Monday, September 17, 2012

Nausau County Seeking Salvation

An interesting report issued out of Nausau County, NY, last week.

Comptroller George Maragos released a workers' compensation study that concludes a high rate of work-related injuries has cost the county more than $13 million since 2010. Maragos projected workers' compensation costs for the county's self-insured program will exceed $25 million in 2012.

The report shows a 200% increase in claims in a single year from 2003 to 2004. Claims increased by 43% again in 2005 and that rate was sustained in each subsequent year to 2011 (which is a projected number). 

Alarmingly, the comptroller reports, "we were unable to find any further explanation or acknowledgement for the rapid rise in claims" other than a correlation between hiring a new TPA and the increase in claims.

The comptroller states that the county's workers' compensation claim rate has grown from one in every 41 full time employees (FTE) in 2002 to nearly one in every eight FTEs in 2011.

What perhaps is even more alarming in the report, aside from the unexplained increase in claims, is that the cost breakdown is not clear to the comptroller.

He states, "Although years 2000 and 2003 show an anomalous increase in annual costs, an analysis of a 3-year moving average from 2000 to 2012 shows a steady increase from approximately $17.5 million to over $25 million per year since 2004. The abnormal increases in 2000 and 2003 were due primarily to the inclusion of litigation costs which were excluded in all other years. We were unable to separate litigation costs from workers’ compensation costs in those years. We were also unable to find any acknowledgement from Triad or OMB for the rise in claims and costs in the data provided."

Triad is the county's third party administrator (TPA). OMB is the County’s Office of Management & Budget.

The report is highly critical of the county's TPA. Whether that is a fair criticism or not, I'm not here to render judgment, but the report does note a correlation between the beginning of the TPA's management of the county's claims and its experience with increased claims and costs.

The comptroller notes: 

"Even as headcount has declined by 18.27% (Full-Time) since 2004, the County’s ratio of workers’ compensation cost to payroll has increased from 2.15% to over 3.09% projected by 2012 (a 44% increase).

"If we assume that the appropriate workers’ compensation cost as a percent of payroll is 2.5% (the average of 2008 and 2009 percentages), then the County may have overpaid a total of up to $12.7 million from 2010 to 2012 (projected)."

New York has some serious problems with workers' compensation as I have previously expressed. I said before that the state doesn't need reform - it needs salvation.

I think this report from Nausau County Comptroller is evidence of that sentiment.

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