Employers and Carriers Await Impact of Health Reform on Workers' Compensation

Anticipating the influence of the Patient Protection and Affordable Care Act is challenging to even the most experienced healthcare analysts. For the workers' compensation sector, which has been slow to respond to innovation and change in the healthcare market, many observers are taking a "wait and see" attitude.

 For example, workers' compensation began using PPOs much later than other payers. Now, there is growing pressure — as there is across the entire healthcare system — for higher quality of care and outcomes-based payments. Ideally, the future of workers' compensation will be influenced by current trends:

Accountable care. The goals of accountable care organizations are to increase quality and manage costs, while improving timeliness and coordination of care. An ACO seeks to provide patient-centered treatment programs and manage the continuum of care from wellness to chronic disease. This involves electronic information sharing, and moving away from fee-for-service payment systems to value-based reimbursement programs focused on quality outcomes and shared risk.

Micro-networks. Healthcare systems organized to create high-quality physician networks provide robust, targeted access to care by channeling workers toward specific providers with financial incentives. By being consistently rewarded for utilizing providers that cost them less out-of-pocket, worker health behavior is likely to change population health, with better individual health outcomes and reduced expenditures. Smaller networks featuring more qualified doctors help to build stronger doctor/patient relationships, which can in turn lead to better outcomes.

Data integration. Automatically aggregating and consolidating information from a variety of disparate systems and sources, including inpatient, ambulatory and home sites, has been shown to improve continuity of patient care and efficiency. Today, many provider organizations are working to effectively connect data silos to enhance value, safety and efficiency.

Predictive modeling. Predictive modeling enables payers to identify the top percentage of covered lives who are at highest risk and highest cost, and who will most likely benefit from disease management programs. The goal is to improve health for those patients and lower costs overall.

The PPACA is designed to improve access to care, change the way accountable care organizations are used and increase consolidation among hospitals and providers. In response, it is expected that total spending will rise, and health plans will increase premiums to mitigate financial risks.

Recently, Treasury Department officials announced that employers with 50 to 99 workers will be given until 2016 — two years longer than originally envisioned — before they risk a federal penalty for not complying. Companies with 100 or more employees are required in 2015 to offer coverage to 95 percent of full-time workers and avoid a fine by offering insurance to 70 percent of them next year.

Medical costs associated with workers' compensation coverage are estimated to be two percent of the aggregate medical expenditure in the United States. While the healthcare law made no direct provisions regarding workers' compensation, healthcare professionals can expect to feel its indirect influence to varying degrees. On a state-by-state basis, the difference will depend on which states do the following:

  • Allow the carrier or employer to direct care and send injured workers to a hospital network or doctor
  • Have a mandated fee schedule
  • Cap claim amounts and how much a doctor can charge

If the goals of the PPACA are successful in terms of prevention and health/wellness, a healthier workforce would be less inclined to continue on workers' compensation, thereby improving that particular claims market.

Cost shift away from workers' compensation
A number of experts predict that costs will shift between the workers' compensation and health insurance markets, improving the current challenges of dealing with a population that does not have health insurance and separating work-related injuries/medical conditions from those that are non work-related.

A RAND study of the Massachusetts' healthcare system found that based on a review of hospital billings to workers' compensation claims, the billed charges and treatment volume per workers compensation claimant did not change. The total volume of workers' compensation billings, however, fell by 5 percent to 10 percent, indicating that some claimants had opted to file claims with their health insurance providers rather than as workers' compensation.

In general, workers with chronic medical conditions prefer health insurance to workers' compensation because they don't have to deal with claims handlers and medical claim payment systems.

The PPACA could also shift workers toward group health coverage because it prohibits health insurers from refusing coverage for pre-existing conditions. Before the PPACA, some individuals relied on workers' compensation for at least some healthcare coverage for a pre-existing condition associated with a work-related injury.

That said, there is a possibility that increased use of deductibles and co-payment requirements in the health insurance market could drive some workers back to the workers' compensation market.

