In an “Out Front Ideas with Kimberly and Mark” webinar broadcast on Jan. 12, Kimberly George, a senior vice president at Memphis, Tenn.-based Sedgwick Claims Management Services Inc., and Mark Walls, a vice president with St. Louis-based alternative risk funder Safety National, discussed their thoughts on the issues that the Workers’ Compensation industry should have on their radar for 2016.
Here is a summary of the 10 of the 20 issues that they expect to affect the Workers’ Compensation industry this year:
1. Viability of Workers’ Compensation
Is the grand bargain still doing what it was established to do?
There is a growing debate around the gaps and shortcomings of Workers’ Compensation.
Our industry needs to engage in a critical analysis of these issues.
2. Election cycle
Everyone knows that this is a presidential election year. But election time also means governor and insurance commissioner seats are on the ballot, too.
State insurance commissioners are elected in 11 states and appointed in the other 39. In the upcoming election, there are 12 gubernatorial seats and five insurance commissioner positions to be decided.
The Workers’ Compensation industry needs to be paying attention to these elections because the insurance commissioners can have significant influence over procedures, policies and enforcement in their respective states.
In October 2015, 10 high-ranking Democrats on key Senate and House committees sent a letter to the Department of Labor asking them to conduct a critical review of state Workers’ Compensation systems.
Some are concerned that this is a sign we could see federal government involvement in state systems.
In some ways, the federal government is already involved in Workers’ Compensation. For instance, the Occupational Health and Safety Administration has a tremendous impact on Workers’ Compensation. In addition, Medicare Secondary Payer Compliance is another example of federal law affecting the system.
Recent criticisms of Workers’ Compensation have focused on the vast benefit differences between states.
There is also growing concern that workers who are permanently disabled are pushed off Workers’ Compensation and onto Social Security disability. With Social Security having solvency concern, lawmakers will be receptive to discussions on how to keep Workers’ Compensation from shifting their long-term claims to the federal government.
This is a substantial issue to watch in the coming years, and there is a significant chance that the federal government will suggest minimum benefit recommendations to the states at some point in time.
This could especially affect states that have hard caps on the total amount of indemnity benefits that an injured worker can receive.
4. Affordable Care Act
The implementation date of the high-cost employer-sponsored health plans tax, dubbed the “Cadillac tax”, was recently delayed from 2018 to 2020.
It imposes an excise tax of 40% on health plans whose value is more than $10,200 for individual coverage and $27,500 for a family.
Regardless of the delay, employer-sponsored benefit plans have evolved over the past five years in preparation to avoid the additional tax. The formerly rich benefit plans were dropped in an effort to provide benefit plans within Affordable Care Act’s requirements and often replaced by higher deducible plans with reduced benefits.
The National Council on Compensation Insurance and the Workers Compensation Research Institute have both conducted studies on how the ACA has affected Workers’ Compensation.
Results have not conclusively tied treatment delays or actual cost shifting to Workers’ Compensation. We believe ongoing studies by these organizations and others are important to evaluate the impact of ACA on workers’ compensation.
Other issues that should be monitored include consolidation of health systems, providers and insurers.
In 2015, there was over $700 billion dollars’ worth of consolidation in the healthcare marketplace. This is driven, in part, by the ACA because scale and size assist providers with efficiency, purchasing power, and the need to provide a continuum of care.
Another issue where the ACA could affect Workers’ Compensation is changing reimbursement models. Medicare is looking to shift to a value-based reimbursement model, and many state fee schedules are based on Medicare rates.
Although not specifically related to ACA, a healthcare topic to keep an eye on is drug pricing. Drug pricing will continue to be a topic within the media, pharmacy benefit managers, employer benefit managers, health plan experts and politically. Prescription drug pricing increased over 10% in 2015, and this trend is expected to continue. This has an affect on the cost of Workers’ Compensation claims.
5. Holes in Workers’ Compensation
What many people do not realize is that Workers’ Compensation protections are not available to all workers in the United States.
In 14 states, employers with five employees or fewer do not have to secure coverage. In 17 states, there is no legal requirement for coverage of agricultural workers.
Half of the states do not require coverage for domestic workers, and five states specifically exclude coverage for these employees.
There are also states that create exceptions for certain types of workers, such as state employees in Alabama.
Finally, we have seen from court cases around the country, occupational diseases that take several years to develop are often barred by the statute of limitations leaving those workers with no recourse for benefits.
