Tag Archives: Property Casualty Insurers Association of America

Top 5 Things PCI Got Wrong on Work Comp

In June, the Property Casualty Insurers Association of America (PCI) published a report titled “Cost Shifting from Workers’ Comp Opt-Out Systems: Lessons from Texas and Oklahoma.” It claims to show how employers in those states are avoiding costs that should be covered by workers’ comp and that are instead paid by workers, their families, private payers and taxpayers. The report is part of a year-long, anti-competitive campaign that has been orchestrated with claimant attorneys who profit under workers’ comp and resist any move away from the traditional approach. The report shows little regard for the facts, applicable law or actual data on performance of alternatives to traditional workers’ compensation.

Here are five of the most significant bits of misinformation and misrepresentation:

1. No relevant data. The PCI cost shifting report boasts of using “verifiable and relevant data” and speaks to “the behavior of opt-out employers.” But the report fails to actually include any Texas or Oklahoma Option claims data, and the truth is that there is no evidence that PCI has even attempted to obtain such claims data.

2. No apples-to-apples comparison. PCI fails to consider the benefit plan payments, supplemental plan payments and negligence liability settlements and awards under Texas Option programs that are not available under workers’ compensation.

See also: 2016 Outlook for Property-Casualty

3. No mention that the majority of Texas workers are covered. PCI fails to acknowledge that the Texas Department of Insurance has determined that more than 95% of Texas’ workers are covered by either workers’ compensation or an injury benefit plan.

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Instead of criticizing responsible Texas and Oklahoma employers who provide injury benefit coverage for their workers, PCI should instead focus on the approximately 14 million — and growing — American workers across all states who have no work injury protection whatsoever.

4. No mention that proposed programs in other states have mandated benefits. PCI extrapolates from Texas to posit a false model for Tennessee and South Carolina. Option programs proposed in those states — unlike Texas — have mandated benefits. No bill has been introduced in either of those states to allow employers to “go bare.”

5. No acknowledgement of option program compliance with Medicare reporting and MSA requirements. Option programs normally pay full benefits before Medicare pays anything. The programs comply with Medicare quarterly, electronic reporting rules on open medical claims and liability settlements. The programs protect Medicare’s primary interest before settling claims with Medicare beneficiaries by setting aside a portion of the settlement funds to pay for future treatment.

Instead of using option programs as a scapegoat and pursuing the fatalistic view that savings by employers equate to cost shifting, perhaps the PCI should expend more energy on how to achieve better medical outcomes for injured workers through communication, employee advocacy, accountability and competition.

Option Program Success in Delivering Better Outcomes Is the Real Story

We will continue to advocate for a more positive discussion on how to achieve better medical outcomes. That should include a sincere discussion of the PCI board’s criteria for an acceptable alternative to workers’ compensation, which was approved in July 2015 and publicly introduced eight months later at the 2016 annual conference of the Workers’ Compensation Research Institute.

See also: Healthcare Reform’s Effects on Workers’ Compensation  

Workers’ comp options in Texas and Oklahoma have disrupted the industry with much-needed innovation and positive change. This has understandably created some dissonance and has rightly generated calls for proof. We welcome a review of real option program data, which amply demonstrates how highly respected industry players and employers are improving the lives of injured workers and reducing costs.

Who could be against that?

The REAL Objection to Opt Out

I have never really understood why the Property Casualty Insurers Association of America has been so vehemently against opt out.

While it seems that opt out returned to the back burner for this year with constitutional defeats in Oklahoma and political stalemate in other states, PCI has reignited the debate with an inflammatory paper.

The basic arguments, which PCI supports with some data, is that opt out results in costs shifting to other systems and that a lack of standards and transparency is detrimental to consumers (i.e. injured workers).

PCI also argues that opt out is all about saving employers money to the detriment of consumers by denying more claims earlier and paying less with capitations and restrictions not found in traditional comp.

I get that alternative work injury systems must meet certain standards and need to be more transparent to consumers — to me, that’s a no-brainer.

But the objections that PCI raises are exactly the same complaints made against traditional workers’ comp: inadequate benefits, unnecessary delays, cost shifting, etc.

