The Fragmentation of the Work Comp Market in California
The number of players in the California Work Comp Market right now is staggering. I do not believe that California consumers have ever had this wide range of choice in selecting an insuring company. The widening of this market has brought relative chaos to the old orderly system, which did not offer many choices, but usually offered the right amount of choices.
The introduction of venture capitalists into the vertical integration of the marketplace has placed many a burden on the Workers Comp specialist and expanded the number of links in the whole process. Prior to this new marketing strategy, an insuring company was just that, and insuring company. They handled the underwriting, the billing, the claims, the nurse case management all under one roof. Now with the influx of capital groups buying companies wholesale and allowing one or more vendors to handle individual assignments within the group of duties, the consumer, through their broker, must pay much more attention to where the business is being placed, and even more attention to who is handling the parts. This is why it is as important as ever to have a specialist handle this line of business.
The use of a Managing General Agent has been around for quite some time in the package market, as it really makes sense for the bottom line of some insuring companies. But its use in the work comp field has really muddied the waters for that line of coverage. It is not uncommon for brokers to access a companies underwriting through an MGA, and when they write the business in that given program, they will be doing business with no less than 4 or 5 vendor companies that support that product. There will be the MGA (who sets pricing and may issue policy), the Third Party Administrator (who will handle claims), the Nurse Case Manager (which is now an industry segment of its own), an independent Audit vendor (which may change based on the location of the risk). Even some MPN (Medical Provider Network) work is outsourced to individual vendors who do nothing but conglomerate doctors groups to assemble and manage MPN’s.
The old system was limited from a number of players standpoint, limiting pricing options, but the new way of doing business has become a minefield for the consumer. Not every TPA is created equal; matter of fact some are horrible, in my opinion. In the battle to control claims cost, the free flow of information from the TPA or claims department through the broker to the employer is extremely critical. Information must go both ways and cannot be held up as claims pile up and get calculated through the individual calculation dates. Reserve discussions must happen and they must happen often, so to with claim disposition issues. The quicker you get that claim to closure, the less of an effect it will have on your experience modification.
With so many newbies in the market it is not hard to imagine (and I have seen it first hand) that they immediately get overrun with claims files and are unprepared for the growth that can happen when you price your services too cheaply. Some vendors basically bury themselves to the point where they become a liability for your clients claims, and therefore become a liability for your client. You learn very quickly that these vendors are not created equal and if you have a high experience mod issue, or want to avoid one, look for a broker with the PWCA or CWCA designation as they will know the good and bad of this group of vendors, and will guide you to the correct insuring company or program.