Worker’s Compensation
Workers' Compensation is a hugely wasteful system that has received almost no attention from think tanks. All too often, employers believe they have lowered health care costs through one reform or another, only to discover that employees simply shifted their claims from group health to worker's comp. See the summary below of a new study on this topic from the NCPA.
Workers' compensation costs are increasing because state systems provide incentives for employers, employees and others to behave in ways that cause costs to be higher and workplaces to be less safe than they otherwise would be, says N. Michael Helvacian, a Senior Fellow with the National Center for Policy Analysis. Specifically:
- Insurance premiums, especially for small employers, are not fully experienced-rated; as a result, firms that improve workplace safety cannot reap the full rewards and others are not penalized for poor safety practices.
- Employers are not allowed to use their regular group health plan to cover workers' compensation injuries; as a result, employers and employees do not benefit from cost-control mechanisms common under normal health insurance, and employees have no incentive to economize on their use of health care.
- Employers are also prevented from using ordinary disability insurance for workers' compensation; as a result, workers report injuries that may not be work-related, stay away from work when it is not medically necessary, and engage attorneys to pursue questionable claims.
Addressing these problems would increase the efficiency of the system by controlling costs and giving workers a greater choice of benefits, says Helvacian. If state systems were properly reformed, employers could:
- Lower their premiums by improving safety and reducing claims costs if premiums were fully adjusted for the firm's experience, rather than based upon occupational or industry risk ratings.
- Integrate employee health plans and workers' compensation medical coverage so that employees could use the same provider networks and employers could pay the same negotiated fees – thus reducing costs and improving care.
- Provide wage replacement benefits under an integrated disability plan – thus reducing perverse incentives to make false claims or to claim a disability as work-related when it is not.
Source: N. Michael Helvacian, "Workers' Compensation: Rx for Policy Reform," National Center for Policy Analysis, Policy Report No. 287, September 2006.
That's one area where individual health insurance has an advantage over group, in that it DOES cover work related accidents. Ralph
You should add to this the state regulations that allow small employers and the self-employed (e.g. illegal immigrants) not to get insurance coverage.
There is the notorious case of the Colorado roofer, reported on 60 Minutes as a story about health insurance, but actually a problem with Colorado workers comp that allowed the roofer (a sub-contractor) to have no insurance, not to be covered by the prime contractor, not to have health insurance, and then to appear on 60 minutes (following a work-related injury) as an example of a problem with the health insurance industry!
As a small employer, I am glad my premiums are not 100% experience rated. I would need to buy additional catastrophic coverage if they were. This is not at all an unusual insurance practice. We are aware of our premiums and take steps to ensure as far as possible a safe workplace (although we are white collar so not too risky). Since many work comp payments are scheduled, integration with discounted fee-for-service networks could be more difficult than you suggest.
Regards,
Ian Duncan, FSA FIA FCIA MAAA
Solucia Inc
Dr. Goodman:
Workman’s Comp has had gotten a lot heat in the past few years and what it needs is some light. Keep up the good work.
The fees are adequate for the medical services provided. HOWEVER, not for the headache and hassle associated with malingering litigious patients. Not to mention medical forms that are nothing like the standard HCFA 1500 used by all other third parties.
Sincerely,
Charles Akins MD
John;
I have been a peer review doctor for WC. It is a spectacular scam, both by patients and the designated doctors (mainly chiropractors). We need to focus on how to remedy this deplorable system.
Dr Bob
I can certainly see the shift with Health Insurance on the rise and in some states such as Florida, Worker Comp rates are decreasing.