By PETER ROUSMANIERE, an expert on the workers' compensation industry.
Workers compensation is a $70 billion a year business than embraces employers, workers, doctors, insurers and regulators. What was 2011 like? Was it any different than, say, 2010. What happened this year to lead to predictions for 2012?
Two developments in stand out in 2011: opioids and insurer finances.
Although medical associations, and some regulators, employers and claims payers have been sounding the alarm for some time, a sense of urgency about the dangers of prescribed opioid use swept the industry in 2011. A few years ago one had to look hard to find a claim payer with well-developed, proactive policy of promoting patient safety. Today, almost all payers acknowledge they have a major patient safety problem on their hands.
A second development in 2011 worth noting was the continued deterioration of insurer finances. Medicare settlements are a particularly painful irritant to insurer finances. Insurers as a whole are now incurring losses and other expenses of about $1.20 for every dollar on premium income. Investment income makes up most of the gap. But this state of affairs, which is worsening, is not sustainable. Premiums will simply have to go up -- by a lot.
Richard M. Sabetta, managing principal of the consultancy Risk Navigation Group, said he is concerned about how insurers may respond to worsening operating results.
"Many insurers initiated cost cutting in the claim operations. Those initiatives have meant reductions in claim staff, often involving more seasoned and experienced staff. But there is a price to be paid," said Sabetta, who advises claims payers on organization and strategy.
The greatest danger is that less attention is being given to reserve setting for the more complex claims. This can lead to under-reserving.
He also is concerned about opioid use and the broader issues of chronic pain among injured workers. They "are treated more and more with expensive drugs and often undergo serial care by a number of physicians," he said. "These claims make up the growing mountain of long-term disability claims in workers compensation."
Sabetta wants to see more attention given to a "battery of approaches that include medical, physiological, psychological coping and psycho-social readjustments"
Medical cost inflation is another worry for Sabetta. In his view, utilization review has not delivered on its promise to control inappropriate care, and insurers are struggling to better define what superior medical practice and how to evaluate doctors.
Jennifer Jordan, general counsel and founding member of MEDVAL LLC, a national provider of Medicare Secondary Payer compliance services said she and her colleagues deal with Medicare settlements, one of the most contentious areas of workers compensation today. Claims settlements now include funds set aside to pay for medical care for injuries of Medicare-eligible workers. Their high cost has seriously complicated claims settlements.
"Carriers currently pay out their entire lifetime exposure at an amount in excess of what Medicare would otherwise have paid in exchange for some assurance that the amount set-aside is adequate," said Jordan, who is also editor-in-chief of The Complete Guide to Medicare Secondary Payer Compliance, published by LexisNexis.
"The problem is about as bad as it can get. The only hope for 2012 is education. The private sector needs to better understand its obligations under the program so that it can take control of the issue."
Most claims payers mistakenly believe that Medicare (that is, CMS) approval is the only way to obtain some definitive closure to their claims. Jordan says "payers continue to endure the voluntary review process and wait six months to a year for CMS' approval. Then they are stuck funding an amount far in excess of Medicare's exposure in the settlement of the claim because the approval requires funding for 100 percent of all possible medical services, sometime despite medical necessity, and at a rate in excess of what Medicare pays."
With Medicare settlements and opioid use besetting the workers compensation, and insurers put under intense financial pressure, 2012 looks like an interesting year indeed.
January 4, 2012
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