ABANDON WORKERS COMP ASSUMPTIONS: SPEAKER

MARINA DEL REY, Calif. -- Risk managers should re-examine their approach to workers compensation as they approach the new millennium, advises a reinsurance executive.

That's because many of the current assumptions undergirding workers comp are based on out-dated information or little hard data at all, said Bruce G. Sundquist, a vp of American Re-Insurance in Princeton, N.J. Mr. Sundquist delivered the keynote address at the Sixth Annual Workers Compensation Conference sponsored by Business Insurance and held Oct. 26-28 in Marina del Rey, Calif.

The workers compensation landscape has changed dramatically in recent years, said Mr. Sundquist. In addition to basing workers comp assumptions on outmoded facts or no facts at all, risk managers face, among other things:

* Continued economic change.

* The dominance of self-insured and/or self-administered plans.

* The first generation of managed care, cost containment and prevention, when the results often are measured by anecdotal evidence.

* A decline in claim adjusters' skill and training as the system grows more complex.

* A growing perception of workers comp fraud -- which Mr. Sundquist said he believes is overstated -- leading to an adversarial relationship between employer and claimants.

* A change from an industrial to a service economy base, which means changing exposures.

* Medical resource oversupply.

* Substantial regulatory change.

* And a move away from a no-fault system, with an increasing number of claims being litigated.

"We as an industry drive people to litigation because of the way we handle claims," he said.

Meanwhile, insurers and risk managers continue to follow a set of workers comp models and beliefs that don't always square with reality, he said.

This includes, for example, a commonly held belief that the right to direct the care of injured employees means superior results, he said. "I continue to be amazed" at the lack of evidence regarding the way that employers and insurers build services, said Mr. Sundquist.

He said that available data shows no appreciable difference between employer-choice states and states in which employees can choose their own providers.

Employers also often believe that "occupational medicine is the answer," he said. While occupational medicine does indeed provide superior results to general medicine, there is a very limited supply of board-certified occupational medicine practitioners, he said. Of the 2,500 board-certified occupational practitioners, only about one-half are in private practice, he said. Also, occupational medicine clinics are in a limited number of locations, he said.

Case management, another touchstone of workers comp administration, operates with very little objective data upon which to assess its performance, he said. Available data suggests that the experience of the workers comp nurse and contact among the employee, physician and supervisor are "key" performance determinants, he said.

By contrast, the use of medical protocols and expert systems appear to be of "questionable value," said Mr. Sundquist.

There is little evidence that medical protocols -- which he called "another one of the holy grails" -- work in most cases, said Mr. Sundquist. An exception would be dealing with lower back pain, he said. But in general, protocols may actually increase costs because of their lack of flexibility, he said. Physicians avoid them, because they feel they "destroy the art of medicine," he said, adding that doctors want "to practice medicine, not police work."

Another area that needs re-examination is that of compensability and fraud, said Mr. Sundquist.

"Real fraud is a relatively small proportion" of workers comp, with less than 2% of all claims being successfully denied, he said.

What drives employees to seek lawyers in workers comp cases? Mr. Sundquist offered three key reasons: denial of recommended treatment; "touchless" examinations by company doctors; and unsolicited settlement checks or surprise termination of benefits. The result, he said, is "significant hostility toward the employer."

Mr. Sundquist called upon his audience to move toward a more fact-based workers comp system. Employers should continue to develop and use outcomes-based measures and data, he recommended. The industry also needs ongoing research into the views and needs of employees, he said.

Facts need to be separated from opinion, he said. Employers' and insurers' efforts must be analyzed to determine if they actually make a difference.