When Joe Mathews wrote his book, The People’s Machine: Arnold Schwarzenegger and the Rise of Blockbuster Democracy (Public Affairs, 2006), he titled his chapter on the workers’ comp reforms of 2004, “Costco and the Carrot People.” The reference was to two of the Big Four of that year – Costco, Grimmway Farms (Carrot People), Safeway, and the Walt Disney Company.
To be sure, there are a host of other large businesses in California, including Marriott and Southern California Edison, whose political and substantive efforts brought about AB 227, SB 228 and SB 899. But the most telling part of this chapter in Mathews’ book is not which names he names but rather documenting what is largely accepted in the workers’ comp universe – that the reforms of 2003-04 were not just brought about by the large self-insureds but rather that these businesses own workers’ comp reform.
It is a bit ironic then that workers’ comp reform success largely is measured by reduction in premium and not savings reaped by self-insureds. It is even more ironic when public officials constantly tout premium reductions generated by the reforms while simultaneously berating “insurance companies” as being the bad actors post-SB 899. After all, it is “insurance companies” that have abused utilization review – just ask the Insurance Commissioner or DWC – even though there have been only a handful of bona fide complaints (fewer than 20 when last an actual number was mentioned) of bad UR practices and, believe it or not, not all of them against insurance companies.
Recently, DWC proposed notice regulations that uniquely will disadvantage insured employers. These notice regulations require 30 days’ advance notice of a change in medical provider network (MPN).
In the case of insurers, that means when a new risk is added to the book of business, there is a 30-day gap in MPN coverage, which, according to DWC, requires the new insurer to notify all employees of the new insured that they have 30 days to see any doctor they want, but that as soon as the MPN is in effect, the insurer may transition care back to the MPN.
Well, that certainly makes sense, doesn’t it? Of course, a self-insured can decide to change a provider panel (not the MPN) whenever it wants and can coordinate the termination of the old provider panel and the startup of the new panel so that there is no gap in coverage. When an insurance company finds out, as it usually does two or three days before the anniversary date of the policy, that it is indeed going to have this risk going forward, no such coordination can occur. In other words, in a one-year policy of insurance, you get the provider panel of the MPN for only 11 months at best, or even less if DWC delays approving the notice form.
Speaking of form over substance, insurance companies insure hundreds, if not thousands, of businesses. These businesses are in all parts of the state, in most cases.
But a self-insured employer knows from one year to the next where it will conduct business and what its workforce will be. When setting up an MPN, therefore, the self-insured has far less to worry about in access standards and notices. Because of this, self-insureds also can set up their own provider panels, develop performance standards for their providers, and make certain all the various notices required by DWC are delivered to employees with unerring certainty.
Insured employers do not have this luxury. Why? First, because insurers do not know from one year to the next where the risks they are on will be. Thus, by and large they all have to lease provider panels that have statewide accessibility. Second, the success of the MPN depends on the willingness of each insured employer to facilitate delivery of notices to its employees. The insurer has no reasonable way to compel a policyholder to post appropriate notices or make certain employees get proper notices at various times required by DWC regulations. All the insurer can do is watch costs go up as applicant attorneys mine those cases where notice was not properly provided.
There is little talk of insurance companies these days, largely because of the enormous drop in premium over the past several years. Even reform supporters have lost track of reductions in insurance costs. But in the silence there is also risk. To the vast majority of employers, insurance is a commodity. The less it costs, the less that needs to be done to keep its costs down. Self-insureds see a direct correlation between MPN compliance, loss control and return-to-work programs, and their bottom line. Insured employers do not.
Those who own the reforms, and the public officials who curry their favor, have seen a system built up that is primarily suited to their particular needs.
Thousands of California businesses are not similarly situated. As we move to 2008, legislators and regulators would serve the system well to take into account the need for simplicity and practicality that to date is not reflected in the implementation of AB 227, SB 228 and SB 899. Yes, it would be nice if all employers were self-insured. They’re not. They never will be.
Better realize that before those nasty premiums start going up again, don’t you think?