Nov

States can deliver low work comp premiums and high benefits

Posted by Joe Paduda on Monday, November 2nd, 2009 | Comments

A few states deliver high levels of benefits to injured workers at low premium rates, and a few deliver low benefits at high premium rates. Peter Rousmaniere’s assessment of each state’s work comp system not only tells us which states fall into which categories, but provides insights into the ‘why’ as well.
For example, NJ NY and Montana have the highest work comp insurance costs, but very low benefits. And Massachusetts is at the opposite end of the spectrum, with low premiums and high wage replacement benefits for injured workers. (Mass doesn’t treat providers nearly as well, as the Mass fee schedule is among the lowest in the country, while medical costs are not)
Peter delves into the whys, and among his findings are:
– five states deliver both low premiums and high wage replacement benefits (IA AZ VA NV MA)
– five states are the polar opposite, with high premiums and low benefits (AK CA NJ NY MT)
and then there’s the majority of states which fall in between costly/poor benefits and cheap insurance/good benefits.
Peter also notes that there is a wide disparity among states in median duration of disability, ranging from 4 days in the best states to 12 in NY.
While some states seem stuck in a dysfunctional morass, making little progress, California’s recent success in dramatically reducing premiums and costs should encourage all state legislators to get cracking. Reform can be done, even in a state as large and diverse as California. Montana, which is tiny by comparison and much more homogeneous, should find reform a much less difficult task.
What does this mean for you?
Find out how your key states are ranked, and you may well find where you’ve got problems in your comp program.

Oct

Syracuse University – the new home of UCR

Posted by Joe Paduda on Friday, October 30th, 2009 | Comments

We now know who will replace Ingenix as the nation’s provider of usual, customary and reasonable (UCR) data; we also know when (by the end of 2010). As to the how, that’s a bit less certain.
Syracuse University will be the home of a non-profit data house’ to be called FAIR Health (Fair and Independent Research Health); Cornell, Upstate Medical Center, SUNY Buffalo, and the University of Rochester will also contribute (got to spread the largesse around). (full disclosure – Syracuse is my alma mater)
The new entity will be funded at least in part by the $100 million NY Attorney General Andrew Cuomo has gotten in settlements from Ingenix’ UCR database customers. In addition to Cuomo’s successes, Ingenix’ parent company, UnitedHealth Group paid $350 million earlier this year to settle a class action suit, and other legal action is continuing which Cuomo expects to add to the $100 million total. The cash will be used to develop the database and set up a mechanism to deliver data to payers and consumers via a website. This last is a great idea – providing health care consumers and providers with access to UCR data should help promote transparency and enable price comparisons by consumers and price competition by providers.
FAIR will be headed up by SU Professor Deborah Freund, an expert in health economics, Distinguished Professor of public administration and economics in SU’s Maxwell School and Senior Research Associate at Maxwell’s Center for Policy Research. Dr Freund has a wealth of experience on the academic side of health policy and economics and has published on a wide range of topics in those fields.
I’ll see if I can stop in for a chat when I’m back up on the Hill in January for another alumni meeting.
The timetable seems…aggressive – there’s a lot to do to avoid some of the problems that plagued Ingenix’ MDR and PHCS databases; non-existent quality control on source data and inadequate volume of data in some areas are just two of the problems that led to the settlements. While Freund et al at FAIR may want very much to provide comprehensive, clean data that covers all procedures delivered by all providers, they don’t control the quality, accuracy, and consistency of the data collected by health insurance companies and other payers. And after the Ingenix debacle, they sure want to be absolutely positively comfortable with their data before they release it to the public.
My guess is the website and initial data will be up and running by the end of next year, but it won’t be comprehensive. Even if FAIR is able to come up with standards and a rigorous QA process, it will take more time for payers to develop and implement processes to ensure the data they provide FAIR meets those standards.
And you can bet your last hundred million that no payer is going to send data they aren’t absolutely sure is up to snuff.
What does this mean for you?
Good news, as the new UCR provider will help reduce payers’ exposure.
Health plans have a new vendor to work with – on the vendor’s terms.
Over the longer term, there’s another ‘outcome’ – Health data quality is about to go under the microscope, and the view may be pretty ugly. Healthplans and other payers may well have to upgrade their technology, training, and staffing to meet FAIR’s demands
Background
For those who don’t follow these things on a daily basis (hard to believe I know), some background. Years ago, the health insurance industry’s lobbying and service arm (HIAA) aggregated and compiled physician charge data as a service to its members. HIAA collected the data and fed it back to members, who then used the data to determine how much they should pay providers in specific areas for specific services (services defined by CPT codes). HIAA was taken over/disappeared about a decade ago, and Ingenix took over the aggregation and distribution of the data, which has become known as “UCR” for “Usual, Customary, and Reasonable”.
For about ten years, all was fine, at least as far as most insurers were concerned. Sure, physicians complained at times and consumers railed about the low reimbursement paid by companies citing their UCR, but the complaints didn’t really make any difference until Cuomo got involved. The problem arose when a few folks in New York complained about the amount they still owed providers after their insurers had paid their portion – according to Ingenix’ UCR. After a lengthy investigation, Cuomo found reason to charge UHC and other insurers, and that action ultimately resulted in this settlement.

