Health care reform legislation is expected to have some impact on workers’ compensation costs, but those impacts should be gradual and reflected in normal ratemaking processes, Swiss Re said in a recent report.
The report, “The Impact of U.S. Health Care Reform on Workers’ Compensation and Other Casualty Lines,” noted that the reforms are not specifically directed at the workers’ comp system and that some provisions are not applicable to workers’ comp.
But, the report added, the legislation “may have an indirect effect on workers’ compensation medical costs and on the cost structures underlying the medical portion of tort liability settlements and judgments.”
The reforms aimed at bending the health care cost curve downward could have both positive and negative effects on workers’ comp, according to the report. These reforms include initiatives such as:
o A mandate that insurers spend either 80 percent (small group market) or 85 percent (large group market) of premiums on medical services
o A heavy focus on wellness programs
o Measures to encourage quality care through payment models and financial incentives.
On the positive side, Swiss Re said workers’ comp insurers “can learn some valuable lessons and best practices from health insurers who implement successful wellness programs.”
Additionally, insurers can benefit if they can adapt results-based compensation to the workers’ comp system, Swiss Re said.
But Swiss Re cautioned that “to the extent that cost containment ends up meaning the government starves the provider community, insurers could face cost shifting into the workers’ compensation system.”
Efforts in the reforms to reduce the uninsured population could benefit the workers’ comp insurers by reducing the number of attempts to bring non-work injuries into the workers’ comp system, the report stated. But the report also noted that similar health care reform provisions in Massachusetts–while lowering the number of uninsureds–had no measurable impact on workers’ comp utilization.
Reform goals to expand access to primary care services could negatively impact workers’ comp, according to the report. As the number of uninsureds is decreased, Swiss Re said it will be “essential that providers expand to meet the new demand.”
Swiss Re explained that cost pressures associated with this expansion could impact workers’ comp if the number of insureds increases substantially before the infrastructure to service them is in place.
Efforts in the legislation to reform private health care insurance should have “little to no impact” on workers’ comp, according to the report. These include provisions such as ending exclusions on pre-existing conditions, prohibiting lifetime limits, and modified community ratings where health insurers will be able to vary premiums only by age, tobacco use, geography and family size.
Swiss Re said it will take months or even years to fully understand the reform’s impact on workers’ comp. Ultimately, liability costs could fall or rise based on the success or failure of cost containment and supply enhancement initiatives, the report stated.