Tag Archives: ama

Inoculating Your Wellness Program Against the EEOC

Two months ago, a posting appeared in this column titled: Are Obamacare Wellness Programs Soon to be Outlawed? Truthfully, that headline was picked for its sky-is-falling value, treating one EEOC lawsuit against one wacky wellness program as a risk for wellness programs everywhere.

As luck would have it, the sky just fell yesterday — right on the head of Honeywell — and the EEOC is indicating more lawsuits are to come.

The scary part: Unlike the wacky wellness program described in the column two months ago, Honeywell was in compliance with the Affordable Care Act. Compliance with the ACA doesn’t seem to get you a free pass on the EEOC’s own “business necessity” requirement. Essentially, the Honeywell lawsuit means no company doing invasive biometric screenings and mandating doctor visits or measuring health outcomes is immune to prosecution, even if it is in compliance with ACA.

The even scarier part: The EEOC is correct that, as this column has noted for almost two years now, wellness programs mandating overscreening and annual checkups have no business necessity. In fact, these “employer playing doctor” programs can harm employees, because:

  • A workplace screen can find heart attacks… but at the cost of a million dollars apiece, when emotionally draining false positives and potentially hazardous overtreatment are taken into account;
  • The Journal of the American Medical Association recommends against mandatory checkups;
  • An embargoed, peer-reviewed article that will be published soon in a major journal concludes that the costs and unintended health hazards of weight control programs generally overwhelm the benefits.

Companies could still claim business necessity if, indeed, these programs save money despite the harm to employees. (OSHA might raise issues, but those are hypothetical whereas EEOC is an elephant in the room.) And a few of you might ask: “Didn’t Seth Serxner of Optum and Ron Goetzel of Truven just write a journal article and show a webinar saying: ‘The overwhelming majority of published studies show positive results’?”

Unfortunately, those “positive results” — as is well-known to the presenters, who, after all, have access to the Internet — fail any sniff test.

These two true believers continue to cite Professor Katherine Baicker even though she has stepped back three times from her old (2009) conclusion that wellness provided a significant return on investment (ROI), including a “no comment” to ITL’s own Paul Carroll. More recently, she has, with great justification, blamed overzealous readers for selectively interpreting her findings. Goetzel also continues to cite the state of Nebraska, which his committee gave an award to as a “best practice” despite the revelations that the state’s vendor lied about saving the lives of cancer victims and that the vendor also paid off his award committee with a sponsorship. Likewise, Goetzel’s misinterpretation of a RAND study has drawn a rebuke from the author of the study, in a coming letter to the editor. [Editor’s Note: ITL emailed a link to this article to the press offices at both Truven and Optum on Oct. 30 offering them a chance to respond to the author’s allegations. Both were told that they could either comment at length in this article or could write separate articles that would lay out their position and that ITL would publish. Neither company has yet responded.]

Clearly, the EEOC is on to something about a lack of business necessity, when even the alleged best-and-brightest wellness defenders are forced to rely on misstatements and half-truths. Not to mention selective omissions — the presentation’s extensive section on “critics” had no mention of me, despite a recent cover story citing me as the field’s leading critic, because both these two presenters know my math is irrefutable. These industry defenders also have spotty memories, as when they claim that it is valid to compare the performance of active, willing participants against a control group of unmotivated non-participants and dropouts — forgetting that they gave out a Koop Award to one of their sponsors who showed exactly the reverse.

Inoculating Your Programs

A problem with the EEOC does not have to happen to you or your clients (if you are a broker). Taking three steps — the first of which is free and the second of which costs only in the four figures — essentially guarantees that you will not end up on the hot seat with Honeywell.

First, sign and adhere to the Workplace Wellness Code of Conduct.  This will allow you and any clients to focus your own efforts on avoiding employee harm and creating a framework for business necessity. This document is provided gratis for ITL readers, from the author.

