I. BACKGROUND
A. ORIGIN OF WORKERS COMPENSATION
• Workers compensation programs represent a social contract trading to right to a tort remedy for a no-fault system assuring medical and cash (indemnity) benefits for work-related injuries and illnesses.
• The U.S. workers compensation system consists of 50 state programs plus one for the District of Columbia along with several federal programs. These programs were adopted by the states starting shortly after the beginning of this century.
B. MEDICAL COSTS AND CLAIMS
• Medical payments cost $15.2 billion in 1990, up 13 percent from 1989. These payments accounted for 40 percent of total workers compensation expenditures (up from 33 percent in 1980). In the last decade, workers compensation medical costs have been increasing about 50% faster than health insurance costs.
• Workers compensation programs generally pay medical services on a fee-for-service basis.
• State cost control efforts include restrictions on employees' initial choice of physician (21 states), limitations on changes in providers (40 states), use of medical fee schedules (27 states), regulation of hospital charges (22 states), development of utilization review (14 states) and bill review (13 states).
C. COVERAGE CHARACTERISTICS
• In virtually all U.S. jurisdictions, there is unlimited medical coverage for work-related injuries or illnesses (though decisions on work-work-relatedness may vary across states, particularly for illnesses). Workers compensation provides first dollar coverage with no employee cost sharing. There are only a few areas of treatment which differ across states (e.g., psychological and psychiatric services, counseling, vocational rehabilitation).
• Workers compensation coverage is mandatory for most employers in all except three states (NJ, SC and TX). Nationwide, 87 percent of employees are covered. • Gaps in workers compensation coverage include domestic workers, agricultural
workers, and some state and local government employees.
• In most states, employers may purchase insurance from private carriers or self-insure by meeting certain standards.
• A number of states operate state-run insurance funds; six states operate exclusive funds (i.e., no private insurers) -- Nevada, North Dakota, Ohio, Washington, West Virginia, and Wyoming.
• In 1990, private insurance carriers paid roughly 60 percent of workers compensation benefits, state and federal funds paid about 20 percent, and self-insurers paid about 20 percent.
D. WORKERS COMPENSATION PREMIUMS
• Workers compensation premium rates are regulated by states. Rates generally are set by class code based on occupation. Rates are calculated for some 600 employment classifications commensurate with the risk of injury. These rates can
vary by orders of magnitude (e.g., in California, from $0.53 per $100 of payroll for auditors to $45.82 per $100 for roofers).
• A prospective experience rating adjustment (higher premiums for firms with higher claims) is made for employers large enough to have a pattern to their claims experience. The adjustments are based on the claims experience over the three previous years. Other adjustments may also be made, including discounts, (dividends at the end of the policy year).
• For very large firms, retrospective premium adjustments are made to reflect the employer's claims experience in the current year.
• Rates are set to provide sufficient funds for the insurer to reserve the entire amount of losses (current and future expenses) for injuries occurring in the policy year.
E. LITIGATION
The major areas of workers compensation litigation deal with (1) whether a particular injury or illness is work-related, and (2) the degree of disability resulting from an injury or illness (this determines the level of indemnity benefits). Both areas require input from the medical providers treating the worker.
F. TWENTY-FOUR HOUR COVERAGE
• Several states (California, Florida and Oregon) have begun to experiment with the integration of workers compensation medical benefits into health insurance coverages (often called 24-hour coverage). These experiments are just beginning and no results are expected in the near future. State efforts are being hampered to some extent by questions about the potential application of ERISA to 24-hour coverage arrangements.
• None of the state efforts has explored integration in a system where employees choose their health insurance plan. California Insurance Commissioner John Garamendi has proposed integration in an employee-choice context.
II. ISSUES
A. OPTIONS EVALUATED BY THE GROUP
1. The working group focused on two primary options for integration. These options provide the context for the issues discussed in this section. The options are:
• A "partial integration" of the two systems, which would keep the financial responsibility for work-related health benefits with existing workers compensation insurers but provide treatment through the health plans chosen by workers under the new system.
