NCCI Predicts Effects of Healthcare Reform on Workers' Comp

Lawmakers narrowly approved to overhaul the health care system in late March and have feverishly debated the short- and long-term impact the measure will have on employers. Workers' compensation experts and insurers, however, have been curiously silent on the topic of health care reform, choosing to cautiously size up the legislation before forecasting its potential effect on the industry.

In a new report from the National Council on Compensation Insurance, researchers highlighted several changes that might occur to workers' comp administrative systems and costs as a result of the Patient Protection and Affordable Care Act (H.R. 3590) and the modified, as enacted, Reconciliation Act of 2010 (H.R. 4872). According to the workers' comp data provider, the overall magnitude and direction of the legislation's impact is not currently measurable because the details of its implementation are not known and may take several years to be enacted. In addition, researchers said that the ultimate impact on workers' comp depends on behavioral changes and actions by claimants, attorneys, health care providers, insurers, and regulators.

Direct effects. The report concluded there are some potential direct effects the legislation might have on the workers' comp market. These effects include:

Changes to federal black lung benefits entitlement provisions. NCCI said it is analyzing the effects on prospective rate and loss costs as a result of the legislation's expansion of the Federal Coal Mine Health and Safety Act benefit entitlement provisions. The organization indicated it will look at the impact to the residual market pool reserves.

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The report said the primary considerations under review include the reinstatement of the 15-year rebuttable presumption of total disability for FCMHSA benefits and the elimination of the requirement for a widower/survivor to prove that the passing of the coal mine worker was due to the occupational disease in order to receive or continue to receive benefits.

"Both of these entitlement provisions will make it easier to get federal black lung benefit claims filed and approved and will increase the benefits payable," NCCI researchers wrote. "These provisions will also increase future insurance premium costs (prospective costs) and will give rise to a significant increase in liabilities for claims from prior periods of time (retroactive costs) for which premiums did not reflect the new and higher costs required by these changes."

NCCI said it is analyzing the prospective cost impact by state in consideration of upcoming rate filings.

Changes to Medicare reimbursement levels. Researchers said there may be cost impacts for those states that utilize Medicare as a basis for the reimbursements in their state workers' comp fee schedules. The report concluded that this might affect both physician fee schedules and hospital fee schedules (for example, inpatient, outpatient, and ambulatory surgical centers).

NCCI said the extent of the impact on state comp costs will depend on two factors -- how and when the federal government makes modifications to Medicare reimbursements and how states adopt the revised Medicare reimbursement formula for their workers' comp fee schedules.

Provisions worth watching. The report highlighted several provisions that the workers' comp industry should keep an eye on for long-term effects. These provisions include:

Increased health care coverage. According to the report, individuals without health insurance or with nonwork-related preexisting conditions may be currently accessing the workers' comp for medical care.
"Since the health care bill expands the number of people covered and requires coverage for preexisting conditions, there may be a decline in workers' compensation funding of treatments for preexisting non-work-related conditions," researchers wrote.
Impact of wellness initiatives. The report concluded that the promotion of wellness programs might reduce the incidence and duration of workers' comp claims by, for example, triggering a decline in obesity rates.
Greater access to generic drugs. The legislation facilitates the early entry of generic drugs into the marketplace while preserving the incentive for innovation. Researchers said that if certain generic drugs are made available sooner, some incremental cost savings in workers' comp could emerge.
Impact of new taxes. According to the report, new taxes are anticipated to be levied on medical devices, drug manufacturers, and health insurance companies.
Reduction in fraud and abuse.Researchers said the reform legislation's fraud and abuse provisions have a wide reach and touch on nearly every aspect of providing health care -- from provider enrollment to payment for services to unusual ordering/billing practices. Enforcement and penalty provisions might raise compliance, the report concluded.

Read more at the WORKERSCOMP Forum^TM homepage.

June 7, 2010

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