Second, employers who sign this and get at least one vendor/carrier to sign and implement its counterpart, the Workplace Wellness Vendor Code of Conduct, can have their own outcomes validated by the GE-Intel Validation Institute (itself the subject of a forthcoming ITL posting), to create an audit trail that, in fact, outcomes are being measured.

Third, I personally — along with colleagues — will do an in-depth  walkthrough to see if, indeed, your wellness program complies with U.S. Preventive Services Task Force guidelines. If not, we will provide a list of next steps to get into compliance.

The inoculation? A six-figure guarantee that you (or your client, if you’re a broker) will not be the subject of a successful EEOC lawsuit. Besides providing some protection on its own, this level of financial commitment may create a self-fulfilling prophecy. Your actions will be a pretty convincing piece of evidence that business necessity and employee health are the goals, as measured by an objective and qualified third party.

Yes, I know it’s not always about me; you can protect yourself in other ways. My ex was quite clear on the subject of whether it’s always about me.

However, in this case, my ex would seem to be wrong. It appears that every screening vendor, every alleged wellness expert and most of those in large benefits consulting firms have done just the opposite of what I’m suggesting: They have proposed massive wellness programs with hefty financial incentives or penalties that get companies into fine messes like Honeywell’s. But, in case I’m wrong, I welcome names, websites and contact information of other consultants taking the same approach that I am. Please note them in the comments boxes below.  All will be published.

The Best Disruptive Writings Of 2013 – Health Care Edition

Clayton Christensen famously coined the term “disruptive innovation” to describe “simple business applications that relentlessly move up market, eventually displacing established competitors.” Disruption is not just change; it is change that gores somebody’s ox. There has never been a year like 2013 for disruptive writing about health care. Here are five “oxen” gored by the best of that writing.

Gored Ox One: The Idea That Someone Else Pays The Bills

The first salvo of the year was David Goldhill’s highly controversial book, Catastrophic Care: How American Health Care Killed My Father – and How We Can Fix It. Goldhill had the audacity to question an assumption accepted as a truism by both proponents and opponents of Obamacare: the notion that Americans can’t pay for their own health care without some kind of health coverage. Goldhill suggests that our nation’s reliance on third-party payors like health plans, Medicare and Medicaid has created – not alleviated – the burdensome problems of cost and bad quality that plague health care, and that we could run a better health care system without them. (Disclosure: Goldhill sits on the voluntary board of my nonprofit, The Leapfrog Group, though Leapfrog isn’t associated with his book).

Goldhill wasn’t the only one asking the impertinent question, “What if you paid your own medical bills directly?” Time published a powerful story by Steven Brill, Bitter Pill: Why Medical Bills are Killing Us, which points out the bizarre oddities of what goes on behind the scenes when the checks are written to pay for patient care. Bills for the same procedure vary tenfold, but few health plans actually pay the full bill. Elisabeth Rosenthal’s reporting in the New York Times pointed out the same bizarre pricing phenomena in her remarkable series on the varying charges hospitals record for their services.

The business community took note of these questions about who pays the bills, since they traditionally pay most of them. A study by S. Eappen and colleagues in the Journal of the American Medical Association found that commercially insured patients were charged an extra $39,000 every time they suffered a surgical site infection at one hospital system. Employers wondered how they missed this enormous surcharge they paid for an undesired outcome.

Where were their health plans and consultants to alert them to this waste? They were AWOL, say Tom Emerick and Al Lewis in their brilliant book, Cracking Health Costs, which all employers seem to have on their desks these days.

The book is getting attention for its strategies on how to bypass health plans and consultants and disrupt health benefits purchasing.