• A "transfer of risk" option, which would transfer the financial responsibility for providing work-related health benefits to health plans in the new system.
These two options are very different in terms of structure, potential cost savings, complexity, and disruption of current arrangements.
2. Effects on the market. Either option essentially subordinates the market for workers compensation medical benefits to the market for general health benefits.
• By requiring injured workers to receive work-related medical benefits from their health plans, we have removed any influence (legal or otherwise) that a workers compensation insurer would have over who provides treatment. Workers compensation insurers thus have no market position with respect to health plans or medical providers with respect to the cost of their services.
• This means that in either option the alliance must be responsible for assuring that payments to health plans for treatment of work-related illnesses are reasonable. • In the partial integration option, the alliance would use negotiation or fee-setting
to establish reasonable rates.
• In the transfer of risk option, the alliance would capitate health plans for the cost of treatment. In either case, the role and influence of workers compensation insurers in determinations related to medical benefits are reduced.
B. SUMMARY OF ISSUE AREAS
There are seven primary issues regarding integration of workers compensation health benefits into the new system:
1. How to coordinate the "management" of the medical benefits and wage-loss benefits that must be provided to injured workers, especially if financial responsibility for health benefits is borne by health plans (i.e., the transfer of risk option).
The crux of this issue is assuring that medical benefits and wage loss benefits are coordinated to assure that an injured worker returns to work as quickly as possible. Managing the wage loss benefits entails activities such as providing vocational rehabilitation and creating light-duty jobs that injured workers can do.
2. How to pay health plans for work-related health benefits.
3. Whether health plans should provide the additional medical benefits (e.g., extended rehabilitation services and long-term care) now provided by the workers compensation system.
4. How to address the significant differences in workers compensation systems across states.
While medical benefits are fairly standard across the country, rules related to eligibility for workers compensation benefits differ dramatically. This can be a problem in assuring portability of benefits for people who move between states.
5. How premiums should be structured to pay for work-related benefits. This is primarily a concern in the transfer of risk option.
6. In the transfer of risk model, how to move from a fully-funded reserve basis in workers compensation to the annually-funded basis in the health care system. 7. How to address special compensation systems, such as the programs established
under the Federal Employees Compensation Act (FECA), the Longshore and Harbor Workers Compensation Act and the Federal Employees Liability Act (FELA).
C. DISCUSSION OF ISSUES
1. Coordination of work-related medical benefits with wage-loss benefits.
a. The medical and wage-loss components of workers compensation are related: diagnosis by a physician determines the extent of injury and disability, and the injured worker's medical status affects the amount of time the person is not at work, and hence the claim for lost wages.
b. Workers compensation insurers want to exercise as much control over the medical benefits as possible so that they can coordinate the medical activities with their return to work efforts (e.g., vocational rehabilitation; creation of light-duty jobs).
• Workers compensation insurers are concerned that, in the transfer of risk option, health plans will not have an incentive to see injured workers quickly or to provide more intensive treatments that could hasten return to work. They believe this would increase the cost of wage loss benefits.
• In some states, employers (and therefore workers compensation insurers) have the right to select the treating physician for work-related medical benefits. This right permits the employer/insurer to influence the medical provider because they are the source of payment and patients. Either option undermines that right, because employees, not employers, would be selecting the health plan to provide medical benefits.
2. Payment to health plans for work-related medical benefits.
a. Partial Integration Option
• In this option, workers compensation insurers would pay health plans as "providers" of work-related medical benefits. The issue is how to assure that health plans charge reasonable prices to workers compensation insurers.
• Because injured workers are required to receive services from their health plans, the health plan has no incentive to bargain or negotiate rates with workers compensation insurers.
b. Transfer of Risk Option
• In this option, health plans would bear the risk for treatment of work-related injuries and illnesses. The issue is how to develop a payment system that capitates health plans for work-related injuries and illnesses.
• Cost containment in the reformed system is based on annual capitation to health plans.
