Everyone talks about the high cost of workers' compensation, but SCCA has taken action to help save our members between 15 percent and 45 percent on their premiums.
 

What you can do about Workers' Comp rates

Contractors are suffering from the impact of 30 percent to 70 percent rate increases, a cost that must be included in bids. Once they're awarded a job that goes past their next renewal, the increases result in a reduction of profits. With so much uncertainty, it's difficult to determine what to put in a bid to cover the next increase.

Many contractors are unaware that there is an alternative that does not change benefits for injured workers, but rather changes handling of claims and disputes so overall costs are reduced. It is designed for union contractors and is "carved out" of the state system.

In 1993, the California Legislature passed a law that allows unions and signatory employers to create their own method to administer workers' compensation benefits as outlined under California Labor Code, Section 3201.5. The law allows a group workers' compensation program to establish any of the following in an effort to cut costs:

■ An "Alternative Dispute Resolution" system. (ADR)
■ The use of an agreed list of providers of medical treatment that may be the exclusive source of all medical treatment
■ The use of an agreed, limited list of qualified medical evaluators
■ Joint labor/management safety committees
■ A light-duty, modified job or return-to-work program
■ A vocational rehabilitation or retraining programs utilizing an agreed list of providers

Building a solution
Building on this premise, Local 12 of the Operating Engineers and the Southern California Contractors Association (SCCA) in conjunction with the Engineering Contractors Association (ECA) established an ADR trust for their signatory contractors in 1999.
It incorporates some of the above points for the improvement of the quality and delivery of workers' compensation benefits for injured employees. The intent is to reduce the waste and excessive costs that have historically been associated with the delivery of those benefits.

Nothing in the agreement diminishes the entitlement of an employee covered by this agreement to compensation payments for total or partial disability, vocational rehabilitation, medical treatment and other benefits as required by California law and fully paid by the employer.

A recent study by the California Workers' Compensation Institute (CWIC) compared an insurance company carve-out program's closed claims from 1993 to 1999 to Standard Industry Results. With the carve-out program, they found a 25 percent reduction on average length of claims and a 39.5 percent savings on average total claim costs.

Savings, now and in future
Because of the favorable reduction in total costs, some insurance companies will be able to apply a 10 percent credit to their policies. In addition, with these types of savings, it can substantially lower the experience modifications on future policies.

These savings are due in part to prevention - the Operating Engineers Workers' Compensation Safety Committee has been established and it works with both SCCA and ECA safety committees in assisting contractors in becoming more aware of safe practices.
Non-confrontational claims administration also plays a significant role as it reduces attorney involvement. Each insurance company utilizing the carve-out program has established a separate claims department that is familiar with the program's claims procedures and time lines.

The Trust has appointed an ombudsman whose sole duty is to advise and assist injured workers on workers' compensation claims procedures. The ombudsman assists the injured employee in filing claims, receiving complaints and attempting to resolve disputes. If the disputes cannot be resolved, mediation is attempted first.  The next step is arbitration.  Every effort is made to resolve issues without involving the court system.

Eligibility for the carve-out program is limited to contractors having 51 percent of their operations in construction and construction maintenance activities in rock, sand, gravel, cement and asphalt operations, heavy duty mechanics or surveying and construction inspection.

Signatory only requirements
The contractor must be signatory to the Operating Engineers Collective Bargaining Agreement (Required under California Labor Code 3201.5). There are also requirements regarding membership in a safety group of SCCA. The cost to the employer is two cents per hour for each operating engineer payable to the Trust, plus the workers' compensation premium. In addition to the operating engineers carve-out program, there are carve-out programs specialized for other unions.

The universal appeal of these programs lies in the combined efforts on the part of management and labor that bring down the cost of workers' compensation claims on every front. Reduced costs mean reduced premiums and the added bonus of a safer and more harmonious workplace.

Eugene Zondlo and Gary Hamilton are vice presidents of the SullivanCurtisMonroe Insurance Brokerage Construction Division. For more information, call (949) 250-7172.