Is the Affordable Care Act lowering workers’ comp medical costs?

Sure looks that way.

Data from NCCI’s 2016 AIS and HSA clients suggested ACA’s impact was positive and sustained.  Flat-to-declining total medical costs over a two-year period that coincided with the full implementation of ACA were a strong indicator of the law’s positive impact on work comp. Later this week, NCCI’s Kathy Antonello will update us with a first look at the 2016 numbers, and we’ll see if that pattern continues.

I summarized the change in the employed population’s healthcare coverage a while back – noting that many more workers in high-frequency jobs are covered under ACA, a positive factor for work comp. (much more on this can be found here)

Wait, there’s more – Fitch’s just-released review of commercial insurance alluded to the impact of ACA on work comp…

Implementation of the Affordable Care Act (ACA) and a corresponding shift of individual medical care delivery away from workers’ compensation to other markets may also be a factor that bears further study.

Other research from Upjohn analyzes the impact of ACA on workers’ comp.  A couple key points:

• immediately after workers turn 26 (and thus lose access to their parents’ insurance as allowed under the ACA), the amount of medical treatment paid by workers’ comp goes up – implying that lack of health insurance leads to greater use of workers’ comp benefits.
• the evidence strongly suggests that the ACA will decrease the likelihood that health care is paid for by workers’ compensation, the size of the cost savings to workers’ compensation is difficult to asses [because]
• the claiming behavior of people with minor medical needs is influenced by having health insurance. This would suggest that the overall savings to workers’ compensation would be modest. Heaton (2012), however, finds evidence that people with greater medical needs respond to health reform, which suggests that the cost savings to workers’ compensation could be large

There’s a lot more to the Upjohn analysis, and I’d encourage you to read it. Potential issues include access to care and the influence of lower Medicare reimbursement. That said, the authors’ overall summary strongly links ACA to lower work comp claims and medical expenses.

What does this mean for you?

Evidence strongly suggests ACA is positively affecting workers’ comp, lowering claims costs and medical expenses.

A couple weeks ago Liberty Mutual announced it would be closing its Research Institute in June. The news came as a shock to many, including me. Just two months ago I had lauded Liberty for its ongoing support for research into disability.

Before we discuss the Institute’s demise, allow me to reprise that applause for Liberty’s decades-long commitment to the Institute. Just because they are shutting it down today does in no way diminish the great work it did for years, the commitment by Liberty and its policyholder owners to the greater good. We are all better off for that commitment.

On one level I understand why Liberty did this – it’s the dollars. While no one at Liberty has said so, it looks like a financial move, pure and simple. The Institute’s staff is well-paid, the research itself is likely expensive, and in these times of tight focus on unallocated expense management, cutting the Institute’s non-revenue-generating millions in expenses is a quick way to increase earnings.

But I’d suggest this is a mistake, for two reasons.

First, the financial benefit pre-supposes the Institute is “non-revenue-generating”. That’s true, but it could and should have been used much more effectively to advance Liberty’s brand. Yes, that’s not “revenue-generating” in the strictest sense of the term, but there’s NOTHING more important than a brand.

I asked Liberty’s Communications folks two questions; they kindly responded in a timely manner.

Here’s the first.

MCM – My take is Liberty didn’t aggressively promote the Institute or effectively utilize it in marketing and branding efforts. Yes there was the occasional press release or website mention, but it was rarely front-and-center. Why?
LM – We communicate to our customers and business partners in numerous ways on issues that are most important to help them best manage and mitigate risk. Our Research, Risk Control and Claims expertise all play important roles in helping employers and their employees manage current and emerging risks…
We are also keeping our Hopkinton facility open while discontinuing our peer-reviewed research efforts. Our Hopkinton facility will continue to house our Industrial Hygiene Laboratory and Driver Training program, as well as a personal insurance claims training center.
What is evolving is the way that people live and work, and the dynamics of today’s workplace reflect these changes. Liberty remains committed to helping people live safer more secure lives. We are revisiting our approach to accessing research while at the same time continuing to provide our Risk Control and Claims expertise to help commercial insurance policyholders improve both safety and return to work.

Liberty’s response didn’t address my statement about the relationship between the Institute and the company’s branding efforts. “Communicat[ing} to our customers” is talking to people you already do business with. And, communicating without weaving the brand message into that communication constantly and thoroughly minimizes its usefulness.

In my view Liberty didn’t effectively leverage the terrific work done by the Institute, never really connecting the work it does to support Liberty’s overall “lead safer, more secure lives” brand statement.

The lack of effective brand management is by no means unique to Liberty. Rather it is a major problem for the entire workers’ comp and P&C insurance industries. Every player talks about their people, their great claims management and effective underwriting, but few really differentiate. That is why this industry is commoditized; why buyers switch carriers for a few percent, why risk managers follow their consultants’ advice based on a spreadsheet.

Directly and consistently and broadly and cogently tying the Institute’s work to the impact it had on Liberty customers would have been expensive, arduous, in some cases tedious, and totally worthwhile. It would have greatly strengthened the brand by demonstrating Liberty’s depth of commitment to its brand statement.

My second reason is much more debatable.

In these days of awfully insensitive corporate behavior, the Institute stands as a shining example of doing good work without a direct dollar benefit. It is just the right thing to do. While corporations are obliged to support their shareholders, Liberty is a mutual insurer; its owners are its policyholders. One could, and I am, make the argument that the Institute was and remains prima facie evidence of Liberty’s commitment to its “owners”.

What does this mean for you?
Lots of terrific researchers are looking for work. Please reach out to them; here’s one source.