I’m often asked how and why workers comp and individual/group health differ; the question comes primarily from investment and private equity firms, managed care vendors, and pharma.
The question is both simple and difficult to answer, as the follow-on query is almost always ‘why are the two so different, and when is work comp going to ‘catch up’?
First, the differences. The biggest difference is in the type of coverage; WC involves both medical and wage replacement while individual/group is only concerned with medical coverage. Of course, individual/group health is far larger in terms of dollars, as WC premium and equivalents are around $80 billion while individual/group health is more than ten times that at $840 billion.
Work comp:
– Regulated by states and mandatory in every state except TX
– Only covers injuries/illnesses occurring during or arising out of the course of employment
– Return to Work is critical
– The insurer owns the claim forever…or until the claimant is back to work, the claim has been settled and/or has reached maximum medical improvement
– Mix of injuries and illnesses is different, mostly Musculoskeletal/orthopedic, trauma and some cardiovascular (public safety in a handful of states
– Coverage is “first dollar, every dollar”; No copays, coinsurance, or deductibles, and no caps
– Drug “Formularies” tend to be fairly open
– Provider types – Occupational Medicine, Physiatry/PM&R, Orthopedics, Neurology, Neurosurgery, General practice
– Relatively few physicians handle most WC cases; 65% of claims in CA handled by 2.2% of physicians (<900 physicians) (source CWCI)
- Comp docs only treat the occupational injury, NOT the 'whole person'
Individual/Group health:
– Not mandatory or required by law
– Regulated by states (fully insured) and/or Federal government (ERISA)
– Covers all types of injuries and illnesses
– Wide range of provider types
– Physicians treat the ‘whole person’ for all conditions and co-morbidities
– Unconcerned about Return to Work
– Covers treatment delivered during the policy year only
– Employs cost sharing and seeks to affect patient behavior via deductibles, copays, coinsurance
– Drug formularies are dictated by payer and PBM, can be highly restrictive
As to the ‘why’, that’s a longer answer. The question usually assumes work comp is somehow ‘behind’ the group/individual world in terms of care management, reimbursement, and overall sophistication – a view not without some justification. However, the individual/group health world would benefit greatly from the emphasis, if not sole focus, on functionality that pervades and drives work comp medical care, a focus that is sadly lacking in the non-work comp world.
That said, some of the medical management approaches used outside of comp would certainly help address medical cost drivers – some form of financial incentive for claimants, more intelligent disease management and use of expert networks, tighter formularies and much, much more use of clinical guidelines would be a great help (if used appropriately).
Some will never happen – financial incentives for claimants is probably the most obvious example. And for good reason – WC covers employment-based issues, and requiring the employee to pay for care for a condition incurred as a result of employment would be a non-starter in pretty much every state.
What does this mean for you?
Group could learn a lot from comp; and comp still needs to learn more from group.
Jan
19
Joe –
Your post is interesting as I have been thinking about what health insurance coverage will look like in the “new world” we may find with national health care reform. I compare my Work Comp and group health experiences and imagine that “reform health care coverage” may look more like Work Comp than group health. For starters, in the future there will be increased government and political involvement as we now have in Comp. Other items from your list include –
Regulated by states and mandatory in every state except TX (a lot of government regulation, definitely mandatory, and even Texas may have to join ranks on this one)
The insurer owns the claim forever (with new entitlements, I cannot foresee people losing, or changing, their coverage)
Coverage is “first dollar, every dollar”; No copays, coinsurance, or deductibles, and no caps (cannot imagine a politician voting for any of these)
Drug “Formularies” tend to be fairly open (see above).
Another Work Comp trait is compensability determination (no individual identification required). In comp, once it is confirmed the injured worker is an employee and the injury occurred at work, the payments begin. In the new world income determines eligibility. Does that imply a review of tax returns? At what rate of frequency – yearly as in group health or “one and done” as in comp? Will the IRS become a part of our new health administration machine?
Workers Compensation is one of the original forms of health insurance in this country. While your post addresses what group can learn from comp, I suggest you send your thoughts to Congress – Workers Comp may be a model for the new system.
Joe,
Is there any data showing that a worker who goes to a hospital or doctor for workers’ comp and has a good experience, will choose that same provider when they or a member of their family have a group health problem?
Thanks.
Mike