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Insurtech: Revolution, Evolution or Hype?

Artificial Intelligence (AI), machine learning, the Internet of Things (IoT), blockchain, robotics, quantum computing — the terminology of technology is staggering enough, let alone understanding what it is and how to use it. While some of the advances in technology are more noise than anything useful, many of these developments can be quite valuable for our industry — especially in claims management and risk control.

Fortunately, there are experts with a good understanding of insurtech and how we can make it meaningful for our companies and our injured workers. Three of them helped us break down the latest technological developments and provided insights into how they can benefit the workers’ compensation system during our most recent Out Front Ideas webinar:

  • Guy Fraker, chief innovation officer for Insurance Thought Leadership
  • Jason Landrum, global chief information officer for Sedgwick Claims Management Services
  • Peter Miller, CPCU, president and CEO of The Institutes/Risk and Insurance Knowledge Group.

What Is Insurtech?

Simply put, insurtech is using technology to improve efficiencies and provide a better customer experience in the insurance industry. Many startup companies have entered this space in the last few years, although the majority are not as helpful as they may first appear. Companies come out with apps or, as our speakers said, shiny new toys that drive user experience and seem really cool but do not add value. One speaker said many companies offer solutions to problems that do not exist.

The more mature, robust companies — those with an actual product that covers the life cycle of the value chain or a significant gap in it — are in the minority but have the most potential to make a difference. They offer strategic and comprehensive solutions. There are not too many organizations with this capability, so there are tremendous opportunities.

The right technology, when properly deployed, has the capability of making a significant impact. Two of the most meaningful advancements for our industry are machine learning and AI. So what are these terms and how do they differ?

Machine learning is actually an application of AI. Where AI is basically computer-based logic, machine learning uses statistical techniques to allow computer systems to learn from data without being explicitly programmed. From the data, it defines a formula to predict an outcome, thereby making it meaningful.

See also: Insurtech Ecosystem: Who Will Eat Whom?  

Some TPAs and carriers are using this technology to quickly flag claims that could be in danger of adverse development. The computer takes a claim, runs it against data on other claims and can determine if it is likely to become severe. As soon as the machine learning model detects something different about a claim — something a human would not be able to identify as a potentially huge loss — it alerts the claims manager to intervene and manage it more carefully. The effect is to drive the outcomes of claims in a more positive way.

For injured workers, technology is being leveraged to provide apps that provide easy access to claim information. Injured workers can find out where they are in each step of the process without having to call the adjuster.

In the consumer market, AI and machine learning are being used to apply natural language processing and determine what the person is actually saying or asking a computer. Think Alexa or Google Home. Our speakers predict it will soon become commonplace for humans to interact easily with machines.

Implementing this technology may seem overwhelming to organizations, especially if they try to adopt it on a large-scale basis. Instead, companies should have a narrowly defined plan and seek real solutions.

Industry Initiative and Blockchain

One of the exciting potential uses of newer technology in our industry is something called the RiskBlock Alliance. This not-for-profit industry consortium is meant to provide a framework that the industry owns: a standardized way of looking at data. It is based on three technologies:

  1. The Internet of Things
  2. Blockchain
  3. Data analytics

The confluence of these technologies is profound. In a nutshell, the IoT is the network of electronic devices that can digitally capture and exchange data. Blockchain enables the storage of this data along with rule sets. It can execute automated instructions based on the data and the rules applied to it. It also allows for data sharing among organizations in a secure way. A couple of examples demonstrate the significant savings and benefits to the industry:

  1. Proof of coverage. For example, a short-haul trucking company must provide proof of insurance for every load each driver takes; approximately eight hauls per day, per driver. It adds up to about 200,000 times each day that proof of coverage must be executed. There are different insurers involved with each load. It takes the company about 30 minutes to get a proof of insurance for each load. However, using the sharable platform of blockchain means the proof of insurance per load can be available in a matter of milliseconds.
  2. Sharing policy information when subrogation comes into the equation. Say there is an auto accident between two vehicles, each with a different insurance carrier. Initially, both insurers start paying the insureds while they sort through the details to see who is at fault. Once fault is established, payment between the two carriers must be settled. Right now, this is done manually at an estimated annual cost of $300 million to the industry. Using blockchain, the policy information could be housed in a secure environment and the settlement done instantly. Putting policy information in an automated process on an aggregate basis could save tremendous amounts of money and time.