• There is no real experience setting per-worker capitations (especially for HMOs) for work-related illnesses.
• Capitations to health plans would need to vary based on work status, occupation and perhaps other factors related to the risk of work-related injuries. The methodology for these adjustments has not been developed.
3. Additional Benefits for Work-Related Injuries and Illnesses
a. Workers compensation provides unlimited medical benefits for work-related injuries and illnesses.
• The theory of workers compensation is that the employer should be responsible for funding complete medical costs of work-related accidents.
• Areas where workers compensation provides greater or additional medical benefits than the health care system include:
-- No copayments or deductibles.
-- No lifetime maximum benefit amounts.
-- Rehabilitation (including treatment by providers that typically are not used by HMOs, such as chiropractors).
-- Long-term care services (workers compensation is responsible for chronic conditions caused by workplace accidents and illnesses).
• Workers compensation medical claims are weighted more toward rehabilitative services than traditional health plan claims.
b. Under either option, should health plans be responsible for providing the full range of medical benefits now provided by workers compensation?
• In the transfer of risk option, would this mean that a separate benefit package would be available for work-related injuries and illnesses?
• If additional benefits are not provided by health plans, would workers compensation insurers remain responsible for them?
• Is it acceptable for workers to be required to pay copayments and deductibles for work-related injuries?
c. If workers are required to pay copayments and deductibles, would this potentially violate the exclusive remedy rule of workers compensation? The exclusive remedy rule provides that workers compensation is the exclusive remedy for workers injured on the job. It applies (in part) because the employer is responsible for the total medical costs of treatment. Transferring costs to the worker could have the effect of diminishing employer protection from tort actions by injured workers.
d. If additional benefits are provided for work-related injuries, won't there be an incentive for people to claim that they were injured on the job so that they can get access to additional benefits?
4. Differences in State Workers Compensation Programs
a. State workers compensation systems differ in a number of ways that are important for thinking about the integration of medical benefits. These differences are important primarily in the transfer of risk option:
• The medical benefits offered by state systems differ to some extent (but not very much); the key differences are in the areas of benefits for occupational diseases, stress and "newer" injuries (like repetitive motion problems).
• The standard for determining causation (i.e., whether an injury arose out of and in the course of employment).
• The types of people eligible for benefits.
b. These differences become important for injured workers who move from state to state.
In the transfer of risk option, where health plans bear the risk for work-related injuries, how do we treat the case of a person who is eligible for additional benefits under workers compensation in one state who moves to another state where the situation would not have been compensated?
For example, take the situation of two people, Person A and Person B, who sustain exactly the same injury playing softball for their employer's softball team. In State X the injury is covered as a work-related injury and Person A is entitled to additional benefits (for rehabilitation beyond what would otherwise be covered). In State Y the injury is not considered work-related, so Person B is entitled to no extra benefits. Both workers now move to State Z (which would consider the injuries as work-related under their laws). How should the injuries be treated by the new health plan in State Z?
This is not a serious problem in the partial integration model. The workers compensation insurer who covered the original injury would remain liable for all future expenses, based on the law in the state where the person worked (this is how the problem is handled in the current system). In some cases, the law of the state where the injury occurred governs.
a. In the transfer of risk option, there is an issue regarding how to pay for the cost of the workers compensation medical benefits that are being transferred to the new system.
This is not a serious issue in the partial integration option, because the risk stays with workers compensation insurers who can continue to fund the costs as they do today.
b. In the transfer of risk option, there is a question as to whether these benefits should be funded through separate premiums charged to employers or should the cost be added to premiums already being collected by health plans.
• If the costs are added to current premiums, should employees also pay a share of the added costs for these benefits? (Workers compensation is now entirely employer funded).
• If workers are required to contribute toward the cost of work-related medical benefits, would the exclusive remedy rule be violated?
c. In the transfer of risk option, if separate premiums are used to fund work-related medical benefits, on what basis should they be assessed?
• If separate premiums are used, should they be experience rated (which is how workers compensation is funded today) or should they be based on a community rate?
