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El Fondo: A legacy of high costs vs. inefficient services
BY ELISABETH ROMAN of Caribbean Business
June 30, 2005
In just three weeks, July 20 to be exact, employers (in the private and public sectors) throughout Puerto Rico will have to submit their payroll disclosure forms and dig deep into their pockets to prepay insurance premiums to the State Insurance Fund (SIF), or El Fondo, as the agency is widely known on the island. Every employer, regardless of the type of business, is required by law to pay the insurance premium, which can cost employers as much as $1 million a year; and the SIF wont take into consideration whether companies have had a good or bad year.
Once a private company, small business, public corporation, or any government agency is covered by the SIF, their employees are entitled to receive compensation and medical benefits, including medical care at the Industrial Hospital, although as we reported in our front-page story, many who work in the private sector opt not to use these services mostly because they are inefficient and poor.
By law, SIF is the only insurance company operating on the island providing protection against labor-related injuries or accidents in the workplace. A Commonwealth-controlled monopoly, SIF has demonstrated its skills at collecting funds and investing them. It isnt as adept, however, at providing the necessary financial assistance and medical treatment it was established to provide 70 years ago. As a result, the recently appointed SIF Administrator Salvador Rovira is facing the challenge of improving the agencys image as well as making SIF more efficient by expediting employees claim process and providing required medical services in a timely manner.
While many government agencies and municipalities struggle with deficits and fiscal crises, SIF is doing well financially. SIF has increased the premiums it collects from employers over the past four years by over $100 million, from $513.3 million in fiscal 2000 to $629.8 million in 2004. During the same period, the number of workers being serviced by SIF has gone down. As of June 30, 2004, the public corporations financial statements reflected a net income of $177.1 million for the fiscal year. SIF also has accumulated over $1.1 billion in investments. Of course, not a single penny of SIFs investments are in local stocks or commonwealth bonds. Rovira, the SIF administrator, says it doesnt make risky investments.
As employers pull out their checkbook to pay El Fondo, they should take note that SIF spent almost $300 million of its $439 million operational budget for fiscal 2005 on payroll and related expenses for 4,316 employees. SIF employees are among the highest paid in the commonwealth government, with cost per employee approaching $70,000. Yet, fiscal solvency and compensating employees with high salaries havent translated into efficient services at SIF. Although SIF is supposed to provide employers with a comprehensive-insurance policy at a reasonable rate and provide workers with expedited services, SIF documents show the average time it takes for a worker to receive the first payment is 129 days or just over four months.
It also takes an injured employee in need of assistance 18 days just to obtain the first interview to see a SIF case analyst. Once a SIF interview is secured, it doesnt guarantee the worker access to speedy medical treatment or therapy; many must wait several months before receiving any care at all. With such inefficiency, it is no wonder injured employees, particularly in the private sector, prefer not to seek services from SIF.
SIFs new administrator may have the best intentions to improve services and process claims in an efficient manner, but it cant happen unless SIF decentralizes its services and competes with other insurance companies that provide workers-compensation insurance, as is done in such states as New York and California. The answer might lie in a simple formula: allow both employers and employees to choose a workers-insurance policy (either public or private) that best fits the risks and needs of each company and its workers, putting an end to SIFs inefficient monopoly.
This Caribbean Business article appears courtesy of Casiano Communications.