Challenges and Opportunities

While there are some challenges in implementing new technologies, there are also many opportunities. Many of the more rote tasks of handling claims can be done faster by technology, freeing claims managers to provide the human touch that is so necessary in so many workers’ compensation claims. Spending more time with injured workers, showing them concern and empathy, results in better outcomes for them and lower costs for payers.

One challenge is the need for data standardization, something RiskBlock is targeting. This could level the playing field and provide opportunities for smaller insurers to grow more quickly.
Incorporating aspects of insurtech into the daily workflow can be challenging, especially because there are so many innovations and ideas at play. It is important to try to harness that enthusiasm and apply it to a framework that captures the best ideas and develops them into solutions.

Another potential challenge is that our industry is so heavily regulated, and regulated differently in each jurisdiction. That means that some insurtech solutions may work in one area but not another. Caution is required before jumping on something that may not be workable.

One challenge that can be easily overcome is changing the mindset that implementing new technology requires many people. It does not. Moving into the insurtech space is best done in a constrained way, with just two or three people involved. As one speaker said, “It’s not about thinking outside the box. It’s about building the box.” Every game-changing organization like Microsoft and Facebook started with a team of just three or four people.

See also: Key Challenges on AI, Machine Learning  

From a healthcare standpoint, one of the best opportunities from insurtech is the ability to get in front of pain, which can also be referred to as pre-pain or pre-hab. As healthcare technology advances, we will be able to help workers and their families understand what to expect in terms of pain before they undergo surgery, for example. We can help them be better prepared, facilitating better and shorter recoveries.

The Future

With the maturation of insurtech companies, our experts expect the number of startups will slow in the next couple of years. Instead, existing companies will return with innovations.

The tremendous amount of data available in the future will help level the playing field between larger and smaller carriers. This is because the smaller carriers will be able to participate in data sharing initiatives to have access to analytics way beyond what their own data could provide. Data aggregation insurtech companies are going directly to the source for data, such as partnering with auto manufacturers to access data from their onboard computer systems.

Insurtech will also allow pharmacists to match DNA to prescriptions to determine if they are feasible. Also, robotics can be used to handle riskier or repetitive tasks. Rather than replacing workers, the technology allows them to engage in more meaningful responsibilities. Using AI to process routine, medical-only claims may even result in eliminating some steps. We may find straight-through processing can be done quickly and efficiently.

One of the most exciting uses of new technology is to eliminate losses by removing risks. Insurtech can be used to detect when and how certain actions will likely lead to injuries, allowing humans to set up systems to prevent those conditions. The ability to avoid losses would truly transform our industry.

Workers’ Comp in the Year 2030

At the WCRI Annual Issues & Research Conference, Dr. Richard Victor, former CEO of WCRI and currently a senior fellow with Sedgwick Institute, discussed his views of workers’ compensation in the future.

The workers’ compensation system was a compromise between labor and business designed to provide no-fault benefits in an environment that gave exclusive remedy protections to employers. Over the years, there have been ebbs and flows to the system in an effort to maintain balance. There is a constant struggle to balance benefits to workers with the costs of the system paid by employers.

In the past, when the workers’ compensation system got out of balance, it was due to actions from those within the system. That is something the system could correct with regulatory change. However, right now, there are things happening outside of the workers’ compensation system that could significantly affect it and cause a rethinking of the grand bargain.

Emerging labor shortages

Retiring baby boomers will cause labor shortages in healthcare and the insurance industry, which will delay claims and medical care. This will ultimately increase claims costs.

See also: The State of Workers’ Compensation  

In addition, a stronger economy is ultimately going to lead to a severe labor shortage. When you pair the aging workforce and people retiring with a growing job market, you end up with not enough qualified applicants to fill the positions. Employers have to relax their hiring standards. This leads to unqualified applicants being hired. These people will likely have higher accident rates.

