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Storm Clouds on Horizon: Workers' Comp to Get More Complex
Formerly calm seas of workers' comp face several threats in 2008, from an aging workforce to an overburdened health care system
Frank Pennachio
Co-Founder,
Institute of Workcomp Professionals
Frank Pennachio, CWCA, is a co-founder and director of curriculum at the Institute of WorkComp Professionals, an organization that tests and certifies insurance professionals with the skills and knowledge necessary to alert employers about the hidden costs and overcharges in the workers’ compensation insurance system.
info@workcompprofessionals.com
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While declining workers’ compensation rates have benefited employers in recent years, challenges cloud the future. The outlook for 2008 is one of caution and concern and here’s why.
> The rising costs and utilization of medical treatment. Alarming increases in the utilization of medical services are compounding the negative impact of escalating medical costs. A National Council on Compensation Insurance study concludes that the key driver is not price but growth in the number of medical treatments. More complex treatments may mean seismic shifts in medical innovation and the corresponding increase in treatment options could mean soaring medical costs.
> Too many health-care standards. California’s sweeping legislative reform successfully reduced employer workers’ comp from an average of $6.47 per $100 of coverage in 2003 to $2.93 in the first quarter 2007. The key is California’s mandated use of the American College of Occupational and Environmental Medicine’s evidence-based treatment guidelines. They allow employers to measure the actual-versus-expected duration of absence based on the injury and determine whether the treatment matches prescribed protocols.
While California’s efforts have been closely watched, only a handful of states have adopted similarly extensive reforms because there is no outcry to find a national model. In a climate of declining rates and unique political obstacles, it’s unlikely that state policies will converge.
The full adoption of evidence-based guidelines will be agonizingly slow. In 2008, many job-related health decisions will continue to be made by health-care professionals without training and expertise in occupational injuries.
> The declining rate cycle will bottom out. The expectation that rates will remain low belies logic. Historically, the workers’ comp price cycle has proven the saying, “What comes down, must go back up.” All eyes are turned again to California, where a key insurance industry group is urging the insurance commissioner to recommend a 4.2% rate hike in 2008, citing the cost of legal work, fraud investigations and other claims’ management tasks. While dramatic rate increases are unlikely, the tide is turning and the days of double-digit percentage rate reductions may be over.
| While dramatic rate increases are unlikely, the tide is turning and the days of double-digit percentage rate reductions may be over. |
> The unnecessary loss of skilled workers. It’s been shown that the longer employees are out of work, the less likely they are to return. Workers’ comp is beset by unnecessary delays along the continuum of care. It takes too much time to get doctors’ reports, see a specialist, get test results and so on. This produces a “disability mentality,” where the employee often believes something is seriously wrong.
While studies show that 90% to 95% of injured employees should be back to work by the fourth day following an injury, nationally, 24% of workplace injuries result in lost time greater than three days. In effect, the system creates unnecessary disabilities and it’s doubtful this will change in the coming year.
> Injuries to older workers will continue to cost more. By the year 2012, approximately 20% of the workforce will be 55 years or older. While older workers have fewer injuries, the injuries are more costly and older workers take longer to recover than do younger employees.
Become attuned to the maturing workforce and implement programs that foster retention and prevent injuries. Without proper planning, this unprecedented growth in the number of aging workers will lead to more serious injuries and increases in workers’ comp costs.
> Drug use, legal and illegal, will continue to plague the workplace. While greater vigilance by employers in the use of drug testing has made inroads, substance abuse remains a daunting problem for the workplace, with alcohol topping the list. Add to this the aggressive advertising by drug manufacturers that has fueled public demand for new prescriptions, and the risk of prescription and illegal drugs leading to workplace injuries is considerable.
As sadly demonstrated by the recent controversy surrounding the death of two firefighters in Boston, this is a thorny issue fraught with resistance. Success will depend upon a high level of employee education as well as increased drug testing. This will take time, so be prepared for continuing problems in 2008.
> Wellness programs require continued commitment. The lifestyle of American workers is a threat to productivity. Many employers now are implementing wellness programs to encourage employees to adopt healthier lifestyles. That can reduce medical care costs, lower absenteeism and injuries and boost productivity.
Employers are still trying to understand what interventions, programs and incentives yield the greatest return on investment. Privacy and legal issues also continue to be concerns. This beneficial trend will continue in 2008, but the effort needs to be constant, much like the anti-smoking campaigns, to be effective.
> The bar will be raised on return-to-work programs. While early and safe return to work is a recognized best practice in workers’ comp, some employers still resist transitional work assignments, offer demeaning or make-work jobs, or run ineffective programs.
Simply getting the employee back to work is not enough. Employers need to understand and enforce medical restrictions, establish realistic, evidence-based guidelines for the resumption of duties, monitor progress, integrate human resources with risk management and train supervisors on the value of such programs.
Health-care providers play a role too, by being accountable and becoming an active partner in the return-to-work process, and case managers must work to minimize lag time in treatments and communications. Only those employers who recognize the value of return-to-work in retaining employees, improving productivity and reducing costs will commit the time and resources required.
> There will be limited use of technology as a strategic tool for cost containment. Sophisticated Internet tools, software and online access to information are available to help employers quickly respond to injuries, predict claims that are likely to spiral out of control, monitor benchmarks, detect fraud and improve communication and collaboration among all parties in the workers’ comp process.
Agents can no longer just sell workers’ comp insurance but must become experts and consultants to deliver a full range of injury-management services. Employers need to recognize that workers’ comp is not an expense but a controllable business cost that can have a measurable and positive return on investment.
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