A few weeks ago the folks at UCDavis published a study on workers comp, asserting that WC payers – insurers, TPAs, but ultimately employers and taxpayers – are heavily subsidized by other insurers, that, in effect, work comp cost-shifts to other payers on a scale almost beyond comprehension.
To quote UCDavis’ press release, “almost 80 percent of these [occupational injury medical and associated] costs are paid by employer-provided health insurance, Medicare, Medicaid, Social Security and other disability funds, employees and other payers..this cost shifting leads to artificially low workers’ compensation premiums that should be used to cover wage replacement and medical care for employees injured on the job.”
Note – I wish I could add a lot more to this analysis, but I’ve asked UCDavis for a copy of the actual report (“Workers’ Compensation Benefits and Shifting Costs for Occupational Injury and Illness.”) twice over the last month, and have had no response whatsoever.
So, rather than wait seemingly forever for my email inbox to chime with the welcome news that Ms. Marjory Spraycar has responded to my entreaties, here’s what I make of this “study”.
First, there’s no indication that researchers Leigh and Marcin factored in settlements; those legal resolutions that result in the claimant assuming all future responsibility for medical and wage replacement issues related to their work comp claim. Simply put, if there’s a settlement, the claimant agrees that they – the claimant – will be responsible for the medical and related costs of that work comp injury going forward (this is simplistic and yes, there are variations, but generally speaking this is the way it works). Not Medicare, or Medicaid, or their Aunt Sally, or Aetna or Blue Cross – the claimant.
For Leigh and Marcin to assert that somehow work comp is “shifting cost” to Medicare et al for reported claims is just not reasonable nor accurate – if Leigh and Marcin have considered settlements (which, as i’ve not been provided a copy of the report, I can only assume they have; after all Leigh and Marcin are professors at a major research institution).
Next, I don’t know if they differentiated among states with no ability to close medicals and those where medicals can be settled. If they have extrapolated data from settlement states to all states, this would be a major error.
Third, they recommend we “Link premiums with company-specific injury experience rather than industry-wide estimates, which would encourage companies to lower premiums by reducing workplace hazards.”
I thought this was what experience rating and ex-mods did; perhaps I am mistaken. or perhaps not.
Finally, there’s absolutely no question work comp pays for treatments to help the claimant get healthy enough to return to work – even when those treatments are for conditions completely unrelated to the work comp injury, and especially when the claimant does not have other health insurance thru their employer or Medicaid. I don’t know if Leigh and Marcin put those expenditures on the work comp payer side of the ledger; somehow I don’t think so. Moreover, the failure of group health payers to deal with obesity problems shifts costs to work comp in a major way, one that – again, I do not think Leigh and Marcin considered.
There were a couple other articles that referenced the study; evidently (this is hearsay) home productivity and fringe benefits were included as part of the study’s analysis of costs due to work comp not paid by the work comp industry.
This is, to be kind, rather a stretch. The ever-quotable Bob Hartwig of III noted workers comp “was never meant to be a form of business interruption insurance, which is what’s being proposed here.”
I remain hopeful I’ll hear from Ms Spraycar or one of her associates at UCDavis. Quite frankly I’m surprised by the lack of responsiveness.
Then again, this is just a blog…
Jul
9
And don’t forget the Medicare Secondary Payer Act. The Work Comp Conference in Orlando in August is devoting an entire day (Wed, Aug 22) to the topic. Maybe the authors of the study should attention.
I have not yet read the referenced article and study as noted in the press release. I have studied Leigh’s earlier research and have examined some 25 +/- studies of occupational injury/illness costs that may be paid for by non- WC sources. Leaving out the very problematic area of productivity loss,the weight of the evidence is that about 40% of work-related conditions do not result in workers comp claims. A constructive response to Leigh et al’s challenge is to ask, in what
practical, verifiable ways can insurers and regulators (with an emphasis on regulators) obtain more complete coverage of these conditions by WC insurers? This does not mean buying the entire Leigh package.
“Third, they recommend we “Link premiums with company-specific injury experience rather than industry-wide estimates, which would encourage companies to lower premiums by reducing workplace hazards.””
Wow, now that appears to really be a significant & fundamental misunderstanding of how comp is priced if (IF) that is what they have written. Yes, from an industry 30,000 foot level explanation, major industry group rates are calculated by grouping/pooling similar industry/risk classes together to establish the annual estimated losses and base rates for that similar grouping of risks, but the individual policyholder rate is then determined by multiplying/calculating each individual policyholder’s classification(s) by their E-Mod (ex-mod) which was created from each policyholder’s historical, individual claims and performance/losses. While this is a very simplistic and general overview, it is the gist of how it is generally done. Thus, I must be reading the report statement wrong as this is pretty 101 level stuff that the writers surely would have researched and understood fully before publishing. Surely.
We all know there is some cost-shifting both ways. However, there is no way to accurately measure what workers’ comp pays for that it should not, and what gets paid by other sources that should be workers’ comp. Absent those accurate measures, this is nothing but speculation.