Changes in the non-occupational health system

As workers see their out-of-pocket health insurance costs rise, it becomes more attractive to try to shift illness and injury episodes into the workers’ compensation system. Richard feels that this shifting will result in a 25% increase in workers’ compensation claims by 2030. With soft tissue injuries, it would be very easy for the worker to indicate the injury happened at work instead of at home. Disproving that would be very challenging for employers. Higher deductibles will greatly encourage workers to look for these cost-shifting possibilities.

Millions of workers losing health insurance

The number of uninsured workers is expected to decrease significantly as elements of the Affordable Care Act are repealed or weakened. These uninsured workers are also highly encouraged to shift their treatment into the workers’ compensation system. Richard estimates a 15% increase in workers’ compensation claims due to this.

Aging workforce

The injury rates for the older workers is higher than for younger workers. As the U.S. workforce ages, we will see higher injury rates across the employee population.

Federal immigration policies and practices

Limiting the flow of immigrants into the U.S. at a time there is a labor shortage will only compound the problem. The only way to grow our workforce to keep up with the demand is with immigrants. All of the growth in the labor force going forward is projected to come from immigrants.

Roughly 15% of all healthcare workers in the U.S. are foreign-born. If we discourage immigration into this country, Richard feels it could cause a labor shortage in the healthcare industry.

It does not even take a change in policy to see a change in immigration flow. After the Brexit vote there was a significant reduction in European nurses registering to work in the U.K. This is even though there had yet to be a policy change in the country.

See also: Healthcare Reform’s Effects on Workers’ Compensation

Conclusions

Taking all of the outside factors into consideration, Richard estimates a 55% increase in the number of workers’ compensation claims by the year 2030. When you add in medical inflation the costs of the workers’ compensation system could triple by 2030 with no change in indemnity benefit levels.

With this significant increase in costs, there will be questions about the continued viability of workers’ compensation. What is the solution? Are there viable options to traditional workers’ compensation? ERISA-style plans like the opt out in Texas have been widely criticized for providing inadequate protections for injured workers. Union carveout plans only apply to a very small sector of the workforce. Could we see workers’ compensation claims organizations become accountable to both employers and workers, with employees having the ability to choose which claims organization they want to use?

5 Trends for Employers to Watch in 2018

Advanced planning and preparation, strategic global thinking, shifts in legislative landscapes and sound technology investments are on the minds of most industry leaders as we move into 2018. As an extension of its own thought leadership program, Sedgwick has identified key trends that are likely to affect risk management and benefit decisions in the coming year.

To stay on top of issues that may affect our clients and industry partners throughout the year, we took a close look at internal research and colleague observations, external exploration and employer discussions and in-depth market monitoring of current and emerging risks. We will continue to watch and offer our projections on these potentially defining movements, classified into five categories:

  • Compounding global risks
  • Shifting tide of policy
  • Bridging the gaps
  • Leveraging interdisciplinary care
  • Improving experience through technology

Compounding global risks. An unusually high number of natural disasters in 2017 underscored the need for organizations to have a strong disaster recovery plan in place. Establishing strategic partnerships that can support an effective business continuity plan is critical. Preparation and action must occur before, during and after a catastrophe if an organization is going to recover and resume operations in a timely manner.

Additionally, the continuing threat and prevalence of emerging risks are expected to push the boundaries of organizational resources and resiliency. Cyber threats like data intrusion and ransomware are evolving and multiplying as the global economy becomes increasingly connected. As we continue to see terrorism, both international and domestic, in the headlines, it underscores the need to prepare and protect our people and property.

During these turbulent times, society’s reliance on first responders as a line of defense against risks of all types becomes even more critical. Caring for first responders’ overall physical and mental health is one way communities and businesses can increase preparedness for debilitating crises. Several states have taken up legislation aimed at increasing coverage for first responders. Organizations can anticipate that, as coverage grows, so will the need for specialized claims, managed care and disability services.

See also: Industry Trends for 2017  

Shifting tide of policy. Businesses can look for leave programs to expand in response to demand from their own employee populations, faced with the need to care for their own health and the welfare of their families. Parental leave, caregiver leave and other paid leave programs are on the rise; several states have already introduced new family-friendly paid leave bills, and others are clarifying and expanding regulations for leave benefits. This trend is expected to continue as the population shifts.

