In Part 1 of this series, I discussed such concerns as rising prices for generic drugs and medical treatment advances as some issues to be aware of. Here I share my thoughts about additional workers compensation issues to watch in 2015.
Evolving healthcare model and integrated disability management
Larger employers are developing outcome-based networks, not only for workers’ compensation, but for their group health as well. They’re contracting directly with the healthcare networks to ensure that their workers receive the best medical care and tying compensation to outcomes. We’re seeing a shift from a focus on price to programs with an understanding that better outcomes lead to increased productivity and overall lower costs.
Employers also are recognizing the importance of mental health to wellness. We’re seeing a wellness revolution more focused on the patient as a whole person and the importance of managing health both physically and mentally.
The evolving health care model is tied directly to an evolving viewpoint on disability management. More employers are realizing the importance of managing all disability, not just that associated with workers’ compensation claims. I feel this integrated disability management model is the future of claims administration. Employers who retain risk on the workers’ comp side usually do the same thing with non-occupational, short-term and long-term disability.
Non-subscription or opt-out has been allowed in Texas for many years. In reality, Texas is an opt-in system because employers who choose not to subscribe need only notify the state and their workers of this decision. There’s no requirement to replace workers’ comp with an alternative benefit plan although larger employers in Texas who opt-out do use such a plan.
The Oklahoma Option that started last year is viewed as a more exportable version of opt-out. Under this system, employers can opt-out of workers’ compensation, but they must replace it with a plan that provides the same (or better) benefits than those available under traditional workers’ compensation.
Although some view the Oklahoma Option as the start of an opt-out revolution, it’s too early to tell what impact it ultimately will have. I expect to see opt-out legislation in a handful of other states in the next three to five years.
Employee or independent contractor
Employee classification should be a fairly basic issue: is a worker your employee or an independent contractor?
The right to control is one of the most significant factors used in this determination. For example, if you’re a trucking company, you hire drivers who can work only for you, and you determine what loads they haul and where, then they will likely be considered your employees, and subject to workers’ comp protection. You should consult with an attorney on the status of your work force because these considerations go well beyond the workers’ compensation implications.
Much of the attention has been focused on medical marijuana as a treatment option. My concern is around employment practices, which have been centered on the fact that marijuana is illegal under federal law, so any trace in the system is unacceptable. I fully expect the federal government to reclassify marijuana from Schedule I to Schedule II in the next few years. When that happens, zero tolerance policies in the workplace will no longer be valid. Instead, the focus will have to be on whether the person is impaired, as it currently is with alcohol.
The next pandemic
With workforces that travel around the world, the threat of a global pandemic is very real. As an employer, are you allowed to quarantine an employee who traveled to an infected country on vacation, not on business? How do we protect our employees from the next pandemic? How do we continue business operations if we had to close for 30 days because of a disease outbreak? When is a disease such as this covered under workers’ compensation? How will your insurance coverage respond? These are all questions that employers need to be asking before the next pandemic comes along.
Medicare secondary payer compliance
I mentioned Medicare Secondary Payer Compliance in my issues to watch last year, and it’s returned this year. This area of compliance is constantly evolving. There are not a lot of hard and fast laws, so most of this evolution is driven by advisory memos from the Centers for Medicare & Medicaid Services and case law. Payers can think they are following all the rules yet they can still end up in costly litigation.
There also is an alarming trend of whistleblower lawsuits that have been filed alleging intentional noncompliance with Medicare secondary payer regulations. The potential exposures here are huge if noncompliance is found.
Rates and market cycles
After several years of increasing rates around the country, the National Council on Compensation Insurance is projecting that, in 2014, workers’ compensation combined ratios will be below 100% for the first time since 2006. Writing workers’ compensation is profitable again.
What should buyers expect in 2015? As in the past, individual loss experiences will determine what happens with premiums. Employers with favorable loss experiences get lower rates, so it pays to stay diligent in the areas of loss prevention and claims management.
Constitutional challenges similar to Padgett in Florida
In 2014, a judge in Miami-Dade County sent a shockwave through the state when he declared the workers’ compensation law to be unconstitutional. Although I don’t think the Padgett case will be upheld on appeal, I am concerned that it’s the first of many similar cases we could see around the country. [Padgett v. State of Florida, CASE NO. 11-13661-CA 25, Aug. 13, 2014.]
The judge in Padgett ruled that the workers’ compensation statutes were unconstitutional on their merits because the benefits provided are no longer an adequate replacement for the right to sue in civil court that that the workers gave up. I expect we’re going to be seeing more of the constitutional arguments in the future.
The one thing in this area I see lacking is results. Predictive analytics are valuable only when they change behaviors. Ask yourself, what is the goal of the analytics? What actionable issues will they identify? What actions will you take in response to the identified issues? How will you measure outcomes?
The only way to know whether the analytics are working is to see your claim costs decrease, but, in the long tail of workers’ compensation, this can take time. Most of the predictive models have only been available for a few years, so it’s too early to tell whether they are indeed changing behavior and saving the employer money.
There also is a potential danger associated with predictive analytics that I don’t hear anyone talking about. What happens when these analytics are used in litigation as evidence that an injured worker was “labeled” and treated differently because the analytic identified certain red flags? What may be a routine claim handling function can look unusual to a jury that doesn’t understand such things.
Overall, I feel some predictive models sound good, in theory, but it’s too early to statistically validate their impact.
One of the biggest issues I see impacting workers’ compensation in 2015 and beyond is the evolving workforce, with technology replacing people more and more. What happens when it becomes cheaper to automate than to hire a human worker? If they can develop self-driving cars, why not self-driving trucks? Just think about how that would alter the risk profiles in the transportation industry.
Also, we’re seeing more part-time versus full-time workers. Unfortunately, part-time workers may have less training, which could lead to higher injury frequency.
With a mobile work force, where is the line between work and personal life when you’re using a company cell phone, tablet or computer to check e-mails any place, any time? Where do you draw the line for someone who works from home regularly? There have been numerous court cases around the nation trying to determine where that line is.
Finally, consider the evolving workforce as it pertains to the workers’ compensation industry itself. You see more adjusters over age 50 than under age 30. Claim handling also is more complex, which makes an experienced adjuster even more valuable. What happens when those adjusters retire? What are we doing to recruit and train that next generation? Will we see more use of automation to compensate for the lack of experienced adjusters?
What should you do in 2015? Stay aware of these issues and stay in touch with your broker and workers’ compensation carrier so you have a strategy in place.