FHP Taking New Tack on Care for Workers : Health: With insurance firm, it offers employers combined medical, workers’ compensation program, state’s first of kind.

FOUNTAIN VALLEY — Beating its competition to the marketplace, FHP International Inc. has teamed with a San Diego-based insurance firm to consolidate its customers’ medical benefits and workers’ compensation bills, company officials said Wednesday.

The so-called 24-Hour Managed Care Workers’ Compensation product, the first of its kind in the state, is in response to a growing demand by employers to reform the state’s burgeoning workers’ compensation bill, company officials said.

California companies last year paid out more than $10 billion in workers’ compensation claims, triple the amount of a decade ago, industry analysts said.

The FHP program was praised by workers’ compensation experts and state officials as a positive step toward cutting costs. Other health maintenance organizations, including Blue Cross of California, are planning to follow suit, while a bill currently in a state Senate committee seeks to address the issue.

“I think that if they do it right, they could make some substantial gains (in cutting workers’ compensation costs),” said William P. Molmen, general counsel for the California Workers’ Compensation Institute, a San Francisco-based insurance industry trade group.

“It would certainly make it easier for employees,” he said.

FHP chief executive Westcott W. Price III said Wednesday that the program was first sold to DieCast Products Inc. of Gardena in January, 1991, as a test to see whether merging the company’s two health-related components for its 124 employees was feasible.

Two months ago the FHP board of directors approved expanding the program, and since then 87 companies, serving more than 9,000 employees, have signed on, said Ria Marie Carlson, FHP director of public relations.

FHP said the program would eventually lower workers’ compensation costs for client companies by providing them with visits by workplace safety experts, restricting treatment of injured workers to the HMO system and using FHP-approved physicians.

The combination program began nearly four years ago after the health care organization consolidated its own workers’ compensation and medical benefits in 1988.

Price said FHP was paying as much as 160% more than the state average rate because of a series of workers’ compensation claims. “Our safety record was not as good as it should have been,” Price acknowledged.

This year, he said, FHP was authorized by the state to pay 40% less than the average after workplace safety experts evaluated the HMO operator and made suggestions on ways to improve employee safety.

Under the combination plan, employers pay no more in premiums than they would otherwise but can expect lower rates within three years as they correct potential health risks in the workplace, company officials said.

A staff of FHP workers expert in Cal/OSHA rules will evaluate a client’s workplace to suggest changes that could lower work-related injuries and ostensibly cut workers’ compensation payments in the future.

Although FHP appears to be the first HMO in the state to offer a consolidation, the idea of merging general health benefits and workers’ compensation is not new, Molmen said.

In theory, “this issue has been around for a while,” he said. “If you look at the economics of it, it makes sense to try to eliminate the need to try to show whether (the injury) is work related or not.”

Molmen said, however, that a true “one-stop” package is not legally available.

For instance, FHP contracted with Insurance Co. of the West to handle workers’ compensation payments and claims because the HMO is prohibited by law from processing such claims, said Gregory B. Kerrebrock, FHP associate director of sales.

But under a bill sponsored by Assemblyman Bruce Bronzan (D--Fresno), state law would be changed to authorize the Department of Industrial Relations to establish a three-year pilot program that would authorize health care service plans, allowing a single insurance company or HMO to handle both health benefit and workers’ compensation coverage.

Such a change, state officials said, would save employers millions of dollars. Currently, employers in California spend 3.1 cents of every payroll dollar on workers’ compensation, versus a national average of 2.2 cents.

A company with 50 employees can pay as much as $60,000 a year in workers’ compensation premiums, said FHP’s Kerrebrock.

“I think it’s a darn good idea,” said Casey L. Young, administrative director of the state division of workers’ compensation.