• Would the experience rating be based only on the occupation of the employer, or would it also be based on the actual loss experience of each employer (as it is today)?
6. Setting Reserves in the Transfer of Risk Model. (While this appears technical, it actually is the biggest obstacle to transferring the risk from the workers compensation system to health plans).
a. Workers compensation reserves are set up very differently than health insurance reserves, which means that the basis of funding for the two systems is very different.
In the transfer of risk option, where the risk of paying for work-related medical benefits is transferred to the health plan, the method of financing these benefits
would need to be converted from the "occurrence" basis used in workers compensation to the annual basis used for health benefits.
b. Under the current system, when a workers compensation injury occurs, the insurer sets aside an amount intended to fund the entire losses that will occur as a result of that injury (i.e., the present value of future claims).
• Premium rates are set to provide sufficient funds for the insurer to reserve the entire amount of losses in the occurrence year.
• For example, under current workers compensation practices, if premiums for the health component of workers compensation for a firm were $10 in a given year, only about $4.00 would go to pay for services in that year and $6.00 would be reserved to pay for services in future years.
c. For health insurance (at least as we are setting it up), premiums generally are established to fund losses only through the current policy year.
d. For example, take Person A who falls and seriously injures her leg. Treatment will entail a series of operations over a three-year period.
• If this were a workers compensation claim (in the current system), the employer's workers compensation carrier would establish a reserve equal to the present value of all of the estimated future costs of the injury.
The insurer would fund these future benefits for Person A, even if she quit her job and moved to another state.
• If this were a typical health insurance claim, the health plan would provide treatment in the first year out of the premiums it received in that year. Treatments in the second year would be funded out of premiums received in that year. If Person A quit her job and moved to another state during the course of treatment, her new health plan would be responsible for funding further treatments (assuming no preexisting condition limitations).
e. Converting work-related medical benefits to an annual funding basis (as we do in the transfer of risk option) can add tremendous complexity to the system, especially for cases where "work-disabled" people change states or move from employers outside of alliances to coverage within alliances.
• The problem for people moving from one state to another is that the eligibility for workers compensation may differ. A method is needed to assure that benefit decisions related to additional benefits for work-related injuries is made under the rules of the state where the injury occurred.
• In the case of work-disabled people moving from non-alliance employers to alliances, the problem is that there will be a transfer of risk (cost) from the non-alliance employer to the alliance, because the non-alliance employer may not be contributing to the pool of money collected by the alliance to treat work-related injuries.
7. Other Compensation Programs
a. Federal law establishes special compensation programs for certain classes of workers:
• Federal Employees Compensation Program (FECA), which is the workers compensation program for federal employees.
• Longshore and Harbor Workers Compensation Act and its extensions.
• Federal Employees Liability Act (FELA). This program applies to railway workers and merchant seamen (Jones Act).
• The Federal Black Lung program, which provides income and medical benefits for miners found to have pneumoconiosis or related diseases. This
is not strictly a workers compensation system, though it does have close ties to state systems and there are transfers between the two systems.
b. The rules governing these systems differ somewhat from state workers compensation systems. The issue is whether they should be integrated into the health care system in the same manner as workers compensation or whether special rules would need to apply.
III. RECOMMENDATIONS AND RATIONALE
A. RECOMMENDED OPTION RECOMMENDATION
1. A two-part strategy is recommended:
a. The partial integration option would be applied when the new system is implemented.
b. A National Advisory Committee on the Integration of Medical Insurance Benefits also would be created. The committee would be charged with studying and reporting to the President on the feasibility and appropriateness of transferring the financial responsibility for all medical benefits (including those now covered under workers compensation and automobile insurance) to the health care system.
2. Initial standards for integration (the Partial Integration Approach). The following standards would apply when the reformed system is implemented in each state:
a. Health plans would be required to demonstrate their ability to provide or arrange for (through contracts with appropriate health care providers) medical benefits for work-related injuries and illnesses.
b. People enrolled in alliance health plans would be required to receive treatment for work-related injuries or illnesses from their health plan.