See also: Debunking ‘Opt-Out’ Myths (Part 6)  

Each statistic cited by PCI against opt out can be asserted against traditional workers’ comp — just use another study or data source.

For instance, just a couple of years ago, Paul Leigh of University of California at Davis and lead author of the study, Workers’ Compensation Benefits and Shifting Costs for Occupational Injury and Illness, told WorkCompCentral, “We’re all paying higher Medicare and income taxes to help cover [the costs not paid by workers’ compensation].”

That study, published in the April 2012 edition of the Journal of Occupational and Environmental Medicine, found that almost 80% of workers’ compensation costs are being covered outside of workers’ compensation claims systems. That amounts to roughly $198 billion of the estimated $250 billion in annual costs for work-related injuries and illnesses in 2007. Just $51.7 billion, or 21%, of those costs were covered by workers’ compensation, the study said.

Of the $250 billion price tag for work-related injury costs, the Leigh study found $67.09 billion of that came from medical care costs, while $182.54 billion was related to lost productivity.

In terms of the medical costs, $29.86 billion was paid by workers’ compensation, $14.22 billion was picked up by other health insurance, $10.38 billion was covered by the injured workers and their families, $7.16 billion was picked up by Medicare and $5.47 billion was covered by Medicaid.

The study drew criticism from the workers’ comp crowd, which defended its practices, challenged the data and anecdotally attempted to counter argue, with limited success.

If one digs deep enough in the PCI study, I’m sure one could likewise find fault with the data and the reporting on cost shifting — because the truth is that absolutely no one has a fix on that topic.

My good friend Trey Gillespie, PCI assistant vice president of workers’ compensation, told WorkCompCentral that “the fundamental tenets of workers’ compensation [are] protecting injured workers and their families and protecting taxpayers. The general consensus is that the way programs should work is to protect injured workers and taxpayers and avoid cost-shifting.”

Of course! All work injury protection systems should do that.

But they don’t.

See also: What Schrodinger Says on Opt-Out

That’s what the ProPublica and Reveal series of critical articles about workers’ compensation programs across the country tell us, both anecdotally and statistically: Injured workers aren’t protected, costs are shifted onto other programs, and taxpayers are paying an unfair portion of what workers’ comp should be paying.

Indeed, in October, 10 federal lawmakers asked the U.S. Department of Labor for greater oversight of the state-run workers’ compensation system, to counteract “a pattern of detrimental changes to state workers’ compensation laws and the resulting cost shift to public programs.”

I started thinking about the one truism that governs human behavior nearly universally: Every person protects their own interests first. And I thought of PCI’s name: Property and Casualty Insurers Association of America. “Property and casualty.” Ay, there’s the rub!

There’s no room for P&C in opt out! ERISA-based opt out uses only health insurance and disability insurance.

Workers’ comp is the mainstay of the P&C industry, the single biggest commercial line and the gateway to a whole host of much more profitable lines.

If opt out spreads beyond Texas, it is hugely threatening to the interests of the PCI members because they stand to lose considerable business, particularly if opt out migrates to the bigger P&C states.

PCI is protecting its own interests (or those of its members) by objecting to opt out.

And I don’t blame them. Their impression of this threat is real.

Michael Duff, a professor of workers’ compensation law at the University of Wyoming, told WorkCompCentral, “These are interested observers. They’re going to have an agenda. They represent insurers who are in the workers’ comp business.”

Bingo.

“Every commercial actor that participates in traditional workers’ compensation has an interest in seeing traditional workers’ compensation continue,” Duff went on. “But that traditional workers’ compensation imposes costs on employers. There is now a group of employers who would like to pay less, and Bill Minick has developed a commercial product that is in competition with this other conceptual approach to handling things.”

Here’s THE fact: Traditional workers’ compensation and ANY alternative work injury protection plan require vendors pitching wares and services to make the systems work.

Insurance companies are as much a vendor in either scenario as physicians, bill review companies, utilization review companies, attorneys, vocational counselors, etc.

Each and every single one makes a buck off workers’ comp, and each and every one has an interest in maintaining the status quo.

See also: States of Confusion: Workers Comp Extraterritorial Issues

Arguing that one system is better than the other without admitting one’s own special interest is simply hypocrisy.