These holes are yet one more thing that critics point to when talking about the inadequacy of Workers’ Compensation. The occupational disease issue is particularly concerning because it is very easy to question the fairness of barring a claim under the statute of limitations and, at the same time, denying the injured worker the ability to pursue a claim in civil court under the exclusive remedy protections of Workers’ Compensation.
6. Blurred lines between Workers’ Compensation and group health
The employee health model is evolving. Employers are finding the need to provide a consistent healthcare experience for their workforce and plan members.
They would like to find a model that provides both quality care and consistency for their employees, regardless of whether the need for treatment arises from a work injury or at home. Because a healthy workforce is a productive workforce, employers also feel that there is a need to tie health and productivity together.
We will continue to see health systems build accountable care organizations (ACO) and enter the health plan, insurance and risk-bearing arena with the goal of directly selling to and partnering with employers. ACOs are an attractive model for employers supporting a healthier workforce by extending the culture of health philosophy from work to the home for their employees and their families.
Mental health is a top driver for absence across employers and not simply a health cost concern. Mental health care should be as important as physical health care and is currently a focus of population health and employer programs. Employers are looking for healthcare models, which consider the person as a whole and offer consistent, engaging behavioral health and wellbeing programs for their workforce.
Workers’ Compensation key stake holders should be a part of the evolving health model discussions and early stage planning so not to be left in the dark as health models change.
7. Options to Workers’ Compensation
Texas has a system that allows employers to completely opt-out of Workers’ Compensation benefits.
Employers in Oklahoma have an option to Workers’ Compensation that allows them to develop a private benefit plan that replaces state-mandated Workers’ Compensation.
It is this concept of an option that is looking to spread to other states. Bills on this issue will be reintroduced in Tennessee and South Carolina this year, and other states have begun preliminary discussions.
Some employers feel that they can provide better benefits to their injured workers at a lower cost with these option programs. Others are concerned that these programs lack the controls and oversight of state Workers’ Compensation. One thing is certain: This issue is not going away any time soon. Perhaps these discussions around options to workers’ compensation can lead to discussions about Workers’ Compensation reform, including employer medical control, increasing thresholds of compensability and reducing the bureaucracy of the workers’ comp system.
8. Evolving claims model
The industry realizes a need to focus more on the injured worker as a consumer.
The model needs to focus more on advocacy, but what does this really mean? Is this a person who assists the injured worker in understanding the claims process or is there a need to change the culture of our industry to be less adversarial?
Other parts of the evolving model involve who actually touches the claim. Are there elements that could be automated? Should there be more specialization with different individuals performing different tasks instead of the current model where the claims adjuster is a generalist performing multiple tasks across multiple jurisdictions?
The claim-handling model also needs to adapt to new technology and the way in which different generations want to be communicated. Some injured workers prefer text instead of email or phone calls. Some like to access claims information in an app on their mobile device or 24/7, as they want it that moment. The model must evolve to take full advantage of new technology and communication methods.
9. Florida Supreme Court
Over the past two years, four cases challenging the constitutionality of various aspects of Florida’s Workers’ Compensation statutes have made it to the state’s Supreme Court.
The first of those cases, Padgett, ended in late December when the Supreme Court declined review. That case had been thrown out on procedural grounds during the appeal process, so the Court of Appeals and Supreme Court never addressed the underlying constitutional challenge.
There are three cases still to be decided:
- Westphal, which deals with caps on temporary disability benefits.
- Castellanos, which addresses limitations on attorney fees
- Stahl, which focuses on post maximum medical improvement medical co-payments and the elimination of permanent partial disability payments.
The expectation is that the Florida Supreme Court will address all of these cases in 2016, but nobody knows when that will occur.
Workers’ Compensation is one of the most highly regulated lines of insurance, and regulators are increasingly aggressive in pursuing fines and penalties.
Every form filed and every payment transaction is an opportunity for a penalty. Electronic data interchange allows regulators to automate the fines and penalties. Some states perform retrospective audits on activity up to 10 years in the past. The independent medical review process process in California adds administrative cost to claims without necessarily improving outcomes and states with self-imposed penalties may be driving up the cost of doing business beyond the benefit of the penalty payment. Lobbying is becoming an increasingly important area for payers and service providers to consider.
The significant costs associated with the bureaucracy of Workers’ Compensation regulations are not improving the outcomes on claims. Most of the money collected from the fines and penalties is paid to the states. The programs may cover the operating costs of state workers’ compensation division and not be paid to the injured worker or medical provider.
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