Workers' compensation insurers and others with stakes in the system need to stay focused on reform, an insurance executive told an industry conference here last week.
Vincent T. Donnelly, president and chief executive officer of PMA Capital Corp. and PMA Insurance Group in Blue Bell, Pa., speaking at the Workers' Compensation Educational Conference, also said a proactive approach is needed to deal with rising medical costs, decisions by an active judiciary and the impact of terrorism.
The Workers' Compensation Educational Conference is a partnership of the Florida Workers' Compensation Institute and The National Underwriter Company.
On the issue of rising medical costs, Mr. Donnelly noted that 60 percent of every comp claim dollar now goes to medical–the cost of getting the injured back to work.
He said over the past 10 years there has been a 112 percent inflation rate in average claim costs–an amount that he pointed out was higher than the increase in gasoline prices over the same period.
He said prescription drugs are an area of medical costs that need more examination. Most prescriptions, he said, are being written for brand name drugs when generics are available for a quarter of the price.
"There are opportunities for insurers to influence and contain medical cost."
He praised reforms made in California and Florida programs that he said have taken costs out of the systems. "We must keep working on this," he warned, noting that the best reforms are often challenged in the courts, and that judicial rulings can arise producing unintended consequences.
Mr. Donnelly noted that Delaware and New York have been involved in extended discussions of comp system changes without passage of reform. "It's time for those states to act," he said.
Discussing the fallout from the 9/11 terror attacks, Mr. Donnelly said he does not believe that terrorism is an insurable risk. He noted that the Terrorism Risk Insurance Act, that provides a backstop for some insurers' terror losses, has only been renewed for two years as a partial and temporary solution to the problem. Insurers, he said, must work with government to craft a permanent "real solution" that safeguards individual insurers so they can meet policyholder obligations.
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