Workers’ compensation is going through some soul searching right now. Employers leading the debate are asking, “Why stay in a system that facilitates vendors’ interests ahead of employers or workers?”

THAT’s the question that BOTH the P&C industry and the opt out movement need to answer. Further debate about the merits of one over the other is simply sophistry.

This article first appeared at WorkCompCentral.

Texas Is NOT an Opt-Out State

There were two sessions on “Opt Out” at the 32nd WCRI Annual Issues & Research Conference, but a single, critical point was generally omitted by all six speakers across both sessions; an omission that could cause confusion for those not well-versed in the vernacular of alternative workers’ compensation systems.

Texas is not an Opt Out state. It never has been. No one may “opt out” in Texas. Period.

Instead, Texas is, and always has been, an “Opt In” state. Workers’ compensation coverage is not required of employers there. They can choose to buy insurance, or not. They can choose to set up alternative plans, or not. Either way, they can “opt” for some sort of coverage or go completely bare; they don’t have to have a policy, a plan or a prayer.

Those that do not acquire coverage or self-insure under state auspices are called “non-subscribers,” on the surface, the distinction about Opt Out vs. Opt In may seem like a shallow and insignificant point. But the differences in the Texas and Oklahoma systems run deep, and the speakers should have pointed that out.

Instead, I believe some intentionally conflate the two for the benefit of their arguments.

Most notably, for employers in Texas who choose not to opt in for workers’ compensation coverage, open liability prominently remains. They can be sued for negligence. They can be found responsible for pain and suffering. They are wide open to all of the foibles and pitfalls generally absent for those who choose to participate in the grand bargain and the exclusive remedy it provides.

By comparison, employers in Oklahoma have managed to develop a system that gives them unparalleled secrecy and control while maintaining the benefits of exclusive remedy. They have liability protections that Texas employers can only dream about.

Common sense would tell us that any alternative plans in Texas are probably better than those found to their north in Oklahoma. The looming reality of open liability means that employers actually have to be responsible if they wish to avoid litigious challenges and expensive jury verdicts. Yet people continually speak of “Opt Out” as if it was one common theme in both states. Our session speakers are not the only ones to do that. Recent articles in ProPublica and NPR also failed to adequately define the difference between the two.

See Also: The Bizarre Decision on Oklahoma Option

Bill Minick, a Dallas attorney whose firm has written most of the Oklahoma Option plans, mentioned the more than “20 years of history” when talking about the “proven” success of Opt Out. He did not really mention that the 20 years he repeatedly referred to was all based in Texas. Oklahoma has only offered the Option for two years, and only 60 of the state’s 70,000 employers have gone that route. Similarly, presenter Elizabeth Bailey of Waffle House, spoke only of their experience in Texas as a non-subscriber. To her credit, she was the only speaker to deliver hard statistics about the experience in that area, but she made no mention of the Oklahoma Option except to note that they had elected not to Opt Out in Oklahoma. She did not say why.

And I really would’ve liked to know.

Really, none of the speakers made an effort to define the difference between these two systems. To the uninitiated, it would seem they are the same thing. They are not. Oklahoma-style Opt Out is what is being proposed in at least two other states, not Texas-style non-subscription. Future sessions on the subject should clarify that point, focus on actual Opt Out and call out presenters if they dilute or confuse the facts.

Additionally, only one speaker, Trey Gillespie of Property Casualty Insurers Association of America, really mentioned that the Oklahoma Option has been ruled unconstitutional in that state. From an overall panel perspective, that fact was almost a non-event, like it never even happened. But more on that later…

See Also: Five Workers’ Compensation Myths

The point is, the Texas non-subscriber system has been around for a long time. The Oklahoma Option, by Minick’s own admission, is an “experiment” (one commenter at the conference pointed out that Frankenstein’s monster was also an experiment). We should not confuse the two. Oklahoma Opt Out, along with proposed similar plans in Tennessee and South Carolina, are unique creatures that deserve to be fully judged on their own scant merits and significant flaws. We should stop providing them cover by supporting them with the alleged achievements of a dissimilar system.

After all, Texas has never been an Opt Out state, and we should stop talking about it like it is.