WCRI Looks At Impact of Affordable Care Act On Workers Comp

I.I.I. chief actuary  Jim Lynch reports from the Workers Compensation Research Institute (WCRI) annual conference:

An important cost-control mechanism of the Affordable Care Act could end up annually shifting hundreds of millions of claim dollars into the workers compensation system, preliminary research by the Workers Compensation Research Institute (WCRI) indicates.

The mechanism is the Accountable Care Organization (ACO), and WCRI researchers used the ACO’s similarity to Health Maintenance Organizations (HMOs) to estimate the nature of the cost shift as well as give a general idea of its magnitude.

An ACO is a network of doctors and hospitals that share the financial and medical responsibility for a group of patients. The ACO receives a set amount per patient for a year, regardless of the services each patient receives, a structure known as a capitated plan. HMOs are another type of capitated plan. The difference: an ACO can be paid more if it saves money while providing high quality care.

This difference gives some health experts hope that ACOs can rein in healthcare costs better than HMOs do. They believe healthcare will respond to the profit incentive ACOs offer.

The Affordable Care Act encourages ACOs and other capitated plans.

WCRI’s research indicates that capitated plans tend to push sprains, strains and other soft tissue injuries into the workers compensation system, WCRI Executive Director Richard Victor told about 300 attendees at the organization’s annual conference in Boston on March 5.

Often it is hard to tell exactly what caused a strain like a sore back, Victor said. It may have come while at work or at home. Usually the classification is the doctor’s decision.

In an ACO or any other sort of capitated plan, the doctor has a choice: call the injury work-related and bill the workers compensation insurer or decline to do so and collect no additional fee. The financial incentive is obvious.

The WCRI study looked at a nationwide sample of more than 700,000 claims from 2008 to 2010, about 17 percent of which came from HMOs. It classified states into two buckets, depending on how prevalent HMOs were.

In states with a relatively large HMO presence, HMO doctors put 26 percent of soft tissue injuries into workers comp. That was 30 percent more often than doctors in traditional fee for service arrangements.

For injuries like a broken arm, where it was easy to know what caused the injury, HMO and fee-for-service doctors put about the same percentage of claims into workers comp.

States with fewer HMOs didn’t exhibit the same shifting, the study indicated.

It is harder to estimate the financial impact, because it’s hard to say how popular ACOs will become. To develop an estimate, Victor hypothesized that ACOs could increase the percentage of workers in capitated plans by 25 percentage points. Such an increase would allow capitation plans to regain the 15 percentage points of market share they have lost since 2000 and then some.

Under that scenario, cost shifting in Illinois would push $90 million of claims into workers comp. In Pennsylvania, the shift would cost workers comp insurers $55 million.

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