More than ever, vigilance is needed for employers to maintain compliance with continuing changes in the Americans with Disabilities Act, Family and Medical Leave Act and other connected federal, state and municipal laws. Throughout 2018, organizations can expect regulatory complexity to increase and fines and litigation to be a looming threat for non-compliance. Many organizations are facing policy changes and compliance demands with a renewed willingness to collaborate across disability, leave of absence and workers’ compensation teams.

It is impossible for organizations not to feel the impact of the prescription drug crisis on their workforces. The costs – personally and financially – of the misuse and abuse of opioids place undue burdens on society. Governmental agencies, pharmacy retailers and employers continue to look for ways to take back control through such means as legislation, drug formularies and first-fill limitations.

Bridging the gaps. Throughout 2018, organizations will seek new ways to bridge gaps in knowledge and services based on evolving needs and preferences of consumers. Organizations are joining in the race toward on-demand, self-service innovation to provide immediate resources to those in need. The infusion of machine learning and artificial intelligence is advancing many capabilities by automatically sifting through mountains of data, allowing service providers to detect patterns faster and formulate valuable insights to improve the quality of the customer experience.

Organizations are also seeking new ways to bridge diversity gaps. Different generations and populations have different needs when considering health concerns, technology, communication preferences and resources. We must address changing demographics within the workforce and determine how to better adapt practices to accommodate and support differences.

Focusing on the claims industry specifically, insurance carriers, third party administrators and self-administered employers must broaden the knowledge and capabilities of today’s claims professional. As seasoned professionals begin to retire, bridging the talent gap becomes increasingly important. Training of claims professionals must expand beyond the traditional claims process. Claims organizations must look holistically at how examiners are addressing the needs of their clients and consumers and how their part in the process affects the bigger picture.

Leveraging interdisciplinary care. The movement toward a whole health approach increases trust and engagement and places less influence on individual providers in favor of a more holistic, consensus view of treatments and interventions. As more employers embrace principles of advocacy, empathy and responsiveness, they are using centralized support to link teams and resources with a common focus on quality care. With this shift, organizations look forward to continued improvement in the consumer experience and stronger physical, emotional and financial health for employees.

We are seeing more businesses embrace integrated programs as a means to address the shared challenges of healthcare, return to work and compliance. In addition, the importance of data connectivity within organizations and across providers will grow as organizations work to avoid information gaps, optimize care and avoid potential dangers.

Interdisciplinary cooperation is also important as a means for exploring alternatives for pain management. Organizations can anticipate more collaboration between employers, physicians, claims specialists and patients as they move away from long-term drug prescriptions, looking instead toward alternative therapies and weaning techniques to help injured workers regain their health and productivity without the risk of addiction.

See also: 3 Technology Trends Worth Watching  

Improving experience through technology. Technology helps employers engage workers throughout their recovery, maintaining a stronger connection while they are away from work and making the process easier for them to understand. Better communication and improved access to on-demand care can help improve the claims experience, and increased consumer satisfaction is leading to accelerated outcomes and better overall health.

Telemedicine and other remote access offerings are still on the rise and evolving as other “tele” services are added to the mix. Eliminating some of the barriers of distance and time, these resources are connecting patients with the right providers for initial and follow-up treatments for minor injuries and illnesses, as well as support resources throughout the claims process. Chatbots and avatars are becoming more prevalent as support and service options for all lines of business. The industry is even seeing potential for these tools as virtual health coaches for workers’ compensation, disability and wellness programs.

Employers can also expect to see the claims industry reach the next level of decision optimization and use technology to deploy intervention strategies in real time. Analytics will influence next-generation methods for addressing all types of claims and be used to predict those that will become complex or incur large liability losses, anticipating care and pharmacy needs, prescribing appropriate steps toward resolution and facilitating return to work.

While the year ahead may bring challenges, it also brings a renewed sense of hope and excitement. As these and other trends materialize and develop, those who have anticipated and planned ahead will be in a position to capitalize on opportunities as they arise. Sedgwick will continue to guide our clients and the broader industry by tracking topics and trends like these that may affect employees, customers and businesses.