Gored Ox Two: Keepers Of Secrets

The health care industry has long been shielded from the candor other industries live by. Writers this year went beyond complaining about the lack of transparency in health care — now, they are successfully calling out those who want to maintain it. Respected nurse-leader Kathleen Bartholomew writes in a piece in the Seattle Times that the lack of transparency in health care is simply unethical, and she points some fingers. In a blog for the influential policy journal Health Affairs, business leader Francois de Brantes argues that our nation’s remarkable lack of progress on quality and costs is a consequence of having no feedback loops — candid information on performance that provides continuous pressure for improvement. He calls for upending the incentives that keep health care opaque and dysfunctional. A breakthrough piece reported by Charles R. Babcock in Bloomberg News exposed the political underpinnings of why we still don’t have national data on many of the most common errors, accidents and injuries happening every day in hospitals — and he discusses the ongoing movement to preserve what little data we have. Author Rosemary Gibson, one of the decade’s most influential health care writers, writes in a memorable Huffington Post blog, “The military counts its dead and wounded even though politicians would prefer to hide the truth.” When we count the dead from medical errors, she says, we could fill Arlington National Cemetery in nine months.

One writer did try to quantify the problem – John T. James, a father and NASA toxicologist who tragically lost his son to medical errors. In a widely discussed piece published by the peer-reviewed Journal of Patient Safety, he used a scientific method developed by the Institute for Healthcare Improvement to estimate how many people die each year from hospital errors. The dismaying answer: anywhere from 200,000 to 420,000 – in other words, as many people as the population of Miami.

Gored Ox Three: The Passive Patient

The Hollywood-inspired idea of the patient as quiet recipient of physician infallibility is officially over. Patients don’t just do what they are told; they expect to make choices. Beth Howard’s cover story in AARP The Magazine – the most widely read publication in the United States – launched a firestorm with its advice for patients on protecting yourself during a hospital stay, including which hospitals are safest and what to look for in a hospital room.

Crystallizing this era of the disruptive new patient is its leading sage, Dave deBronkart, coauthor of Let Patients Help! Survivor of Stage 4 kidney cancer, deBronkart has a popular TED talk and delivers speeches throughout the world arguing that patients should serve as active members of the team delivering care, a job that includes supplying the wisdom and knowledge physicians and nurses don’t have. The emergence of this new patient cannot come soon enough, as evidenced in a widely discussed report published by the nonprofit Childbirth Connection, Listening to Mothers III: Pregnancy and Birth. The report shows the results of a Gallup survey of women who had recently given birth and reveals a stunning number of maternity patients whose wishes were ignored or manipulated, to the detriment of the women and their babies.

Among the most disruptive writers of 2013 are physicians who found themselves – or their families – on the wrong side of the hospital bed. Dr. Bob Wachter told a fascinating story of his mother’s stay in his own hospital (The University of California San Francisco Medical Center), candidly weighing some of the positive aspects of the care she received with the negatives that caused his family distress. Dr. Ashish Jha talked movingly about his father’s hospital stay, recounting with alarm three errors averted only because Jha happened to be in the room.

Gored Oxen Four: Conventional Wisdom About Delivering Care

The role of the patient has changed and so has the practice of medicine and nursing. Hollywood took note of one passionate nurse writer, Sandy Summers, and her colleagues, whose blog on the fascinating website http://www.truthaboutnursing.org analyzes media portrayals of nursing practice. Summers points out how TV depicts physicians performing tasks nurses actually do in real practice and generally portrays nurses as incompetent, unprofessional and/or none-too-bright. This hurts patients, she says, since the vast majority of care patients receive comes from nurses, and we need the best people on the job. Her passion had a direct impact this year, influencing advertiser choices and prompting talks with producers of problematic programs.

Physicians, too, are raising eyebrows by asking impolite questions about their practice. Atul Gawande’s article in the New Yorker asked why providers don’t always do the right thing in their day-to-day practice. It’s not malice, he says; it’s human nature. The piece explores lessons from international public health on a specific peer-education strategy that works to change practice patterns.

Another piece of conventional wisdom stood on its head in 2013 came from the University of Michigan’s John Birkmeyer and his colleagues, concerning surgical skill and its implications for patients. The study in The New England Journal of Medicine prompted tumultuous debate in the surgical suite when it demonstrated widespread variation in the skill of surgeons performing the same surgery. The study also suggested that skill level correlated with complication rates, raising significant new questions about what surgeons and hospitals can do to improve outcomes in health care.