• State laws regarding choice of provider for workers compensation would be overridden (exceptions would be necessary in cases of disputes) with respect to individuals in alliances.
c. Integration would not apply to people enrolled in health plans chosen by non-alliance employers.
d. Each health plan would be required to have a workers compensation case manager to coordinate the treatment and rehabilitation of injured workers.
e. Health plans would be reimbursed by workers compensation insurers or self-funded employers for providing work-related medical benefits in accordance with the fee-for-service fee schedule in the alliance.
• Balance billing of patients with work-related injuries or illnesses would not be permitted.
• Health plans would be permitted to negotiate different fees with workers compensation insurers and employers.
f. The law would state that nothing in it is intended to alter or diminish the effects of the exclusive remedy for work-related injuries or illnesses.
g. A federal agency, in consultation with states and experts on work-related injuries and illnesses, would develop protocols for the appropriate treatment of work-related conditions.
h. A federal agency would be authorized to conduct a demonstration program to develop protocols for the treatment of work-related injuries and illnesses.
i. The provisions of the FECA, FELA and Longshoreman's Act would be amended to apply the partial integration approach to those programs.
3. A National Advisory Committee on the Integration of Medical Insurance Benefits ("National Advisory Committee") would be created to address the potential for more complete integration in the future.
• The National Advisory Committee would be charged with studying the feasibility and appropriateness of transferring the financial responsibility for all medical benefits (including those now covered under workers compensation and automobile insurance) to the health care system.
• The National Advisory Committee would be required to make a report to the President, including a detailed plan for integration if it is found advisable, on or before July 1, 1995.
• The Departments of Labor and Health and Human Services would be required to provide appropriate staff and resources to the National Advisory Committee.
RATIONALE
1. Some form of integration is necessary to protect workers compensation insurance from cost-shifting when the new system is implemented.
Workers compensation is a small part of the medical benefit market, and most workers compensation insurers have small market shares. Unless some integration takes place, providers would be squeezed by the increasingly efficient health care system and be forced to shift costs to the less controlled workers compensation system.
2. Integration also should reduce costs for employers:
• Workers compensation insurers will be able to take advantage of the lower fees negotiated in the reformed health care system.
• By having injured workers look to their health plans for treatment, fraud should be reduced. The level of controversy over choice of physician also will be reduced, because people will choose their physicians before injuries occur.
• Providing workers compensation services through health plans should reduce the amount of inappropriate care, because health plans generally have an interest in contracting only with efficient practitioners.
• Providing workers compensation services through health plans permits information about their outcomes and performance in treating work-related injuries to be collected and provided to workers, alliances and workers compensation insurers.
3. The partial integration option is recommended, at least as a short-term strategy, because it has many fewer implementation problems than the transfer of risk approach.
Beginning with the partial integration model is a logical first step toward greater integration. The partial integration step provides an opportunity to experiment and develop
capitation methods. The partial integration step requires health plans to begin treating work-related injuries without placing them at risk.
4. To implement the transfer of risk approach, at least the following steps would need to be taken:
• develop a method of capitating health plans for the risk of work-related medical benefits;
• develop supplemental benefits for work-related injuries and illnesses;
• develop methods of coordinating back to work activities between health plans and workers compensation indemnity carriers;
• develop a premium collection method (that may be experience rated) for work-related medical injuries;
• modify the risk adjustment system so that payments to health plans would be based in part on their success in facilitating early return to work for injured workers;
• develop national benefits for work-related injuries and an administrative system to assure portability of work-related benefits across differing state systems; and
• manage the potential for transfer of risk for large employers to small employers if larger firms are permitted to be outside of the alliance.
5. Because of the complexity of implementing the transfer of risk approach, the creation of the National Advisory Committee is recommended to more fully study the appropriateness and feasibility of more complete integration.
