Workplace Issues

Watch out for Workers’ Compensation

The workers’ comp system, complicated by the fact that it’s regulated by 50 different sets of state rules, tends to flat-out cost more than group h...
David KatzJune 24, 2013

In most cases, employers end up paying a whole lot more for outpatient treatment for employee shoulder and knee injuries under workers’ compensation than they do under group-health benefit plans, according to a new study. The takeaway for CFOs: Do all you can to make your workers’ comp payment rates equal your group-benefit rates.

Depending on the states where workers are located, the costs can vary widely between the two systems. In two-thirds of the 16 large states studied by the Workers’ Compensation Research Institute (WCRI), employers paid more for the identical outpatient hospital treatments under workers’ comp than under group health benefits.

Further, in half of the states studied, hospital outpatient payments connected to shoulder surgeries in workers’ comp were at least $2,000 (or 43 percent) higher per injury than that doled out under group-health-insurance plans.

construction workers examine blueprintIn each of two of the states, Florida and Virginia, workers’ comp hospital payments were about double those of group health for shoulder and knee injuries, according to the study, which covered hospital outpatient services delivered in 2008. (Since most of the states studied haven’t had big changes in their workers’ comp fee rules over the last five years, the results should provide a decent gauge of the current state of payment rates, according to the report.)

In contrast, in a quarter of the states, the average payment for workers’ comp hospital outpatient services was within 16 percent of group health insurance payments. In Massachusetts and California, in fact, workers’ comp payments were 43 percent and 16 percent lower than group health.

But those two states buck the overall trend. The workers’ comp system, complicated by the fact that it’s regulated by 50 different sets of state rules, tends to flat-out cost more than group health, which is regulated only by the federal government. Indeed, the report cites the additional burden placed on hospital providers by the system: “additional paper work, delays and uncertainty in reimbursements, formal adjudication and special focus on timely return to work.”

In a state like Indiana, average payment for outpatient hospital services under workers’ comp ($9,183) outpaced those under group health ($7,302). “Is this substantial differential of $1,881 necessary to get quality care for injured workers?” Olesya Fomenka, the WCRI study’s author, writes.

At the same time, average workers’ comp payments were at or below group health payments in states where workers’ comp payments are made according to fixed fee schedules. Since there’s “no obvious reason why treating an injured worker should be cheaper” under workers’ comp, “policymakers in these lower cost states might want to inquire about problems with access to hospital care for injured workers,” the author comments.

In any event, CFOs and other senior executives have looked at this complicated system and have deduced that there’s nothing that they can do to reduce their companies’ payments, according to Daniel R Miller, president of MPH Consulting, a workers’ comp adviser. “And that’s not true,” he adds.

Even under a fixed fee schedule there’s room for negotiation between an employer and a provider or insurer. That’s because payment schedules are based on standards of “reasonable and necessary” care, which are negotiable, according to Miller. That’s especially true in “soft-tissue” injuries affecting shoulders and knees, whereas the circumstances of a broken bone may be much clearer.  

Although employers do have more leeway — and often more clout — in negotiating group-health rates than they do in bargaining for lower workers’ comp rates, they can use the fees they pay for group health as a basis for negotiating their workers’ comp rates down in states where there aren’t fixed fee schedules, Miller says.

Another thing finance chiefs can do is ask the risk managers who report to them to institute a plan to take action on a claim within 48 hours of when it’s made, according to Barry E. Thompson, president of Risk Acuity. In that way, the company can seize control of the claim by assembling enough data, for example, to support the contention that an injury did not happen at work and, hence, should be priced under the group-health-benefits plan.

Risk managers can collect data on an employee’s knee or shoulder surgery to “make certain that the diagnosis and causal relationship occurred within the first week or so,” Thompson says.

By doing that, the employer can fortify itself against a claim that may start with the finding that the employee was injured at home to a finding, closer to the date of surgery, that the injury was suffered in the workplace. By keeping claims out of the workers’ comp system, he suggests, an employer can often pay less for at least an equal quality of employee care.

Image used CC-BY by Elvert Barnes