Does the Affordable Care Act Push Medical Expenses Toward Workers' Comp Insurers?

Recent JAMA Study Indirectly Supports Earlier WCRI Findings

Since President Obama signed the Affordable Care Act (ACA) into law on March 23, 2010, there has been a debate within the workers’ compensation (WC) world as to whether one of the ACA’s unintended consequences is to promote cost shifting from health insurance plans to WC insurers and self-insuring employers. Last September, for example, the Workers’ Compensation Research Institute (WCRI) published a study paper [see Victor, Richard A., Fomenko, O. and Gruber, J., “Will the Affordable Care Act Shift Claims to Workers’ Compensation Payors?” September 2015] that pointed to significant levels of cost-shifting toward WC when it comes to soft tissue injuries and conditions.

A study recently published in JAMA Internal Medicine [Adrion, Emily R., PhD, MSc, et al, “Out-of-Pocket Spending for Hospitalizations Among Nonelderly Adults,” JAMA Intern. Med., June 27, 2016; doi: 10.1001/jamainternmed.2016.3663], provides at least indirect support for the WCRI’s findings. The JAMA study suggests that while more Americans may now be covered by health insurance, they are actually paying more in terms of out-of-pocket expenses for such care than before the effective date of President Obama’s signature social program. The researchers point to increased deductibles and copays that have resulted from the ACA-compliant health care plans. While the JAMA study doesn’t mention WC claims in any way, one can extrapolate from the study’s findings that the significant deductibles and copays that many Americans now face will serve as disincentive to shift medical care from the WC arena toward group and individual health insurance plans.

JAMA Study Utilized Huge Claims Database

The researchers indicated their study was the first national assessment of out-of-pocket spending for inpatient hospitalizations. They stressed the breadth of their research, noting that they utilized data from a large commercial health insurance claims database compiled by the Heath Care Cost Institute (HCCI), containing inpatient hospitalization claims data for more than 50 million privately insured individuals, aged 18 years to 64 years, from all 50 states. The data related to patients who had coverage with Aetna, Humana, and UnitedHealthCare between January 1, 2009 and December 31, 2013. The study group included a mix of patients covered both by employer-sponsored group plans and individual market health insurance plans.

JAMA Study Found Significant Growth in Out-of-Pocket Costs for Inpatient Care

The researchers observed that the patients’ total out-of-pocket expenses associated with their inpatient hospitalization care increased by 37 percent during the relevant time period, representing an annual growth of 6.5 percent. The researchers noted that the growth in annual health insurance premiums during the same period was less—5.1 percent per year.

The researchers stressed a broader point: the 6.5 percent annual growth in cost sharing coincided with a notable slowing in the growth of overall health care spending, which the researchers indicated had risen at an annual rate of slightly less then 3 percent during the time frame. Looking at data culled from the last year of the study period—2013—the researchers observed that the growth in out-of-pocket expenses was highest among those in individual health insurance plans.

Among the other findings of the researchers:

> They noted that the growth in patient expense varied with the type of out-of-pocket spending. For example, during the study period, coinsurance payments increased by one-third.

> Expenses associated with required deductibles increased by 86 percent.

> The researchers pointed to other research studies that indicate more than 80 percent of those in employer-sponsored plans now have annual deductibles averaging $1,300. That is significantly higher than in pre-ACA years.

> Coinsurance is an important part of the ACA. According to the study, 72 percent of silver plans offered through the federal health insurance marketplace included coinsurance requirements, with average coinsurance rate of 26 percent of the cost of care.

Americans Don’t Understand Their Cost-Sharing Responsibilities

Drawing on the research of others, the JAMA study authors indicated that most Americans do not have a basic understanding how cost sharing works when it comes to medical care. They don’t understand how a deductible really works. They can’t easily differentiate between copay and coinsurance. The researchers posit that this unfamiliarity puts patents at significant financial risk, particularly if they are hospitalized.

What Does Any of This Have to Do With Cost-Shifting in the WC World?

Some WC experts posit that one of the signature provisions within the ACA—the elimination of pre-existing condition waiting periods—provides a strong incentive to settle one’s WC claim as early as possible and that the result might be reduced medical expense claims paid by insurers and self-insured employers.

