That is the reason there’s been so much investor interest in workers’ comp – we are the epitome of the “yellow sticky” business…

Workarounds abound, driven by individual adjuster’s requests, insurer system limitations, ever-changing state requirements, unrealistic-but-nonetheless-mandatory employer demands, and system “upgrades” that eliminate prior changes built specifically to accommodate a specific customer.

A couple examples…

Some state regulations require insurers to allow physician dispensing of drugs only within seven days of the date of injury. This requires the payer, Pharmacy Benefit Manager, bill review processor, and adjuster to have a “counter” to make sure they aren’t approving/allowing/paying for doc dispensed drugs they shouldn’t be. Data feeds have to be designed and built and tested, new fields added, new alerts coded, and staff trained and monitored and QA processes developed.

Or, more likely, put a yellow sticky with “do not pay Doc Disp Rx w/i  DoI” on that computer.

A large employer’s risk manager does NOT want Dr Awful to perform any Independent Medical Examinations (IMEs).  The employer TPA has to ensure its adjusters never use Dr Awful.  The adjuster that usually handles that employer’s claims is out on maternity leave, and somehow their replacement is supposed to KNOW this, perhaps by puzzling thru the SLAs (Service Level Agreements), reading the special handling instructions, or asking their manager.

Or, more likely, just put a yellow sticky with “DO NOT USE DR AWFUL FOR COMPANY X’S IMEs” on that computer

Pretty soon you get a cube that looks like our photo above.

Our industry is seen – rightly so – as horribly inefficient, ripe for automation, desperate for change. It is also inherently un-automatable, for several reasons.

First, it’s a state-driven system.  And when you’ve seen one state, you’ve seen one state.  Fee schedules, billing rules, employee direction to preferred providers, clinical guidelines, utilization review, state forms, dispute resolution processes, documentation requirements, all vary from state to state, and are constantly changing.  It’s just very, very hard to stay on top of these changes, figure out how to implement them, and also educate adjusters, clinical staff, bill processors, employers, lawyers and patients.

Second, payers chronically under-invest in technology, so even if the vendors have this whiz-bang terrific artificially intelligent tech platform, chances are pretty good they are trying connect with a payer just a generation away from the green screen era…if they ever left it.

Third, TPAs and service vendors have gotten very good at figuring out how to jury-rig their platforms and workflows to accommodate demanding customers.  It’s a hyper-competitive business; it’s either accommodate or lose the business.  Often it comes down to Martha or Mike in operations knowing that Fred the adjuster wants his reports on pink paper on Tuesdays and purple on Wednesdays.  And if that’s what Fred wants, that’s what you need to give him to earn – and keep – his business.

What does this mean for you?

Smart people who really understand the business can find lots of ways to do things more efficiently, increasing performance while stripping out cost and eliminating errors. However, if one doesn’t really understand the business, making things more efficient may well disrupt and break processes put in place because customers want and need them to work that way.

Wrapping up WCRI’s opt out marathon, a four-person roundtable dove into the issue with AIA’s Bruce Wood leading off.  Bruce began with something I kept thinking during the earlier talk: what problem is opt out solving?

Work comp rates are down, no systems are in crisis, benefits are decent and in many states improving, and medical costs are, with a couple notable exceptions, not increasing too much.

Yes, there are problems in many states, some much worse than others – opioids, crappy docs, too much litigation, some outright lousy incentives that motivate bad behavior, and some bad employers, but overall, we’re doing ok.

Bruce went thru a litany of reasons opt out isn’t viable or appropriate; as one of the nation’s most knowledgeable experts on all states’ systems, he knows of what he speaks. One key point is that opt out is a federally regulated plan, therefore states can’t require financial stability or standards or minimums or audits.  Thus, even if states pass laws requiring financial standards, guarantee funds, etc, these laws will not apply to opt out.

Next up Elizabeth Bailey of Waffle House gave her views; the covered-smothered-chunked-and-served company is a non-subscriber in TX and insured thru the work comp system in OK. For those unfamiliar with WH, they sell waffles and related foodstuffs in sort of a mini-diner setting.  WH opted out in TX because the system was broken back in 2002; Bailey indicated that the lack of settlement ability and lifetime medical benefits coupled with the strength of providers made the TX WC system untenable.

That’s worked out pretty well – according to Bailey their plan features solid benefits, the ability to direct to specific medical providers, a strong focus on workplace safety have delivered much lower costs due to a dramatically lower injury rate, almost no indemnity expenses, and an overall decrease of almost 90% in costs.

My based-on-almost-no-real-knowledge-of-WH’s-program view is these folks are doing things the right way, which benefits their workers greatly – far fewer have injuries, which is the core goal of any occupational program.  And they get back to work quickly, so they don’t get stuck in a disability mindset.

Attorney Alan Pierce then weighed in; his slides were very detailed (much better for future reading than trying to follow live).  Perhaps his key point was the contention work comp is a right, not a benefit; a right owned by the employer.

Aside – Pierce’s pontification was more than a bit annoying; his attempt to denigrate the sessions and attendees by asserting that there were few/no injured workers in the audience, and therefore he, as an “injured worker advocate” was somehow uniquely qualified and special.  A physician friend and colleague noted afterwards that this was offensive indeed as there were several treating docs in attendance, all of whom likely had just as much experience “advocating” for injured workers.

Pierce made a case that opt out results in a dramatically greater cost shifting.  While I don’t agree with all the examples of potential issues, he made a reasonable case that opt out may well increase cost shifting of both medical and wage replacement expense away from the employer.

The session wrapped up with a representative from the Oklahoma Insurance Dept, James Mills.  He provided a concise overview of the program, which is regulated much more tightly than Texas’.

The key takeaway is one offered by…once again…David Deitz MD.  There just isn’t enough data, or, arguably, any data that would allow anyone to make a reasonable assessment of opt out and/or a comparison with workers’ comp.

Until and unless there is, it is difficult if not impossible to evaluate opt out.