Entries tagged with “Insurance”.

Last week the Illinois Supreme court ruled that a law passed in 2005 by state congress could not establish liability caps  limits for pain and suffering damages.  The overturned law capped the the amount for this portion of settlement to $500,000 or $1,000,000 for a doctor and a hospital respectfully.

The law was passed to curb the rising costs of medical liability in the state due to large “discretionary” settlements awarded by juries.  The court held that the cap violated the “separation of powers” doctrine by establishing limits to awards the judges feel appropriate in these types of cases.

My concern over this ruling is the wide ranging impact a decision like this has on the overall health costs and quality of care.   

  1. With the removal of the cap, the insurance company or medical professional will be subject to greater risk via larger potential cost in a law suit. 
  2. In order to offset this risk, a greater reward is required to fund the “pool” of money that must be available to pay for these types of claims. 
  3. To fund the pool (or pay the insurance premium) the costs for Dr. visits, procedures, hospital stays, tests, etc. will increase.
  4. To remove hints of impropriety, or improper medical treatment, more tests will be generated to validate the diagnosis.
  5. More tests lead to more medical charges.
  6. An increase in medical charges, leads to increased medical costs to insurance companies, employers and employees, and the associated increase in consumer goods to pay for the increased medical costs.
  7. Higher costs could limit the number of medical professionals in the state due to the high cost of establishing a practice.

I might be wrong, but the 2005 law reminds me of the Worker’s Compensation (WC)  coverage.  With WC an injury or death is covered at a set amount as established by a state board.  The coverage is provided by the company for the employee and if the employee is hurt while working, the insurance coverage kicks in.  For this coverage, the employee may not sue the employer and the employer may not terminate the employee.

This process makes sense to me.  The programs were established to protect the worker from unjust treatment, and to hold the employer accountable during work hours and unsafe working conditions.  It even protects the employees from those “oops” or “aw shucks”  where they ignore safety rules or make a stupid mistake and get hurt.

The Worker’s Compensation program has been doing an excellent job for a number of years and has helped to keep costs down.  Perhaps it’s time to expand the model to the medical insurance program. 

While I agree we should be limiting the costs associated with malpractice claims, I also think that the medical field should be held to accountable and a national board be established to review credentials, and make sure these professionals remain current and be certified and that the certification must be renewed on a regular basis.

It’s the first day of 2010 and between the parades, football and food, I wondered what new years resolutions are on the minds of Risk Managers.   If you haven’t put together this years list, here are 5 suggestions for the coming year.

1.  Increase the awareness of Risk in your organization- In my experience, many decisions are made based on best case scenario, or what will put more money to the bottom line.  While this philosophy works very well, in many cases the decision makers do not realize the total extent of the upside and the downside to the organization.  It’s important to be aware of the risks and rewards to be sure that the decision is based on what is best for the organization as well as making sure that the reward is appropriate for the amount of risk that is involved.

2.  Monitor the credit health of your suppliers as closely as your customers - The roller coaster ride the economy has taken over the past 18 months have shown the vulnerability of all businesses.  The success of your organization may be tied to goods, services and material from an upstream supplier, and if that supplier is at risk of going out of business, the interruption to your supply chain may be a devastating blow.  Monitor the “health” of your suppliers as carefully as you monitor your own Accounts Receivable.  It may just help identify a stress point in your supply chain.

3.  Review your organizations risk tolerance- If you have already taken the initial steps to determine your company’s tolerance of risk, do a follow up to make sure that the mood and thoughts of the company has not changed.  If you haven’t established the risk levels your company is willing to endure, I would suggest completing the process.  Identifying the risk tolerance of an organization provides a benchmark to measure the risks that new proposals, ideas and opportunities present when green-lighting a project.  It helps determine the amount of insurance coverage your company may require, or which alternatives should be put in place to manage the risk at hand.

4. Review contracts and agreements for inappropriate risk transfer or lack of protection – Many contracts can call for you to take on additional risk, or require your company to maintain an inappropriate or unnecessary level of insurance coverage.  In my years of creating and establishing business relations with vendors and customers, I have found that many smaller companies do not fully understand the agreements they are signing and may not realize the full scope of the contract.   The clauses in the fine print and away from the unit price, can call for stiff penalties for errors, responsibility for damages that are not associated with the product or service you select, insurance coverage requirements (including the amount of coverage needed and the naming of the customer as an entity on the policy) and/or minimal reimbursement for the loss or damage to your product.  Reviewing the entire contract and accounting for all the bits and pieces of risk help you to determine if the price or payment is appropriate for the risk that is taken.