To read more, visit Sedgwick’s Navigating 2018 webpage.

Impact on Mental Health in Work Comp

According to the World Health Organization, mental health is described as: “a state of well-being in which every individual realizes his or her own potential, can cope with the normal stress of life, can work productively and fruitfully and is able to make a contribution to his or her community.” But the World Health Organization’s definition applies only to part of the population.

At any given time, one in five American adults suffers with a mental health condition that affects their daily lives. Stress, anxiety and depression are among the most prevalent for injured workers. Left untreated, they can render a seemingly straightforward claim nearly unmanageable, resulting in poor outcomes and exorbitant costs.

Increasingly, many in our industry are recognizing the need to do all we can to address this critical issue. We must openly discuss and gain a deep understanding of a subject that, until now, has been taboo.

Four prominent workers’ compensation experts helped us advance the conversation on mental health in the workers’ compensation system during a recent webinar. They were:

  • Bryon Bass, Senior Vice President for Disability, Absence and Compliance at Sedgwick
  • Denise Zoe Algire, Director of Managed Care and Disability for Albertsons Companies
  • Maggie Alvarez-Miller, Director of Business and Product Development at Aptus Risk Solutions
  • Brian Downs, Vice President of Quality and Provider Relations at the Workers’ Compensation Trust

Why It Matters

Mental health conditions are the most expensive health challenges in the nation, behind cancer and heart disease. They are the leading cause of disabilities in high-income countries, accounting for one third of new disability claims in Western countries. These claims are growing 10% annually.

In addition to the direct costs to employers are indirect expenses, such as lost productivity, absenteeism and presenteeism. Combined with substance abuse, mental health disorders cost employers between $80 billion and $100 billion in these indirect costs.

In the workers’ compensation system, mental health conditions have a significant impact on claim duration. As we heard from our speakers, these workers typically have poor coping skills and rely on treating physicians to help them find the pain generator, leading to overuse of treatments and medications.

See also: Top 10 Ways to Nurture Mental Health 

More than 50% of injured workers experience clinically related depressive symptoms at some point, especially during the first month after the injury. In addition to the injured worker himself, family members are three times more likely to be hospitalized three months after the person’s injury. Many speculate that the distraction of a family member leads the injured worker to engage in unsafe behaviors.

Mental health problems can affect any employee at any time, and the reasons they develop are varied. Genetics, adverse childhood experiences and environmental stimuli may be the cause.

The stress of having an occupational injury can be a trigger for anxiety or depression. These issues can develop unexpectedly and typically result in a creeping catastrophic claim.

One of our speakers relayed the story of a claim that seemed on track for an easy resolution, only to go off the rails a year after the injury. The injured worker in this case was a counselor who had lost an eye after being stabbed with a pen by a client. Despite his physical recovery, the injured worker began to struggle emotionally when he finally realized that for the rest of his life he would be blind in one eye. Because his mental health concerns were raised one year after the injury, there were some questions about whether he might be trying to game the system.

Such stories are more commonplace than many realize. They point out the importance of staying in constant contact with the injured worker to detect risk factors for mental health challenges.

Challenges

Mental health conditions — also called biopsychosocial or behavioral health — often surprise the person himself. Depression can develop over time, and the person is not clued in until he finds himself struggling. As one speaker explained, the once clear and distinct lines of coping, confidence and perspective start to become blurred.

In a workers’ compensation claim, it can become the elephant in the room that nobody wants to touch, talk about or address. Organizations willing to look at and address these issues can see quicker recoveries. But there are several obstacles to be overcome.

Stigma is one of the biggest challenges. People who realize they have a problem are often hesitant to come forward, fearing negative reactions from their co-workers and others.

Depictions of people suffering from behavioral health issues in mass media are often negative, but are believed by the general public. Many people incorrectly think mental health conditions render a person incompetent and dangerous; that all such conditions are alike and severe; and that treatment causes more harm than good.

As we learned in the webinar, treatment does work, and many people with mental health conditions do recover and lead healthy, productive lives. Avoiding the use of negative words or actions can help erase the stigma.