But it’s not enough to identify and test new innovations for delivering care better; if they work, they must be hard-wired into practice, says Paul Plsek in his book, Accelerating Health Care Transformation with Lean and Innovation: The Virginia Mason Experience. He describes how the Virginia Mason Medical Center applied principles of lean manufacturing to balance the seemingly contradictory objectives of expanding innovation and improving adherence to the routine.

Gored Ox Five: Sacred Cows Of Public Health

Almost everyone agrees that the best strategy for improving Americans’ health would be to prevent people from needing health care in the first place. But as these writers demonstrated in their powerful arguments, beware the easy answers.

Does more health coverage mean better health? Not necessarily. A study of the impact of Medicaid in Oregon found that coverage had no impact on emergency room visits or health status (though it did relieve financial stress, an important advantage).

Does employee wellness save money? Not really. That was the reluctant conclusion of Rand researchers in a shocking study: Employee wellness programs did not appear to save money nor measurably improve health status. For more thoughts on the topic, The Health Care Blog’s series by Al Lewis and Vik Khanna is also worth following. The blog posts have prompted employee backlash and even a call for revocation of the C. Everett Koop award for a wellness program with questionable outcomes.

Should we cut the fat to fight obesity? Maybe not. A summary in the British Medical Journal of the research on obesity is prodding the nutrition science community in new directions. The exhaustive research overview by science journalist Gary Taubes found that most of the assumptions and guidelines we rely on are not supported by research, and policymakers ought to rethink our approach to the problem from the bottom up. Among the surprising observations: There’s no evidence that saturated fat is the culprit, and attempts to eliminate it from the diet may have accelerated the obesity epidemic.

Optimism For The New Year

I am confident that health care is headed in the right direction as we welcome 2014, thanks in no small part to the courage and eloquence of these disruptive writers.

This post first appeared on Forbes.com.

Workers’ Compensation Comes of Age

With close to $40 billion in net written premium, the workers’ compensation line of business is an important driver of financial success for many property/casualty insurers. It has come a long way since its inception roughly 100 years ago. 

As we move forward into the second century of workers’ compensation, it’s possible to anticipate many of the challenges (and opportunities) that are coming. What follows is a checklist of areas to watch.

CLAIMS FREQUENCY—Many aspects of the U.S. economy should help keep claims frequency flat or negative in the near future, including:

An increasing underground economy

In April, Mark Koba, a senior editor at CNBC, chronicled the growth of a large shadow economy of workers who, because they are unable to find regular employment, are taking jobs under the table with no reportable income or taxes. Since these workers have no workers’ compensation insurance protection, medical costs may shift from the workers’ compensation system to the health care system. With some estimates showing construction employment at just 75 percent of 2007 levels, it’s possible that a portion of these jobs are being filled by under-the-table workers. If that’s the case, these traditional higher-frequency classes may not show up as heavily in the industry’s calculations as they have in the past—moderating frequency trends going forward.

Growth in Social Security disability payments

Also in April, CNN Money reported a 29% increase in the number of Americans with little or no employment income who receive disability payments. For those who were formerly employed, the increase was a staggering 44%. In 2011, according to the CNN report, the federal government spent almost $250 billion on disability payments to some 23 million Americans. Although this is a ballooning liability for the federal government, the impact on workers’ compensation insurers is largely in the opposite direction. As workers who are less than healthy exit the workforce, the remaining pool of healthier workers will lead to claims frequency decreases in the future.

Expansion of other state and federal backstops

Since the recession began, there’s been a dramatic increase in federal and state assistance. A March article that appeared on the MoneyNews website reported that the number of food stamp recipients reached a record high in 2012, with an average of 46.6 million people receiving food stamp benefits each month. According to Supplemental Nutrition Assistance Program (SNAP) data, total food stamp benefits increased from $30.4 billion in 2007 to $74.6 billion in 2012, a 145% increase. As state unemployment benefits and other backstop programs cover more people for longer periods, the pool of future workers’ compensation claimants likely to file claims shrinks. When individuals leverage government backstop programs and choose not to work, workers’ compensation insurers benefit.

