Pooling community risks works but it requires pooling values, too. Nebraska political entities share risks because many of our communities have similar needs, similar work forces, similar backgrounds and work ethics, similar regard to safety, and similar care for one another and the importance of what we do.
The pooling doesn’t work when the sharing of risks and values stops.
For example, if 159 pool members use less than 50% of an entire year’s worker’s compensation reserves, and one member uses more than 50% of them, it may be because of difficulties in a single year. If it goes on year after year, it is a problem of different values. When that happens, adjustments must be made.
This is the case with LARM’s members. A single member used more than 50% of the reserves one year and perpetuated a crisis level history in which it averaged one workers’ compensation claim every eight days for the past seven years.
A history like this makes the LARM Board of Directors sit up and take notice, and it led them to take important action involving one member in August 2018. The action was taken after consultation with the LARM’s independent professional consulting and risk management service and its actuaries. The action was consistent with the legal obligations of LARM.
According to Nebraska state law, ‘a pool shall maintain adequate surplus and reserves and receive adequate financial contributions from its members in order to operate in a manner which is not hazardous to the public.’ This requirement of the Department of Insurance played an important role in the decision by the Board to offer a single LARM member significant potential changes in premium structure or deductible structure, or, in the alternative, the choice to depart from the LARM Pool.
Any other approach would force the entire pool, except for one, to subsidize a member with an eight year history of safety values that is inconsistent with the safety values of all other members.
LARM’s General Counsel has been in touch with the city attorney for the LARM member with the problematic claims history. After consultation with the insurance department, the member was offered an opportunity to remain in LARM with a much larger deductible until its claims experience improves, or to have the amount of time provided under the policy to find a new worker’s compensation insurance carrier. The choice is up to the member.
The Department of Insurance is being kept informed. This letter is for LARM members who are affected by costs of contributions, and risks of claims, in the Pool.
LARM Board Chair