Workers Compensation


I.I.I. chief actuary James Lynch brings us an intriguing tale of workers comp and college football:

The most interesting story in workers compensation these days is playing out, quietly, on the sports page. At least the insurance part is quiet.

You’ve doubtless heard that Northwestern University football players were recognized as employees by an arm of the National Labor Relations Board and earned, tentatively, the right to form a union. The news made The New York Times front page, among others, and merited editorials in The Times and The Wall Street Journal.

Less prominent in the stories is what the players want: workers compensation – or at least some system to pay for the injuries they suffer on the field.

The players, petitioning as the College Athletes Players Association (CAPA), aren’t shy about wanting comp-like coverage. Here’s the second paragraph of their petition to the NLRB (pdf):

Faced with the serious risk of concussions and long-term injuries, the Players seek to bargain over health and safety issues like other employees protected by the [National Labor Relations] Act.”

And they make it clear, in the next sentence, that they aren’t out for money, at least not primarily:

CAPA will not jeopardize the Players’ eligibility by bargaining compensation not permitted by National Collegiate Athletic Association rules, but can bargain additional financial support and protections within the existing NCAA rules, and will speak for the Players as the NCAA landscape continues to evolve.”

The seminal takedown of the NCAA is Taylor Branch’s long, long, click-only-if-you’re-stranded-at-O’Hare opus in The Atlantic magazine’s September 2011 issue. In Branch’s telling (scroll down – wayyyy down – to ‘The Myth of the Student-Athlete’) it was precisely because the NCAA feared workers comp that it fought against classifying athletes as employees. The term student-athlete, he writes, was invented in the 1950s after a widow filed for a workers comp death benefit after her husband died from a head injury he got playing football.

Northwestern is appealing last week’s ruling. If the union gets what it wants, it will likely mean the players could be covered under Illinois’ Workers Compensation Act, like other Northwestern employees.

Northwestern is a private university. Public universities – being state entities – don’t always fall under a state’s workers comp laws. Take, for example, the University of Alabama, a powerhouse program I happened to Google. Its employees are covered by The University of Alabama On-the-Job Injury/Illness program – not part of the workers comp system, but governed by similar principles.

The most interesting what-if discussion I’ve seen on the topic comes from – where else? – Bleacher Report.

(Full disclosure: I used to live about 50 yards from Ryan Field, where Northwestern plays. Talk about noisy neighbors.)

I.I.I. chief actuary James Lynch brings us a timely post on one of the most important female contributors to the history of property/casualty insurance:

Constituting nearly 60 percent of the insurance work force in the United States, women are clearly important to the insurance industry.

March is Women’s History Month and this is the perfect time to honor the importance of women in the industry. Our earlier post on this topic can be read here.

The Casualty Actuarial Society (CAS) plays its part, in an indirect way. This month’s Actuarial Review, as part of the organization’s centennial, touches on one of the most important female contributors to the history of property/casualty insurance.

The woman is Crystal Eastman (pictured).

Eastman wasn’t an actuary, and to my knowledge she never worked in insurance. She was a lawyer, a radical in her day, and one of her causes was workers’ rights. Her 1910 publication, Work-accidents and the law, detailed worker injuries in 1907 and 1908 in Allegheny County, Pennsylvania, and the economic toll those injuries took.

In those 12 months, 529 workers died from job-related maladies (see table). Eastman led a team that investigated every death, plus another 509 workers hospitalized between April and June 1908.

About one third of the accidents were unavoidable, the study found, while one third were the fault of the workers themselves and another third resulted from employers failing to provide a safe workplace. The financial burden of the accidents, though, fell overwhelmingly on the victims and their families. They lacked the resources to sue, and common law at the time was stacked against them anyhow.

The solution: workers compensation – insurance covering worker injuries without regard to fault. But early workers comp laws were ruled unconstitutional, typically because they took from employers their right to due process – their day in court. New York’s law, for example, was found unconstitutional on March 24, 1911.

The next day, 146 workers – 123 of them women – died in the Triangle Shirtwaist factory fire. The tragedy led to a state commission, headed by Frances Perkins – later the first female Cabinet member – that documented dismal and dangerous working conditions across the state. The result: a workers comp law that passed constitutional muster.

The law addressed the workers problems – now they could be compensated for their injuries. It created an insurance problem: without a court to adjudicate, how does one set a fair compensation for an injury?

