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workers' compensation costs Archives - Insurance Thought Leadership
Tag Archives: workers’ compensation costs
Implementing International Medical Providers Into The U.S. Workers' Compensation System, Part 4
December 4, 2012 Richard Krasner	Leave a comment
This is Part 4 of a multi-part series on legal barriers to implementing international providers into Medical Provider Networks for workers' compensation. Previous articles in the series can be found here: Part 1, Part 2, and Part 3. Subsequent articles in the series will be forthcoming soon.
Workers Compensation And The Legal Barriers To Medical Tourism
The parallels to health care costs rising and workers' compensation medical costs are no coincidence, since workers' compensation is a subset of the health care system.
The average workers' compensation medical cost per loss time claim (in which the worker has lost more than seven days from work) in 2008, as previously stated in this series, was $26,000, which is a 6% increase from 2007. In addition, medical costs in 2008 were 58% of all total claims.62 63 Approximately 40% of workers' compensation costs are associated with medical and rehabilitative treatment. In the 1980's and 1990's, medical costs for workers' compensation fluctuated, and in the last decade rose again, and in 2002, totaled $41.7 billion annually.64
As with health care, states have experimented with different ways to reduce workers' compensation costs. Former California Governor Arnold Schwarzenegger made workers' compensation reform a part of his legislative program.65 Some of the same strategies applied to health care have been tried with workers' compensation: utilization management of workers' compensation medical services, restricted networks of designated physicians, case management, mandatory treatment guidelines, and hospital payment regulations.66 The introduction of DRG's for hospital payments and ICD-9 and CPT codes for provider payments for health care in the 1980's, also impacted workers' compensation, as insurance companies began to use them.
This has led some to believe that there is a place for medical tourism in workers' compensation.
Merrell: “… Can you see a role of medical tourism in workers' compensation injury?”
Ludwick: “I could, if it were a long-term issue. Many workers' comp issues are emergent, so that would take out the medical tourism aspect. However, if it was a long-range issue, I could see us involving workmen's comp issues into that, or problems.”
Lazzaro: “I would support that. I don't know the incidence, for example, of some of the orthopedic procedures that are non-emergent, such as knee or hip replacement, which would fall under workmen's comp. But theoretically, a case could be made for that …”
Merrell: “I was thinking about it in terms of the chronic back injury and the repetitive action injuries and hernia that are in the workers' compensation area. An acute injury on the job would probably not be at issue, but a work-associated problem with a potentially surgical solution might be a matter for medical tourism.”67
The savings from medical tourism mentioned in Part 1 of this series are even more relevant to workers' compensation. As Lazzaro and Merrell discussed above, knee and hip replacement, as well as chronic back and repetitive action injuries and hernia are just some of the work-related injuries that can benefit from medical tourism. Table 1 lists three of the most common procedures performed and the costs of each in the U.S. and three countries that cater to medical tourists.68
*Retail and insurer costs are mid-point between high and low ranges.
**U.S. rates include one day hospitalization; international rates include airfare, hospital and hotel.69
Given the data presented here, one could conclude that implementing medical tourism into workers' compensation is a logical solution to rising medical costs for workers' compensation, and should be seriously considered. However, there are legal barriers to accomplishing this.
One of the most obvious legal barriers to implementing medical tourism into workers' compensation are the provisions of State workers' compensation laws that establish who can provide medical care to injured workers. In four of the largest workers' compensation states — California, Florida, New York and Texas — medical providers must be licensed by the state to practice medicine.70 71 72 73 Florida's statutes have a provision to allow certain foreign-trained physicians to practice in the state, but do not mention treatment outside of the state.74
On the other hand, two states, Oregon and Washington State, both have statutes or rules that allow workers to choose an attending doctor or physician in another country. Oregon's labor code states, “… The worker also may choose an attending doctor or physician in another country or in any other state or territory or possession of the United States with the prior approval of the insurer or self-insured employer.”75
The WA State Department of Labor and Industries has a page on their website that allows workers to find an attending practitioner in the U.S., Canada, Mexico and Other countries. The webpage allows the worker to search for a U.S. physician by entering a zip code, miles, doctor or provider type, and specialty.76 Workers seeking physicians in Canada, Mexico and Other countries, such as England, Germany, Honduras, New Zealand, the Philippines, Spain, Thailand and Ukraine, are directed to .pdf files that list selected doctors and their specialties and contact information.77
Among some of the other barriers to medical tourism is the result of entrenched interest groups wishing to avoid competition with low-cost providers78 79 and outdated federal and state laws intended to protect consumers, but which only increase costs and reduce convenience.80 81 Additionally, state and federal regulations restrict public providers from outsourcing certain expensive medical procedures.82 83 Federal laws inhibit collaboration84, and state licensing laws prevent certain medical tasks being performed by providers in other countries.85 86 Foreign physicians lack the authority to order tests, initiate therapies and to prescribe drugs that U.S. pharmacies are able to dispense.87 88
Restrictions on the practice of medicine have been removed, and many still exist. Some laws, for example, make it illegal for a physician to consult with a patient online without an initial face-to-face meeting; it is illegal for a physician who is outside the state and who has examined the patient in person to continue treating via the Internet after the patient goes home; and, it is illegal (in most states) for a physician outside that state to consult by phone with the patient residing in that state if the physician is not licensed to practice there.89 90
Other barriers or potential barriers, which are extremely important ones, also exist that must be addressed before medical tourism is accepted for workers' compensation. Issues regarding medical malpractice and liability laws overseas, patient privacy and medical record laws (including the Health Insurance Portability and Accountability Act of 1996), the Employee Retirement Income Security Act of 1974 and the impact of the Patient Protection and Affordable Care Act of 2010 have to be dealt with before medical tourism is a viable option not only for non-compensation patients, but for compensation patients as well. Some of these issues will be spelled out in the next article in this series.
