BOCES’ workers’ compensation consortium saves millions, encourages workplace safety

On Board Online • August 20, 2012

By Lisa Bielmeier

When Orleans/Niagara BOCES and several member districts started taking a close look at payments made for worker’s compensation two decades ago, patterns emerged. “The number of people out with back injuries was just overwhelming,” recalls Clark Godshall, then the BOCES’ school business official and now the district superintendent. “We had to hire private investigators to follow people.”

That’s part of what it takes to responsibly self-insure workers’ compensation. For 20 years, the BOCES has partnered with component districts in the Orleans/Niagara Workers’ Compensation Consortium, resulting in savings in premiums of $3.2 million when compared with other insurers.

The Albion, Lockport and Medina school districts joined the consortium in 1992. The Barker and Lyndonville school districts were attracted by the premium savings and joined the consortium in 2001 and 2004, respectively.

“The main benefits of joining a self-insured group for workers’ compensation are the cost savings over traditional insurance and also the measure of control you have over the claim handling process,” said Tom Surwill, manager of statistical analysis for Commercial Insurance Consultants in Williamsville and an advisor to the consortium. “In most cases, there is significant premium savings achieved by joining a self-insured group.”

Cost-saving factors include:

• No shareholder profit. “While traditional insurance companies are required to make a profit for shareholders, the self-insured group only needs to cover the costs of the plan,” Surwill said. “There is no incentive to charge districts more than what is needed to run the program.”
• Lower fixed expenses. Fixed expenses include claim management, attorney fees, independent medical examinations, catastrophic loss policy, and nurse care managers, among others. “The group self-insurer can aggressively negotiate with regional service providers to achieve significant savings over the standard insurance carrier that may have a policy of using only national vendors,” Surwill said.
• Commitment to safety. Self-insuring engenders a strong commitment to workplace safety. “This built-in incentive to control claims mitigates the claim costs,” Surwill said.

What if there is an event in which many school employees are injured and costs go beyond the consortium’s resources? “This risk is mitigated by the purchase of stop-loss insurance that protects the member districts from catastrophic claims,” Surwill said. For instance, the Orleans/Niagara Workers’ Compensation Consortium holds a policy that limits the consortium’s payments on any one accident to $400,000.

One result of participating in the consortium is that Orleans/Niagara BOCES has developed expertise on ways districts can prevent accidents and avoid claims in the first place. Patricia Hartigan, the BOCES’ business official, needs to take a deep breath before listing all the areas in which component districts receive training: “Blood-borne pathogen; hazard communication; chemical hygiene; respiratory, asbestos and emergency training and drills; playground; slips, trips and falls; and pool safety, just to name a few,” she said. Consistent with New York’s Right-to-Know Law, the unit also does training for employees of component districts on any hazards or toxic substances at worksites.

Despite the training and awareness, employees still get hurt. How does handling a claim in the consortium differ from a regular worker’s compensation claim? Self-insured groups usually hire a third-party administrator to handle most aspects of the claims process, Surwill said. “Although they are bound in most circumstances by state specific workers’ compensation statutes, the claims administrator works closely with each district to manage and monitor their claims.”

“This is something that truly makes sense especially for smaller districts,” Hartigan said. “If someone was looking to start something like this at their BOCES, I would highly recommend hiring a consultant and meeting with all your local business officials. A consultant is key because they have the expertise to advise you of adequate reserve levels, develop premiums, and help you analyze your information. Each of our member districts is involved in the management and decision making for the consortium. We have a vested interest in making it work and have seen results in the premium savings.”

For more information contact Hartigan at (800) 836-7510, extension 2210.

Lisa Bielmeier is public relations director for Orleans/Niagara BOCES.