We are so screwed.

That’s the conclusion I’ve reached partway thru a quick-and-dirty survey of a handful of savvy, connected brokers.

The people who buy workers’ comp insurance and or claims and/or medical management are, mostly, clueless.  

They succumb to spreadsheets when comparing TPAs.  Because they have no idea how to separate out the good ones, they go for the cheapest per-claim fee, then are surprised when their ALAE costs are thru the roof.  But hey, that’s “claim-related” so they’re safe.

They bitch at their insurer when their claims costs go up, but won’t direct to good docs, or educate their employees before injuries, or hold management accountable.

They think bigger networks are better networks, that deeper discounts deliver big savings, that case management is the “state of the art.”  Many are quite ignorant of evidence-based medicine – which to my mind is the ONLY way we’re ever going to deliver quality care at reasonable prices.

Providers who pitch outcomes and return to work get some traction with a few of the bigger employers, but nowhere near enough to change the managed care business model.

To be fair, some large employers – think Lowe’s, Costco, Safeway – are doing really great stuff, and I’m sure there are lots of others who are innovating and improving and demanding performance.

The only thing that’s protecting these “buyers” is the up-and-down insurance cycle, a driver that has a disproportionate effect on the price and availability of work comp insurance and claims services.  Those that think they are safe may want to consider what’s coming.  PPACA has and will dramatically affect provider behavior, provider access, and the type and quantity of care delivered.

What does this mean for you?

To paraphrase HL Mencken, you get the work comp results you deserve, and you deserve to get them good and hard.

6 thoughts on “We are so screwed.

  1. I run a P&C pool for local governments that provides WC for some 470 members so I am both an insurance buyer and seller. I agree that many retail buyers are ignorant and focus on the lowest claims handling fee – never mind its usually an annual fee incentivizing the TPA not to close claims! We used to offer a cradle to grave fee that was nearly triple the going rate from the low bidder. We couldn’t sell it. So, we switched to the prevailing model. If a broker is paid commission instead of a flat fee they are also not incentivized to do considerably more work to help their clients lower premiums. And don’t even get me started on the absolutely nonsensical bill review industry. Very few retail clients can penetrate that maze of smoke and mirrors. Over the last 20 years we have had 5-6 bill review vendors and not once has the projected medical savings been any where near what was represented during the sales pitch. So, of course buyers look for lower fees – its the only real number on the page. So who is to blame and/or screwed – the non insurance savvy retail buyer who is just trying to run their business or the various segments of the insurance/medical bill review industry who are there to “help” them?

  2. Our biggest challenge is trying to make employers/ decision makers understand that they have choices. We see so many large TPAs using large and very COSTLY national case management vendors, (or those vendors that pass themselves off as having a national presence), and yet their own accounts complain about the poor ROI. It’s beyond me why the decision-makers can’t see the quality they are losing and the money they are spending by having “national contracts” with vendors who have only one thing in mind – big profits at the insured’s expense!

  3. Being an educated buyer is definitely key. To make the right decision the buyer must understand the many components of claims management and medical management/bill review. Buying solely on lowest cost is a huge mistake. There are many “moving parts” to workers’ compensation claims/cost management and all must work in sync to produce better outcomes. Understanding evidenced based medicine philosophies and targeted programs within managed medical help to control costs but we also feel the employer must take an active role with TPA, bill review/med management and pharmacy vendors to ensure that the program they design will promote early diagnostics, earlier and appropriate treatment to get injured employees back to work.

  4. Excellent post, Joe! The current model — TPA, managed care services, all designed to generate so-called “savings” — is broken, and has been for quite some time. I have always thought that the focus has shifted over the years from taking care of the injured employee to revenue. However, there are other options available. Steve Haynes/City of Plano – Risk Manager just published an excellent article in Public Risk Magazine describing success he has had with the City. They have a unique model.

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