One of the most controversial topics of the President’s proposals for health care reform is “the public option.”  While this blog is not a forum for personal or institutional opinion for or against the reform proposals, I do want to point out that, in the insurance industry, there are abundant examples of public options that work well.  While my experience is in the property-casualty side of the world, I can’t see why these examples would not extend to health insurance.

 

Consider personal automobile insurance.  Auto insurance is viewed by many as being a social right.  Every state where I’ve done business has a state-sponsored “assigned risk pool” that provides insurance for all but the most dangerous drivers—usually those whose licenses have been revoked.  Premiums are high and based on driving records, but the depth of availability proves that it is “affordable.”  Private insurers peacefully co-exist with these pools, and often issue and service the policies on behalf of the governmental department that runs the program.  So, administratively, it works.

 

Consider homeowner’s insurance in coastal states.  Protection from hurricanes is viewed as a social right by these states’ citizens and legislators.  Some insurance companies provide “wind coverage,” while most rely on state-run FAIR plans or state-sponsored insurance companies to serve folks who own homes or condos in the wind zones.  In some cases, insurance companies issue and service policies on behalf of the plans; in other cases, the state-run insurers do the job.  In a few cases, the private companies actually compete with the state-run companies.  Once again, a “public option” system works.

 

And in my home state of California, we have perhaps the best example of a working “public option.”  Workers’ comp is not only a social right; it is legally required for employers. California’s State Compensation Insurance Fund has operated for decades as a backstop insurer of workers’ compensation.   Over time, the State Fund has expanded to be a very large enterprise and often competes with insurance companies in a state whose work comp market is larger than the next five states and the federal work comp program combined.  Here, corporate insurers coexist with the State Fund in good years and lean; and employers stay or switch insurers based on a variety of factors including service, convenience, financial solidity and price.  As employers and agents and brokers participate in the WC market in California and discuss provider options, State Fund is mentioned as often and as unremarkably as Travelers, Zenith, Liberty Mutual, and all the other insurance companies who voluntarily compete in the marketplace.  In this example, the “public option” works very well.  (Dean Calbreath, a staff writer for the San Diego Union Tribune, has a great article on this subject in that newspaper’s August 16 edition.)

 

So the health care debate rages on, and who knows where it will all come out.  But care should be taken about dismissing the “public option”—in many cases public options serve a great and useful purpose to free enterprise and society.

            Mediation is all the rage in settling claims and lawsuits. What did we do before there were mediators?

There was a time, back when dinosaurs ruled the Earth, when insurance claims adjusters and their appointed counsel actually negotiated settlements with claimants and their counsel. It was far from a perfect system, but it worked most of the time because the best plaintiffs’ lawyers knew that, on average, they’d do better by settling most cases, and that they couldn’t take every case, or even a large percentage of cases, to trial. It was a more congenial time, when opposing advocates would battle fiercely, but professionally, in court, then head out afterwards and try to settle the case over a couple of drinks.

The old system can still work, but today it’s considered “safer” to discuss settlement in the context of a formal mediation. State and federal rules encourage mediation and generally cloak the process in an unbreakable “cone of silence” privilege to allow the parties and the mediator to communicate candidly, without fear of what they say being later used in evidence.

As mediation has become overutilized, myths have grown up around mediating, the foremost of which is that it’s the mediator’s job to evaluate the case for the parties. If that were true, why would claimants and insurers even bother to hire adjusters and counsel? The fact is that it is the claims professional’s job to evaluate the case, aided by the legal advice and courtroom experience of outside counsel. (Ironically, is also the plaintiff’s attorney’s job to evaluate cases.) The mediator may have many years’ experience on the bench or in practice, and any mediator worth hiring is worth listening to, but that doesn’t turn mediation into an evaluative process. The evaluation precedes the mediation.

Evaluating a case requires the use of a highly specialized tool, a telephone. Oh, it will likely involve other tools, such as independent medical examinations, depositions, and some jury verdict research, but all that paper is meaningless unless the claims professional and his/her colleagues, including outside counsel, honestly discuss the case. The dialog cannot be outcome-driven; no participant should try to sugar-coat a bad fact or play “spin doctor.” There needs to be a healthy skepticism in the dialectic—nobody should accept any important fact as a given. Long before the mediation begins, the arguments and evidence should be tested by fire.