B. COORDINATION OF WORK-RELATED MEDICAL BENEFITS WITH WAGE-LOSS BENEFITS
RECOMMENDATION
1. Under the recommended approach, the risk for both medical and wage-loss benefits remains with the workers compensation insurer, so the coordination problem is reduced. Some coordination steps are recommended:
a. Health plans will be required to have a workers compensation case manager to coordinate the health plan's activities with the workers compensation insurer's activities. The case manager would be responsible to assure that:
• The plan of treatment for the injured worker meets appropriate protocols and is designed to assure rapid return to work.
• The plan of treatment is coordinated with the actions of the workers compensation insurer and/or the employer to facilitate rapid return to work.
• The health plan complies with medical/legal requirements related to the workers compensation.
• If the health plan is unable to provide a needed service to treat a work-related event, the workers compensation case manager of the health plan, in consultation with the workers compensation carrier at risk for payment, would be responsible for referring the worker to an appropriate provider.
b. A federal agency would develop protocols for treatment of common work-related injuries, which would lessen disagreements between workers compensation insurers and health plans over treatment given to workers.
c. Health plan performance in the treatment of injured workers would be measured by the quality and outcome data collected for each health plan and reviewed by alliances.
RATIONALE
1. The types of coordination suggested are intended to improve the quality and effectiveness of the treatment of injured workers.
2. The health plan case manager gives the workers compensation insurer a focal point for coordination efforts.
3. Alliances and workers compensation insurers would be able to judge health plan performance against developed protocols.
C. PAYMENT TO HEALTH PLANS FOR WORK-RELATED MEDICAL BENEFITS
RECOMMENDATION
1. Workers compensation insurers would pay health plans for treating work-related injuries in accordance with fee schedules developed by the alliance or state. The alliance or state could use the fee schedule developed for fee for service plans or could modify it for work-related injuries.
2. Health plans and workers compensation insurers would be permitted to negotiate different arrangements for payments.
3. The federal government would create a demonstration program to test paying health plans on the basis of per-case capitation payments.
4. The National Advisory Committee would be charged with making recommendations on this issue if more complete integration is recommended.
RATIONALE
Under the recommended approach to integration, health plans would be acting as providers of medical benefits for workers compensation insurers.
A fee schedule is proposed to limit the ability of health plans to charge high fees to workers compensation insurers.
D. ADDITIONAL BENEFITS FOR WORK-RELATED INJURIES AND ILLNESSES
RECOMMENDATION
It is recommended that health plans be required to provide or arrange for all workers compensation medical benefits, even those outside of the comprehensive benefit package (e.g., rehabilitation and long-term care services).
• Health plans would be required to employ or have contracts with specialists in industrial medicine and occupational therapy.
• Health alliances could enter into contracts with centers of excellence or with certain specialists for the purpose of providing all health plans with access to providers who provide specialized services for the treatment of work-related injuries and illnesses.
RATIONALE
Health plans would provide for the full array of medical benefits to injured workers in order to:
• assure a coordinated approach to treatment of the full injury; and
E. DIFFERENCES IN STATE WORKERS COMPENSATION PROGRAMS
RECOMMENDATION
This is not an important issue under the recommended approach because the workers compensation insurer remains responsible for an injured worker's treatment even if the worker leaves the state. The rules of the state where the injured person was employed would govern future benefit decisions.
The National Advisory Committee would be charged with making recommendations on this issue if more complete integration is recommended.
F. PREMIUMS FOR WORK-RELATED MEDICAL BENEFITS
RECOMMENDATION
Under the recommended approach, premiums for workers compensation medical benefits would be collected in the same manner as they are today. The National Advisory Committee would be charged with making recommendations on this issue if more complete integration is recommended.
RATIONALE
Workers compensation insurers would retain the financial responsibility for work-related medical benefits under the recommended approach, so there is no need to change the current premium structure.
G. SETTING RESERVES IN THE TRANSFER OF RISK MODEL
RECOMMENDATION
The National Advisory Committee would be charged with making recommendations on this issue if more complete integration is recommended.
H. OTHER COMPENSATION PROGRAMS
RECOMMENDATION
The provisions of the FECA, FELA and Longshoreman's Act would be amended to apply the partial integration approach to those programs.