Older workers not retiring

People are working longer. For the manufacturing industries, this most likely means a dramatic reduction in the number of new employees entering the workforce. Although older workers have higher claims severity, new workers have significantly higher claims frequency.

Workplace health and safety efforts

The risk management and environmental, health, and safety departments of companies continue to focus on enhancing return-to-work programs, promoting workplace wellness, and improving workplace safety. These efforts continue to bear fruit, especially as the workforce ages and the adverse impacts of obesity receive more attention.

Part-time to full-time bias on frequency

Workers’ compensation frequency is often calculated as a ratio of the number of lost-time claims per an adjusted payroll amount. To the extent that recent payroll increases have been driven by more part-time workers converting to full-time work, the doubling of exposure for current workers isn’t the same as doubling the number of workers. In the short term, a heavier reliance on existing employees working longer hours very likely will help make frequency statistics look better. This trend could reverse if smaller employers keep their head count under 50 employees or reduce employee hours to part time (under 30 hours) to mitigate the impact of the employer mandate in the Affordable Care Act (ACA). Newly added part-time workers are likely to bring higher claim frequency, while workers taken below the 30-hour threshold to avoid employer-mandated health care might have an increased incentive to shift claims to workers’ compensation.

SEVERITY—A number of coalescing factors could drive medical and indemnity severity higher in the years ahead, including:

Rising interest rates

With the Federal Reserve finally winding down its quantitative easing programs, interest rates will be heading higher. To the degree that this coincides with an improving economy, indemnity severity is likely to tick up with rising wage pressure. Medical severity, which historically has run at roughly double the medical consumer price index, is likely to rise from the 3% levels we are experiencing today. Severity trends in the 6% to 7% range may be manageable in light of today’s rate increases, but it will be difficult to expand profit margins over the long term if medical inflation returns to double-digit levels.

Claims predictive modeling

Companies increasingly are using advanced analytics to identify claims for triage as early as the first notice of loss. By identifying the highest severity claims, assigning the appropriate resources for triage, and doing a better job on referrals from special investigative units, companies are favorably affecting the duration and severity of claims.

Obesity

The obesity statistics are staggering. The Centers for Disease Control and Prevention (CDC) estimates that in 2010, 36% of Americans age 20 or older were obese. The Robert Wood Johnson Foundation in a 2012 report predicted that obesity rates for adults over the next 20 years would reach or exceed 44% in every state in the United States, and exceed 60% in 13 of those states. Recent NCCI studies show that the ratio in the medical costs per claim of obese to nonobese claimants at the end of five years is 5.3, and the duration of obese claimants is five times that of nonobese claimants. Given the fact that workers of all ages are struggling with maintaining a healthy weight, workers’ compensation costs will only increase as other comorbidities associated with obesity increase costs.

An aging workforce

As workers age, gradual changes in hearing, vision, strength, and balance may lead to increased probabilities and durations of workplace injuries, including sprains, strains, slips and falls, carpal tunnel syndrome, knee and shoulder problems, hip replacements, and back issues. A 2012 NCCI study, however, concluded that an aging workforce appears to have far less of a negative impact on workers’ compensation claims costs than was previously thought. Although there’s evidence that injured workers older than 35 years have higher costs than those younger than 35, costs associated with injured worker cohorts older than 35 tend to be quite similar. And while older workers have more costly injuries, the NCCI observed that such injuries are becoming more prominent in younger workers.

While the NCCI has presented conflicting data on the claim costs of older workers, we know that the number of older workers in the workforce will nearly double in the next 15 to 20 years. The U.S. Department of Health and Human Services estimates that the 39.6 million persons age 65 years or older today will increase to roughly 72.1 million by 2030. That equates to roughly one in every five Americans being 65 or older. While the jury is out on the precise impact of an aging workforce on claim frequency and severity, an aging workforce increases the likelihood of more severe injuries and longer claim durations.