Oct

It feels like the party’s just about over

Posted by Joe Paduda on Thursday, October 29th, 2009 | Comments

It’s been a wild party in the comp world – and a long one too. A brutal hangover may well be next for work comp payers.
Those who remember the late nineties are getting increasingly nervous, as well we should. The longest soft market in my memory is still around, doggedly refusing to firm up – as it should have, long ago. Work comp premium rates continue to decline, especially in key states such as California (down by a whopping two-thirds in five years) and Florida (an equal drop over six years). Most other states have also seen precipitous declines, driven by successful reforms and a decline in frequency.
Yet medical severity – the comp industry’s somewhat-misleading term referring to medical cost – continues to increase in most jurisdictions.
Pause and think about that. Workers comp insurance costs have dropped by two-thirds over five years. Two-thirds. How is that possible? Does that make sense? Is there any way that’s sustainable? Don’t cite statistics and financials and actuarial reports – tell me what your gut tells you.
Mine’s really queasy.
Back in the late nineties, most comp payers thought medical inflation was tamed, as their view in the rear-view mirror indicated medical trend was in the seven to eight percent range. Not so fast, the gods of workers comp proclaimed. Inflation roared in the ensuing years, crushing many payers’ financial returns and bankrupting more than a few carriers in the process.
While NCCI reports medical inflation is under control, that’s not what I’m seeing. Facility costs are trending up, driven by declining ‘savings’ from broad, generalist PPOs. Prescription drug costs are on the increase after four years of declining trend. Ancillary costs are also heading higher, especially for those payers yet to fully embrace specialty managed care programs – and regardless of what you may think, that’s most of the payers in the industry.
Today’s WorkCompCentral reports [subscription required] Liberty Mutual, the nation’s largest writer of work comp with premium of $5.4 billion in 2008, is backing out of California and very nervous about Florida. I have reason to believe the big carrier is not leaving California, but the points made in the article regarding market conditions are spot on. Employers Direct already pulled out of the Golden State, and if it weren’t for new entrants to both Florida and California competing hard for share, the market in both states may well have firmed up by now.
Yet new carriers are entering these markets – which may be either a horrible idea or a pretty smart move. Unburdened by an existing book of comp claims incurred by writing policies that I believe are increasingly underpriced, the smart ones (if there are any) may be able to prosper as the carriers who showed up early for the party are heading towards the floor.
A more likely scenario is these johnny-come-latelies will party hard to catch up, consuming large quantities of business on an empty stomach. Kind of like freshmen at their first college party, with equally unattractive results.
Is it possible that there will be a ‘soft landing’. It is, but it is much, much more likely most carriers will feel like they fell out of a moving cab onto cold, wet, and very hard pavement…

Oct

Swine flu and workers comp

Posted by Joe Paduda on Monday, October 26th, 2009 | Comments

While there will be differences due to jurisdictional rules, I’d be surprised if we don’t see Workers Comp cover many health care workers who get the flu.
Health care workers are getting inoculated due to their higher risk, the prevention information you mention indicates they are at risk due to their employment status, and there’s no question of their increased exposure risk.
The Federal government’s website, flu.gov, directs workers who are exposed to flu to contact their state work comp boards for questions on eligibility and coverage – that direction alone may encourage sick workers to file for comp, and if they were exposed at work and the exposure meets specific criteria, they may well have a compensable claim.
In addition, lower paid workers who do not have health insurance may – and I emphasize MAY – be more likely to claim WC for flu as they have no other coverage.
My sense is in many jurisdictions and for many claimants, swine flu would be compensable – if it can be demonstrated that the contact was ‘during the course of or arising out of employment’. And for health care workers, that shouldn’t be too difficult to prove.
Jon Coppelman wrote a good synopsis of this some months ago – here’s an excerpt from his piece:

In order for the flu to be a compensable event under comp, certain requirements must be met:
: the individual must be “in the course and scope of employment” when exposed to the virus
: the exposure must arise out of work (as opposed to being a totally random event)
: work itself must put the individual in harm’s way

My sense is in many jurisdictions and for many claimants working in health care service delivery, swine flu will be compensable – if it can be demonstrated that the contact was ‘during the course of or arising out of employment’. For health care workers, that shouldn’t be too difficult to prove.