Here’s how the argument goes: In a number of states, it is relatively easy to settle out a WC claim, even when there is a question about future medical expenses. If I could digress just a bit, yesterday afternoon, my colleague, Robin Kobayashi, and I took an informal and unscientific survey of WC legal practitioners from more than 20 states around the nation. At least half the experts indicated lump-summing was freely sanctioned by the various administrative agencies, as long as the injured worker was represented by counsel. Many insurers favor lump-summing; it lets them close out their files.

In the past, however, settling claimants had at least one significant problem: most health insurance policies refused to cover pre-existing conditions. The settling claimant, therefore, had to worry about whether or not the allocation for future medical care was sufficient. In all too many cases, the settling claimant put the “future” medical allocation in his or her pocket and rolled the dice as to future care.

The argument follows that since, under the ACA, health care insurers must now provide coverage without restrictions as to pre-existing conditions, this should be a boon to WC settlements. That is to say that following the settling of the WC case, the claimant can merely secure an ACA policy—after all, everyone is required to be insured anyway—and have the future care paid out as it is rendered. With a major obstacle to settlement removed, everyone wins, right?

No Real Reductions in Med Claims for WC Insurers

The argument continues that with the increased number of settlements, medical claims dollars will be shifted from the WC insurers to ACA insurers. There’s at least one problem with the math, however. To the extent that the WC settlement is an appropriate allocation of future medical care expenses for the injured worker—yesterday afternoon’s informal afternoon survey of experts indicates that while many state administrators favor settlements, most require appropriate amounts be paid by the insurer for future medicals—there is no reduction in medical expense outlays for the WC insurers.

Bottom line: while the ACA may lessen the risks of an injured worker’s settlement, it does not lessen the medical outlay by the WC insurer. Rather than shift medical expenses from the WC to the ACA insurer, the likely result will be to shift the medical expenses from the injured worker to the ACA insurer.

ACA Copays & Deductibles Are Not Being Factored In by Many Claimants

Returning to the JAMA study, settling WC claimants face another danger. As the JAMA researchers indicate, most Americans—and, therefore, most injured workers setting WC claims—do not appreciate the significance of the ACA-mandated copays and deductibles. As noted in the JAMA study, while perhaps more Americans are now insured, they actually appear to be paying more—not less—out-of-pocket for their health care.

There has been a great deal of attention paid to the premium subsidies that many, if not most, injured workers enjoy under the ACA. All well and good, but in many cases, Bronze and Silver ACA plans require the patient to pay the first $6,000, or so, in annual medical care costs. Many injured workers who see the allocation of future medical expenses in their WC settlement package as an extra wad of cash that can be stuck in their pockets will find themselves reaching back into those pockets to pay for the subsequent medical care that they need.

When All the Dust Settles: Aren’t the Parties in Essentially the Same Position as Before the ACA?

If the JAMA researchers are correct, those who settle their WC claims will face increased out-of-pocket expenses for their post-settlement care. The insurers and self-insured employers will be in the same position as they were prior to enactment of the ACA. The health care insurers under the ACA may pay some additional amounts, true, but not because the WC insurers have saved any money. The ACA insurers will be subsidizing those who settled their WC cases and pocketed the proceeds, but not to the full degree that many claimants anticipate.

We are also left in the position described in the WCRI study, where powerful provisions within the ACA push more and more patients toward so-called “capitated” health insurance plans and away from “traditional” fee-for-service arrangements. The movement toward capitated plans provides strong incentives for medical care practitioners to assign causation for medical conditions, such as soft tissue injuries, to repetitive trauma or other causes within the workplace in order that they can be paid on a fee-for-service basis. Those strong incentives mean the WC insurers will pay larger and larger claims over time.

There is tremendous pressure on ACA insurers these days. Some are pulling out of the market because of the losses they have experienced. As more and more claimants settle their claims, pocket the future medical allocations, and push the expenses off onto the ACA insurers, one should anticipate a push-back. Just as the folks at Medicare finally grew weary of being treated as the primary—instead of a secondary—payor for medical expenses associated with settled WC claims, so too, the ACA insurers may push for some sort of formalized set-aside requirement regarding WC settlements.

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