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Worker's compensation costs helping to erode the GNP.

Workers' Compensation Costs Helping to Erode the GNP

In an increasingly complex world, consensus can be difficult to achieve. However, the view that health care spending in the United States is eroding the Gross National Product is unanimous, according to insurance industry analysts.

By the year 2030, unchecked health care spending will account for one-third of the nation's GNP and could lead to a "first-class societal revolution," according to James Davis, chairman and chief executive officer of the national resource division of Corroon & Black Corp. in Nashville, TN. Mr. Davis cited workers' compensation claims as a major contributor to that gargantuan price tag. "A 1991 Alexander & Alexander survey of risk managers outlined 15 of the most pressing insurance issues," he said. "Eight of them dealt with workers' compensation. If we have the same workers' compensation losses from 1991 to 1993 that we did in the mid-1980s, the costs will be 27 percent higher because of benefit escalations."

According to Ann Clayton, director of Florida's workers' compensation has historically not been an issue with employers, but instead has been the domain of insurers and policyholders. She said the system must be returned to the people it was designed to help--employers and employees.

"Wisconsin has depoliticized its workers' compensation program by creating a compensation council of employers and employees," she explained. "In that state, the legislature won't consider any bill until it has passed by the council."

As a result of the action taken in Wisconsin, not much change to the workers' compensation system there has been affected, to the relief of state government workers responsible for watching the budgetary bottom line. "You change a statute and lawyers will litigate every sentence, which adds more cost to the system," Ms. Clayton said. However, for those states still facing the bureaucratic monolith of legislative constraints in workers' compensation, she suggested three ways to reduce costs.

"Creating a safe and healthy work environment can be achieved through an appropriate safety program," she said. "You must have a commitment from senior management in writing and in action. You must also identify hazards and trends and hold people accountable."

Second, human resources must be valued and protected. Finally, injured employees must be returned to work as soon as possible.

Considered from a more macro-economic perspective, Mr. Davis said a possible solution to the workers' compensation problem is qualified self insurance in states where premiums exceed $500,000 in assessments and taxes exceed 10 percent. "Employers could also become non-subscribers to the Texas Workers' Compensation Commission, but they would have to give up legal immunity to suits," he said.

According to Mr. Davis, the emphasis risk managers used to place on loss financing when building their careers has come and gone. "Over the next five years the areas of loss control and loss prevention will make or break the careers of risk managers," he prophesied. "Risk managers must direct those disciplines as they relate to workers' compensation, because if they don't, someone else will!"

As a result of the new emphasis, Mr. Davis predicts that "turf wars" will occur between risk financing departments and field operations that handle loss control problems.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:gross national product
Author:Johnson, Tom
Publication:Risk Management
Date:Oct 1, 1991
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