Oct

Work comp drug fee schedules – what’s going to happen?

Posted by Joe Paduda on Friday, October 23rd, 2009 | Comments

No one knows just yet, not even the regulators and legislators who are the ones tasked with coming up with a mechanism to replace AWP – which is going away in less than eighteen months.
More accurately, the First Databank/Medispan version is going to disappear; the Redbook version will still be around.
One option is to use Redbook as the standard, and there are some indications from some states that they are looking at Redbook. But Redbook has its issues – folks who know more than I about these things say it is not updated as frequently as Bluebook, and while it covers more medications, this ‘delay’ may make it problematic for PBMs who may well get into disagreements with retail pharmacies over the reimbursement level.
Beyond that ‘quick fix’, here’s how the changes may roll out. States with fee schedules set by their legislatures may well find themselves hard-pressed to meet the deadline; some, like Texas, aren’t due to meet until 2011, and others have a rather full legislative agenda with a lot more important stuff to deal with than work comp drug fee schedules. Thus, it is entirely possible that some states may not be able to address the issue before the clock runs out.
In that case, PBMs and payers will likely have to use the last version of the FDB AWP file for repricing pharma bills. That’s fine if the delay in selecting a new benchmark is a matter of days or perhaps weeks, but if it goes much beyond that we’ll see problems as prices charged by pharmacies will change while the reimbursement levels don’t. Litigation will likely ensue…
States that manage fee schedules via regulatory process are (likely) going to be a bit better off, as these processes are not dependent on the legislative process and complications thereof. Several states are already carefully evaluating alternative methodologies, and from my interaction with a number of regulators at the IAIABC conference last month, they are goign about this thoughtfully and with their eyes and ears wide open.
The real risk is if fee schedules are changed to match the Medicaid reimbursement rates.
This would be a disaster, as it was in California when physician dispensing exploded, and drug costs actually increased after the fee schedule was linked to Medi-Cal. In NY, where the State also set WC reimbursement at Medicaid, every PBM sent letters to the Chairman of the Workers Comp Board relaying their intention to exit the state if rates were not revised. Fortunately for all parties, they were successful in their efforts.
Unlike workers comp, there is no eligibility problem with medicaid – all recipients have a card. The formulary and DUR processes are well known and electronically administered. In comp, many claimants don’t know who their PBM is, and the only drugs that are approvced have to be directly related to the occupational injury or illness. These are just a couple of the distinctions, but they serve to illustrate the fundamental, and real, differences between comp and Medicaid.
Stay tuned – it is likely the big group PBMs and payers will move to another pricing benchmark, and like it or not, that will become the de facto ‘standard’.

Oct

H1N1 – the impact on employers

Posted by Joe Paduda on Monday, October 19th, 2009 | Comments

Of the many topics worthy of attention, I’ve been remiss in not learning more about swine flu, aka the H1N1 virus.
According to the CDC, to date there have been 9000 hospitalizations and over 600 deaths due to H1N1, and more are coming. There’s no doubt H1N1 will have a significant impact on employers – and also no doubt many have yet to plan adequately.
Here are a couple things to ponder…
1. If an employee gets sick after exposure at work (think teachers…) is that a work comp claim?
2. If a bunch of workers get sick, should you shut down operations for a while? If so, can employees work from home?
Broadspire, the big TPA, is hosting a webinar on H1N1 le\d by Jake Lazarovic, MD, the company’s medical director and in my experience a thoughtful and insightful clinician. The webinar is going to be held today (Monday) at 3 est, Wednesday at 1 est, and Friday at 9 est. Click on the links for more info.
Note – Broadspire is not a client.

