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Why You Should Demand That Your Workers Compensation
Insurance be placed through the NECA ADR Program! Because it is the only workers compensation plan that actually
lowers the cost of the claims paid by your policy, thereby decreasing cost.
Lower cost will translate into lower premiums. This answer is simple but can
take considerable explanation. Background Alternative Dispute
Resolution (ADR) was originally developed by employers and unions in the
early 1990s, primarily in the union-concentrated states of California, New
York and Illinois. Legislation created the legal alternative to the statutory
system, granting employers and unions in the construction industry the
authority to carve out the current statutory system and implement an
alternative worker's compensation system through collective bargaining. At
present, ADR is permitted by legislation in 10 states for use in collectively
bargained building trades. In California, labor code
3201.5 effective July 1993, permitted the establishment of a program whereby
a union and an employer or group of employers in the construction industry
could collectively bargain to create an alternative to statutory worker's
compensation using ADR. The use of ADR by unions grew over time for one
simple reason: it works. Recognizing the success
achieved by construction employers since 1993 using ADR, state legislators
agreed to expand ADR programs to non-construction industries. In January 2004
labor code 3201.7 which went into effect. 3201.7 permits collectively
bargained unions and private / group employers in any industry to create an
ADR alternative. A quick definition: "program" or "group"
is simply a combination of smaller employers, which as one can be considered
a "safety group". The program sponsors insurance on behalf of all
member employers in the group, and ADR is negotiated collectively between the
employers and the union. Objectives &
Benefits of NECA ADR
How It Works The philosophy behind ADR is
simple: rather than viewing an injured worker as an expense to be paid, the
injured worker is viewed as an important asset to the business and someone
who is in need of efficient, quality care so they can return to work quickly.
Whereas a standard WC claims strategy is to move claim payments out over time
for time value of money considerations an ADR strategy is to get the employee
back to work as rapidly as possible for human welfare consideration. ADR
seeks to actively manage a workers medical care. By focusing on properly
caring for injured workers, ADR will ultimately lead to lower medical
expenses and a lower likelihood of litigation. This will in turn reduce an
insurer's claim costs, and allow the carrier to earn a profit, ultimately
saving money for both employer and employee. In practice ADR is a
multi-faceted product, combining: 1.
Preventative measures taken on site for wrap-up projects. 2.
Delivery of managed medical treatment emphasizing quality car, maximizing
injured worker satisfaction, and returning injured workers to productive
employment. 3.
Contractually obligated, mediation-driven process designed to deal with
problems before they result in costly litigation. In combination, these
elements ensure that injured workers receive the benefits they need and are
returned to work faster, with less litigation then under a traditional
statutory plan. Here is a graph of the
process:
What Do We Mean
by Actually Lowers Costs
To understand any Workers
Compensation product we need to understand the average cost to close a claim
and how often does a claim go to litigation. Obviously once a claim goes to
litigation the costs skyrocket. The first statistic that is important is the
average cost for a closed claim and the second is frequency of litigation:
Other factors that we must
understand are does the process actually get the employee back to work more
rapidly thereby saving money and is an ADR claim settled in less time?
Does ADR Work? Independent institutions took
note of the success achieved by ADR programs and several studies were
conducted into the efficacy of ADR. Separate studies by the California
Workers' Compensation Institute ("CWCI") and Cornell University
concluded that the use of ADR reduced average claims costs by 35-40%, reduced
average time lost by workers by ~25%, and achieved these results with
significantly less litigation. Specifically, the NECA West
ADR program NECA/IBEW has been operating for over 10 years and is considered
the largest and most successful ADR program in the United States. The ADR
program run by NECA has achieved pure loss results that are 23% below the
California industry average, and the loss ratio for the NECA program has been
at approximately 53% for the past 7 years. NECA's recent independent
actuarial report indicates that the reduced pure loss and DCCE for NECA are
attributable to its successful ADR program. Cost of an
Insurance Program
Here is a cost breakdown of a
typical workers compensation product:
If we are going to
significantly lower the price of a Workers Compensation policy to your client
we must lower the cost components, it is that simple. NECA WEST ADR has directly
attacked the largest cost area of any insurance product, the actual cost of
individual claim settlements. Lets say a statutory WC program has $10,000,000
of actual paid claim settlements for the year 2004, those same claims may be
settled for approximately 75 cents on the dollar using the NECA WEST ADR
workers compensation program. The actual cost of the program has been
reduced. The actual dollars spent to settle the same claims would be
$7,500,000 in this example, or a savings of $2,500,000. These program savings
will be passed along to the NECA WEST participating members. NECA electrical contractors
have received correspondence form other Insurance Carriers stating that they
will compete or that they offer ADR like claim settlement. Both of these
statements are inaccurate once you understand that ADR is not merely price
reduction it is a system that actually reduces the costs for the insurance
carrier. Here are a few of the reasons that none can offer ADR to your NECA
client. 1.
ADR must, by law, be a collectively bargained. 2.
ADR requires approved labor-management medical providers 3.
ADR requires ombudsman, mediator and arbitrator 4.
ADR requires joint labor-management safety committees. A statutory carrier does not
have the long term price advantages of true ADR claims settlements therefore
although any carrier can offer short term price reduction no other program
has the long term cost efficiency of the NECA ADR program. No carrier has the
system to reduce costs over the long term like NECA WEST ADR. This is "Why You Should Demand That Your Workers
Compensation Insurance be placed in the NECA ADR Program!" NECA
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