Marsh Report on ACA and Workers’ Compensation: Helping Employers to Keep a Foothold on Snowy Roads and Black Ice

Karen C. Yotis, Esq., a Feature Resident Columnist for the LexisNexis Workers’ Compensation eNewsletter, provides insights into workplace issues and the nuts and bolts of the workers’ comp world.

Whatever your views happen to be about the Patient Protection and Affordable Care Act of 2010,  if your interests touch upon the workers’ compensation industry, you’d best stop for a minute and listen to what the experts at Marsh are starting to say. These are the business insiders who spend their time in the trenches learning about day-to-day, practical trends, the ones who are witnessing first-hand how the ACA has quickly become a great source of uncertainty for employers. So far, everyone has focused on the ACA in the context of group health coverage. But the winds of change being fanned by the ACA will also seriously impact employers’ strategies for managing their workers’ compensation costs.

This is the unadorned conclusion (warning?) that Marsh broadcasts in its March 2014 Risk Management Research Briefing entitled Health Care Reform and Workers’ Compensation (Briefing) The introductory message of the Briefing is crystal clear: “Employers should understand how reform will affect the quality of care available to their employees, the calculation of workers’ compensation premiums, and claims filings—and what they can do to manage those effects.”

The ACA’s impact on various aspects of workers’ compensation—risk management, cost strategies, and workers’ access to medical care to name a few—is a hot button topic that will require the best and the brightest in the industry to formulate creative approaches to solutions in a shifting landscape.

Author’s Tip: Marsh recently provided a glimpse of its hard-hitting, no-nonsense point of view about managing the particular risks that the ACA poses to the WC industry in its first of a four-part webinar series—summarized in one of my recent articles—in which Mark Walls, Workers' Compensation Market Research Leader at Marsh, discussed the potential provider shortage for injured workers that could arise as a result of the anticipated increase in coverage on the group health side brought about by the ACA, as well as the resultant increased utilization of services in a medical universe that has a finite number of available providers. During the webinar, Walls emphasized the critical importance for workers’ compensation payers to identify providers who will deliver the best outcome for injured workers. Walls also spoke about the need to shift the future focus of medical networks from fee-for-service discounts to a quality of care and outcomes model as a workable (albeit initially more costly) solution to getting more timely and less inappropriate treatment, lower costs, and faster return to work in the medical landscape that is evolving under the ACA.

The Briefing delves into the ACA’s effect on workers’ compensation in more detail than the earlier webinar, discussing the ACA as it relates to the specific issues of workers’ health, cost shifting, access to care, standards of care, and premium refunds, and placing those issues into a risk-management context.  The Briefing recommends a series of specific steps employees can take to accentuate the positive and eliminate the negative during this interim (and increasingly prolonged) transition period between enactment and full implementation of the ACA.

The Briefing first challenges the views of ACA proponents that the statute will lead to a healthier society and a reduction in comorbidities, a big word for additional medical problems from which a patient suffers along with a primary disease. The Briefing uses the example of an obese patient who also suffers from hypertension and diabetes. Relying upon a California Workers’ Compensation Institute analysis (that studied five years of workers’ comp claims and concluded that average benefit payments were 81 percent higher for obese injured workers), a study from Assured Research (showing “little correlation” between an employee’s status as an insured and the likelihood of that employee filing a workers’ compensation claim) and data from the Centers for Disease Control and Prevention (highlighting heart disease as the leading cause of death in this country) the Briefing concludes that employers can expect their workers’ comp claims experience to rise considerably despite contentions about the ACA’s future salubrious effects on the nation’s overall health.

The Briefing also challenges head-on the idea that the ACA’s promised greater access to health care will reduce the shifting of non-work-related injury costs from group health insurance to workers’ compensation (with its higher reimbursement rates and absence of co-pays and deductibles). To the contrary, the Briefing states that “it has become clear that the law will not result in all Americans having health insurance coverage,” and goes on to conclude that “the financial incentive for employees to shift treatment toward workers’ compensation will continue under the ACA.” The referenced Mercer’s National Survey of Employer-Sponsored Health Plans 2013 about large employers’ plans to cut back on employee hours to avoid the ACA coverage mandates supports Marsh’s recommendation that employers continue to anticipate increased cost shifting and take steps to avoid its impact on workers’ compensation costs.

The Briefing points to an increasing problem of limited access to medical care (caused by the ACA increasing the number of individuals with health insurance) as a downright critical reason for employers to “develop medical networks that focus on quality of care and outcomes—even if it means paying more for a fee-for-service basis.” Since the anticipated physician shortage as it relates to specialty services such as orthopedic care can have a particular effect on the type of injuries that are prevalent in the workers’ compensation system, the Briefing cautions that decreased access to medical care could easily become a cost driver for the employer who does not anticipate and manage this risk.

The Briefing identifies a risk associated with the ACA’s allowance of premium refunds to employers whose health care program performance exceeds expectations.  When deciding how to exercise its statutory option of returning premium refunds to employees or holding them to offset future premiums, the Briefing encourages employers to be aware of the tie between premium calculations and an employee’s payroll, and to take into account the unfortunate outcome that could arise when good performance on a group health program causes an increase in the costs of an employer’s workers’ compensation program. 

While cautioning employers to look beneath the surface of the ACA to get a handle on the law’s true implications, the Briefing’s message is not mired in gloom and doom. Pointing to the post-reform shift from a focus on volume and costly procedures to a focus on “improved standards of care and achieving better patient outcomes,” the Briefing predicts: “Although it remains to be seen whether the standards of care developed under the ACA for group health care would be enforced under workers’ compensation, this is a promising development for employers.”

While the full effect of health care reform on workers’ compensation costs and claim trends remains will remain uncertain until full implementation of the ACA, the Briefing recommends that employers take the following preventative measures:

> Step up efforts to locate medical personnel who provide the best care and make sure employees have access to these providers

> Manage how company handles premium rebates under the ACA in view of the impact this issue could have on payroll calculations under workers’ compensation

> Monitor any cost shifting of injury claims from group health insurance to workers’ compensation

> Avoid the temptation to let ACA concerns interfere with an employer’s commitment to loss control efforts

It’s possible to read about every side to every argument in some form or fashion when it comes to whether the ACA’s reform measures will save and protect us or unravel the threads of the nation’s constitutional fabric.  And whether your own view of the ten titles that comprise the ACA is good, bad, or indifferent, if you take one thing away from the Marsh Briefing let it be this: Forewarned is forearmed. It’s time to get busy.

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