LAUSD Claims Fault Widens
By Robert Warne - January 15, 2003The Los Angeles Unified School District’s (LAUSD) has received a failing grade in claims management for its record $148 million workers’ compensation bill in 2002.
Coming straight out of its general fund, the $148 million could have been used to cover the annual starting salary of 382 teachers or to build four-dozen schools.
Officials hope the reforms they’ve implemented over the year yield some positive results. If things don’t change, the only positive they’ll be dealing with is a projected increase in workers’ compensation expenses to nearly $627 million by the summer of 2006.
Over the past year the district has initiated new safety programs, compiled claims data, stepped up environmental inspections, screened for fraud and tightened its oversight of claims examiners, but nothing has worked yet.
Officials are now weighing the option of transferring their claims to a private carrier.
So far though American International Group (AIG) is the only carrier to submit a proposal to handle one year’s worth of claims. But AIG’s $172 million bid comes in $17 million over what is estimated would cost to just self-administer the claims.
Another aspect of the district’s workers’ compensation system that needs to be addressed is it’s high rate of litigated claims. Half of LAUSD’s claims end up in court.
One observer blames the district’s actions against real claims and lowball settlements for fueling the litigious environment.
Whatever the district decides to do, it needs to deal with its potential liabilities that range from around $370 million to nearly $500 million when it only has about $250 million in reserves.
With statewide budget cuts and AB 749 benefit increases, the district is going to be forced to something radical to stem the ugly tide. LAUSD’s workers’ compensation system is turning out to be much like its Belmont Learning Center— built on a fault and a toxic oil field, and no body wants to go near it.
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