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What business are you in?

The good folk at WorkCompWire asked me to contribute a piece this week; you can find it here.

The main point – Most workers’ comp executives – C-suite residents included – do not understand the business they are in. They think they are in the insurance business – and they are not. They are in the medical and disability management business – with medical listed first in order of priority.

Let the brickbats fly.

8 thoughts on “What business are you in?”

  1. You got that right! The history of risk avoidance by the work comp underwriting community is a testament to your assertion: all the incentive has been to pass along the “risk” of managing medical expenses to the policyholder plus whatever percentage the State regulations and NCCI allows!

  2. You are exactly right. When someone asks what do you do I explain that I help injured workers get quality medical care ASAP so that they can get better and get back to work. Sometimes it means talking the adjuster into agreeing to non IAB fees so they can see top doctors that do not take WC fees. Even an injured worker should be able to treat with the best doctors in the area. Kelly

  3. I dunno, I think you might put a too fine point on it here. I remember speaking with a coworker who worked at just such a company you suggest. They were completely provider centered and staffed by medical experts. They provided high quality care at low cost. However they didn’t have a clue about underwriting. They went insolvent a few years after my coworker saw the writing on the wall and split before it blew up.

    The reality is that underwriting is still hugely important to Work Comp because work comp IS actually insurance. Health insurance is NOT insurance. If it was then when you got diagnosed with cancer your health insurance company would pay for any treatment related to cancer for the rest of your life. Period. ie pre-existing conditions = gone.

    Instead they only pay until you switch to another insurance company or medicare/medicaid. Individual premiums are jacked up higher if you get diagnosed with a condition and they do everything possible to drop you. Health insurance is really just a bill paying service based on when you seek treatment. All of their incentives are clustered around low cost treatment and dragging their feet on providing care (artificial scarcity). Health insurers make more money if someone dies while waiting for an appointment than providing the treatment and making them better.

    This is NOT true for work comp companies. They always have to pay for the medical costs for the rest of claimants life. Delaying can be a short term way to hide losses but ultimately they will have to reap what they sow. Every week a claimant is out of work the WC company pays money, they have incentive to get people back to work as quickly as possible in a safe way. They also have incentive to not pay for expensive treatment which is not supported by evidence.

    Overall I think your post is spot on. There is clearly not enough emphasis put on providing high quality low cost medical services and managing the medical service providers at work comp carriers. However to say work comp is not insurance is quite a stretch. That kind of statement makes me want to send you a book of roofers to put on your books. Don’t worry, I’ll let you pick out which ones you want first. We’ll see who ends up standing when all is said and done.

    1. Mathguy – thanks for the thoughtful comment. I agree that underwriting is critical, however most WC carriers spend way more time energy and resources on that and nor near enough on medical management.

      My point is – I’d be only to happy to select a group of roofers, as long as they agree to my medical management requirements. I’ll be standing quite tall when all is said and done.

      cheers Joe

  4. I think you’re right again Joe. Jeeze. That’s two for two.

    IT spending for many workers’ compensation payers has focused on rates, rules and forms. A recent survey revealed that claims professionals have a far different view of where IT priorities should be placed. The problems facing claims managers are the result of many factors. The systems designed for claims management no longer deliver an effective solution for managing a claim. The management technologies today are essentially a loosely strapped together bundle of separate software applications that focus on single functional areas that do not look forward and cannot communicate with other technologies on the “system”.

    The survey results (TECHdecisions, Sep 2012, SMA Research, N=337), shown above, reveal the top six technology needs identified by the claims professionals. In order of importance, the priorities were: making workflows more efficient, improving the customer experience, being able to access detailed data necessary to make informed decisions, reducing claims expense, improving fraud detection & management, and meeting compliance and regulatory demands.

    I think the data shows, as did your recent annual survey, there is a disconnect between many at the executive level and the front-line managers.

  5. Joe’s article makes a very good point. One consequence of insurers focusing on “managing the employer’s risk” is that they get very focused on optimizing functional areas – sales, underwriting/policy issue, premium billing, product actuarial and claims. You can be very good in these areas and still have a lousy loss ratio.

    When you look at the problem differently, as Joe suggests, you can begin to get out ahead of the claim by selecting (underwriting) brokers who really provide customer education, health and safety programs, early intervention, return-to-work programs, etc. Then, you partner with these brokers to help employers manage injuries effectively, focusing on outcomes at reasonable costs. Claims becomes the feedback loop for the brokers, sales force, product actuarial and underwriting functions.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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