According to Peter Burton, senior division executive for state relations at the National Council on Compensation Insurance (NCCI), medical now represents on average 60% of the benefit dollar provided to injured workers nationally.
“If you went back 25 years ago, it would have been about 40%,” Burton says. “Medical is the largest component in most states of the benefit given to injured workers. If you looked at the amount of legislative pricing requested of NCCI during last year, the majority of the requests were medical-related.”
Why are medical costs on the rise? And what’s happening in the health care space that will impact workers comp insurance in 2016?
Rising and Shifting Costs
“The rise in medical costs—we’ve all seen it on typical health plans and we’ve also seen it on workers comp,” says Donna Urben, vice president and workers compensation product manager at Erie Insurance. “What helps with the control of the increase in medical costs are those states that actually are able to direct medical care.”
According to some state laws, an injured worker must go to the proposed panel physician “established by the employer for a timeframe mandated by state guidelines,” Urben says—in Pennsylvania, for example, it’s 90 days; New Jersey mandates the life of the claim. “Panel doctors are set up to give appropriate medical care.”
If the injured worker receives medical care that fits the injury, “that ultimately gets them back to pre-injury status and enables them to return to work more quickly,” Urben says. “This explains why in states that permit direction of care, employers are able to see a reduction in the claim cost on the medical claims side, versus those states that don’t permit direction of care—employers see a greater volatility in the medical costs from a workers compensation claim.”
Duration of treatment is another culprit behind rising medical costs. “Our workforce today is composed of an aging population,” Urben points out. “Data indicates that when the aging worker experiences an injury, their recuperation is longer. This scenario requires additional medical treatment, therefore impacting the medical costs of that workers compensation claim.”
Medical costs could also transform under the Affordable Care Act (ACA), which Yvonne Hobson, vice president of corporate underwriting at Amerisure, says could cause some cost shifting in workers comp insurance by authorizing the use of capitation models that designate a set amount for each enrolled plan member, regardless of whether they take medical during that time.
“There are some injuries, such as soft tissue injuries or back or knee or shoulder pain, where the cause of the injury isn’t really readily apparent if it happened on the job or outside of work,” Hobson explains. “The doctors for these injuries have some discretion when determining if the injury is work-related or not.”
Matt Lyon, head of workers compensation at Foremost Insurance Group, cites some predictions that the ACA could reduce frequency of these “Monday morning claims.”
“Let’s say somebody gets hurt over the weekend—they’re out on their ATV or they’re playing sports, they don’t have health insurance and they come in and file a workers comp claim,” Lyon says, noting that some preliminary studies suggest a slight correlation between the ACA and a decline in fraudulent comp claims. “We would expect that over the course of the next 5-10 years, structurally there will be a slight change.”
“The challenge with cost shifting is that the research and the data on it is new, so only time is going to be able to tell us how it’s going to ultimately be impacting workers compensation costs,” Hobson agrees. “What agents and employers can do is really make sure they have a good understanding of the health insurance program that they’re providing, as well as the workers compensation program and how the two interact.”
Marijuana and Other Drugs
In the medical space, misuse and abuse of opioids remains a concern for workers comp insurance. “The industry is looking at this and saying, ‘Why are doctors prescribing injured workers opioids, a drug that really doesn’t belong in that environment?’” Urben says. “Opioids create all kinds of side effects besides addiction. That has a big impact on the cost of claims today.”
“Opioids are not only expensive, they can be associated with poor medical outcomes that really have serious side effects for the injured worker,” Hobson agrees. “Sometimes they’re appropriate, but it’s a continued issue for work comp carriers to determine ways that they can contain prescription drug costs as well as advocate for the patient’s safety.”
In response, some states have implemented stricter rules for prescribing opioids. “The industry is really pushing for all states to have more rigid formulary narcotic drug guidelines,” Urben says. “We don’t want to see an injured worker becoming addicted to opioids when we’re trying to get them healthy from another avenue.”
Medical marijuana is another hot-button issue for the workers comp industry, which is “struggling with the fact that there is a push for prescribing medical marijuana for work-related injuries,” Urben says. “That creates a conflict for those employers that have a drug-free workplace policy in place.”
Currently, medical marijuana is legal in 23 U.S. states and Washington, D.C. “Keep an eye on state laws that are being proposed, because medical marijuana is still a growing topic as more states have taken up the issue—some successfully, some not,” Burton says, citing the recent failed ballot initiative in Ohio. “Medical marijuana is going to be an opportunity for dispensing in states around the country.”
In 2016, look for states that are considering whether to allow medical marijuana in their locales, Burton advises—currently, government and private health care plans are not required to reimburse for medical marijuana.
“It’s still a drug that is not recognized by the federal government for reimbursement, but some states like New Mexico have had Supreme Court cases and found that, for activities that do warrant medical treatment, it can be addressed in that state,” Burton says. “There are rules coming out on how much can be purchased by an injured worker and the rate for payment.”
But right now, “there is no structure out there that protects employers or p-c insurers from being required to reimburse for medical marijuana,” Urben adds. “The workers comp industry is working to help push for regulation so ultimately the employer knows how they can react to a drug-free workplace policy.”
And don’t forget about states that have adopted recreational use: Alaska, Colorado, Oregon, Washington and counting. “It’s definitely a topic that agents should be focused on going into 2016,” Burton says.
Non-medical regulatory issues will also shake up the market moving forward. To find out how opt-out laws, state reform efforts and employee misclassification could make waves for workers comp, keep an eye on IAmagazine.com and upcoming editions of the Markets Pulse e-newsletter.
Jacquelyn Connelly is IA senior editor.