It was for this task that, in 1914, the Casualty Actuarial Society (CAS) was created. So it is not much of a stretch to say that women, both famous and not so famous, are at the fountainhead of the organization.

Check out I.I.I. facts and statistics on workers compensation here and on careers and employment here.

I.I.I. chief actuary James Lynch reports from Day 2 of the WCRI annual conference in Boston:

Health insurance and workers compensation are sort of kissin’ cousins, in that changes that affect one inevitably affect the other.

But that’s my metaphor. Dr. Richard Victor, executive director of the Workers Compensation Research Institute (WCRI), likens the impact of health care reform to a hurricane.

Like a storm whose path is not quite defined, health care reform could take a significant toll – but we don’t know precisely where. Since workers comp differs from state to state, the impact of the Affordable Care Act (ACA) will differ from state to state. Like a good weatherman, Dr. Victor told an audience of about 400 at WCRI’s annual conference in Boston on Thursday he could make some educated guesses what might happen.

He is assuming the ACA is enacted exactly as written – a tough assumption but as good a starting point as any. In that case, the increase in insured Americans will increase demand.

The marketplace might decrease the use of doctors, relying instead on well-trained nurses or even sophisticated computers to help provide care.

Or doctors might raise prices in the face of rising demand.

What actually happens will differ by state. Some states make it difficult to take diagnosis and treatment out of the doctors’ hands. In those states, medical costs – and their kissin’ cousin, comp costs — are likely to rise. Elsewhere, the effect will be muted.

Other insights:

● Health care reform will result in a healthier work population. This will tend to help the comp system, because healthy workers are less likely to get hurt on the job, and if they do get hurt, they get well faster.

● Changes in billing, Dr. Victor said, will “absolutely” lead to upcoding – in which a doctor exaggerates the severity of a treatment to receive a bigger reimbursement. The practice is well-documented in workers comp, he said, citing examples from Florida and California.

● Changes are likely to shift into workers compensation. That’s because many employers are increasing deductibles that employees pay for treatment. Workers comp, meanwhile, has no deductibles and no co-pays – giving an employee the incentive to label an injury as work-related.

I blogged about Day 1 of the conference here. Other highlights from Day 2:

● Alex Swedlow, president of the California Workers Compensation Institute (CWCI) noted that even after all appeals are exhausted only about five percent of denials of comp claims are overturned. Swedlow also said evidence-based pain management guidelines effectively control costs; and a comparison of California and Washington pharmaceutical costs show that more cost savings are possible.

● Harry Shuford, chief economist of the National Council on Compensation Insurance (NCCI), argued that underwriting cycles are closely linked to bond yields and that when it comes to managing their business, insurers in the long run “do a much better job than other financial intermediaries” like banks.

Workers compensation insurance will have to move quickly to keep from being a net loser from health care reform, said Dr. Jonathan Gruber, one of the architects of what ultimately became the template for the Affordable Care Act (ACA).

Dr. Gruber, an MIT economist who helped construct the Massachusetts health reform that the ACA modeled, spoke to more than 400 attendees at the Workers Compensation Research Institute (WCRI) conference in Boston.

Health care reform should help the workers compensation system, he said. Fewer workers will be uninsured, so fewer people will get injured over the weekend and then claim on Monday they got hurt at work.

But Dr. Gruber, an MIT economist, noted that the comp system is incredibly inefficient. It pays higher rates for services than most health plans. And it changes slowly, which could be a big disadvantage as the ACA forces efficiency on the other parts of the health care system – hospitals, doctors and health insurers. If the comp system can’t keep up, the rest of the system will find ways to dump costs on it.

Dr. Gruber said it will be three years before we can tell whether ACA has been successful. At this point – in ACA’s early days, its proponents and opponents are “saying too much.”

Gruber also gave a nod to researchers like those at WCRI. With ACA’s many moving parts, he said, it will be important to intelligently determine which of those parts are truly working.

Day One of the WCRI conference also featured two examinations of how changes in state comp laws play out.

The first showed how Texas successfully reduced the rate of claims through changes enacted in 2002, 2003 and 2005. The changes brought individual claims under greater scrutiny.

The good news: the rate of claims in Texas lagged those of 15 states studied, said WCRI senior analyst Carol Telles. The rate of claims from chiropractors fell more sharply than other professional services, though Texans continue to use chiropractors more than the other states.

