jobs offshore that we as a society no longer need workers' comp like we once did. Really? Think again.
Even if you accept the condition of a present and future United States economy as one built in the main on the service sector there are plenty of ways for workers in the service sector to get injured. A slip and fall in a fast-food restaurant has the potential to cause just as much misery and expense as an injury on a factory floor.
Workers' comp does what it does well. We must guard against the corruption of this 100-year-old institution as well as we guard against the corruption of our educational and financial systems.
November 1, 2011
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