Workers' Compensation & Utilization Management
November 17, 2017
Where are workers' compensation (WC) programs heading in 2018 and beyond? The high variance of WC rules and regulations by state - coupled with the absence of a federal component to WC, unlike Medicaid or Supplemental Security Income (SSI) - makes it difficult to generalize about future trends. However, WC remains at the center of many ongoing debates on health outcomes, labor force participation and state budget priorities. There are several major converging trends, mostly framed in the context of "WC reform" that have emerged in similar ways across the states in recent years and should continue into 2018:
The question of which procedures and conditions are actually covered by WC benefits has become tougher to answer in recent years. Some programs have expanded their services, while many beneficiaries have contested the definition of "injury" for WC purposes:
Expansion and reinterpretation of WC laws has also fueled many attempts at WC reform. Small- and medium-sized businesses have become frequent advocates of changes to WC programs that would reduce the rates they pay for compliant insurance.
An Oklahoma state senator once reported that WC costs were a top concern for his state's attractiveness to these employers. In states with relatively generous WC benefits, measures such as fund privatization or reduced spending are often considered workable solutions to larger political questions of how to balance and sustain state budgets.
The debate over how much to cover under, and to spend on, WC is complicated by the long-term decline in workplace injury frequency. The Occupational Safety and Health Administration (OSHA) reported a drop in the rate of injuries per 100 workers from 10.9 incidents in 1972 to less than 4 in 2009. As injury rates have diminished, so too have premiums and claims. ProPublica charted a decrease in average WC premium cost to employers per $100 of worker wages, from $3.42 in 1988 to $1.85 in 2014. The National Council on Compensation Insurance also revealed that in 36 of the 38 states where it handles filings, the filing rate is set to decline in 2018. Such change could be the result of many overlapping causes, including less frequent injuries, legislative reform of WC and the rise of alternative payers such as Medicaid and SSI, both of which continue to climb in total expenditures. The entry of professional providers of WC-specific utilization review has also reshaped the WC landscape, by helping promote positive health outcomes for WC injured workers as well as savings for payers. At Advanced Medical Reviews (AMR), an independent review organization (IRO), WC cases are reviewed by licensed physicians and specialists who determine the medical necessity of the medical treatment, be it prospectively, concurrently, or retroactively, for the insurance carrier or TPA. One example of how these reviews work in workers' compensation is drug utilization review. Nelson Dunham, VP of Enterprise Accounts at AMR, explains, "The opioid crisis has spurred many payers to turn to IROs to address drug utilization in pain management. We found that in over 80% of these reviews, physician reviewers recommended initiating a non-pharmacological treatment option which would result in the reduction of the amount of the daily morphine equivalent dosage (MED). These recommendations, combined with a peer-to-peer agreed-upon weaning schedule, can improve patient outcomes."
Every state is unique when it comes to WC. But reform is a common thread uniting them, with two-thirds having made significant changes since the 1990s, according to NPR and ProPublica. Illinois and Montana offer representative examples of current reform efforts and how they could affect both large and small states in 2018.
WC is a hot-button issue in Illinois for two overarching reasons:
A proposal for reform supported by Gov. Bruce Rauner would make WC regulations in Illinois resemble the ones in Massachusetts, where there is a high standard of causation. In other words, in the Bay State, an injury must be at least 50 percent caused by work to qualify for WC benefits, offering one solution to the complexity issue we raised earlier in regard to Georgia and California. This model excludes many conditions that are the results of aging and degeneration, at a time when the U.S. workforce is becoming much older, on average. After bottoming out in the early 1980s, the percentage of workers 65 or older continues to rise, according to the Census Bureau and Moody Analytics. As of October 2017, the Illinois General Assembly had not passed the Rauner-approved reforms. A blueprint of what these changes might look like can be gleaned from New York, where a 2017 reform bill might reduce employer contributions by $350 million each year, according to Insurance Journal.
Although Montana has less than one-tenth the population of Illinois, it has faced similar issues in controlling its WC expenses. The state maintains a massive $1.6 billion WC fund serving 26,000 policyholders. This fund currently competes with private insurance plans, but some state legislators have looked to dismantle it in hopes of increasing competition and lowering Montana's WC premiums, which are among the highest in the country. In mid-2017, the Montana Legislature decided to temporarily postpone any action on WC fund reform, fearing the potential scope of the project and its political ramifications. WC is a complex issue deeply interwoven into the healthcare, financial and government sectors of each state. While we can probably expect Montana and other states to continue their reform efforts in 2018 and beyond, these initiatives won't necessarily result in enactable legislation, as the Illinois example demonstrates.
Attempts at WC reform are ongoing. They generally aim to either extend WC benefits (as in Vermont) or place more limits on them (as in Illinois, but not enacted). Decisions about WC reform are often informed by state budget priorities, potential health outcomes for beneficiaries and legal precedents about who is and is not eligible for WC benefits. We will look in more detail about what WC changes could entail for injured workers, employers and payers in our next entry. More specifically, we will consider what privatization could bring to the table, based on its track record in states such as West Virginia.
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