Costs per claim, though, increased, in part because the changes aren’t free. It costs money to review claims. Any changes to a workers comp system must consider whether savings will be able to justify those costs.

The second study showed how Illinois took a more blunt approach in 2006. It cut fee schedules 30 percent across the board. One interesting result, said senior public policy analyst Rebecca Yang: costs per claim fell, as you might expect, but only by 24 percent overall.

Among the reasons: the rate of claims increased, and there were signs that doctors were billing for more complex office visits than before.

Day Two of the conference will take a longer look at the impact of ACA on workers comp. Other sessions will look at how the economy drives workers comp results; accountable care organizations; and medical dispute resolution.

With the Affordable Care Act (ACA) at center stage, interest is high in this week’s workers compensation conference in Boston, Massachusetts.

We read a lot about how ACA is changing health insurance and the world of business, but an effect of less renown is how the health law will affect workers compensation insurance.

Check out previous T+C posts on this topic here and here.

The conference, sponsored by the Workers Compensation Research Institute (WCRI), will feature health care experts like economist Jonathan Gruber, an MIT professor and one of the architects of the ACA, teasing out how health care and workers comp will intertwine in the coming years.

More than a dozen media organizations are scheduled to attend, from industry blogs to national media. I.I.I. will be there, too, with chief actuary James Lynch reporting and tossing off the occasional tweet @III_Research under the hashtag #WCRI.

WCRI is an independent, not-for-profit research organization that provides high-quality, objective information about public policy issues involving workers compensation systems. The conference is March 12 and 13, with details here.

A roundup of I.I.I. workers comp work can be found here.

The Insurance Research Council (IRC) has taken a closer look at the potential effects of the Affordable Care Act (ACA) for property/casualty insurers.

Its analysis – which doesn’t make any specific estimates of the potential cost implications for the P/C industry – identifies the possible ways in which P/C insurance claim costs will be affected by the Act.

The upshot is that the IRC believes the most significant impact will be cost shifting by hospitals and other providers from public and private health insurers to p/c insurers.

According to the report:

Cost shifting will occur in response to increased cost containment efforts by public and private health insurers, and will appear in the form of higher charges and a higher volume of billed services.”

And:

Cost shifting will be particularly severe in state jurisdictions and with coverages where the differences between public and private health insurance reimbursement levels and property-casualty reimbursement levels are greatest.”

The potential magnitude of the cost-shifting is likely to be major, the IRC notes.

To mitigate this potential impact, the IRC suggests that P/C insurers should consider options to ensure that the prices paid as reimbursement for medical services are consistent with prices paid by public and private health insurers.

While market-based fee schedules and bill review authority are among the tools often applied to address medical pricing issues, the IRC says P/C insurers should also consider alternatives to ensure that only medically necessary and appropriate treatment is provided to P/C insurance claimants and reimbursed by insurers.

Utilization review authority, evidence-based treatment guidelines, and the authority to deny reimbursement for unnecessary or inappropriate treatment are among the tools that P/C insurers should consider, the IRC suggests.

PC360 reports on the IRC analysis here.

The Affordable Care Act (ACA) will have both potential positive and negative effects on the property/casualty insurance industry, according to a recently published paper by Travelers.

In the paper, Travelers notes that medical trends impact workers compensation, general liability, and auto insurance costs, which make up about 5 percent of health care revenue.

Key ACA components expected to affect the P/C industry are:

– Extended healthcare coverage – a 15 percent increase in demand for a fixed supply of healthcare services

– Black lung presumptions – any miner (or surviving spouse) with 15 or more years of underground coal mine employment and a totally disabling respiratory or pulmonary impairment is presumed to be disabled due to pneumoconiosis and eligible for Black Lung benefits.

– Pharmacy and durable medical equipment (DME) taxes and assessments – the potential to increase costs 1.5 percent and 2.3 percent, respectively.

– Medical data – enhanced electronic record-keeping and sharing of data among providers.

Some of the potential positive effects of the ACA on P/C insurers include increased wellness – a healthier and better conditioned population – and a decreased incentive to file questionable P/C claims, Travelers says.

However, on the negative side, the ACA could result in decreased access to care, increasing indemnity costs as prompt access to physicians is reduced and return to work is delayed, the paper notes.

Travelers also cautions that there could be increased cost shifting from Medicare to P/C payers by physicians and hospitals due to declining Medicare reimbursement rates.

Hat tip to Claims Journal for its report on P/C insurer impacts of the ACA here.