There is an old saying that "knowledge is power." Greater access to information allows us to make informed decisions that should lead to better outcomes. In the workers' compensation field, there are many sources of claims data: carriers, third-party administrators, bill review companies, pharmacy benefit managers, managed care networks, etc. With so much claims information out there, you would think that our industry would be able to easily identify loss trends and take the steps necessary to solve the problems that are causing losses to escalate. This claims data should also be very useful to employers when they are trying to differentiate between various vendors.
Two years ago I was moderating a panel at the National Workers' Compensation & Disability Conference and ExpoŽ when the subject of claims data analysis came up. Some very passionate members of the audience asked the TPA and carrier panelists why they were not fully sharing their claims data. They pointed out that there is a tendency in the workers' comp industry to withhold certain claims data as proprietary. The panelists agreed this was a problem, but did not offer any solutions.
Unfortunately, there are many reasons why all this claims data is not harnessed to its fullest potential. Let's start with the claims data that is collected from workers' comp carriers. The National Council on Compensation Insurance's (NCCI) web site describes itself as "the largest provider of workers' compensation and employee injury data and statistics in the nation." NCCI produces some wonderful studies every year which are considered the gold standard in the industry. However, the information does not include approximately one-third of the United States workforce because approximately one-third of the states do not report to NCCI, including three of the largest six states by population. So, while the NCCI analysis is very useful, it is not a complete picture of the national workers' compensation industry.
In addition, many do not realize that the reporting agencies are usually not collecting claims data from self-insured employers. Approximately 50 percent of workers' compensation premium volume in the United States is in some form of risk retention program, including self insurance. This includes the largest employers in the country and also most hospitals and municipalities. Without the inclusion of self-insured claims data, any analysis of the workers' compensation system is incomplete.
Another problem is the quality of the claims data. The focus for claims data reporting is on the big picture, with injury types being classified generally by body part such as the "back" or "leg." If the analysis went to diagnosis code, you would have much more meaningful information. This would be particularly useful in evaluating medical providers. For example, if injuries were reported by diagnosis code, an evaluator could see the frequency with which important items like prescription medication and physical therapy were prescribed. You could also identify the particular providers that were getting better outcomes and not over-utilizing services. The transactional level claims data is out there because the bill review providers, PBMs, and managed care organizations all capture this information. But your ability to access this information is on a vendor-by-vendor basis, and, even then, there is limited analysis available to employers.
This lack of quality, coherent and comprehensive claims data and the capture of incomplete information also exposes the fundamental flaw in the benchmarking systems that exist in the workers' compensation market. Trying to benchmark against claims data from a single TPA or carrier has limited value. For example, benchmarking does not currently exist that would allow an analysis of whether a TPA/carrier has significantly higher allocated expenses than their competitors, or if an insured's average disability durations are longer than industry average. In addition, many benchmarking systems are based on NCCI claims data. If you are a self-insured employer, your performance should usually be above average compared to NCCI claims data given that self-insured employers are usually more focused on loss prevention and claim management efforts.
From a claims data analytics standpoint, the most underserved segment of the workers' compensation market is self-insured employers. Claims data is housed at the TPA level, and there is no nationwide pooling of the information. If such a source were available, it would be a powerful benchmarking tool for self-insured employers. Imagine a self-insurer being able to compare its claims results to the entire universe of self-insured claims. This would assist self-insured employers in identifying and addressing their shortcomings. This could lead to increased loss control and injury prevention measures. A self-insured claims data pool would also give employers a significantly enhanced method for evaluating their TPA, bill review provider, PBM, etc. That should lead to lower costs for employers, and greater satisfaction with their claims outcomes.
There are efforts underway in the industry to develop a claims data pool for self-insured employers. Several of the largest TPAs in the United States are working on this and I am hopeful that it will become a reality in the near future. I've been working with self-insured claims for over 21 years now, and I can tell you that this effort is long overdue and will be very useful for employers.
Now, if we could just find a way to combine all the self-insured and carrier claims data into one place, we would have a true industry-wide benchmarking and claims analysis tool. Once the self-insured claims data has been aggregated, the next step will be much closer than it is today.
May 17, 2012
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