Oct

What you missed on MCM

Posted by Joe Paduda on Wednesday, October 14th, 2009 | Comments

For at least a couple weeks, many of the 1642 people who subscribe to MCM didn’t receive notices when new posts went up. It looks like we’ve figured out the problem (electronic fingers crossed), so here’s what’s been on the blog while we were in a technical hiatus.
Yesterday I opined that the recent AHIP/PwC report is more right than wrong; the report misses a lot – and much of what it misses is less than favorable to the report’s funders – health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can’t force insurers to take all comers without charging more for higher risks or excluding them altogether.
Last week was devoted to the recent report by the state of Texas’ Research and Evaluation Group’s report on workers comp networks. The initial post generated a good bit of dialogue with the report’s authors wherein they clarified a confusing (at least to me and several large payer clients) statement; the follow up post detailed the issue, adn explored another concern; “the report didn’t note that three of the networks are provided by one company – Coventry, which also administers a network that is likely underpinning much of the ‘non-network’ category.”
The ‘Texas Week’ concluded with a post on the larger issue with the report – the fallout in workers comp “C” suites, and the potential damage to managed care.
Two posts the week before covered the AmComp meeting in NYC, with one lamenting the lack of concern about medical costs among work comp execs and another summarizing a talk by industry veteran John Burton.
Before I got all wrapped up in workers comp, i handicapped the health reform odds, saying “If the Baucus bill comes out of committee with unified Democratic support, that tells a lot. And if Snowe signs on, that’s even more telling…The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they’re better off holding their nose and voting in favor or handing the victory to the GOP.”

So far, looks like those Dems are indeed holding their collective nose.
This was preceded by a confession – I’m one of those nerds that actually reads Health Affairs – the latest issue has a great piece on the primacy of price in health care inflation. I don’t necessarily agree, but the authors make a compelling case.
It appears that the problem started just before the end of September; readers can always check the main page, sort by category, or type in key words to find specific posts.
Thanks for the forbearance, and here’s hoping the gremlins are back in wherever gremlins live..

Oct

UPDATE – the Texas report on work comp networks

Posted by Joe Paduda on Tuesday, October 6th, 2009 | Comments

New news on yesterday’s post – turns out that ‘costs’ are not based on billed charges, but on payments. Unfortunately, the report doesn’t make that clear – nowhere in the report does it define ‘costs’ as payments, it does state costs are based on billing data, and in the data sources section it explicitly links cost to billing data.
Here’s where the confusion lies.
On page 2, the report reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. Duplicate medical bills and bills that were denied due to extent of injury or compensability issues as well as other outlier medical bills were excluded from the analyses. Cost and utilization measures were examined separately by type of medical service…”
Note there is no differentiation between utilization and cost, and no specific definition of ‘cost’. So, perhaps that’s a bit misleading.
But wait, there is another statement that certainly seems to describe how ‘cost’ figures were derived:
In the data sources section (also on page 2), the report reads “Medical cost, utilization of care, and administrative access to care measures were calculated using the Division of Workers Compensation’s medical billing data [emphasis added]. Seemed pretty straightforward to me.
Unfortunately I wasn’t the only one confused; two large payer clients interpreted the statement the same way I did.
My post generated a good bit of excitement at the REG and among stakeholders. Bill Kidd reported on it at WorkCompCentral, where DC Campbell, director of the department’s Workers’ Compensation Research and Evaluation Group, was quoted as saying “”Paduda expresses concern about the results since Coventry covers ‘much’ of the non-network claim population. It’s not clear from his statements [emphasis added] whether this refers to Coventry’s market share in terms of utilization review activities, bill review activities, contractual discounts outside of certified networks, etc.”
I’m not sure where the confusion lies, as I clearly referred to ‘networks’ in the post yesterday…

For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.

The net is the report uses payments for all cost calculations. Thanks to Amy Lee and DC Campbell for setting me straight. OK, now that that’s behind us, I’m still not sure what to make of the report’s findings. According to the report, claimant demographics were accounted for, I assume to enable fair comparisons among and between the various networks. Yet the report didn’t note that three of the networks are provided by one company – Coventry, which also administers a network that is likely underpinning much of the ‘non-network’ category.
Consider that Liberty’s average medical costs were lower than non-networks in 4 categories, and Coventry’s in 3, yet the Coventry network was utilized by all three entities. And that’s just one of the findings. Claims in the Coventry network had higher overall medical costs than non-network claims, as well as higher hospital inpatient and outpatient costs. Both Coventry and Travelers network claims had higher inpatient utilization than non-network claims, but Liberty’s was lower. Coventry outperformed non-networks in release to return to work, but Liberty and Travelers underperformed non-networks.
So, what does this mean for you?
It sure doesn’t look like one can draw any meaningful conclusions from the report’s findings.
Kudos to the Texas REG and their supporters for funding and conducting the research. More time for the data to mature, more clarity on definitions, more disclosure about the similarities among the networks being studied, and more discussion about possible reasons for the disparate results from all-but-identical networks and their work will be much more useful.