And then it is time to mediate, or if you want to be brave, to negotiate.

There are two overused processes at many mediations: opening presentations and “mediator’s proposals.” An opening joint session can be useful to set the tone and lay out the ground rules, but lengthy, grandiloquent dissertations tend to produce more heat than light. PowerPoint slide shows are death to discussion, and chew up hours of valuable time that should be spent bargaining, rather than grandstanding for the clients and driving the parties further apart. Neither side does better by “surprising” the other. That’s why mediation briefs, including crucial exhibits and consultants’ reports, should be (gasp!) exchanged in advance of mediations. Both sides need to be ready to compromise, which requires knowing their downsides, not just their mantras.

Then there is the ultimate mediation cop out, the “mediator’s proposal.” These were once face-saving devices, in which each side would confidentially disclose its acceptable range to the mediator, who would then pronounce, with Delphic acuity, a proposed number that just happened to fit within the narrow overlap of the two ranges. Miraculous!

Maybe it’s that sense of infallibility that has given rise to the modern myth of mediator as judge, jury, and executioner, in other words, both sides moving in baby steps until 5:45 PM, then letting the mediator pick a number in last few minutes. Is that mediating or passing the buck—maybe hundreds of thousands of bucks?

A skilled mediator can aid the parties, especially those unaccustomed to litigation, by helping them see past their emotional ties to their positions, and see their case as it is, warts and all. The mediator should be more than a telegraph, simply sending messages back and forth, but less than an oracle. If the parties have impartially evaluated their positions, and each other’s, they won’t need an oracle.      

(The author of this article is Louie Castoria.  He is an attorney with Wilson Elser and a Director of the Insurance Educational Association.  Louie publishes often in trade journals and shares his sense of humor on a weekly basis in his home town newspaper.)         

 

A long time ago, when I was learning the finance trade at Cigna, the insurance folks there started talking about “24-hour coverage.”  That seemed a natural for this brand-new company which was trying very hard to mesh the life insurance culture of Connecticut General with the property/casualty culture of the Insurance Company of North America in Philadelphia. 

 

24-hour coverage made a lot of sense to me then.  Why couldn’t you line up your workers’ comp policies and your group health policies and simply tell your employees “you’re covered!”  And to this untutored observer, it looked like a great business opportunity for large providers like Cigna, who were able to bring both sides to the customer.  One very large state—California—welcomed the idea and offered to be an incubator.

 

As we all know, 24-hour coverage is still a work in progress.  (That’s usually code for “we missed the deadline,” or “we’ll keep studying it until the funding runs out.”)   There are systemic hurdles including regulation, systems integration and—yes—culture.

 

But the concept still makes a ton of sense, and there is one group of active and rapidly growing advocates who have developed a workable concept which makes integrated delivery of occupational and non-occupational health and productivity services a reality.

 

That group is the Disability Management Employer Coalition (DMEC).  Supported by a large number of major employers and providers, DMEC and its members work tirelessly to overcome hurdles and make integrated delivery of employee health and productivity programs work. 

 

I just attended DMEC’s national conference in Portland, and 500 participants filled three and half days with workshops, presentations and case studies—all targeting integrated disability and absence management.  These folks work hard and share what they know…in a year when most conferences are at 50% of average attendance, this conference nearly matched 2008’s record turnout.

 

Employers and providers who need to know more about integrated disability management, and the hard financial benefits this concept can bring to the bottom line, should go to DMEC’s website, www.dmec.org.

Welcome to the Insurance Educational Association blog: "IdEAs."  IEA is always involved in two worlds--insurance and training.  IEA wants this blog to be a community forum for issues, ideas and inspiration about both these worlds.  Our staff, Directors and instructors will be publishing small, but relevant observations about insurance and professional training.  We love comments!  And if we spot a great article, video or website you ought to know about, we'll pass them along.  If you know about something we should know, please pass it along to us!