WORKERS’ COMPENSATION: Employer Premiums to Increase

      With medical expenses for workers' compensation claims rising "rapidly," insurance companies are significantly raising employer premiums to offset the costs, the Silicon Valley/San Jose Business Journal reports. According to Edward Woodward, president of the California Workers' Compensation Institute, employer premiums rose 19% last January and a "double-digit increase" is expected in 2001. For the past five years, employers have benefitted from insurance company efforts to gain a share of the workers' compensation market, a push that began when the industry became an "open-market system" in 1995, leading to as much as a 40% discount on premiums. However, medical costs have increased from $2.2 billion in 1995 to $3.6 billion in 1999. The average "medical per indemnity claim" for a worker has nearly doubled since 1990. Small employers are likely to be hit "hardest" by the premium increases because they cannot "spread risk over hundreds of employees" as do large employers (May, Silicon Valley/San Jose Business Journal, 10/17).

No Pay, No Gain
      In related news, Community Hospital of Los Gatos has ceased performing "most back and spine surgeries for workers' compensation patients" until the state raises the compensation fee schedules that guide insurance company reimbursements. Hospital experts say the current fee schedule, issued last year, contains rates "below market cost." According to the fee schedule, the current maximum payout for spine surgery is $38,000, although the cost of such procedures can exceed $150,000. Community Hospital CEO Dan Door said his facility has "lost $10 million since last year," on back and spine surgeries. Ken Steele, vice president of managed care at Catholic Healthcare West Bay Area Region, said his hospital system also loses millions every year on back and spine surgery for workers' compensation patients. "We think the fee schedule should be abolished. The best solution is to let the market decide what rates should be paid," he said. Community and other hospitals have requested rate hikes, but according to the California Workers' Compensation Institute, the proposed increase "could result in an estimated $1.8 billion additional cost to the state's workers' compensation by 2004." State regulators will probably not decide whether to implement a new fee schedule until the end of the year (May, Silicon Valley/San Jose Business Journal, 10/17).