A Pound of Cure Costs More in New York

New York state recently made it to the top of the list in a national workers’ compensation survey. Unfortunately, topping this particular list is not good news for New York’s employers. For the last two decades, the Oregon Department of Consumer and Business Services has conducted a biennial survey of workers’ compensation costs in all 50 states and Washington, DC. They use the results of their study to compare the relative cost of workers’ compensation by state. California had ranked as the most expensive state for workers’ compensation since 2014 however, when the most recent Oregon Workers' Compensation Premium Ranking study was completed in 2018, New York supplanted California as the nation’s most costly. 

The median national premium expenditure for workers’ compensation in 2018 was $1.70 per $100 of payroll. In New York, the expenditure was $3.08 per $100 of payroll – about 81% higher than the national average. Further, New York’s average expenditures have grown steadily in recent years. In 2016, New York’s median cost was $2.83 per $100 of payroll or 54 % above the national average. 

Many factors can affect workers’ compensation premiums including the cost of medical treatment, ability for an insurer or employer to direct care to preferred medical providers, minimum and maximum indemnity rates, permanency awards and litigation expenses. Insurers and employers in New York are prohibited from directing care for injured workers and New York’s maximum indemnity rates for lost wages and permanency awards are among the highest in the nation. In addition, most reform measures passed in New York State over the last decade or so have either increased benefits to injured workers or limited the ability of insurers and employers to reduce claims expenses. It should therefore not be surprising that New York has the highest workers’ compensation costs in the country.

Safety Is No Accident

Assuming you are a New York employer and are neither looking to move to another state with lower comp costs nor ready to shutter your doors, what options do you have to control costs? The most effective means of controlling claims costs, especially in a jurisdiction as challenging as New York, is simply not to have claims in the first place. Although this may sound childishly simple and possibly a bit na?ve, risk avoidance is often the best means to reduce workers’ compensation costs. Once a claim enters the workers’ compensation system, particularly one with high benefit levels and limited cost containment options, it may be very difficult to control the cost of a claim. It is therefore imperative to eliminate as many claims as possible before they ever occur. 

Employers regularly spend hundreds of thousands and sometimes millions of dollars on workers’ compensation claims each year but few of them invest any money at all in risk management and safety programs that could help eliminate some of these claims and their ensuing costs. For just a mere fraction of the annual budget allocated to claims expenses, employers can establish a best-practices safety program with a qualified independent third party loss control consultant. These programs do require active participation and support from both management and staff but the rewards for the investment of time and capital are a reduction in lost work days, increased productivity and decreasing workers’ compensation costs. 

Somebody Get Me a Nurse! STAT!!!

Of course, not all claims are avoidable and even employers with the best risk management plans still have claims from time to time. When those claims do occur, a qualified nurse case manager can help establish an appropriate treatment protocol for injured employees, reduce claims costs and return employees to work more quickly.

Repeated studies have shown the positive impact nurse case managers can have on both claim costs and an employee’s satisfaction with a workers’ compensation treatment plan. In 2016, Liberty Mutual’s third party administrator (Helmsman) published a report on the value of nurse case management. They evaluated 4,000 of their own complex medical claims where half used a nurse case manager and half did not. Helmsman found that claims where a nurse case manager were involved had 15% lower costs and closed 12% faster than those claims where a nurse case manager was not involved. Even in states such as New York where insurers and employers are prohibited from directing care, nurse case managers can help injured workers navigate the workers’ compensation system more effectively thus avoiding unnecessary treatments, improving outcomes, returning employees to work sooner and reducing claim costs. 

Too Much of a Good Thing?

So, if nurse case managers have such a positive impact on claim outcomes and costs, shouldn’t they be used on every claim? Maybe not... Like any other vendor service in the claims process, nurse case managers come with a cost. There are many different firms offering nurse case management services with a variety of pricing options but in general, it costs about $100-$200 to have a nurse case manager involved in a claim that does not have lost time or complex medical treatment. For complex medical claims and lost time claims where ongoing oversight is required from a nurse case manager, the typical cost is about $100 per hour. For a simple medical only claim where the total cost is usually under $1,000, adding a nurse case manager into the mix could actually increase the cost of these claims substantially. 

Therefore, most insurers and self-insured employers opt to use nurse case managers on a selective basis and not on every claim. Nurse case managers tend to have the greatest positive impact on claims involving complex medical treatments, lost time, long term pain management and claims where comorbidity, psycho-social and medical issues not directly related to the actual work injury may be a factor. In cases like these, an investment of a few hundred or even few thousand dollars up front may save multiples on the back end of the claim. 

An Ounce of Prevention…

For employers in high-cost workers’ compensation jurisdictions, the cure is often worse than the disease. Thankfully, there are still options available to those willing to make the investment and commitment to loss prevention and nurse case management programs. As the saying goes, an ounce of prevention is worth a pound of cure. For those that don’t, the pound of cure will cost about 81% more in New York.