Controlling Workers Compensation Costs for Employers

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Companion Insurance Company Goes ‘Belly Up’

higher premium rates

The Companion Insurance Company Goes 'Belly Up' – So to speak.  It's good news for Enstar and the carriers  – it's bad for employers. Every employer with Companion as a carrier in the last five years, beware.  You must be proactive to protect your premiums.

Companion is a wholly owned subsidiary of Blue Cross and Blue Shield of South Carolina – or at least it was until a short time ago. Apparently Blue Cross decided that work comp was too 'capital intensive' and decided their resources were better utilized in health care. Amazingly, they see the Affordable Care Act as a greater profit potential than California's work comp (- as Br'er Rabbit said, 'Please don't throw me in that briar patch').

Companion sold their outstanding claims liabilities to Enstar. Enstar will profit from the transaction by closing claims by paying less than the adjusters believed the claim would cost.

The consequences for California employers will likely be unpleasant.

Some might say, 'Who cares if the claims aren't paid? It helps the employers as well, doesn't it?'

No – 'It's the X-MOD stupid'. (Learn more about the X-MOD).

While Enstar is buying claims at the inflated 'reserves' rate and paying them down at pennies on the dollar, the X-MOD for employers continues at the higher level. In fact, the claims will continue to get worse because, when Enstar doesn't close the claim, they grow and get worse. X-Mods are based on a three year window. From the time Enstar buys the claim until it is closed, it will likely go UP by a large amount. The final amount Enstar will settle for will be much smaller. By then, the employer will have suffered a much higher X-MOD - thus, paying a larger premium to their current work comp carrier.

Companion wrote over $100 million in premium last year. That represents a lot of employers. Good news is Enstar is going to make a huge profit. The better news is a lot of carriers that will inherit that business will probably make more. It's good for Enstar and the carriers – it's bad for the employers.

Here's my call to action. Every employer with Companion as a carrier in the last five years needs to become proactive and make sure their claims are closed in a timely and reasonable manner. If they don't, it's going to cost them a lot in extra premiums.

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