LONG-TERM TRENDS—On the plus side, several trends are emerging that could benefit workers’ compensation insurers in the long run, including:

Price transparency

When the Surgery Center of Oklahoma in Oklahoma City started posting its prices online four years ago, it forced competing area hospitals to follow suit. Although it will take time to catch hold across the country, greater price transparency in the delivery of health care could benefit workers’ compensation insurers. Running counter to this trend is the pace of consolidation in health care. The ACA, with its focus on accountable care organizations (ACOs), electronic medical records, and other coordination-of-care rewards, is fueling consolidation in health care at an unprecedented rate. With increased consolidation comes increased local pricing power, and workers’ compensation insurers could find themselves on the wrong end of that pricing pendulum.

Opioid use

The epidemic of opioid abuse that had swept the nation is finally starting to abate. State governors, attorneys general, and legislatures are passing laws to toughen criminal and administrative penalties for doctors and clinics, establishing standards of care for doctors who prescribe narcotics, increasing the reporting and tracking of prescriptions, and limiting reimbursements to physicians who dispense prescription drugs to no more than a certain percentage above cost. State agencies, local agencies, and the U.S. Drug Enforcement Administration also are aggressively prosecuting individuals involved in illegal prescribing activity and “pill mills,” causing physicians, nurse practitioners, and pharmacies to surrender their federal licenses to dispense controlled substances. In the most serious cases, the offenders have had to surrender their medical licenses to state medical/pharmacy boards. Physicians and medical boards also have developed resources to guide physicians on responsible opioid prescribing, and there’s been a rise in the number of physicians who have had their licenses suspended by state medical boards for the unlawful distribution of controlled substances and for prescription drug fraud. Organizations like the Federation of State Medical Boards and Physicians for Responsible Opioid Prescribing also have joined the fight.

Given the high-profile nature of these efforts to define the proper use of opioids in treating injured workers, it’s likely the workers’ compensation line will see an effect. With medical expenses exceeding 60% of workers’ compensation costs, 20% of that going toward prescription drugs, this would be a welcome development.

Medical tourism

Medical tourism continues to grow as an option for patients all across America. An airline magazine recently had advertisements from hospitals outside the United States showing savings of 50% to 80% on procedures such as knee and hip replacements that are common in workers’ compensation. The general cost in the United States for a knee replacement was shown at $34,000, versus the overseas cost of just $10,000. A hip replacement was listed as $35,000 versus the overseas cost of just $11,000. Even with the cost of airfare, transportation, and hotel accommodations, the potential savings are significant (acknowledging that we aren’t attempting to control for quality or safety differences). With several companies and health insurers investigating offering medical tourism options to their employees and insureds, there could come a day when workers’ compensation insurers could leverage these tremendous savings to help drive down severity for certain procedures. While businesses may welcome the cost savings, we recognize that persuading state legislatures and injured workers to agree to these practices could be difficult.

The ACA

Several economist and workers’ compensation industry stakeholders have predicted that the ACA will create shifts in the workers’ compensation industry. But exactly how isn’t clear. Many refer to the Massachusetts Health Care Reform Act to bolster the argument that the ACA will lower overall health care costs and workers’ compensation costs. Under Massachusetts health care reform, costs within the workers’ compensation system decreased. Although ACA is more complex, similar provisions in the two laws allow a comparison of the impact on the workers’ compensation system. Analysis by RAND in 2012 found that expanding coverage to previously uninsured individuals resulted in a drop in workers’ compensation costs in Massachusetts. Finding an association between being insured and the frequency of workers’ compensation claims, RAND concluded that expanding the population holding group health insurance could reduce cost shifting to workers’ compensation.

In a May blog posting, Joe Paduda, a principal at Health Strategy Associates, affirmed his belief that the overall effect of the ACA on workers’ compensation would be positive, citing among other things, that it would lessen the motivation for cost shifting and fraudulent claims. Others have argued that increasing access to care and expanding preventive services, coupled with employer-sponsored wellness initiatives, should make the working population healthier overall, leading to a reduction in claim frequency and faster recoveries when injuries do occur.