Cultural differences also affect the ability to identify and address mental health challenges. The perception of pain varies among cultures, for example. In the Hispanic community, the culture mandates being stoic and often avoiding medications that could help.

Perceptions of medical providers or employers as authority figures can deter recovery. Family dynamics can play a role, as some cultures rely on all family members to participate when an injured worker is recovering. Claims professionals and nurses need training to understand the cultural issues that may be at play in a claim, so they do not miss the opportunity to help the injured worker.

Another hurdle to addressing psychosocial issues in the workers’ compensation system is the focus on compliance, regulations and legal management. We are concerned about timelines and documentation, sometimes to the extent that we don’t think about potential mental health challenges, even when there is clearly a non-medical problem.

Claims professionals are taught to get each claim to resolution as quickly and easily as possible. Medical providers — especially specialists — are accustomed to working from tests and images within their own worlds, not on feelings and emotional well-being. Mental health issues, when they are present, do not jump off the page. It takes understanding and processes, which have not been the norm in the industry.

Another challenge is that the number of behavioral health specialists in the country is low, especially in the workers’ compensation system. Projections suggest that the demand will exceed the supply of such providers in the next decade. Our speakers explained that, with time and commitment, organizations can persuade these specialists to become involved.

Jurisdictions vary in terms of how or whether they allow mental health-related claims to be covered by workers’ compensation. Some states allow for physical/mental claims, where the injury is said to cause a mental health condition — such as depression.

Less common are mental/physical claims, where a mental stimulus leads to an injury. An example is workplace stress related to a heart attack.

See also: New Approach to Mental Health  

“Mental/mental claims” mean a mental stimulus causes a mental injury. Even among states that allow for these claims, there is wide variation. The decision typically hinges on whether an “unusual and extraordinary” incident occurred that resulted in a mental disability. A number of states have or are considering coverage for post-traumatic stress among first responders. The issue is controversial, as some argue that the nature of the job is, itself, unusual and extraordinary and that these workers should not be given benefits. Others say extreme situations, such as a school shooting, are unusual enough to warrant coverage.

What Can Employers Do

Despite the challenges, there are actions employers and payers are successfully taking to identify and address psychosocial conditions.

For example, Albertsons has a pilot program to identify and intervene with injured workers at risk of mental health issues that is showing promise. The workers are told about a voluntary, confidential pain screening questionnaire. Those who score high (i.e., are more at risk for delayed recoveries) are asked to participate in a cognitive behavioral health coaching program.

A team approach is used, with the claims examiner, nurse, treating physician and treating psychologist involved. The focus is on recovery and skill acquisition. A letter and packet of information is given to the treating physician by a nurse who educates the physician about the program. The physician is then asked to refer the injured worker to the program, to reduce suspicion and demonstrate the physician’s support.

Training and educating claims professionals is a tactic some organizations are taking to better address psychosocial issues among injured workers. The Connecticut-based Workers’ Compensation Trust also holds educational sessions for its staff with nationally known experts as speakers. Articles and newsletters are sent to members to solicit their help in identifying at-risk injured workers.

Continuing communication injured workers is vital. Asking how they are doing, whether they have spoken to their employer, when they see themselves returning to work reveal underlying psychosocial issues. Nurse case managers can also be a great source of information and intervention with at-risk injured workers.

Changing the workplace culture is something many employers and other organizations can do. Our environments highly influence our mental health. With the increased stress to be more productive and do more with less, it is important for employers to make their workplaces as stress free as possible.

Providing the resources to allow employees to do their jobs and feel valued within the organization helps create a sense of control, empowerment and belonging. Helping workers balance their work loads and lives also creates a more supportive environment, as does providing a safe and appealing work space. And being willing to openly discuss and provide support for those with mental health conditions can ensure workers get the treatment they need as soon as possible.

As one speaker said, “By offering support from the employer, we can reduce the duration and severity of mental health issues and enhance recovery. Realize employees with good mental health will perform better.”

To listen to the full webinar on this topic, click here.