Oct

Texas’ report on workers comp networks – fatally flawed?

Posted by Joe Paduda on Monday, October 5th, 2009 | Comments

Texas’ Department of Insurance has been analyzing the performance of workers comp networks for the last couple of years, and the latest report has some pretty interesting results.
Unfortunately, those results look to be based on a faulty analysis, making the whole report questionable.
Before we delve into the results, here’s the problem. On page 2, it reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. [emphasis added].” Thanks to a comp insurer’s managed care exec for the tip – should have caught this myself, but really, who would have thought they’d count ‘charges’ as ‘costs’?
There is little to no correlation between medical charges and actual costs – defined as amount paid. Providers, especially facilities, charge much more than they’re reimbursed. Reimbursement is affected by fee schedules, medical management determinations, network discount arrangements, prompt pay deals, and bundling/unbundling edits, among other factors.
The findings from the report are also somewhat misleading. For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.
I contacted Coventry in an effort to get their take on the report – which at first blush was pretty damning. I was quite surprised to get a call back from one of their execs – as loyal readers know I’ve been trying – till now unsuccessfully – to get Coventry to talk with me for as long as I’ve been writing this blog – which is now more than five years. This is the first of what I hope will be an ongoing dialogue.
We’ll see.
Coventry’s take on Texas’ report was rather limited as it was just released. They were pleased with the return to work results; but noted their medical resutls (which, according to the report, were not good) may have been tainted by seven outlier cases. Perhaps, but the other networks and the non-network results may suffer from the same issue.
More compelling was the Coventry exec’s observation that much of the “Non network” business actually is handled by the Coventry network. That adds a bit of wonder to the report’s first finding: “Overall, networks had higher average medical costs than non-networks.”
I asked the Coventry exec to get back to me asap with a more complete analysis, but I’ll suggest he save the dime. I may be missing something here (and if I am I’m sure you’ll tell me), but I’m hard-pressed to see how anyone can draw any meaningful conclusions from an analysis based on medical charges.
Lest my comments be construed as damning Texas for their efforts – absolutely not. I applaud the Texas REG for the efforts. I don’t know what limitations they have in terms of resources, access to data, or access to payment data. I do know that they are one of the few states making a serious effort at analyzing cost drivers and the impact of managed care programs. I’ve done enough data analysis to understand you’ve got to use what you can, even if it is far from perfect. Here’s hoping the REG continues to improve their analysis.
What does this mean for you?
An object lesson in not jumping to conclusions, and why abstracts and executive summaries can be misleading.

Sep

Workers comp results are going to get worse. And medical will drive the decline.

Posted by Joe Paduda on Wednesday, September 30th, 2009 | Comments

The property and casualty industry will get worse before it gets better, led by the work comp business. That’s one of the key takeaways from a session at AmComp yesterday.
The session featured a panel of CEOs from workers comp insurers asked to tell the audience at the AmComp NY meeting what keeps them up at night. None of them mentioned medical costs, although in a response to a question (from your reporter) they all said it was a big problem.
How are they addressing it? One said they just factor 6-9% of medical trend into their rates, another said it was up to the health insurers and the third said you had to have good claims and medical cost control.
With all due respect, I’d suggest that medical is a very big problem in comp, that very few insurers or TPAs have anything approaching effective medical management programs, and there are any number of programs, tools, processes, vendors, and methods that can have a dramatic impact on medical expense.

Which will impact claIms costs which in turn affects losses and reserves and premiums and profits.
I have no knowledge of these insurers’ managed care/claims programs; t is entirely possible that one – or perhaps even all – of these insurers have strong, outcomes-oriented medical management programs built around small, workers-comp focused physicians, specialty programs for PT, facility, drug, and imaging, and evidence-based clinical guidelines. If they do, they’re well ahead of the market.
As one who started out working in HMO consulting decades ago, the CEOs’ statements were reminiscent of what we heard from executives at big indemnity insurers – medical costs were medical costs, they had cost containment programs. They dominated the health insurance industry back in the mid-eighties.
They are all out of business, with one exception. And that exception – Aetna – is the only one that successfully transformed itself into a health plan company.
Workers comp ~~is becoming~~ has become a medical management business. Some smart insurer will figure this out, and when they do, they will win.
And win big.

Category: Workers Comp