Tag Archives: healthcare reform

Curtail ACA’s potential impact on self-insurance programs

The long-tail nature of professional liabilities and workers’ compensation claims make it difficult to gauge the effect that healthcare reform will have on self-insurance. A plan of action is needed though to help organizations value their self-insurance programs. Milliman’s Richard Frese recently authored an article in HFM magazine offering five strategies for lessening the impact of the Patient Protection and Affordable Care Act (ACA) on self-insureds.

Here is an excerpt:

Healthcare leaders will be better prepared to ensure that actuarial estimates will meet loss accruals and forecast needs by implementing these strategies.

Inform all parties of legislation updates and implementation. Although the components of the ACA have been determined, implementation has hit a few snags. Even with a strong effort to explain the proposed changes to the public, there have been multiple interpretations. Further clarification and revisions—and even repeal—are possible. Healthcare leaders should focus on keeping all parties—including the broker, actuary, auditor, third-party administrator, outside defense counsel, and captive management—involved in the self-insurance program apprised of any changes. In return, these parties also should communicate any changes with each other and with the organization’s senior leaders.

Gather opinions from various sources. Senior leaders of each provider organization may not share the same views as leaders of other organizations regarding how the ACA may affect their organization’s role and function. The leaders of each organization will want to ensure the organization’s service providers are on the same page and are working toward its goals and directions, particularly if strategic goals and directions have been revised because of the ACA. During these conversations, leaders also should share their interpretation of what is occurring in the industry.

Monitor loss activity. Healthcare leaders should work closely with risk managers, third-party administrators, and other claims personnel to track any changes in frequency and severity of reported claims. Service providers should be alerted immediately about any noticeable changes. It should be noted whether such changes are believed to be due to the ACA or a different cause, such as a change in claims handling. It will be critical to determine whether any loss change reflects an actual trend and is expected to continue or whether the change is related to a one-time event. Internal meetings also might be held more frequently to better monitor activity.

How will healthcare reform influence the workers’ compensation system?

The Patient Protection and Affordable Care Act (ACA) may have several indirect effects on workers’ compensation. The most immediate impact could result in the shifting of medical expenditures to the health insurance market as a portion of the uninsured population will no longer need to use workers’ compensation to obtain healthcare.

In his new article “ACA: An act of unknown consequences for workers compensation”, Derek Jones details how healthcare reform may affect workers’ compensation. Here is an excerpt:

The U.S. Census Bureau estimated that the uninsured population in 2011 was 48.6 million or 15.7% of the U.S. population. The combination of guaranteed issue and individual mandates that become effective in 2014 with expanded Medicare eligibility is expected to facilitate coverage for an additional 30 million lives.

One clear intention of the ACA is that greater access to health insurance coverage should lead to a healthier population, which should have two direct effects on the workers compensation market. First, all else being equal, a healthier workforce is expected to lead to a reduction in claim frequency. Second, a healthier workforce could also lead to greater ability to recover from workplace injuries, which will accelerate the employee’s return to work. If this occurs, or if healthier individuals are less inclined to continue on workers compensation with a combination of work-related and other medical conditions, the claim experience of the workers compensation market should improve.

Less clear, but perhaps more significant, is the potential shift of costs between the workers compensation and the health insurance markets. A common challenge for workers compensation providers is the tendency by a portion of the workforce that does not have health insurance to file for or to stay on workers compensation, with some health benefits being paid for medical conditions that may not be work-related. In practice, to the extent many of these claims are treated easily and closed quickly, the expanded availability of healthcare insurance by the general population may shift some of these claims to healthcare. To the extent they are small, there may not be a significant impact on either system. To the extent any of these claims are larger, there may be a significant cost shift from workers compensation to healthcare.

For workers with ailments that require regular treatments over a number of years, there is the issue of convenience in addition to the question of availability of insurance coverage—both workers and medical service providers (e.g., physicians, hospitals) generally prefer health insurance over workers compensation. Workers tend to dislike the lack of control they have in the workers compensation system, which is due to the requirements of dealing with claims handlers and medical claim payment systems and, in some states, having to select physicians from the employer’s medical provider network. Workers also seek to minimize interaction with a carrier’s claim handlers; this is a frequent driver of claimants’ pursuits of workers compensation claim settlements. When a choice between health insurance and workers compensation coverage is available, many workers will opt for health insurance.

For physicians, the workers compensation system typically requires more justification of the treatment, as well as the preparation of reoccurring formal reports and other paperwork. In some cases, they may be required to testify regarding their treatments before receiving reimbursement from the insurance carrier. This administrative burden and low fee reimbursements are why many physicians do not accept workers compensation claimants as patients. Opportunities to direct patients to claim coverage under health insurance instead of workers compensation will be welcomed by the physician community.

While workers find the administrative requirements of workers compensation to be onerous, the increased use of deductibles and copayment requirements in the health insurance market could drive some users back to the workers compensation market. Another factor that could increase the costs of workers compensation is the current shortage of primary care physicians in the United States. A shortage of primary care physicians could delay the employee’s medical evaluation(s) and thus impede carriers’ ability to deny questionable claims as quickly as possible. More importantly, the lack of primary care physicians will prevent timely treatment of workers’ medical conditions. Claims professionals commonly acknowledge that the first 90 days of a claim define the course for the claim while it remains open. Obstacles to timely initiation of a proper course of treatment will slow workers’ ability to recover and to return to work, which could unnecessarily extend the medical cost and wage replacement components of workers compensation claims.