Hurricane Obamacare: Experts Attempt to Forecast Impact of Affordable Care Act on Workers’ Compensation

Workers’ Compensation Research Institute (WCRI) Executive Director Richard Victor, Ph.D. of Cambridge, Massachusetts stated in his presentation “Impact of the Affordable Care Act on Workers’ Compensation” during WCRI’s 2014 Annual Issues and Research Conference on March 12-13, 2014 in Boston that predicting the impact of the Affordable Care Act (ACA) on workers’ compensation was comparable to forecasting the path of a hurricane. He explained that both the effect of the ACA on workers’ compensation and the characteristics of large storms possessed uncertain elements and that the impact of those events may vary among different geographic areas.

Victor added that the ACA (better known as Obamacare) was unlike a hurricane in that desirable impacts were possible. A chart that he presented further visually represented the numerous possible paths that the positive and negative effects from that law could travel.

Victor additionally explained that he based his conclusions regarding the relationship between Obamacare and workers’ compensation on “informed speculation.” He also clarified that the expressed views were his own, rather than those of WCRI.

A panel discussion on the aforementioned effort to forecast the impact of the ACA on workers’ compensation immediately followed the presentation by Victor. Panelist David North, President and CEO of Sedgwick Claims Management Services, Inc. of Memphis, TN pointed out that the ACA itself never mentioned workers’ compensation. He noted that the conversation initiated by the ACA regarding the general healthcare system was the event that would impact the treatment for compensable injuries.

Panelist Donald Hurter of AIG, Inc. in New York, New York advocated utilizing the benefits of Obamacare to administer workers’ compensation systems more efficiently.

Christopher Cunniff of Liberty Mutual Insurance of Boston offered statistics that briefly contrasted the implementation of Obamacare and the rollout of the 2006 Massachusetts healthcare reform known as Romneycare.

Overview of Informed Speculation

Victor echoed several conference speakers in stating that Obamacare has not been in place for an adequate amount of time to determine the impact of that law on workers’ compensation. Consistent with his hurricane metaphor, Victor additionally identified the following areas of particular concern regarding how Obamacare would alter elements of workers’ compensation and speculated that the ACA would have different effects of varying degrees among workers’ compensation jurisdictions:

> Provider Shortages

> Improved Worker Health

> Cost Shifting To/From Workers’ Compensation

> Claim Shifting To/From Workers’ Compensation

This presentation additionally offered thoughts regarding the response of healthcare providers related to the disruption of traditional revenue streams and reimbursement models under the ACA. These possible effects included:

> Consolidation of healthcare providers that increased the market power of those medical professionals in a manner that resulted in higher costs to the workers’ compensation and general healthcare systems;

> Motivations for providers to find new means for increasing revenues;

> Increases or reductions in the number of workers’ compensation claims; and

> Increased cost shifting between the workers’ compensation and general healthcare systems

Victor noted regarding cost shifting that the ACA, which made high-deductible general health insurance plans common, increased the possibility of classifying uncertain claims, including accidents involving soft-tissue injuries, as workers’ compensation incidents. The logic was that selecting the workers’ compensation classification both allowed for the claimant to avoid what would likely be a high deductible amount under a general health insurance plan and for the healthcare provider to be paid under the fee schedule or other fee-for-service system of the workers’ compensation system for that state.

A related observation was that amended workers’ compensation reimbursement rates in the wake of these changes would influence decisions regarding classifying subsets of treatment that medical professionals provided claimants. One provided example was the impact of new reimbursement rates on whether to classify MRIs and similar procedures as scheduled or unscheduled radiology. The reported effect of this classification practice included evidence that showed this model overall cost a workers’ compensation system more than the alternative of raising the reimbursable amount for services under the appropriate classification.

In the case of the hypothetical MRIs, increasing the reimbursement rate for scheduled radiology would result in the savings described immediately above.

Victor Thoughts on Provider Shortages

In addressing the impact of a relatively rapid influx of millions of newly insured people into the American healthcare system, Victor stated that the competitiveness of a workers’ compensation fee schedule compared to the revenue available through the general healthcare system would likely affect the ability to recruit providers that would treat claimants. He added that that competitiveness would impact the amount of effort needed to maintain relationships with both new and established medical professionals in a workers’ compensation network.