5.  Review of your insurance agent(s)/broker(s) and other Third Party Administrators - Your insurance agent, broker or third party claims administrators (TPA’s) are important partners to your business.  They represent you and your interests to the insurance companies and work to maintain or reduce your total cost of insurance.  Typically you will have contracts with the insurance broker and the TPA’s that outline the expectation you have of them for the fees you are paying.  Make sure that a review is periodically set up to measure how well they are doing both in managing your costs as well as looking for cost reduction opportunities.   Remember that there is nothing that would prevent you from placing your business out for proposals on a regular basis to make sure you are receiving the appropriate service for the appropriate price.  However I would put out a few caveats related to the RFP process.  First, make a determination of what is needed and craft the proposal very carefully to establish the core requirements and how these requirements are responded to in the proposal.  You need to be able to compare apples to apples and keep the ancillary issues, ideas and proposals separate so they do not cloud the comparison (they come into play after the core issues are reviewed).  Second, I would suggest that an RFP is not issued every year, unless the quality of service is unacceptable.  You should provide a sufficient window to allow the service provider to build a track record showing the quality of service as well as show stability when working with the insurance companies.  Third, remember that an RFP is not a sign that the current provider is unacceptable, and you do not need to make a switch. 

6.  Build better relationships with other departments to better understand the operational risks they are facing -  This one probably goes back to our first resolution, but the better relationships you have with other departments, the better understanding you will have with the overall operation of the company and in turn the potential risks that could pop up from unexpected places.

7.  Subscribe and read to a business or industry related magazine, e-zine or newsletter  - I am continually amazed at the number of ideas and new opportunities I find in Business Week, Fast Company, Wired, and Bnet.  They are sources of inspiration and thoughts from different industries and business areas that can be modified to fit my organization or spur on new ideas, products and services. 

8.  Update your disaster recovery and business continuity plans -  These plans are the things that minimize the oops in operations.  The plans are not just for IT service outages, but for any unexpected incident that can cause an interruption in your business.  Make sure you review the plans annually to adjust for any changes in personnel, operational locations or new impact areas.

There you have it, a listing of 8 resolutions for 2010, and I am sure there are many more out there.  Please feel free to contribute your suggested resolutions for 2010.

Wishing you a Safe, Healthy, Happy and Prosperous 2010.

The Illinois General Assembly has passed a law  banning the use of cell phones and other devices to be used for texting and accessing the Internet while driving.    The law goes into effect on January 1, 2010 and is one of two laws associated with the use of personal communications while driving.

The other law (public act 096-0131) prohibits the use of cell phones in school zone speed limits, constructions zones and use by individuals under 19 while driving.

These steps will help in the reduction of accidents, injuries and death due to distracted driving and I applaud the state government for taking this action.  It also helps you set HR policy for your company on the use of cell phones and other communication devices that send or receive text messages or connect with the Internet.

In a previous post (texting while driving can contribute to insurance cost increases) I talked about how a “no cell phone use while driving” can contribute to a reduction in insurance costs and an overall reduction in your total cost of risk.  The establishment of a policy like this, and enforcement, demonstrates the companies commitment to reducing auto accidents.  With this type of demonstration and the historical data showing a reduction of auto accident claims, your company is in an excellent position to negotiate a reduced rate (or reduced increase depending on market conditions).

Establishing this type of policy will not be easy, especially if your C-level employees are the type who “multi-task” while driving.  However the up side in savings, both in human life and in costs should be a major factor in putting this policy into place.


(November 14, 2009)

Rhode Island is the latest state to ban texting while driving, bringing the number up to 18 states with laws on the books or some coming into effect.  The law went into effect on November 9 and carriers a fine of up to $125.00.

Pennsylvania is also considering a ban on texting with the added twist of making this a primary offense which would allow the police to stop a driver even if no other infraction is committed.

With the significant increase in these types of laws across the states it is more important than ever to have a policy in place to protect your company and employees.