Healthcare providers' point of view
Many physicians oppose the PPACA, and because the workers' compensation fee schedule is higher than Medicare, would prefer a workers' compensation patient over an exchange patient. The workers' compensation system, however, typically requires more justification of the treatment, and demands more formal reports and other paperwork. In some cases, providers may be required to testify before receiving reimbursement.

From this perspective, the opportunity to direct patients to claim coverage under health insurance instead of workers' compensation would work in favor of the healthcare providers.

Physician shortage
The physician shortage could increase workers' compensation costs by delaying the employee's medical evaluation(s), thereby impeding a carrier's ability to deny questionable claims as quickly as possible. The shortage would also prevent timely treatment of workers' compensation conditions. Delays in care tend to slow recovery time and prevent a worker from returning to work sooner, which in turn extends the medical cost and wage replacement components of workers' compensation claims.

The shortage of physicians and registered nurses will lead to proposed options for appointments with nurse practitioners and physician assistants. But the workers' compensation system does not typically recognize treatment from these providers, which could pose reimbursement issues and add client approval requirements. If an occupational medicine facility is available, it would be the best option for an injured worker, improving access to care. It is likely, however, that most injured workers' would visit their family doctor first.

The PPACA proposes to address physician shortages by providing loan-based repayment programs aimed at primary doctors and offering incentives to medical schools to increase
enrollment. But results remain to be seen.

The PPACA's Patient-Centered Outcomes Research Institute, created to perform comparative effectiveness research, is expected to identify the most effective medical treatments and preventive medicine. Such optimized care could get claimants back to work sooner, reducing both the medical cost and the wage replacement component. Evidence-based medical guidelines have increased across the country, and have been found to decrease workers' compensation medical costs.

Conclusion
Ultimately, workers' compensation will catch up with the overriding trend toward quality care, rather than simply focusing on price. The true impact of the PPACA on workers' compensation coverage will become more measurable as 2014 unfolds and more definitively in the next two years when the impact of the employer mandate begins to play out. Based on expert speculation, it's probable that medical expenditures will shift from the workers' compensation market to the health insurance market because a portion of the uninsured population will no longer need to use workers' compensation to obtain healthcare.

In the long run, access to more affordable care and health insurance will lead to a healthier workforce and improved productivity — the ultimate goal of reform.The future of the healthcare industry is likely to transition away from injury-based care management toward a more patient-centered approach that focuses on prevention and timely care that puts the worker/patient first.

Steve Kokulak joined MagnaCare in 2007 as director of Workers Compensation and No Fault, coming to the organization from Liberty Mutual Insurance Company where he had served as senior trial counsel and team lead. At MagnaCare, he rose to vice president and eventually to his current position as senior vice president. In this capacity he is responsible for all matters relating to MagnaCare’s Workers Comp and No Fault lines of business, including sales, marketing, business development and compliance.  He is also involved in operational structure of the areas which support this division. 

Steve holds a BA in political science from Fordham University and received a law degree from Brooklyn Law School. He has been a member of the New York State Bar since 1987. He currently sits on SIIA Workers’ Compensation Committee, moderating lectures and contributing articles to their magazine. Other memberships include RIMS, both local and national chapters, NYSBA, NYCA, NYSIA and NJSIA.

References

Eilperin, Juliet, Goldstein, Amy (2014, February 10). White house delays health insurance mandate for medium-sized employers until 2016. Washington Post. Retrieved from
http://www.washingtonpost.com/national/health-science/white-house-delays-health-insurance-mandate-for-medium-sized-employers-until-2016/2014/02/10/ade6b344-9279-11e3-84e1-27626c5ef5fb_story.html

Jones, Derek A. (2013, July 10) ACA: An act of unknown consequences for workers compensation. Millman. Retrieved from http://www.milliman.com/insight/2013/ACA-An-act-of-unknown-consequences-for-workers-compensation/

Sedgwick (2013). Understanding and preparing for the impact of the Affordable Care Act. Retrieved from https://www.sedgwick.com/news/Documents/Studies/ACAstudy.pdf

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