NCCI: EMPLOYERS, INSURERS MUST PROTECT REFORMS: SPEAKERS

ORLANDO, Fla.-Employers and insurers in many states are facing an uphill battle to maintain workers compensation reforms.

Improved market conditions and earlier reforms have combined to eliminate the sense of crisis that led state lawmakers to enact many of the reforms.

As a result, employers, insurers and labor representatives need to work together to keep reforms in place, according to several speakers at the National Council on Compensation Insurance's issues symposium earlier this month in Orlando, Fla.

"Preventing the erosion of previous reforms is the most critical legislative issue we face in the near future," said William Hager, president of the Boca Raton, Fla.-based NCCI.

"The medical community, organized labor, the trial bar and sympathetic legislators are beginning to mount attacks on past reforms," he said.

"The states in the spotlight are primarily those where the 1996 elections produced a shift in the political balance," he said, citing especially Connecticut, Maine and Vermont. Democrats, which already controlled the Houses, took over control of the Senates.

"Connecticut seems hell-bent on undoing past reforms," Mr. Hager said. One proposal in the state would liberalize eligibility definitions while another would eliminate the Social Security offset.

"In Maine alone, 35 reform takedown bills are currently under legislative consideration," he said.

Meanwhile, New Mexico is considering a series of proposals that would erode reforms, including one that would revert to older, more expensive medical fee schedules, Mr. Hager said.

Legislative challenges to workers comp reforms also are expected in Arkansas, Illinois, Indiana, Maryland, Mississippi and Nevada, he added.

"While results are still favorable, caution and vigilance are needed to ensure that the system remains healthy," Mr. Hager said.

There has been dramatic improvement in the workers comp market over the past five years.

For example, average claim costs are slowing, claim frequency has taken a sharp drop and injury levels are at the lowest in a decade. One of the major factors contributing to the improved market for workers compensation was the stripping out of a total of $3.6 billion in costs from the system, according to Mr. Hager.

That is the cumulative effect of legislative reforms that have varied significantly during each of the past six years, said Ron Retterath, the NCCI's former senior vp and chief actuary who returned from retirement to give a financial overview. From 1996 through 1991, reforms saved the system, respectively, $447 million, $151 million, $887 million, $892 million, $261 million and $923 million, he reported.

Worker representatives and their attorneys increasingly complain that reform-imposed limitations on compensable claims and benefits are unfair, especially in light of high industry profits, Mr. Retterath noted.

However, the intent of those reforms was to bring the system back to its no-fault roots by removing attorneys from the system as well as other unnecessary friction costs, Mr. Retterath said.

Workers have benefited, too, during some of that time, he said.

The nationwide average for weekly wages has increased 16% to $488 in 1995 from $422 in 1990, while the maximum weekly benefit for total disability increased 32% to $464 in 1995 from $351 in 1990, he said.

Holding the line on reform depends on the continued efforts and cooperation of all parties in the system, Mr. Hager said.

Maintaining a good workers comp climate, which has brought the state additional industry and jobs, requires open communication between labor and management, said Christopher P. Krahling, superintendent of the New Mexico Insurance Department.

Leaders of New Mexico's labor-management coalition meet every two months to discuss issues and try to prevent all kinds of special interests, including attorneys, from chipping away at previous reforms, he said.

In addition, common interests have expanded since some labor representatives formed self-insurance groups and face problems similar to those employers face, he added.

State insurer and labor/management groups need to establish positive agendas, rather than just respond defensively, several speakers agreed.

They also need to get more involved in lobbying to preserve legislative reforms. Six letters from employers in a legislator's district have more impact than any general ad campaign, said Robert A. Kehmna, president of the Insurance Assn. of Connecticut in Hartford.

In addition, coalitions also should make use of the agent system in their states to educate their clients, said Mr. Krahling.

"The one thing we need to guard against is complacency," said panel moderator Joseph A. DiGiovanni Jr., senior vp-state affairs for the American Insurance Assn.