62 Barry Llewellyn, (2009, September). Workers' Compensation Medical Cost Issues. Casualty Loss Reserve Seminar (presented at the meeting of the Casualty Actuary Society (CAS), Chicago, Illinois, September 14, 2009).
63 Dennis C. Mealy, (2009, May). State of the Workers' Compensation Line. (Presented at the meeting of the Annual Issues Symposium at the National Council on Compensation Insurance, Boca Raton, Florida, May 7, 2009). Figures shown in the 2009 report for 2008 were adjusted in later years, so that in the latest report, the average medical claim cost per lost-time claims in 2008 was $255,000, as shown in Figure 1 of Part 1 of this series.
64 Facts in Brief, “Workers' Compensation Medical Care: Controlling Costs”, University of Massachusetts, Worcester, (2002).
65 California Healthcare Foundation, “Schwarzenegger Signs Workers' Compensation Reform Bill,” California Healthline, (April 20, 2004), accessed February 22, 2011.
66 University of Massachusetts, Worcester, (2002).
67 Ronald C. Merrell, et al., Roundtable Discussion, Medical Tourism, Telemedicine and e-Health, (January/February 2008), 16.
68 Herrick, Table 1, The Cost of Medical Procedures in Selected Countries (in U.S. dollars), 11.
69 Ibid, 11.
70 CA Labor Code, § 3209.3 (a) (2010).
71 FL Statutes, Title XXXI, Chap. 440.13, (1)(q) (2010).
72 NY Workers' Compensation Laws, Art. 2, § 13-b (2010).
73 TX Labor Code, Title 5, Subtitle A, Chap. 401, Subchapter B, § 401.011 (17) (2005).
74 FL Statutes, Title XXXII, Chap. 458.3124).
75 Oregon Labor Codes §656.245 (2)(a).
76 WA Dept. of Labor and Industries website, (2012).
77 Ibid, see http://www.lni.wa.gov/ClaimsIns/Claims/FindaDoc/FadMexico.pdf, http://www.lni.wa.gov/ClaimsIns/Claims/FindaDoc/FadCanada.pdf, http://www.lni.wa.gov/ClaimsIns/Claims/FindaDoc/FadOtherCountries.pdf
78 Herrick, 23.
79 Longe, 21.
80 Herrick, 23.
81 Longe, 21.
82 Herrick, 23.
83 Longe, 21.
84 Ibid, 21.
85 Herrick, 24.
86 Longe, 22.
87 Herrick, 24.
88 Longe, 21.
89 Herrick, 24.
90 Longe, 22.
cost of healthcareemployee retirement income security acterisahealth carehealth insurance portability and accountability acthealthcare costshipaamedical costsmedical tourismpatient protection and affordable care actppacaworkers compworkers' compensation costsworkmans compworkmans compensation
November 27, 2012 Chuck Coppage	Leave a comment
There are three major concerns and opportunities that must be considered. First, is the impact of SB 863, the major reform legislation bill passed late in this year’s session of the legislature. Second is the continued increase in loss cost on prior years’ claims. Lastly, will the weak economy improve enough to start bringing new workers into the workplace and what impact will that have on Workers’ Compensation costs?
SB 863 holds the promise of lower claims costs, improved efficiency in claims processing procedures, and ultimately rate relief for California employers. At issue is the time frame for writing new regulations that will implement the new law. They are scheduled to take effect on January 1, 2013 which may lead to rushed procedures and unintended consequences. Also major parts of the law will be challenged in court. The Independent Medical Review procedures raise the issue of right to appeal. The injured employee attorneys have already indicated they will challenge this portion on constitutional grounds. Time will tell what the ultimate impact of the new legislation will be on the system, but immediate reduced costs are not expected.
Unfortunately, increasing premiums and rates will almost certainly continue into 2013. The Workers’ Compensation carriers are spending 138 cents for every dollar of premium. The overly competitive marketplace coupled with medical cost inflation has led to large developments in claims settlements beyond case reserves. The collapse of the economy has also led to decreased premiums, while claims have increased.
It will take at least 24 months for this cost bubble to work its way through the system. The most recent actuarial review of past years’ claims cost indicates that rates are over 9% lower than they should be. While the Workers’ Compensation Insurance Rating Bureau governing board, in a purely political move, decided to recommend no increase in rates to the Department Of Insurance, underlying costs continue to increase.
Finally, as the economy slowly recovers and payrolls increase, we will see hiring pick up. While it seems like this would lead to lower loss ratios as premiums go up, just the opposite is true. As you add employees in general, they will be less skilled, need more training and will be less able to work safely immediately. Increasing workforces will lead to increased accident rates and increased loss ratios.
The carriers will always compete for very clean, well-managed and low loss ratio accounts, so now is the time to redouble efforts with safety programs, training and claims management.
californiadpartment of insuranceindependent medical reviewlegislationloss ratiomedical costssb 863sb863wcirbworkers compworkers compensation ratesworkers' compensation costsworkers' compensation insurance rating bureauworkmans compworkmans compensation