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