On the other hand, some speculate that the ACA will increase workers’ compensation costs over time by straining already scarce primary care resources and causing longer wait times for treatment. The projected shortage of primary care physicians could make it more difficult for injured workers to find a physician. This, in turn, could lead to increased costs because of extended disability durations while waiting to see a physician. Others have pointed out that a decreasing supply of physicians and increasing patient demand could drive costs higher. Other factors that could affect cost shifting are significant increases in copayments and high-deductible health plans—costs that employees must bear. This could motivate some employees to file workers’ compensation claims for nonoccupational injuries.

According to findings from a recent study by Assured Research, a connection between increased health insurance coverage and decreased workers’ compensation costs isn’t supported by the data. The study evaluated health insurance penetration rates by state from 1999 to 2011 and corresponding statewide workers’ compensation loss ratios. After adjusting for national workers’ compensation trends, the results showed 31 states with rising health care penetration that resulted in decreased loss ratios. On the other hand, 20 states with rising health care penetration experienced increased loss ratios.

Immigration reform

There are approximately 11 million undocumented people living in the United States. Many don’t file workers’ compensation claims for fear of being deported. The general consensus is that legalizing undocumented immigrants will increase workers’ compensation claims. At the same time, immigrant workers are more prevalent in high-risk sectors such as agriculture, construction, and landscaping. With an influx of workers into a high-risk injury class, the potential impact on frequency and severity in the workers’ compensation system can’t be overlooked.

Anticipate and Plan

British Prime Minister Benjamin Disraeli once quipped, “What we anticipate seldom occurs, what we least expect generally happens.” Still, it’s important to anticipate and plan for the future risk. There’s little doubt that change is looming for workers’ compensation insurers and that actuaries have a key role to play in identifying and managing the transformation.

Authors

Denise Gillen-Algire and Kevin Bingham collaborated with Bill Van Dyke and William Wilt in writing this article.

Bill Van Dyke, an associate of the Casualty Actuarial Society and a member of the Academy, is a specialist leader at Deloitte Consulting LLP in Hartford, Conn. He has extensive actuarial experience in managing and performing workers’ compensation unpaid claim reserve and pricing analyses for state funds, insurers, reinsurers, state agencies, municipalities, self-insured corporations, and captives.

William Wilt, a fellow of the Casualty Actuarial Society, is president of Assured Research, a research and advisory firm focused on property/casualty insurance. Prior to forming Assured, he held diverse roles as an actuary, as a credit and equity analyst, and in corporate development.

This article first appeared in the November | December 2013 issue of Contingencies Magazine and is © 2013 American Academy of Actuaries. Reprinted with the permission of the American Academy of Actuaries.  All Rights Reserved.

New AMA Classification Of Obesity: How It Affects Workers’ Compensation And Mandatory Reporting

On June 16, 2013, the American Medical Association voted to declare obesity a disease rather than a comorbidity factor. This change in classification will affect 78 million American Adults and 12 million children. The new status for obesity means that this is now considered a medical condition that requires treatment. In fact, a recent Duke University / RTI International / Centers for Disease Control and Prevention study estimates 42 percent of U.S. adults will become obese by 2030.

According to the Medical Dictionary, obesity has been defined as a weight at least 20% above the weight corresponding to the lowest death rate for individuals of a specific height, gender, and age (ideal weight). Twenty to forty percent over ideal weight is considered mildly obese; 40-100% over ideal weight is considered moderately obese; and 100% over ideal weight is considered severely, or morbidly, obese. More recent guidelines for obesity use a measurement called BMI (body mass index) which is the individual's weight divided by their height squared times 703. BMI over 30 is considered obese.

The World Health Organization further classifies BMIs of 30.00 or higher into one of three classes of obesity:

  • Obese class I = 30.00 to 34.99
  • Obese class II = 35.00 to 39.99
  • Obese class III = 40.00 or higher

People in obese class III are considered morbidly obese. According to a 2012 Gallup Poll, 3.6% of Americans were morbidly obese in 2012.

