As with every other stakeholder in the insurance industry today, the National Council on Compensation Insurance (NCCI) continues to absorb and examine the details and impact of the health-care bill signed into law by President Barack Obama this spring.

Given our area of expertise, NCCI has examined the law with an eye toward enumerating the effects we anticipate for the workers' compensation industry.

To be clear, the overall magnitude and direction of the impacts are not currently measurable, due to the following:

The details of implementation are not currently known, and may take several years to be enacted
There are potentially offsetting impacts
The ultimate long-term effects will depend on behavioral changes and actions by claimants, attorneys, healthcare providers, insurers, and regulators

However, as of this writing, we can outline some of the potential direct and indirect effects that the national health-care bill might have for the workers' compensation insurance market, as well as some longer term items that the industry will need to keep an eye on.

Direct Effects of the New Federal Health-Care Law

NCCI has identified two immediate, direct impacts of the health-care law: Changes to black lung entitlement provisions and changes to Medicare reimbursement levels, as described below.

Changes to Federal Black Lung Benefit Entitlement Provisions (Section 1556): Federal Coal Mine Health and Safety Act (FCMHSA).

In 1981, certain provisions of the FCMHSA were made inapplicable to new claims filed after Jan. 1, 1982. Two of these provisions have been reinstated for claims filed after Jan. 1, 2005.

The provisions will:

1. Provide for an automatic survivor benefit to be paid upon the death of a miner with an awarded federal black lung claim without the requirement to prove that the miner's death was due to coal workers' pneumoconiosis; and

2. Reinstate the rebuttable presumption that a miner is totally disabled due to pneumoconiosis, that his death was due to pneumoconiosis, or that at the time of his death he was totally disabled by pneumoconiosis, if the miner had:

15 or more years of underground mine employment,
was totally disabled by a respiratory condition, and
the X-ray was interpreted as negative for complicated pneumoconiosis.

Both of these entitlement provisions will make it easier to get federal black lung benefit claims filed and approved and will increase the benefits payable. These provisions will also increase future insurance premium costs. NCCI has submitted law-only filings in the largest coal states (Kentucky, Virginia, West Virginia) to address this change in exposure. As other states are reviewed during the year, we will be evaluating how these provisions impact those state costs.

NCCI is in the process of estimating the retroactive impact of the Black Lung Act changes on assigned risk coal mine exposures.

Changes to Medicare Reimbursement Levels Under Title III: Improving the Quality and Efficiency of Health Care.

Although the details are not currently known, to the extent that the Centers for Medicare & Medicaid Services (CMS) authorized reimbursement levels for Medicare are modified, there may be cost impacts for those states that utilize Medicare as a basis for the reimbursements in their state workers' compensation fee schedules. This may affect both Physician Fee Schedules and Hospital Fee Schedules (In-Patient, Out-Patient, and Ambulatory Surgical Centers).

The magnitude and extent of the impacts on state workers' compensation costs will depend on two factors:

How and when the federal government makes modifications to Medicare reimbursements.
How states adopt the revised Medicare reimbursement formula for their workers' compensation fee schedules.

NCCI will continue to evaluate the impact of these changes to workers' compensation state systems as the implementation details become known.

Federal Health-Care Provisions That Bear Watching

Among other provisions of the health-care law that will bear watching for long-term lasting effect (both intended and unintended) are:

Increased Health-Care Coverage: Those without health insurance or with non-work-related pre-existing conditions could potentially be accessing workers' compensation currently for medical care. Since the health-care law expands the number of people covered and requires coverage for pre-existing conditions, there may be a decline in workers' compensation funding of treatments for pre-existing non-work-related conditions.
Wellness Initiatives: Promotion of wellness programs may reduce the incidence and duration of workers' compensation claims (e.g., a decline in obesity).
Protecting Consumer Access to Generic Drugs: This facilitates the early entry of generic drugs into the marketplace while preserving the incentive for innovation. If certain generic drugs are made available sooner, some incremental cost savings in workers' compensation could emerge.
New Taxes: New taxes are anticipated to be levied on medical devices, drug manufacturers, and health insurance companies.
Reduction in Fraud and Abuse: The reform law's fraud and abuse provisions have a wide reach and touch on nearly every aspect of providing health care, from provider enrollment, to payment for services, to unusual ordering/billing practices. Enforcement and penalty provisions may raise compliance.

Other Areas of Interest

Transaction Standards (Section 10109): The new law provides that by Jan. 1, 2012, the U.S. Health and Human Services (HHS) secretary must solicit input from standard-setting organizations and others interested in the development of national reporting standards as they relate to health-care services. The secretary is also required to determine whether the reporting of health services provided through workers' compensation should be subject to HHS standards and operating rules.

The goal is to "improve the operation of the health-care system and reduce administrative costs." This section could possibly result in another set of standards for workers' compensation medical data reporting at a time when CMS continues to struggle with the implementation of Section 111 data reporting.

Coordination, Subrogation, and Reimbursement Issues: The House Health Care Bill originally included language that would require the Commissioner of Health Insurance to establish standards for the coordination and subrogation of benefits and reimbursement of payments in cases involving individuals and multiple-plan coverage.

According to some congressional committee members, workers' compensation was to be among the plans that would be subject to these standards. However, that language was removed in the Reconciliation Act of 2010. Since these are issues that still need to be addressed, they may be taken up during the rule making process.

Medicare as a Secondary Payer: Although the bill does not specifically mention it, there is the potential — through the reduction in fraud and abuse initiatives — that the administration will more aggressively pursue the recoveries from workers' compensation and other primary insurance payers.

As noted at the outset, the overall magnitude of the industry changes that will be caused by the new federal health-care law are not clear at this point, though we do expect significant changes.

As the challenges to the new health-care law are settled and we are able to complete a comprehensive examination of the legislation's impact, NCCI will communicate our findings both on our web site at www.ncci.com and in our formal discussions with other stakeholders.

Steve Klingel is president and CEO of NCCI Holdings, Inc. www.ncci.com.

Special Reports /

Federal Health Care and Workers' Compensation

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