ALAE Allocated Adjustment Expenses
The ALAE Allocated Adjustment Expenses of state by state analyses.
State by State Comparison of ALAE – represent 10 to 20% across States
Moderator- Ramona Tanabe
California highest overall
Medical Management ALAE – Highest states are Louisiana and New Jersey- interesting that the top two did not include California
There has been a steady Medical Management Expense increase over the last twelve years – 4-11%
Texas had an increase in ALAE medical management expenses even though medical costs decreased. HB 7 caused a sharp increase in ALAE medical expenses. Informal networks were eliminated by Texas, only certified networks
In my humble opinion, HB 7 harmed the WC community as the informal networks were very critical to cutting workers comp costs in Texas.
New Jersey actually had a 14% medical management cost in 2003. By 2014, the medical management ALAE increased to 23%.
The bottom line is that the medical management costs (ALAE) were justified by the decrease in medical costs- for most states.
Litigation Costs
Defense attorney expenses were the highest across the states by far. The state with the highest average amount of litigation ALAE was California.
The legal expenses seemed to be centered around:
- The complexity of the state WC system
- Length of process
- Inefficiencies in the state WC system
Is there a right amount of medical legal medico-legal expenses across the states? Is there a benchmark amount? Are these caused by inefficiencies in the cost reduction systems.
ALAE is one of those areas where much more research needs to be conducted as it is not discussed as much as it should be overall.
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