By Greg Snapper
Just as a homeowner takes all necessary precautions to protect his property against fire, precasters can protect their “homes” – or workplaces – by taking all necessary precautions against fraudulent workers’ compensation claims. Work comp claims can have a similar effect on a business as a fire can to a home. These claims can gut the innards of the most stable of companies and leave nothing behind but ashes and smoke.
A constant worry for companies nationwide, work comp claims, especially the fraudulent ones, are beginning to draw special attention for one California precaster due to claims currently in negotiation. The precaster, who wishes to remain anonymous, says five fraudulent claims since 2003 are responsible for losses in his company. He says abuse of the system runs rampant.
Individuals prey on smaller California businesses with intentions of feigning injury to collect workers’ compensation from the state, which happens to operate under a liberal system despite current legislative action to revamp its work comp laws.
The precaster says that at this point, his business is faced with only a handful of options despite governmental change. Two of them include the sale of his company to a larger corporation or to offer employees part ownership of the company, which would make some employees exempt from work comp collection.
Dale Martinez, claims adjuster for Matrix Absence Management, a third-party adjuster in California, agrees that limited options exist for precasters who struggle with work comp claims. One of Martinez’s clients, San Diego Precast Inc., a subsidiary company of U.S. Concrete, isn’t as preoccupied like smaller companies about work comp claims reaching a breaking point. The company isn’t worried because it is a self-insured company in the state of California, a status that smaller California companies drool over because of the benefits and advantages that go with it.
California law requires that for three years, a self-insured company within the state will employ a third-party administrator (TPA), who in turn hires a claim adjuster. In San Diego Precast’s case, the TPA is Matrix and the claim adjuster is Martinez. This combination seems to be working so far, according to Todd Ebbert, general manager for San Diego Precast. “Being self insured allows us to have almost complete control over the claims, and it gives us a claims adjuster completely dedicated to our needs.”
Martinez may fit perfectly in her role because she understands the importance of communication with her clients. She says it’s vital to have frequent contact with employees at the facility. Her work involves closing the loop with parties implicated in work comp claims. “I’m calling everybody that’s involved in the claim, making certain no employee is missing a check, and I’m getting in contact with doctors, lawyers, everyone involved in the work comp claim,” says Martinez. She participates in depositions, often surprising doctors and lawyers with her presence, as this interaction is rare with work comp negotiations. “I can get a lot of (fraudulent claims) squashed at this point without going through the system. We can catch a lot more, but we’ll never be in a position to get ahead of every single claim.”
Maybe not all fraudulent claims will get squashed, but the ones Matrix audited so far have left San Diego Precast with an annual approximate indemnity of $4,264 in contrast to the state average of $63,000. Martinez credits San Diego Precast’s proactive measures of communicating often and keeping in touch with its workers during and after claims. But San Diego Precast also has the advantage of being a self-insured company.
“A lot of the smaller companies now realize the advantage of being in a self-insured program,” says Martinez. Many smaller California employers are looking at self insurance as a coverage option for their workers, taking advantage of a 1995 law allowing the formation of groups for self-insurance purposes. In recent years, co-ops have popped up across California, creating small affinity groups to meet self-insurance qualification. Potential self-insured companies must meet stringent standards on financial stability and provide security to cover any work comp claims.
Several steps in the application process require the company or co-op to invest a substantial amount of resources, says Rick Maidens, director of safety and risk management for U.S. Concrete.
“Not just any company can become self insured in California,” he says. “A company has to put up a collateral source, qualify with audited financials, have a detailed and thorough safety policy and have an independent audit of its locations by a certified safety professional.”
Maidens says that for a smaller California precast company, the only way to stay on track with claims would be to have some type of control. “Therein is the generator as to whether or not you can be successful in California from a workers’ compensation standpoint. If you don’t have someone to take the time to handle claims, you’re going to have a difficult time with work programs, communication and much more.”
Deedra Douglas, corporate claims manager for U.S. Concrete Inc., says the biggest hurdle for California companies is to coordinate efforts in their financial stability to obtain the self-insured status. On top of collateral sources and financial quotas, each application for self insurance in California must include an Evaluation of Injury and Illness Prevention Program by a certified industrial hygienist or certified safety professional. Douglas suggests that while smaller companies combat these challenges, they should develop a professional relationship with their claims adjuster to address any claims.
“What they can do initially is to get a dedicated adjuster and at least get them to do a walk-through of their plant – familiarizing them with their business,” she says. “They should communicate with their adjuster often and report suspicious claims immediately.”
If a company manages to obtain California’s blessing of self-insured status it brings several advantages, says Maidens. “It allows more timely accident reporting, and the adjuster who handles the claims individually has an understanding of our industry and knows exactly what the details of the accident were. Our claims adjuster has a significantly lowered claim load, giving more time to handle each file.” Maidens points out that a reduced claim load is not the product of self insurance, but rather how the claims-handling program is structured.
Martinez, San Diego Precast’s claims adjuster, says her light claim load allows her more time to offer personalized attention. She says she knows how to hit work comp claims head on and how to come out from under them without holes in the company’s pockets. “I have the time to accomplish my tasks. I have the time to prevent and put out fires,” she says. “No matter if you’re self insured or not, you need to make buddies with your claims adjuster.”
While California work comp laws are considered the most liberal for workers and often have severe consequences for the small company, precasters in other states can heed the advice from their West Coast colleagues. After all, it’s best to stomp out those fires before they have the chance to stomp you out.