Insurance Information Institute chief actuary Jim Lynch attended the Workers Compensation Research Institute (WCRI) conference last week in Boston. Here are some highlights:
Preliminary research from WCRI indicates that New York City residents sometimes get surgery done across the river, in New Jersey, where surgical costs can triple.
WCRI researcher Bogdan Savych outlined how the research organization uncovered this fact. It was akin to unraveling a mystery.
Researchers noticed a 37 percent increase in the average payment for knee arthroscopies at ambulatory surgical centers from 2011 to 2012. Shoulder arthroscopies rose a similar amount.
This was a surprise because New York workers comp claims follow a fee schedule. Normally researchers expect to see claim sizes spike when fee schedules change, but not in other years. Yet New York’s schedule hadn’t changed in years.
Then they noticed that all of the expensive surgeries were done in New Jersey.
It turns out a quirk in New York law exempts out-of-state providers from being paid according to the fee schedule. Instead they receive the usual customary and reasonable charge.
For knee arthroscopies, that means the NJ surgeries paid 266 percent more, an additional $4,954 on average. For shoulders, the cost is $8,551 more – a 326 percent increase.
Preliminary WCRI research indicates that fee schedules in health insurance can drive workers compensation claims higher.
The issue emerges because in many states, workers compensation fee schedules pay more than do group health schedules, said WCRI president and CEO John Ruser.
That creates an incentive for doctors to call an injury work-related–particularly if the cause of the injury is murky, like a strain of the knee or shoulder.
Workers also have an incentive to say the claim comes from work. Workers comp doesn’t have co-payments or deductibles, so the workers save money while the doctor receives more.
“This is not about fraud,” Ruser said, though the study showed that “financial incentives might have a role to play” in the classification of some injuries.
The study showed that when workers comp schedules are 20 percent richer than group health, the odds of a soft-tissue injury being called work-related grows by 6 percent.
Total cost: 1.5 percent of comp claims.
Putting a claim in the workers comp world creates additional hits for employers. First, they pay more for the medical treatment because the comp fee schedule is more expensive. Second, injured employees receive payments for lost income; the payment is covered by workers comp, but eventually the employer pays for it through higher premiums. Finally, where comp benefits are higher, claims can last longer – an additional cost.