The above comments further reflected the more specific widespread concern that a large new population of patients in the general healthcare system would impose new pressure on the ability of medical professionals to meet the demand for the supply of their services.

Thoughts regarding addressing these potential shortages in the context of the availability of medical professionals extended beyond increasing fee schedules to utilizing innovative ways for diagnosing and treating a claimant; the primary theme of these alternatives was reducing the reliance on a physician to provide that care.

Victor noted that less restrictive state regulations regarding the direct involvement of a physician in diagnosing and treating a claimant would ease the shortage problem. He further advocated increased use of online consultations and other technology-based resources and outsourcing some medical work to other countries.

The presentation further noted that the amount of time that a claimant had to wait for care for a compensable injury could affect return-to-work statistics. Victor observed that longer waits for care and delays in getting back on the job also could increase both the costs of a claim and the uncompensated losses of a claimant regarding a compensable incident. These losses included any difference between wage benefits that a claimant received and the pay that he or she would earn if working.

This informed speculation further included predicting that reimbursement rates under workers’ compensation systems generally would exceed the amount available through the general healthcare system. A related statement was that some providers reported that low reimbursement rates under the general healthcare system required charging more to treat claimants to offset the lower amounts regarding the larger system. Victor noted that this practice fit the textbook definition of the term “cost shifting.”

Victor commented as well that larger compensation for treating claimants than for seeing patients through the general healthcare system could lead to a “jump the line” effect in which a claimant had a shorter wait for treatment than someone who awaited services under the general healthcare system. The idea behind this was that the workers’ compensation insurance provider for the claimant, by paying more to the healthcare provider, bought that patient the privilege of receiving care faster than the patient with ACA coverage from whom the healthcare provider received less income.

Elements of Relationship Between ACA and Workers’ Compensation

North observed that the ACA prompted dialogs regarding issues, such as wellness programs and comorbidities, which affected both the general healthcare system and workers’ compensation. He noted as well that the traditional workers’ compensation model of paying the lowest possible amount for care and sending a claimant to the closest possible provider adversely affected the quality of initial care that that patient received.

This introduction led to discussing how workers’ compensation systems currently focused on providing healthcare services in a manner that coordinated with the national conversation regarding the ACA. North described this development as an extraordinary opportunity for workers’ compensation experts to participate in determining how healthcare was provided in the United States.

Cost Shifting Under ACA

Hurter forecasted that the ACA would prompt minor upward movement regarding cost and claim shifting toward workers’ compensation. An associated conclusion was that significantly increasing the number of people with general health insurance would slightly reduce fraud in the form of workers falsely claiming that their injuries were sustained within the course and scope of their employment.

The reasoning behind the prediction related to cost and claim shifting reflected the economic incentives described above. The conclusion related to reduced fraud reflected that increasing the number of workers who had general health insurance coverage reduced the number of people who faced the choice of either personally paying the entire cost of the care or being deceitful regarding whether the treated harm arose out of the course and scope of employment.

Recommendations from this portion of the panel discussion included taking advantage of the possible provider shortages and other anticipated effects of the ACA to enhance the use of tactics that included predictive tools and nurse triage intervention before the need for a workers’ compensation claim arose. Hurter pointed out as well that focusing on the outcome, rather than the cost, of a workers’ compensation claim made the best economic sense because it resulted in providing a claimant the most efficient treatment.

Romneycare vs. Obamacare

The disclaimer by Cunniff that he based his conclusions on the assumption that the ACA would not be amended or repealed reflected the caution of the other speakers at the conference regarding their analysis of how that law would affect workers’ compensation. Cunniff went a little further in stating that Romneycare was not a perfect predictor of how Obamacare would affect the national healthcare system.

The data on which Cunniff based his statement related to two statistics regarding which Massachusetts was not representative of the rest of the United States.

1. Only 3.5 percent of the Massachusetts population lacked healthcare in the pre-Romneycare era; and

2. The number of physicians in Massachusetts was well above the national average.

Extended Forecast

The consensus of every workers’ compensation expert who offered his thoughts regarding what could metaphorically be considered Hurricane Obamacare on workers’ compensation was that it would likely hit every jurisdiction hard, but that the storm had not yet achieved enough momentum to allow anyone to pinpoint the exact effects from it or which elements of workers’ compensation in which states would be hit the hardest. This reflected the unpredictable nature of every storm of the century.

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