Tag Archives: WCRI

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.

Annual Workers Comp Conference Beckons

Next week Jim Lynch will be in Boston for the annual conference of an I.I.I. subscriber, the Workers Compensation Research Institute (WCRI). Here’s  his preview:

WCRI is known for its painstakingly objective analyses of workers comp trends in more than a dozen large states. Lately mainstream media have noticed WCRI, particularly this New York Times article, in which researchers found that when the prices of common dosages for back pain were capped, California doctors switched to dosages whose prices were not capped. This allowed them to charge about five times more per pill.

Physicians tend to charge considerably more than pharmacies when they dispense drugs, a phenomenon WCRI studies regularly. The costs and consequences of physician prescriptions is one of the main topics of the first morning of next week’s conference. (Registration and other details here.)

Day Two will feature a topic in which I’ve become more interested in recent weeks — the ability to opt out of the workers comp environment entirely.

For about a century workers comp has been a pact that has bound employers to employees in liability law. Workers give up their right to sue if they are injured on the job. Employers agree to pay for all injuries at work, regardless of how they occurred.

For decades Texas was the only state that didn’t follow these rules. Employers could opt out of the system, but they lost the considerable common law defenses employers usually enjoy. Workers’ Comp Insider has a nice overview of the Texas system.

In 2014 Oklahoma became the second opt-out state. Tennessee lawmakers have proposed their state become the third, even as Oklahoma’s law faces a constitutional challenge, as Business Insurance reports.

At the WCRI conference opt-out will get a hearing. A representative from retailer Nordstrom, which supports opt-out measures, will discuss the matter with an AFL-CIO representative and one from PartnerSource, a company that helps successfully opt-out.

Follow my live-tweeting of the conference @III_Research and check back for another blog post.

Update: Aw, shucks. I learned early Thursday that the opt-out session at the WCRI conference has been canceled. I’ll still be going to the conference.

I.I.I. offers facts and statistics on workers compensation.

A Revisit: Impact of Obamacare on Workers Comp

I.I.I. chief actuary Jim Lynch previews the Workers Compensation Research Institute’s (WCRI) Annual Issues & Research conference:

This time last year, property/casualty insurers worried how the Affordable Care Act’s rollout would affect workers compensation insurance. The debate seemed to disappear as the law took hold, but research to be unveiled at a March workers compensation conference in Boston might return the issue to the limelight.

The big fear a year ago was cost-shifting, and both health insurers and comp insurers felt costs would be shifted onto them. The issue was the borderline claim, one that could arguably be a health claim or a comp claim.

Consider a person with a lingering back injury. The injury could have been caused by heavy lifting at work or at home, and the injured person might be able to make a claim on either health insurance or workers comp.

Comp insurers worried that the ACA was tightening health insurance cost controls better than comp insurers were allowed to. As the cost containment took hold, cases that straddled the border might drift into the workers comp world.

Health insurers, meanwhile, worried that they would take on claims of the previously uninsured, some of whom used to find a way to make that borderline case into a workers comp claim.

Research swung both ways. As the law has rolled out, the issue dissipated, at least among the mainstream media. If there was an impact, it appeared to be too small to measure.

Now the Workers Compensation Research Institute (WCRI), a Cambridge, MA, not-for-profit organization has looked at the ACA/comp issue again, specifically the potential effect of accountable care organizations on the workers comp system.

Accountable care organizations add to health care’s alphabet soup by being known as ACOs. They are groups of doctors, hospitals and other health care providers that combine to form networks that coordinate patient care. If they can save money while keeping quality high, they share in the savings. Kaiser Health News has a Q&A with details on how ACOs work.

The health care law offers incentives to create ACOs, but WCRI’s research indicates that “as ACOs become the norm, the number of workers compensation claims is very likely to increase,” said Richard A. Victor, WCRI executive director. The dreaded cost-shifting may be on its way.

Details of WCRI’s analysis will be released at the organization’s annual Issues and Research Conference March 5 and 6 in Boston. Other sessions at the conference will cover physician-dispensing of drugs, low fee schedules, a look at workers comp reform over the past two decades and look at challenges the line of business faces in the years ahead.

The I.I.I. has an Issues Update on workers compensation, one of the oldest casualty lines of business and one of the most complex.

Loss Trend Factors Unearthed

I.I.I. chief actuary James Lynch digs into the data in an informative piece on loss trend factors:

Actuaries can be buggy about numbers, to say the least, and my article in this month’s Actuarial Review — a publication of the Casualty Actuarial Society (CAS)  – looks at a couple of sources of loss trends that can act as useful benchmarks.

One looks at workers compensation medical costs in 25 states. It is produced by the Workers Compensation Research Institute (WCRI), an organization I work closely with in my role as I.I.I. chief actuary.

The other looks at comp loss trends plus those of about a dozen other lines of business and has information going back to the 1930s, if you do a little digging. Older actuaries remember it as the Masterson Index, named after a Stevens Point, Wisconsin, actuary who created it and maintained it until relatively recently. Now Towers Watson actuaries have taken over the calculation.

As a sidebar, I also looked at the way the federal government measures auto inflation, including how it handles the introduction of predictive models and other overhauls to rating plans.

Impact of ACA Like Hurricane, Says WCRI Exec Victor

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:

â–  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.

â–  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.

â–  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:

â–  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.

â–  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.

MIT Economist Speaks on ACA Impact @WCRI

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.

WCRI Conference Preview

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.