The Self-Insurance Institute of America (SIIA) held its Self-Insured Workers’ Compensation Executive Forum Tuesday and Wednesday of this week at the Windsor Court Hotel in New Orleans. The gathering, which focuses on industry-wide challenges, is a popular choice among both local and national comp leaders for its strong speakers and panels. This year, the event featured some local flair with a speech by current Louisiana Insurance Commissioner, and former National Association of Insurance Commissioners (NAIC) President, Jim Donelon.
Donelon’s discussion, “Self-Insurance and Self-Insured Groups: A Regulator’s Point of View” focused not just on comp and self-insured comp, but also on the general property/casualty sector in Louisiana and the recovery of post-Katrina New Orleans, as the Southeastern portion of the state is set to mark the tenth anniversary of the storm this year.
To frame the catastrophe of Hurricanes Katrina and Rita in terms of industry, Donelon explained, “Private insurers, just for insured losses from Hurricane Katrina, paid just over $25 billion to policyholders in our state…and three weeks later, our second biggest insured loss event, [Hurricane Rita in Southwest Louisiana] resulted in insurers paying $3.3 billion more. We only pay $2.7 billion [in premium] for all of our commercial and property insurance statewide – so we collected ten years worth of what we pay [over the course of these events.]”
However, Donelon spent most of his speech to the national crowd of executives touting the resurgence of Louisiana in a post-Katrina world, noting that the city of New Orleans is back to 83 percent of its pre-Katrina population, plus the renewed presence of national insurers willing to do business across the state. “We are the posterchild of how to recover from the worst insured-loss event in the history of insurance,” he said.
In reference to the Louisiana workers’ comp world, Donelon had words of congenial support for self-insured employers and self-insured groups. “We have seen self-insured funds on the rise, ever since the 80s and 90s when workers’ comp rates were dramatically higher,” he said. “We have a different landscape today, where workers’ comp rates have dropped over 50 percent, actually 56 percent, in the past twenty years here in Louisiana, and over 37 percent in the last ten years.”
Donelon credited tort reform in the 80s (of which he was a supporter in the Legislature at the time) as a major contributor to the rate drop, and relayed the story of a pre-Governorship Senator Mike Foster, who was unable to find comp coverage for his oil and gas contractors in the same tumultuous decade, as a catalyst for the creation of LWCC as a residual market solution.
“[LWCC] has been remarkably successful, but in large part, this is because we have been able to attract all of the major national players to our market. We have a large vibrant self-insured marketplace as well,” Donelon said.
In addition to the tort reform and competition generated in the comp market, of which self-insurance is a significant factor, Donelon emphasized safety as the other primary pressure that has lowered workers’ comp rates in Louisiana over the last two decades. “We, historically, had higher rates than other states due to the elevated level of benefits that we paid to Louisiana workers, as well as the fact that our workforce has had a higher risk [of injury] because of the type of work that our economy is based on: oil and gas, much of it offshore; port activity; chemical plants up and down the Mississippi River, and other high-risk industries,” he said.
Proceeding to cite WCRI findings that reveal a levelling out of cost-per-claim in Louisiana since 2011, but a large rise in defense attorney costs-per claim since 2008, Donelon noted that there is still work to do, but indicated that self-insurance could be a part of the solution in a comp market worth $810 million in the state.
“From my perspective as a regulator…self-insurance can provide increased freedom,” Donelon said. Tempering that freedom though, is increased scrutiny from regulators regarding solvency, and increased risk: “We do not set a minimum surplus requirement, but we do require group funds to be solvent…In Louisiana, we do not have receivership authority over our self-insured funds, and that’s an area that we’re looking at closely as we speak,” he warned. “Self-insured groups and employers are not covered by our guaranty association and those employers are liable…that’s an area where we as regulators feel that communication is critical. Employers need to understand their in solido liability.”
By way of conclusion, Donelon said he spoke for both himself and his fellow regulators in saying that self-insurance is appreciated and valuable. “My group [self-insurance funds] are represented here today, and my Department’s relationship with them is completely open and very accessible. We take pride in that at the Department of Insurance, and think that it has enhanced our ability to see those costs of workers’ comp coverage drop in our state.”
Indeed, several Louisiana SIGs were represented, including executives with the Louisiana Restaurant Association Self-Insurer’s Fund, Louisiana HomeBuilders Association SIF, LAC Self-Insured Fund, and LCI Workers’ Comp.
The SIIA Forum as a whole addressed a wide range of emergent issues in the comp world, including the effects of the ACA and the influences the workers’ comp system should draw from group health, the rise of medical marijuana and its implications for employers, and a moving discussion about behavioral medicine in chronic pain.
Rounding out the “big picture” sessions was a spirited panel discussion yesterday afternoon, moderated by frequent industry commentator and Safety National Executive Mark Walls, in which three speakers (including David DePaolo of WorkCompCentral and DePaolo’s World) broke out their “pet issues.” Opt-out, increasing empathy in claims-handling, the aging of comp industry professionals, and opioids were all named.
Though solutions may not have been fleshed out just yet, the overarching message of the intensive two day forum was clear: change is coming, ready or not.