Hurdles Remain in Path of ‘24-Hour’ Coverage

In the best of all possible worlds, employers could buy one insurance policy to cover workers’ comp, group health and group disability, saving pots of money in the process.

In the real world, you can’t do that, and even though insurers would like you to believe they can do the next best thing these days, a little skepticism is in order. What they do now is good, but it’s not ideal.

The goal is what insurers call “24-hour� insurance, which covers the employee who falls ill or suffers an injury either on or off the job--an attractive idea, should it come to reality.

Why?

For one thing, 24-hour insurance could cut premiums by combining three coverages in one policy--with one agent, one insurer, one claims unit, one case-management department and so on. This efficiency could yield real benefits to insurers and employers alike.

For another, as things now stand, to many employees the key difference between workers’ comp and group health coverage makes for a temptation that’s hard to resist.

Group health insurance commonly requires the employee to pay either a small sum, often $10, for each visit to a doctor (the co-pay), or the first $100 in costs each year (the deductible).

Deductibles can range up to $2,000 in some cases, and the insurance company may also stick the employee with 20% of the costs of treatment (the co-insurance).

Workers’ compensation, on the other hand, comes with “first-dollar� coverage--in essence, no co-pay, no deductible and no co-insurance. In plain English, under workers’ comp law, the employer foots the total bill for any occupational illness or injury suffered by the employee.

The result: Many an employee claims that an illness or disability is work-related to escape the burden of the deductible. This circumstance drives up workers’ comp costs, to be sure; and in not-so-subtle ways, it also corrodes the relationship between employer and employee.

Twenty-four-hour insurance would eliminate the temptation by giving the ill or injured worker the same medical benefits on or off the job.

Insurers would love to sell this coverage. At present a number do offer claims-administration and case-management services covering workers’ comp and group health, including group disability--�integrated coverage,� in insurance-speak.

Most recently, Travelers Property Casualty Corp. joined Metropolitan Life Insurance Co. in a pilot program offering such services to a handful of large employers. CNA Insurance Group began selling a similar service this year.

These programs target large employers, and as insurers refine them, they will target small and mid-size businesses as well. All in all, that’s good news for employers of all sizes. Another good bet is that insurers will broaden their programs, hoping at some point to offer true 24-hour coverage for workers’ comp, group health and group disability.

But first they have some mountains to climb, starting with the fact that in most states the laws covering workers’ comp differ radically from those governing group-health and disability insurance. On the whole, these differences favor employers when it comes to group insurance, employees when it comes to workers’ comp.

For example, employers enjoy a great deal of control over the choice of the treating physicians under group insurance. Once employees stray outside the system, they foot most if not all of the bill.

On the other hand, California workers’ comp law allows employers to dictate the choice of the treating physician for a full year only if they send the ill or injured worker to one of the dozen or so health-care organizations offering workers’ comp care in the state. At present these organizations include CompPartners Inc. of Irvine and Priority CompNet Inc. of Torrance.

If you as an employer send your worker anywhere else, you may control the choice of the physician for only 30 days.

This distinction is important because in workers’ comp, if you lose control over the physician who treats your employee, you pretty much lose control over the claim as a whole. That’s a broad statement, and if it exaggerates a bit, it also illustrates an unpleasant truth about workers’ comp: If you don’t control the treatment given your ill or injured employee, you don’t control costs.

These include legal costs--and in California, as in other states, the legal profession, led by the plaintiff’s bar, has a great deal to say about what happens in the Legislature, where the power to change things resides.

Legalities and politics aside, there’s no reason insurers couldn’t sell one policy covering workers’ comp, group health and group disability--and if they did, everyone would benefit.

“I don’t think it’s going to happen in the short term,� says Neil Finestone, a partner in Tow Finestone & Associates, a Sherman Oaks-based insurance agency. Finestone holds a designation under state law as a life analyst, meaning that his fiduciary duty is to his client--as opposed to ordinary life insurance agents, who hold such a duty to the insurers they represent.

“But in the long term it makes sense to combine these three risks under one insurance policy,� he said. “Why? Because it should generate lower overall costs to the employer. If you can manage the claim from the outset, it makes a big difference in overall costs.�

Finestone agrees it’s a good bet that as insurers fine-tune their programs, they will set their sights on mid-size companies and even small businesses--though it might take time.

“Right now, insurance companies want to see the results they achieve with larger accounts, and then they may adapt the programs to the mid-size and small accounts,� Finestone says. “It’s possible they may show a 10% to 15% reduction just with the programs combining case-management and claims administration.

“I have no idea how much they might cut costs if they could offer a true 24-hour package. I do know it would be a marketing manager’s dream.�

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Juan Hovey can be reached at (805) 492-7909 or at [email protected].