The insurance industry, by its nature, is slow to change. It's a very conservative industry that tends to keep doing things the way they've always been done. However, evolution has a way of catching up with everything. Eventually, things must evolve or they lose their value.
We are an industry who has always focused on the indemnity dollar. That large settlement gets everyone's attention. We consider a file "resolved" when the indemnity is closed out but medical remains open. Files that remain open at that point are transferred to "future medical" desks, which usually have the least experienced staff handling caseloads -- several times more than what an indemnity adjuster carries.
The reality of things is that 60 percent of every dollar spent in workers' compensation is on the medical side. Workers' comp costs keep going up every year, and the driver for that increase is the medical expense, not the indemnity. As an industry, we need to be focusing on medical to control costs. We need to be coming up with new and better ways to address this, because doing what's always been done clearly doesn't work.
I'm seeing signs that changes are coming. In August 2011, while speaking at the International Association of Industrial Accident Boards and Commissions Conference, I encouraged the regulators attending that conference to take the action necessary to address problems such as opioid abuse in workers' comp.
To their credit, the regulators have stepped up to the plate. Washington led the way with imposing strict guidelines on the prescribing of opioids. Texas, Colorado and New York have all rolled out treatment guidelines addressing opioids, surgery and a wide range of other medical treatments. The IAIABC is getting ready to release model opioid rules that they will be recommending to their members. These rules are based on the success in Washington and other states. These changes will save lives and improve the quality of life for injured workers. I applaud these states and the IAIABC for taking these very important steps. My hope is that the IAIABC Model Opioid Rules are quickly adopted around the country.
The industry is also starting to realize that focusing on transactional measures such as fee-for-service or cost-per-fill, alone, doesn't work. Instead, we need to focus on things like quality-of-care and outcomes. For employers to achieve better outcomes on their claims, they are going to need to invest more into managing them. I see many employers who are setting up their own medical networks with a focus on quality-of-care and outcomes. They are paying more than fee schedule, but the improved outcomes, ultimately, translate into cost savings for the employer. With the advent of the Affordable Health Care Act, an increasing number of patients will be accessing a finite number of medical providers. If employers want the best medical providers treating their injured workers, they are going to need to pay a little more on a per-service basis. If this translates into better outcomes for the injured workers, employers will ultimately see lower costs.
Organizations that focus on quality-of-care and outcomes for patients, such as Best Doctors and Paradigm Outcomes, have been very successful working on catastrophic claims such as brain and spinal cord injuries. They have experienced this success because they work with physicians and facilities who are the best at what they do. They have significant data to back up the return on investment savings that can come from utilizing the best medical care. But the impact of this can go beyond catastrophic claims -- they are also seeing success addressing important issues such as the excessive use of opioids. I've seen these organizations make a significant positive impact on the lives of injured workers, which benefits both the worker and their employer.
Finally, I'm starting to see more employers who are viewing their claims handling not as an expense item, but as an investment in cost savings. These employers are spending more on their claims handling operation in order to have lower claim counts, more nurse case manager involvement and ultimately better outcomes on their claims. They are realizing that the increased financial investment up front will easily pay for itself in cost savings down the road.
Change is coming to the workers' comp industry. This change is focusing on controlling the abuse of opioids, and producing better outcomes for injured workers and for employers. We need to encourage and embrace these changes. Let's make 2013 the year that the workers' comp industry changed for the better.
January 31, 2013
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