Workers covered by those programs would be required to receive treatment for work-related injuries and illnesses from their health plans (only if they are in alliances). The National Advisory Committee would be charged with making recommendations on this issue if more complete integration is recommended.
RATIONALE
These programs are similar to workers compensation programs and should be treated in the same manner.
I. EFFECT ON NON-ALLIANCE EMPLOYERS
RECOMMENDATION
Employees of non-alliance employers (employers not providing benefits through the alliance) would not be required to receive treatment for work-related injuries or illnesses through their health plans. Existing state laws regarding choice of provider would continue to apply in these situations.
RATIONALE
Integration would not be required outside of alliances because it is not assured that employees would have any choice of health plans. States currently are divided regarding whether employers or employees control the choice of provider for workers compensation services.
IV. QUESTIONS AND ANSWERS
1. Why is there any need to disturb the current workers compensation system as a part of health care reform?
One of the principal goals of health reform is to reduce costs through aggressive purchasing, an emphasis on managed care, and global budgeting. Workers compensation insurers are small purchasers of medical benefits with little experience in managed care techniques. The push for efficiency in the health insurance market will result in substantial cost shifting to workers compensation unless some efforts are made to integrate work-related medical benefits into the new system.
Integration also can result in lower workers compensation medical costs and better coordination of treatment for injured workers.
2. Why not just merge work-related benefits completely into the new system and eliminate the need to distinguish between work-related and non-work-related medical benefits?
This option was not recommended for the following reasons:
a. Workers would lose benefits under this approach as compared to the current system. For example, workers would be responsible for cost-sharing (i.e., co-payments and deductibles) that are not currently charged in workers compensation system.
b. Unless additional benefits are added to the comprehensive benefit package for work-related injuries, workers under this approach also could lose access to long-term rehabilitation or long-long-term care services now provided under workers compensation.
c. Alternatively, those benefits could remain in the workers compensation system, but some (maybe much) of the administrative cost-savings of integration would be lost if some medical benefits remain with workers compensation carriers. Further, continuity of coverage and efficient treatment would be compromised if medical benefits are split across the two systems.
d. Workers would be required to pay for part of the premiums for work-related injuries under this approach.
e. Workers compensation is entirely employer financed (with a few exceptions currently). Placing twenty percent of the burden on employees (and potential subsidy burdens on the government) would be a significant transfer of responsibility.
f. Adding the costs to premiums also would require nonworkers to contribute to the costs of work-related injuries.
g. This approach eliminates any option to have experience rating of employers for causing work-related injuries, which could lessen the incentives for workplace safety and could reduce employer incentives to return injured workers to work.
h. The exclusive remedy rule could be put in jeopardy because workers would be made responsible for part of the costs of work-related injuries. This could lead to more tort suits against employers.
3. If the goal is to promote managed care, why not let workers compensation insurers contract directly with health plans (e.g., HMOs) for services?
Workers compensation insurers (including self-funded employers) want the right to direct all their business to select health plans, with whom they can negotiate favorable rates. This is not consistent with our health reforms, which rely on employee choice of health plan. It also is not consistent with the goal of wanting each person to go to their health plan for all their health care needs (under the workers compensation insurer approach, a person would have a separate health plan for work-related injuries).
V. INTEREST GROUP POSITIONS
The working group met or communicated with the following interest groups regarding integration of workers compensation:
• The AFL-CIO*
• Labor Management Discussion Group on Workers Compensation
• Actuaries and consultants from Coopers and Lybrand, William M. Mercer and Foster and Higgins
• The National Association of Manufacturers* • U.S. Chamber of Commerce
• National Small Business United
• National Federal of Independent Businesses • The American Insurance Association* • The Alliance of American Insurers*
• The National Association of Independent Insurers • Group Health Association of America*
• Representatives of particular insurers, including the Travelers and Liberty Mutual* • Scholars such as John Burton (Rutgers)*, Alan Krueger (Princeton), Richard Victor
and Tom Granneman (Workers Compensation Research Institute), Kevin Haugh (Institute for Health Policy Solutions)
• National Council on Compensation Insurance • Independent Insurance Agents of America*
• International Association of Industrial Accident Boards and Commissions (IAIABC)*
• National Association of Insurance Commissioners
• Representatives from the state insurance and compensation commissions (Florida, Oregon, Minnesota, California, West Virginia)
* Position statements and letters from these groups are contained in the attachments.
