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Moore: 24-Hour Workers' Comp and Health Insurance Policy Fades Away

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In 2006, the buzzword (flavor) of the year pointed out that a 24-hour workers' comp and health insurance policy answered the round-the-clock coverage concerns.  

James Moore

James Moore

The California Carpenters Union/Association initiated a carve-out program that looked attractive. That concept quickly progressed to the rearview mirror and then became a faded memory.  

At that time, I was not a fan of anything cutting-edge in the area of insurance programs that combined health insurance with workers' comp. The 24-hour workers' comp and health insurance policy looked complicated with so many coverage issues. 

In one word, technology should push the combo policies over the line. Every time I write an article that covers combining workers' comp with health, I receive many emails saying, “Oh, wait, we have that program, and it is working.” 

Law of large numbers

Unfortunately, after each of the programs failed, I wrote an article on those specific failures. The 800-pound pumpkin in the room says the law of large numbers will eat the program like a Thanksgiving pumpkin pie, with whipped cream, of course. 

The law of large numbers says that if you do not have enough membership — policyholders, self-insureds, etc. — absorbing the risk of paying claims becomes too burdensome. E-mods, X-mods, mods, EMR (all the same thing) have built this concept into their employer ratings since the 1930s.   

Smaller insureds pay more per unit of coverage than larger ones. Why? Because two claims to a megacompany will be a small blip on the radar. A roofer with 20 employees cannot pay enough premiums to cover the company’s amount of risk like a larger company.   

Is it all fair? The workers' comp infrastructure was essentially built on the law of large numbers assumption.   

Technology equals 24-hour policy

I found a few apps on my Android smartphone that allows a business owner to request a quote. A client was searching for a new policy. I gave one of the apps a try to see if I could receive a workers’ comp quote within a few minutes.  

Yes, I spent 90 seconds online and had a quote in front of me. I am not an agent. The app hooks into an agency that has no human intervention — kind of scary, yet exciting.  

If I could receive a quote from a nonhuman agency from a carrier in 90 seconds, one would have a very difficult time questioning whether or not a health and workers' comp policy could be connected. 

The Google search did not produce a website that creates the 90-second quote policies. Why? Because all the other agencies have taken over and dominated the keyword search of 90-second policy quotes. The big online agencies know a good marketing segment when they see it.   

Risk retention groups and 24-hour coverage 

Risk retention groups (RRGs) combine many of the self-insured and group self-insured elements. I attended a conference in 2014 where one of the sessions covered RRGs very well. Risk retention groups remain one the most hybrid insurance programs that exist today.   

One of the speakers from Chicago covered a model that combines workers’ comp and health insurance. The RRG still exists today. Due to privacy concerns, I will not mention the RRG by name, as it had requested at the conference. 

According to the Risk Retention Reporter, an RRG is a liability insurance company that is owned by its members. Under the Liability Risk Retention Act (LRRA), RRGs must be domiciled in a state. Once licensed by its state of domicile, an RRG can insure members in all states. Because the LRRA is a federal law, it pre-empts state regulation, making it much easier for RRGs to operate nationally. As insurance companies, RRGs retain risk. 

24-hour workers' comp coverage and the Affordable Care Act

A few years ago, many articles appeared on this blog concerning how the Affordable Care Act could easily blend in with workers’ comp coverage. The AFLAC model of benefits would be the best way to describe what the program would possibly look like for employers and carriers.

The Affordable Care Act faded into the rearview mirror, but not exactly. The program exists in at least 10 states today, including North Carolina.  

Unique challenges for claims adjusters, underwriters and actuaries 

As with any new line of policies, many unique challenges occur with 24-hour workers' comp and health coverages.     

One of the main challenges actuaries and underwriters would face comes from how would you price and affix risk to an all-day and all-night coverage. What happens if the employee travels over the water or internationally? The complex nature of the policies necessitates combining two coverages that could mix like oil and water.

What would the claims staff look like overall? How would you investigate compensability? How would the states respond if an occupation accident policy substituted coverage for workers' comp?    

I have adjusted occ acc policies for offshore captives. Applying a work comp investigation to those claims caused great concern, as the policies were “taking all comers” and “paying for all accidents.” Denial of a claim became a tenuous position to take with what was a disability policy, not a workers' comp policy and coverage.  

The most effective way to combine health care and workers' comp comes from employers in a state demand change of the status quo. Until then, a 24-hour workers' comp and health insurance policies will still be in the rearview mirror. 

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.

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