large programs vs. small programs alternative program structures wc feasibility study controlling...

LARGE PROGRAMS VS. SMALL PROGRAMSALTERNATIVE PROGRAM STRUCTURES

WC FEASIBILITY STUDY

Controlling Workers Compensation Costsfor

State Agencies, Colleges, and Universities

Risk and Insurance Management Society(RIMS)

RIMS—largest Risk Management related association 10,000 risk management professionals 3,500 entities 120 countries

2011 RIMS Benchmark Survey 1,431 organizations participated Measures the Cost of Risk (first developed in 1962)

2011 RIMS Benchmark SurveyCost of Risk per $1,000 of Revenue

Less than or equal to $1B revenue

Total COR: Average: $15.20

Total Workers Compensation: Average: $3.14

Greater than $1B revenue

Total COR: Average: $5.16

Total Workers Compensation: Average: $1.62

(WC—48% advantage due to Economies of Scale)

Current State WC Program Structure

Commercial Insurance Guaranteed Cost Deductible Options

Self-Insurance Excess WC

Each agency purchases on an individual basis

Lost Opportunities

Advantage of economies of scale Leverage in the insurance marketplace Spread of risk Optional retention levels per agency Agency specific development factors Agency control of costs through targeted loss prevention

programs—Best Practices approach Consolidation of internal and external administrative fees Places more program control at the agency level—

establishing accountability and responsibility

Proposal

Conduct a Self-Insurance Feasibility Study

Evaluate combining State entities into one program

Analyze Self-Insured retention levels

Commercial Insurance Market offerings for large comprehensive WC programs

Study establishes savings targets

How to Proceed

Engage Large Insurance Brokerage/Consulting Firm

Gather 7 to 8 years of WC Data for all entities Payroll Historical loss data Premiums paid All expenses associated (TPA or claim handling fees, legal

expense, managed care, medical bill review, etc.)

Also, current program structure and copies of WC policies

Summary

Current system antiquated

More efficient systems available

Similar existing State insurance programs have already proven to be effective in reducing costs