TAB 1
American Insurance Association, Workers Compensation Law State of Arizona, 1992.
The extract from this publication provides a summary of the WC law in Arizona. It illustrates the topics addressed in most state laws.
TAB 2
Baker, Laurence and Alan B. Krueger, "Twenty-four Hour Medical Coverage, Health Affairs, March 1993, pp. 258-270.
This paper discusses the potential costs and benefits of combining the health component of WC with universal health insurance. The major finding on the benefit side is that elimination of price discrimination in WC could lead to large savings (their reanalysis of WC and Blue Cross claims data collected for a study of the Minnesota system found that WC was charged an average of 110 percent more than Blue Cross for the same injuries). The major costs noted are the administrative costs associated with designing and implementing the program.
TAB 3
Beckwith, Geoffrey C., "The Myth of Injury Prevention Incentives in Workers Compensation Insurance, New Solutions, Winter 1992, pp. 52-73.
This article looks at whether the current experience rating system for workers compensation provides incentives for employers to improve workplace safety.
The article concludes that current rating methods do not provide adequate incentives to promote safety.
TAB 4
The Insurance Reform Group, Health Care Reform Task Force, "Workers Compensation and Health Care Reform."
This paper is the product of the insurance reform group's deliberations during the initial phase of the health care reform task force. It is drawn from some of the source documents included in this briefing package, many other documents, and discussions with a variety of WC experts and interest groups. The paper summarizes the characteristics of the WC system in the U.S. with special emphasis on the medical component, reviews integration issues with a concentration on the financing considerations, notes the potential effects of integration, and lists the many decisions required if the decision is made to integrate WC into the new health system.
TAB 5
National Council on Compensation Insurance (NCCI), "Classification is Fundamental to Workers Compensation Pricing," and "ABCs of Revised Experience Rating."
These two papers describe how NCCI develops WC premium rates for the great variety of businesses found in the U.S. The approach is to develop rates that first reflect risk of injuries (claims) by industry (called the "manual" rate and computed for some 600 industrial classifications) and then to adjust these rates for individual firms according to their specific experience relative to average for their industrial classification (experience rating).
TAB 6
U.S. Chamber of Commerce, 1993 Analysis of Workers Compensation Laws.
This document provides summary information in 16 charts on WC laws in the 50 states and the District of Columbia, the Federal FECA program and Longshore program, and in the Canadian provinces. It covers a variety of topics, including: the type of law (compulsory or elective), employment coverage, occupational disease coverage, medical benefits (chart IX), and rehabilitation benefits.
TAB 7
Victor, Richard, Editor, Twenty-Four-Hour Coverage, Workers Compensation Research Institute. Enclosed is chapter 3 written by Roger Thompson. He discusses the issues involved in integrating WC and employee benefit plans (including medical and nonmedical provisions). Among the topics addressed are coverage, period of entitlement, cost sharing, and medical benefits.
TAB 8
Wicks, Elliot; Haugh, Kevin, and Curtis, Richard, "An Analysis of the Garamendi Plan for Health Reform in California," Institute for Health Policy Solutions.
Enclosed are the Appendix, which summarizes the Garamendi plan, and chapter 2, which discusses the inclusion of auto and WC medical coverage in the plan - so-called 24-hour medical coverage.
The author expects some reduction in fraud and abuse and duplicative payments, and potentially significant savings from better control of medical expenditures and administration. However, he states that predictions of the size of savings are difficult because details of the plan are not complete and studies of 24-hour medical plans have not been done.
