Cities, Counties & Public Entities Can Save $Millions By Settling Claims

FOOTHILL RANCH, Calif. - May 28, 2014 - PRLog -- Question 1 - What do the following cities have in common?

Atlanta, Los Angeles, Santa Monica, Philadelphia, Pittsburgh, PA, Berkley, CA, Marion County, San Bernardino, CA

Question 2 - What do these two public entities have in common?

Pittsburgh, PA, Marion County

The answer to question number one is that these public entities are all suffering from the gross increases in workers compensation costs that threaten their very existence.  The answer to question number two is very simple.  These two entities took a proactive approach to reducing their workers compensation claims losses.  While a few of these entities took the time and expense to audit their claims administration program, the most obvious course of action was overlooked – settle the claims.

Too many answers and not enough focus

A few entities on the list believed that enhancing their loss control procedures would help to alleviate their troubles.  Another was focused on fraud. All audits did identify the same departments as creating the bulk of the claims – police, fire and public works.  The most frequent and costly were the police and fire departments.  The audits also identified issues with claims administration, training and labor unions.  While these entities are correct in their findings, it’s a combination of all of these that create the multi-million dollar losses that threaten these and all public entities throughout the country.

Many contributing factors

There are other issues that directly impact claims costs such as the growing girth of aging American workers, a decline in professional claims handling best practices, collective bargaining agreements and a lack of effective Early Return to Work (ERTW) programs.  However, from a fiscal perspective, which is really what matters, the growing inventory of future medical and long term litigated claims are the culprits.  The fact that the police and fire departments file an excessive number of claims is symptomatic of the employment culture.

Taking a proactive approach to claims

Pittsburgh and Marion County both recognize that in order to repair or preserve their entities and the tax dollars supplied by the people of their respective jurisdictions, they need to cut long term costs such as medical and legal and reduce their reserves.  The only way to do this is by settling claims.  In Pittsburgh, a massive audit into the finances of the city showed that 21% of workers comp payments in 2003 went to former employees injured over 20 years ago.  The restructuring plan devised for the City of Pittsburgh, entitled the Act 47 Recovery Plan, included the implementation of a workers comp claims settlement program.  By settling out claims, the city would save millions in long term costs and reserves.

The story is similar in Marion County, where next year’s reserves will be reduced by $2 million dollars.  The realization being that these cases get worse with time and significant dollars can be saved over time by ridding the claims inventory of the old dog files.  It’s simply a numbers game.  Forget the nature of the claim and focus on the numbers.

If a claim can be settled for less than the total exposure, in spite of the issues of the claim, then a lump sum settlement should be pursued. Doing so can save thousands, if not, millions in taxpayer dollars, medical expenses, legal fees and excess insurance costs.  The effect of proactive claims approaches such as this reverberates throughout a city, county or school district.  There is a positive trickle-down effect for the public entity, and the taxpayers it serves.  It’s a good business decision.

BMA West Medical Financial Consultants is located in Foothill Ranch, CA.  They have been helping cities, counties, public entities and self-insured employers since 2007 reduce costs through thought leadership, claim reduction project development, medical financial cost projections and Medicare compliance services.  If you have questions or would like to schedule an appointment call (949) 830-2027.