Point: Privatize Comp Now
Is there really any doubt that the private sector can move more quickly and efficiently than governments can?
Workers' compensation coverage should be privatized because managing the rapidly escalating costs in that area requires the ability to pivot quickly, and moving quickly is not something that bureaucracies do well, when they move at all.
One of the key tools in managing workers' compensation costs is controlling the choice of providers. State-run systems have historically given far too much leeway to the treating physician and the injured employee. This has resulted in abuse of alternative therapies, such as chiropractic therapies, and a liberal approach to pharmacy distribution and consumption that has had almost catastrophic results.
This has had a frustrating impact on employers, which rather than engage with a system they view as hopelessly corrupt, have become alienated in some cases to the point where they give up on such basic cost containment tools as improved worker safety and meaningful return to work programs.
There is strong evidence that privatization works.
In Texas, where employers are given the leeway to opt out of the state system, losses for companies that have opted out have dropped by about 60 percent. Not only are costs less there now, but treatment is better.
Likewise, a private sector option in West Virginia has resulted in lower costs for employers and the introduction of competition has actually improved the stability of the state fund there, a state fund that was in such disarray that its unfunded liabilities once measured as much as the state's general fund.
Ask anyone that covers workers' compensation for a living and they will point to one of the more egregious aspects of the state-run system. What are we doing appointing boards of attorneys to judge permanent disability claims when its doctors that have the knowledge to make those decisions?
Taking care of the health of injured employees isn't something that should be left to politics, it should be left to professionals. Too often, appointments to state funds or boards of workers' compensation are political appointments.
Uncovering fraud and abuse in workers' compensation is also not something that should be undertaken by laymen who just happen to know someone in elected office. It should be undertaken by either medical or underwriting professionals who know the landscape.
With the combined ratio in workers' compensation heading toward the 120-range nationally, we can ill afford as a society to sit around and wait for change at the rate that governments can provide it.
The private sector can move much more quickly and efficiently and we should let it do so.
DAN REYNOLDS is managing editor of Risk & Insurance®. He can be reached at firstname.lastname@example.org.
November 1, 2012
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