James F. Mahoney, Attorney

November 2012

How Will Obamacare Affect Workers' Compensation Costs?

The Affordable Care Act provides some hope for reining in runaway premium rates

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The RAND Corporation recently studied the issue by looking at the Massachusetts version, which was implemented in 2006; and Rand decided that the ACA provides at least some hope for moderation of workers' compensation (WC) premium rates, which are currently skyrocketing.

The RAND findings suggests that health care reform may actually reduce WC claim numbers, billing rates and volumes, and overall costs. Although the study looked only at acute care in hospitals and ERs, it offers insight into other areas of work WC expense. It didn’t look at pharmacy costs or other modalities of care, e.g. chiropractic, or assess how a provider may treat the whole person instead of dumping the cost onto Comp. But here are some thoughts and takeaways:

The year 2006 wasn’t far enough back to consider additional benefits of near-universal health care, such as wellness care. But we can surmise that claimants may have an aversion to misapply for WC when their non-industrial accidents or illnesses can be covered by their health insurer.

There may also be a return by providers to consideration of the appropriateness of treatment and treatment kind and frequency.

Of course, for those claims already in the system, the answer is “no effect,” at least not immediately. But, long term, the ACA will probably have significant effects.

For example, will some claims that aren’t really industrial stay out of WC if the person has health insurance? Yes.

Will healthcare providers and lawyers who seem to funnel questionable claims or order excessive modalities of care be likely to avoid doing so?

Well, probably the docs will if they don’t care who’s paying them. If a patient has a potential WC claim but no health insurance, there are many docs who decide the condition is related to employment. If there’s health coverage to bill, there’s a better chance that won’t happen.

Another pivot point is the fee schedule used to pay treating doctors in Work Comp. Which will pay better? There’s no doubt in my mind that WC medical fees will quickly be aligned with healthcare fees, which will help hold down expenses in many states.

The ACA may also affect WC if there’s an emphasis on wellness programs, better and increased use of electronic medical records, and increased use of generic meds, and other likely initiatives which will come from health insurers in their efforts to increase medical efficiency.

Injured workers with co-morbid conditions cost the WC system quite a bit. You have to treat the unrelated condition to get to treat the related condition (see, e.g., obesity and back surgeries). Co-morbidity increases indemnity (lost wage replacement) expenses significantly right now.

Indemnity is an issue that the ACA can’t address. But, quite frankly, it’s health care costs that drive premium more so than indemnity. If we could only do something about indemnity obligations, we could – conceivably – drive away WC coverage or at least drive down premium considerably. Hmmm.

Next, if a claimant already in the system knows he/she can get health coverage after settling a WC claim, he/she may be less reluctant to settle his/her case, without having the current concern about giving up the right to claim future medical care from the WC insurer.

This alone would free up reserves that are held for long, long years – Work WC medical care can extend out for life by court order.

This will (should) also free up the collateral requirements for you employers who have high-deductibles or self-insure.

Take heart, all you doomsayers.