The decision to reclassify obesity gives doctors a greater obligation to discuss with patients their weight problem and how it's affecting their health while enabling them to get reimbursed to do so.

According to the Duke University study, obesity increases the healing times of fractures, strains and sprains, and complicates surgery. According to another Duke University study that looked at the records for work-related injuries:

  • Obese workers filed twice as many comp claims.
  • Obese workers had seven times higher medical costs.
  • Obese workers lost 13 times more days of work.
  • Body parts most prone to injury for obese individuals included lower extremities, wrists or hands, and the back. Most common injuries were slips and falls, and lifting.

The U.S. Department of Health and Human Services said the costs to U.S. businesses related to obesity exceed $13 billion each year.

Furthermore, a 2011 Gallup survey found that obese employees account for a disproportionately high number of missed workdays. Also earlier National Council on Compensation Insurance (NCCI) research of workers' compensation claims found that claimants with a comorbidity code indicating obesity experience medical costs that are a multiple of what is observed for comparable non-obese claimants. The NCCI study demonstrated that claimants with a comorbidity factor indicating obesity had five times longer indemnity duration than claimants that were not identified as obese.

Prior to June 16, 2013, the ICD code for comorbidity factors for obesity in workers' was ICD-9 code 278. This is related to obesity-related medical complications, as opposed to the condition of obesity. Now the new ICD codes will indicate a disease, or condition of obesity which needs to be medically addressed. How will this affect work-related injuries?

Instead of obesity being a comorbitity issue, it can now become a secondary claim. If injured workers gain weight due to medications they are placed on as a result of their work-related injury or if an injured worker gains weight since they cannot exercise or keep fit because of their work-related injury and their BMI exceeds 30, they are considered obese and are eligible for medical industrially related treatment. In fact, the American Disability Act Amendment of 2008 allows for a broader scope of protection and the classification of obesity as a disease means that an employer needs to be cognizant that if someone has been treated for this disease for over 6 months then they would be considered protected under the American Disability Act Amendment.

Consider yet another factor: with the advent of Mandatory Reporting (January 1, 2011) by CMS that is triggered by the diagnosis (diagnosis code), the new medical condition of obesity will further make the responsible party liable for this condition and all related conditions for work-related injuries and General Liability claims with no statute of limitations. It is vital to understand that, as of January 1, 2011, Medicare has mandated all work-related and general liability injuries be reported to CMS in an electronic format. This means that CMS has the mechanism to look back and identify work comp related medical care payments made by Medicare. This is a retroactive statute and ultimately, it will be the employer and/or insurance carrier that will be held accountable.

The carrier or employer could pay the future medical cost twice — once to the claimant at settlement and later when Medicare seeks reimbursement of the medical care they paid on behalf of the claimant. This is outside the MSA criteria. The cost of this plus the impact of the workers' compensation costs as well as ADAA issues for reclassification of obesity for an employer and carrier are incalculable.

The solution is baseline testing so that only claims that arise out of the course and scope of employment (AOECOE) are accepted. If a work-related claim is not AOECOE and can be proved by objective medical evidence such as a pre- and post-assessment and there is no change from the baseline, then not only is there no workers' compensation claim, there is no OSHA-recordable claim, and no mandatory reporting issue.

A proven example of a baseline test for musculoskeletal disorders (MSD) cases is the EFA-STM program. EFA-STM Program begins by providing baseline injury testing for existing employees and new hires. The data is only interpreted when and if there is a soft tissue claim. After a claim, the injured worker is required to undergo the post-loss testing. The subsequent comparison objectively demonstrates whether or not an acute injury exists. If there is a change from the baseline site specific treatment, recommendations are made for the AOECOE condition ensuring that the injured worker receives the best care possible.

Baseline programs such as the EFA-STM ensure that the employee and employer are protected and take the sting out of the new classification by the AMA for obesity.