Risk & Insurance – July 5, 2012

What Impact Will PPACA Have on Workers' Compensation?

As everyone knows by now, on June 28, 2012, the United States Supreme Court issued a ruling in the historic case of National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services. In this ruling, the Court indicated that certain provisions of the Patient Protection and Affordable Care Act were Constitutional, allowing the law's implementation to move forward.

While there are still significant issues that need to be addressed — such as funding and administration — it's time to put politics behind us and start talking about the impact that health reform may have on workers' compensation.

On its surface, there is very little mention of workers' compensation in the PPACA. The only direct mention is related to black lung coverage and some very narrow occupational disease exposures surrounding asbestosis mining in Libby, Mont.

However, there are a number of issues arising from this legislation that could potentially impact workers' compensation. Since the Supreme Court's ruling, these issues have been widely debated in the Work Comp Analysis Group forum on LinkedIn. Among the possible impacts are:

Healthier Workforce

In theory, if more people have access to health care, then we should see a reduction in co-morbid conditions such as obesity and diabetes. While this sounds reasonable, there is no significant evidence to back this up. Studies that compared workers' compensation frequency and severity for workers with and without health insurance did not produce any conclusive findings. From my personal experience, I have seen many claims involving workers who have outstanding group health coverage with the same co-morbidities that are so prevalent in our society. Body Mass Indexes continue to climb, a problem that is not confined to the uninsured population. Simply put: having health insurance does in-and-of-itself make you healthier.

Cost Shifting to Workers' Compensation

Workers' compensation typically reimburses at higher rates than other payment sources (group health and Medicare). Because of this, providers may be tempted to shift conditions to workers' compensation that should otherwise be covered under group health. Additionally, higher payment rates also may result in a greater and expanded utilization of services in the workers' compensation setting versus other resources, like group health. Unfortunately, the existence of universal access to healthcare under the PPACA will not solve the underlying motivation of the reimbursement rates being higher in workers' compensation.

The other concern has to do with the cost to the patient. Workers' compensation has no co-payments and deductibles. With healthcare costs continuing to climb, more companies are increasing the deductibles and co-payments that employees must pay to access the coverage. Everyone seems to agree that PPACA will increase insurance costs, which likely means employees will be asked to bear more of the burden for these costs. This could lead to even more of a push to have conditions covered under workers' compensation instead of group health.

Access to Care

Health reform will significantly increase the total amount of individuals with health insurance coverage which, in turn, should significantly increase the number of people seeking treatment. However, the number of physicians is not going to suddenly increase. Thus, access to care becomes a concern. In countries with universal healthcare, there can be significant delays in obtaining diagnostic tests and elective surgeries. If the surge in patients causes these delays in the United States, it could increase workers' compensation costs due to the continued payment of total disability benefits while awaiting care.

Medicare Set-Asides

Medicare set-asides protect Medicare and ensure that Medicare does not pay for things that should be covered by another source. If everyone has healthcare coverage, is the potential for shifting costs to Medicare eliminated? If that is the case, then does the MSA become unnecessary?

24-Hour Coverage

Previous attempts to provide 24-hour medical coverage merging group health and workers' compensation were unsuccessful because the two models were so vastly different. However, does the presence of mandatory group health insurance change that? Not necessarily. Consider Canada, where a single payer system exists with a distinction drawn between occupational and non-occupational treatment.

The Massachusetts Example

The RAND Corporation recently released a study called The Impact of Health Care Reform on Workers' Compensation Medical Care: Evidence from Massachusetts. It concluded that the healthcare reforms enacted by Massachusetts in 2006 did lower some workers' compensation costs compared to surrounding states. However, the study only applied to hospital care, which accounts for a small portion of the workers' compensation medical expenses. In addition, Massachusetts has one of the lowest workers' compensation fee schedules in the country, which tends to eliminate the cost shifting that is seen in other states.

Time Will Tell

Will PPACA have on impact on workers' compensation? The real answer is that it is just too early to tell. There is potential for the law to both increase and decrease workers' compensation costs. In addition, because the cost for the coverage and administration provided by the legislation are significant, it remains to be seen whether PPACA will remain viable in the long-term in its present form.

As we've written in a previous blog, workers comp seems to be the system of choice for those who want to abuse the system. It offers indemnity payments, settlements (which sometimes are for life), and medical care with no deductibles or a higher rate of pay for doctors to bill. Brokers who want to stay ahead should offer their clients workers compnesation premium recovery.