The general health care industry has plenty to learn from the success of workers' compensation managed care, writes Mark Cooke.
In workers' compensation, managed care has transcended the concept of cost containment first envisioned by legislators in their attempts to reverse out-of-control costs in the 1980s and early-1990s. It has emerged as a humanizing factor with cost control serving as a side benefit to the process.
With the emphasis on early intervention focused on a swift return-to-work for injured employees, it is fast becoming a model worthy of emulation in the general health care industry. But the task of implementing this emerging model is a daunting one, bordering on the impossible.
Although three out of four US employers use a managed care organization for their group health coverage, the lessons being learned on the workers' compensation side cannot be immediately infused into the mainstream for a number of reasons.
First, provision of workers' compensation (or alternative but comparable coverage) is a statutory requirement in all but one state in the nation. Each state regulates its own workers' compensation system. And the rules vary considerably from state to state, emanating from different state agencies. Rate-making is artificially imposed in some states while in others file-and-use is the rule.
Second, the industries have been set up on opposing sides of the insurance industry. Workers' compensation is a mainstay of property/casualty and group health is lodged on the life and health side. Although employers may deal with the same insurance agency or broker, it is unusual to find that an individual agent is licensed to sell both types of insurance. An agent on one side or the other is often not even exposed to the same information sources. Even magazines such as Best's Review and the National Underwriter, both sources of good industry information, put out two versions - one for property/casualty, the other for life and health.
Third, the focus on a patient's livelihood is integral to workers' compensation case management but is a non-issue on the general health care side. Since the disability coverage that may complement major medical coverage in an employer's employee benefit plan is rarely provided by the same carrier, the employee and the employer's lost time costs are not a factor in the return-to-health plan.
Fourth, workers' compensation is a pre-paid system from the employee point of access with no co-payments or deductibles to consider. Virtually all company-paid general health benefit programs contain some sort of employee-paid annual deductible and many have some form of built-in co-payment.
Fifth, on the workers' compensation side, early incident reporting is not only required but essential to proactive management of the claim. From a workers' compensation managed care perspective the sooner appropriate medical attention begins, the more likely it is that the patient will heal and return-to-work with the least lost time. Although upfront medical costs may be higher at the onset of a workers' compensation claim, the resulting reduction in indemnity payments often significantly reduces the cost of the overall claim while dramatically increasing the level of employee satisfaction. Incident reporting usually becomes an issue on the general health side in managed care programs only when medical care is secured without following a prior approval procedure. And, although lack of prior approval can sometimes be grounds for denying the validity of the claim on the general health side, state rules governing workers' compensation coverage frequently do not allow this luxury.
And sixth, there is no consistent professional standard in managed care case management for either workers' compensation or for general health care. Medical training may or may not be a job requirement for case managers interacting with injured workers. In some organizations, cases are still managed by traditional adjusters. At Stirling Cooke's Fort Lauderdale operation, we have employed a hybrid system with in-house case management and claims adjusting and CorVel's CorCare provider networks to complete the managed care arrangement. Stirling Cooke's on-staff case managers who interact with injured workers, medical service providers, the employers and in-house adjusters throughout the life of a claim are licensed nurse practitioners. Other managing general agencies and carriers have chosen other paths. Discussion of the need for credentialing individuals who serve as case managers in workers' compensation managed care settings has become a frequent topic at all levels from Florida's Agency for Health Care Administration (AHCA) on down.
For ceding companies along with their reinsurers, it is exceedingly difficult to measure the benefits of managed care to the bottom line savings in cost. It appears at this stage more of a mechanism to discount rates to make a workers' compensation rate filing more competitive in the marketplace than a "real", major cost saving to the reinsureds and their capital partners, the reinsurers. As the old saying goes, we are still in the "suck it and see" mode.
In order to solve the woes of the US health care system, measures similar to the changes forged during workers' compensation reform legislation would have to be forced on it. The cultural changes required by carriers and self-insurers, in all states except Texas where experience in integrated benefits programs such as our IBI/24-hour coverage has been developed, would be extreme. Employees and small to medium sized employers would heave a sigh of relief if integrated coverage could be achieved. Dealing with fewer carriers and more consistent rules would increase employee satisfaction with the system and the companies they work for. Employers of all sizes, types and locations would be able to do a better assessment of the health care benefits they provide.
The ability to establish a common data base would allow premium and out-of-pocket costs to become measurable. Employers would be able to easily compute the costs for medical treatment, indemnity payments, disability payments, temporary replacement/training costs and any other down time costs resulting from an employee's injury or illness. The savings, or return-on-investment, realized by retention and rehabilitation of existing workers would also become easily measurable.
For the first time since workers' compensation programs began in 1913, actual monitoring of quality and cost would be achievable for American employers. An added benefit of integration would be the ability to effectively manage the newly implemented Health Insurance Portability and Accountability Act (HIPAA) legislation in conjunction with existing Consolidated Omnibus Budget Reconciliation Act (COBRA) and Employee Retirement Security Act (ERISA) regulations. In smaller companies, this leveling of health-related benefits may make it possible for them to offer their employees the group benefits that are at present not deemed to be an affordable cost of doing business.
Sadly, our current workers' compensation and general health care systems run on parallel but rarely intersecting tracks, even when both systems carry the label "managed care". And the differences that still exist between the various states' workers' compensation systems, whether they use a managed care approach or not, leave us with little reliable, historical data to evaluate national success. For example, in each of the states:
* Methods used by claims adjusters to set reserves vary considerably;
* Costs can be measured in paid losses, incurred losses or projected losses; and
* Employee indemnity levels differ considerably in amount, initiation date and duration limitations;
* Industries vary as to type and severity of losses; and
* No insurance industry-wide standards exist for tracking risk management information data elements.
Fortunately, organizations such as the Workers' Compensation Quality, the Workers' Compensation Research Institute, Risk and Insurance Management Society, the National Council of Self-Insurers, the American Society of Quality Control and even the Florida Managed Care Institute recognize the problem. Each is actively involved in identifying and quantifying elements which can be used in establishing multi-state quality and cost benchmarks.
As early as 1994, the Workers' Compensation Quality Council established a rudimentary database. With participating companies tracking the selected elements, the council's analysis of the impact of reporting lags on overall costs has resulted in a best practice for claims reporting.
Now that managed care has become a mandatory component of the Florida workers' compensation system and historical data is available, the Florida Managed Care Institute and the Florida Workers' Compensation Institute are expected to give us a statewide report card on the impact of managed care. Savings to Florida employers and carriers were estimated to be more than 11% by the National Council on Compensation Insurance as early as 1996. With more than four years passing since managed care was incorporated into the state's reform legislation, the anticipated 1998 report card will give the state, the industry and the nation the results it needs to begin the long-term cultural change in the country's overall health care systems.
Perhaps the success of workers' compensation managed care will result one day soon in an insurance industry standard to which all carriers and third party administrators can subscribe. It is a day we can all look
Mark Cooke is ceo of the Stirling Cooke Brown group of companies. With offices throughout the US, in London and Bermuda, Stirling Cooke provides a full spectrum of insurance and reinsurance-related services that range from traditional workers' compensation coverage, non-subscriber products including IBI/24-Hour, USL&H, to captive and rent-a-captive programs, a commercial business program (workers' compensation, commercial auto, general liability and property coverage) and statutory workers' compensation reinsurance. Stirling Cooke offers coverage opportunities through A-rated carriers throughout the US and worldwide. It was honored with the Queen's Award for Export for its work in the Texas alternative market.