Once Insignificant, Health Care Costs Within Workers' Comp Have Ballooned
From 1996 to 1999, staff at the National Conference of State Legislatures (NCSL) educated legislators and legislative staffs, regulators and administrators about the health benefit component of workers' compensation, a system designed to care for workers who are injured on the job.
The NCSL developed the project in cooperation with the National Association of Insurance Commissioners (NAIC) and the International Association of Industrial Accident Boards and Commissions (IAIABC), a trade association for workers' compensation program administrators.
- The project identified two issues in the workers' compensation health care system that have hampered state legislators' efforts to develop policies that are cost-efficient and still assure quality of care:
- There is a need for better data measuring the quality of care and the cost of health care provided within the workers' compensation system.
- It is imperative to the long-term health of the workers' compensation system to find out how managed care is working within it.
- Project staff identified Florida, Kentucky, California and Minnesota as potential states for case studies on what works and what does not work in workers' compensation health care reform.
The Robert Wood Johnson Foundation (RWJF) supported this project through a grant of $203,018.
Between the 1910s when most states passed laws establishing workers' compensation programs to care for workers who are injured on the job and the early 1980s, policymakers paid little attention to the cost of the health benefit component of workers' compensation primarily because medical costs were a relatively small part of total expenses.
However, workers' compensation health care costs rose 15 percent per year from 1985, compared to an average annual increase of 10 percent for national health care costs. By 1993, health care costs represented about 40 percent of total workers' compensation claim costs.
State legislatures have been faced with the difficult task of developing public policies designed to reform the health benefit component of the workers' compensation system to be more cost-effective while maintaining a high level of care. Their efforts have been hampered by the complex and technical nature of workers' compensation and by the introduction of new concepts, such as managed care and 24-hour medical coverage (a system integrating health insurance and the medical expense portion of the workers' compensation program). See Grant Results on ID# 020229 for more information on a 24-hour medical coverage program in Oregon.
Managed care itself has become controversial. Health care costs have continued to rise in spite of the introduction of managed care. Complaints have arisen about managed care's additional layer of bureaucracy, which according to the NCSL has increased litigation and decreased the quality of care to injured workers, as well as delayed payments to them.
The grant from RWJF to NCSL funded a series of focus groups, a workshop, and a meeting for the purposes of educating legislators and legislative staffs, regulators, and administrators about the theories, concepts, and new developments in workers' compensation health care; identifying the major public policy concerns about managed care in workers' compensation; identifying and prioritizing solutions to address those concerns; and identifying ways to fund future information-gathering efforts.
NCSL, a nonprofit, bipartisan organization serving the nation's 7,461 state legislators and their staffs, with headquarters in Washington, D.C., and Denver, Colo., developed this project in cooperation with NAIC and IAIABC. Oversight for the project was provided by an advisory committee composed of representatives from NCSL, NAIC, and IAIABC. (See the Appendix.)
The first focus group, attended by 23 legislators, was held in April 1997. The second focus group of 25 legislators, regulators, and administrators was convened in June 1997. In October 1997, a workshop ("Data Collection: To Collect or Not to Collect?") was held. The final focus group was held with participants from all three organizations in January 1998. A final meeting to disseminate the information gathered was held in July 1998 in conjunction with NCSL's annual meeting.
NCSL provided additional funding of $20,000 for each year of the grant.
The project identified issues and possible solutions to the problems surrounding the workers' compensation system's lack of uniform, reliable data.
- The primary concern of Legislators was the lack of data measuring the quality of care and the cost of health care within the workers' compensation system. The concerns they felt were most critical in order to enact effective legislation were:
- What is the real health care cost in workers' compensation?
- Uniform data across the 50 states is needed in order to develop interstate comparisons.
- The data that are collected need to come from an unbiased source so the results can be trusted.
- Have the costs associated with benefits been successfully controlled?
- Are the benefits provided equitable?
- Are the data being used the right data to make the conclusions the legislatures have made?
- What are the cost drivers of benefits?
- How can legislators take the mystery out of the rate-making process?
- Are legislators using outdated data to predict the future?
- Are the data being used reliable?
- Workers' Compensation Administrators identified the following as their concerns with the current system.
- What information will the legislature need?
- Who is covered and who is not?
- Are there many disputes in coverage?
- Can we compare information on self-insurers with that of insured employers?
- How do we know the true cost of workers' compensation?
- Can expert testimony in contested claims be trusted?
- What research benchmarks should we use?
- Are providers being properly paid for services rendered?
- Do providers accurately code outcome information?
- Do disability ratings vary between managed care and non-managed care systems?
- What is the cost of defending claims?
- Insurance Regulators identified the following as their concerns with the current system.
- Reliable data for the rate-making process are needed.
- Data that measure market performance are needed.
- Timely, accurate, and credible data are needed.
- Improved ways to identify trends in the workers' compensation market are needed.
- Data that address the availability and affordability of coverage to all workers are necessary.
- Additional information needs to be provided regarding insurance reserve practices.
- Data benchmarks are needed to approve or disapprove managed care organizations.
