Tag Archives: large deductibles

5 Complex Issues Facing Regulators

The 2014 International Association of Industrial Accident Boards and Commissioners (IAIABC) Annual Conference in Austin offered a forum for regulators from around the country to discuss common issues and potential solutions. At this year’s conference, held Sept. 29  to Oct. 2, regulators highlighted a variety of complex issues that they are currently facing. Top issues include:

1. Hospital-Fee Schedules

In states that do not have hospital-fee schedules, the standard for payment is usually “reasonable and customary” charges. The question becomes, how do you determine what is reasonable? Healthcare providers push for billed charges to be the standard, but payers feel that this is an unfair standard because the charges are significantly higher than what providers ultimately accept as payment. Payers are pushing for paid charges to be the standard, but providers argue that preferred provider organization (PPO) contracts heavily influence average charges and that those contracts are based on volume. Providers do not believe that those without contracts should get the benefit of that volume discount.

2. Benefits for Illegal Aliens

Nearly all states extend benefits in some form to illegal alien workers. In some states, benefits are limited to medical benefits, while other states limit benefits to medical and total disability. In most states, there are no limitations to what benefits these workers can receive.

The concern is that some states are awarding these injured workers permanent total disability benefits because their status as illegal aliens means they cannot be put through vocational rehabilitation and returned to work. Attorneys argue that total disability benefits should continue when a light-duty release is obtained because that person cannot legally return to work. States are trying to find a balance that protects the illegal alien workers but doesn’t award them additional benefits simply because of their inability to legally work in the U.S.

3. Ride-Sharing Services

The explosion of ride-sharing services such as Uber is causing concern with regulators around the nation. The big concern from a workers’ compensation standpoint is whether these drivers should be classified as employees of Uber or whether they are independent contractors. Owners of taxi companies argue that allowing these drivers to be classified as independent contractors creates an unfair competitive advantage. States are challenged with whether they can classify these drivers by statute or whether this should be done by courts interpreting current statutes.

4. Treatment Guidelines

Several states, including Washington, Texas and Colorado, have pushed out treatment guidelines for issues such as opioids and lower back injuries. These guidelines have resulted in significantly lower medical costs on claims. The medical community tends to resist implementation of such guidelines as they feel this impedes their ability to render appropriate medical care based on the specifics of the patient. Those that argue for treatment guidelines point to significant research on the effectiveness of certain treatment methods and the dangers associated with opioids above certain dosage levels.

5. Large-Deductible Policies

Regulators feel that there is confusion on the differences between large-deductible policies and self-insurance, with many employers assuming that the two are interchangeable. In some states, courts have ruled that employers under a large-deductible policy cannot have influence over the claims-handling process, so they cannot access items like adjuster files.

The carrier is ultimately responsible for payment of the claims and compliance with the statutes. If the carrier is unable to collect the deductible from the employer, the regulators do not have jurisdiction over the issue. The deductible agreement is outside the parameters of the insurance policy.

The C-Suite View on Employer Costs

An open mic session at the California Workers Comp & Risk Conference in Dana Point featured insurance industry leaders identifying emerging market trends that are important to employers in California. Panelists were: moderator Pamela Ferrandino, national practice leader at Willis North America; Bill Rabl, chief operating officer at ACE Risk Management; Robert Darby, president at Berkshire Hathaway Homestate and former chairman of WCIRB; Duane Hercules, president at Safety National; and Michele Tucker, vice president at CorVel.

The panelists indicated that their short-term outlook on rates was flat to slightly higher, but not as high as over the last couple of years. For first-dollar accounts (those with no deductible), competition is increasing because there are more carriers entering the California marketplace. For the self-insured and those with large deductibles, the rate tends to matter less than the amount of risk retained by the employer, because the goal of these loss-sensitive programs is for the carrier to only cover unusual claims such as catastrophic injuries.

Managing medical costs also continues to be a challenge. Opioids are still driving costs, so there must be an aggressive pharmacy management program in place. The industry is starting to see complications such as organ damage arise from opioid abuse. This could become a cost driver. Almost half the opioids in California are dispensed by physicians, so it may be necessary to address this issue legislatively, as other states have done.

Predictive analytics are becoming increasingly important in the workers’ compensation industry. Some third-party administrators (TPA)s and carriers are doing excellent work in using psychosocial questions to identify issues that could complicate claims handling and increase costs. This allows them to intervene and devote additional resources to these claims. Analytics are also useful in the pricing process to assist carriers in identifying accounts that are performing above and below average and trends related to them.

Municipalities face significant, long-tail impact from presumption claims (for diseases that have uncertain origins but that may be presumed to have been caused by an occupation). Defending against these claims is extremely difficult, and, once accepted, the claims have a tendency expand. Claims for high blood pressure can eventually morph into claims for advanced heart disease or a heart attack. In many municipalities, a large percentage of police officers and firefighters retire under presumption claims. There are currently bills sitting on the governor’s desk that would expand presumption laws in California, including one bill that would create presumptions for certain healthcare workers in the private sectors. If these bills are signed, they will increase California municipalities’ workers’ compensation costs even more.

Finally, panelists were asked what they expect the key issues will be three years from now. Panelists predicted that mobile technology and the ability to communicate with injured workers will advance through apps that help with early intervention. They also expect to see an increased focus on wellness to address co-morbidities. Finally, everyone anticipates that within three years we will be talking about yet another California workers’ compensation reform bill and the continued expansion of presumption laws.