by Frank Pennachio, WorkCompEdge Contributor
Every presidential election we are reminded that it’s the electoral vote that really counts. It is, as history and pundits remind us, possible to win the popular vote and lose the electoral vote. Now, hold on to your comments, as I’m not trying to make any political statement here, and I know we all get our fill of polls and graphs. I mention these numbers as an example of the cliché: it’s all in how you slice and dice the data.
I recently met with top level claims representatives from a major insurance company to discuss some issues related to their management of several injured employee cases. These are good people striving to do a good job. They do difficult work in a challenging system.
When it comes to claims management, insurance companies and employers are looking at the data in different ways.
However, during the meeting, it suddenly occurred to me why employers – and the agents who serve them – are often at odds with insurance companies over the way injury claims are handled. We’re looking at the data in different ways. Simply put, insurance companies frequently have different goals, objectives, and measurements than employers. I was at the meeting to discuss 9 individual injured employees. They came to the meeting to explain the workings of a system that handles 20,000 injuries a year.
Insurance companies’ key measurement for workers’ compensation injuries is something called the pure loss ratio. This is the percentage of the premium dollar that goes to pay for injury costs. For example, their goal might be to spend no more than 60% of premium dollars on injury costs. Add expenses to that percentage and what remains is their profit, not counting investment income.
From the insurance company’s perspective, if they meet their goal, then their processes are working. They see the work comp world from an aggregate view, while we’re looking at specific injured employees.
Some might suggest that if insurance companies are not effectively dealing with the specific, they will not meet their overall objectives. However, there are times, as is now the case, when they are saved by legislative reforms which drive down injury costs regardless of their processes. When doctors and lawyers get reigned in by the legislature, everybody looks smart. But as the saying goes, just because you are standing on third base, that does not mean you hit a triple.
The employer’s primary objective is for the injured employee to get the best medical treatment and to get back to health and productivity as soon as possible. The insurance company’s primary objective is to meet a number. If they attain their aggregate goal, then they are not as open to improving their processes.
Thus, it is up to the employer to make sure the employee gets what is needed and is not just a set of dates and numbers “sliced and diced” in the insurance company’s claims system. The incentives are not aligned such that the employer can abdicate this critical responsibility to insurance companies.