- Financial data on health care networks are needed.
- The collection of medical cost data needs to be a priority.
- All three groups believe it is imperative to the long-term health of the system to find out how managed care is working within the workers' compensation system. Specifically, they need the following information:
- How can data be translated into meaningful information?
- Is managed care working to reduce costs while maintaining adequate benefits to employees?
- How do we collect and organize the medical data? By provider? By procedure? About frictional costs? Separated by inpatient/outpatient care? To identify trends?
- There is a need for better data measuring the quality of care and the cost of health care within the workers' compensation health benefits system. The workshop ("Data Collection: To Collect or Not to Collect?") covered various state initiatives in data collection, relevance and limitations of data collection, and a status report of the IAIABC's Electronic Data Interchange Project, which is establishing standards for the electronic transfer of workers' compensation-related data.
- A legislative brief on workers' compensation and managed care issued by NCSL in their newsletter, NCSL LegisBrief, August/September 1998, provided a brief overview on the subject and findings from studies in three states. Washington State's pilot managed care program reduced costs by 27 percent from April 1995 to April 1996; Colorado's managed care program did not reduce the costs of medical claims; in Florida, a study has shown decreases in premium rates, lost time cases, medical authorization appeals, and indemnity benefits since it enacted reforms in 1993 managing managed care.
- Florida, Kentucky, California, and Minnesota, each representing a different form that managed care can take within the workers' compensation system, were identified for potential case studies on what works and what does not work in workers' compensation health care reform.
Two major presentations, "Measuring the Effectiveness of Managed Care in the Workers' Compensation System" and "Presentation on Worker's Compensation Managed Care Data Collection," were made at the final meeting of the project, which was held in conjunction with NCSL's 1998 Annual Meeting. Also, NCSL prepared a Legislative Brief on workers' compensation and managed care in 1998. (See the Bibliography for details.)
AFTER THE GRANT
As a result of the focus groups, workshop, and meeting NCSL, NAIC, and IAIABC submitted a proposal for a renewal grant to establish a data collection benchmarking system. RWJF did not accept the proposal.
GRANT DETAILS & CONTACT INFORMATION
Education for State Policymakers on Workers' Compensation Health Reform Issues
National Conference of State Legislatures (Denver, CO)
Dates: November 1996 to February 1999
(303) 830-2200 x235
Members of the Advisory Committee
From the National Conference of State Legislatures (NCSL)
Legislative Research Commission
Executive Director for Policy
Honorable Nathaniel Exum
Representative for the:
Honorable Angela Z. Monson
Oklahoma City, Okla.
Honorable William E. Thompson
From the National Association of Insurance Commissioners (NAIC)
Mona T. Carter
Director, Property and Casualty
Kentucky Department of Insurance
Division of Insurance
Commonwealth of Massachusetts
Property & Casualty Section Chief
State of Missouri
Jefferson City, Mo.
The Honorable Darla L. Lyon
South Dakota Division of Insurance
Department of Commerce & Regulation
The Honorable Douglas M. Sizemore
Tennessee Department of Commerce & Insurance
From the Insurance Association of Industrial Accident Boards and Commissions (IAIABC)
New Mexico Workers' Compensation Administration
Oregon Department of Consumer and Business Services
Wisconsin Division of Workers' Compensation
State of Nevada Division of Industrial Relations
Las Vegas, Nev.
California Division of Workers' Compensation
San Francisco, Calif.
(Current as of date of this report; as provided by grantee organization; not verified by RWJF; items not available from RWJF.)
NCSL LegisBrief. Denver, Colo.: NCSL. 6(31): 1998.
NCSL Focus Group Meeting, April 4, 1997, San Francisco, Calif. Attended by 35 people, including legislators, members of the National Association of Insurance Commissioners, and the International Association of Industrial Accidents Boards and Commissions.
NCSL Focus Group Meeting, June 6, 1997, Chicago, Ill. Attended by 25 participants representing the National Conference of State Legislatures, National Association of Insurance Commissioners, and International Association of Industrial Accidents Boards and Commissions.
NCSL Focus Group Meeting, January 1415, 1998, Washington, D.C. Attended by about 40 representatives from the National Conference of State Legislatures, National Association of Insurance Commissioners, and International Association of Industrial Accident Boards and Commissions.
"Measuring the Effectiveness of Managed Care in the Workers' Compensation System," July 22, 1998, Las Vegas, Nev. Held in conjunction with the NCSL Annual Meeting. Attended by 16 people, including legislators and members of NAIC and IAIABC.
- Eric Nordman, "Measuring the Effectiveness of Managed Care in the Workers' Compensation System."
- Kate Kimpan, "Presentation on Workers' Compensation Managed Care Data Collection."
"Data Collection: To Collect or Not to Collect?" October 23, 1997, Newport, R.I. Attended by 43 people representing 30 organizations, including state workers' compensations boards, Traveler's Insurance Company, and UpJohn Institute.
Report prepared by: Janet Spencer King
Reviewed by: David Kales
Reviewed by: Janet Heroux
Program Officer: Michael Rothman