It’s Time to Act on SSDI Trust Fund

The new Congress and the Trump administration need to act soon if they want to address the projected 2023 exhaustion of the Social Security Disability Insurance (SSDI) trust fund and protect hard-working Americans. Every year, millions of Americans lose their jobs due to injuries or illnesses, but policymakers can take concrete steps to maintain these workers’ incomes and reduce spending for their SSDI, Medicare and other public benefits.

The first and most critical step is to empower states and the private sector to test promising approaches for helping ill or injured workers stay in the labor force. Otherwise, policymakers will be faced with either cutting disability benefits for workers who need them or diverting revenue from the trust fund that is intended to pay for the same workers’ retirement benefits. Policymakers chose the latter course in 2015, when the SSDI trust fund was projected to dry up within a year. But that option will be even less attractive in 2023 because the retirement trust fund is on a trajectory for exhaustion in 2035.

The nature of the opportunity

Research shows that a large but unknown portion of the more than two million workers who leave their jobs each year for medical reasons could continue to work if they received timely, evidence-based support. Yet many workers with work-threatening conditions fall through the cracks in a fragmented support system and enter SSDI instead.

See also: What Trump Means for Health System  

The private sector already has the tools to help more of these workers stay in the labor force, but the tools aren’t targeted to those most likely to enter SSDI—those in relatively low-skill jobs with limited education. Many employers of skilled workers provide job retention services along with short-term disability and health insurance. Workers’ compensation is available to most workers if their injury or illness is due to work, but the degree to which they receive job-retention services varies. Some states’ vocational rehabilitation agencies also provide job retention services, but their size and scope is very limited.

The fact that some job-retention services are already available reflects the substantial benefits of these services to workers, employers and state governments. It is clear, however, that the provision of services is suboptimal because of misaligned financial incentives and institutional constraints. Most notably, financial incentives created by federal programs work against job retention rather than for it: Federal support for ill or injured workers is almost entirely reserved for those who leave the labor force and enter SSDI. After a further 24 months, SSDI entrants also enter Medicare, and many with sufficiently low incomes receive Supplemental Security Income, Medicaid and various in-kind benefits. Furthermore, there is a sharp drop in the federal taxes collected from workers who stop working and enter SSDI.

Keeping these workers on the job and out of SSDI could save the federal government billions. The potential gains of investing in job retention far exceed the costs—which is why policymakers now have the chance to help hard-working Americans as well as reduce the size of the federal deficit.

The need for immediate action

To build on what we’ve learned thus far, federal policymakers must provide states and the private sector with opportunities to test various ways to help Americans whose livelihoods are threatened by medical conditions. Implementing a new policy based on our current limited knowledge could harm, rather than help, many workers, or it could result in new costs to federal and state governments that exceed the savings to public programs. For instance, policies that excessively push workers to pursue work when they are in dire need of SSDI and Medicare would harm their well-being. Likewise, policies that spend significant resources on services and supports that do not at least pay for themselves through reductions in program expenditures will increase government spending.

Instead, policymakers should plan to scale up, replicate and improve test systems that work and stop supporting those that do not. Over the past few years, we and others have identified many opportunities to test such systems. For example, the three states with public short-term disability insurance programs—California, New Jersey and Rhode Island—could pilot-test case coordination and behavioral interventions to help their claimants stay at work. Other states could test similar approaches for their own employees, and accountable care organizations could test the use of job retention as a quality metric. (On Feb. 23, Mathematica Policy Research’s Center for Studying Disability Policy is hosting a live webinar, “The Promise of State Initiatives to Prevent Long-Term Disability,” to discuss these and other state-level initiatives that can help workers keep their economic independence and save billions of taxpayer dollars.)

See also: A Closer Look at the Future of Insurance

Such tests are not likely to occur, however, unless federal policymakers lead the way. They could do that by (1) making the testing of promising systems a national priority, (2) establishing an interagency office to lead the effort, (3) providing modest funding to gain the participation of states and the private sector and (4) supporting learning via rigorous evaluation.

Rarely do policymakers have an opportunity to both help American workers and reduce entitlement expenditures. Such an opportunity presents itself today, but the window is closing on our chance to address these issues and preserve the SSDI trust fund.