Workers’ comp trends a mix of good and bad

Declining workers’ compensation injury claims and the impact of legislative reforms bode well for employees, employers and insurers as rates have gone down in most states in recent years.
Yet, as always, there are challenges that cloud the future. Here is an assessment of what employers can look forward to in the years ahead.
• Rising costs of medical treatments. Escalation of medical costs in workers’ compensation is well documented and expected to continue.
A study that compared 2001-02 treatments with 1996-97 concludes that the key driver is not price, but growth in the number and mix of medical treatments. For all diagnoses combined, the number of treatments increased 45 percent.
What’s more, there is a shift to more complex and expensive treatments. For example, complex surgery and anesthesia increased 60 percent and complex diagnostic testing increased 57 percent, while physical therapy increased 67 percent.
Coupled with consumer demand for the latest and greatest treatments, the mix of treatments will continue to propel the spiral of increased utilization and cost in 2008.
• A sundry of health care standards. While the ability to direct care is governed by states, none have programs as extensive as those in California. A cornerstone of the state’s successful sweeping reform legislation is the mandated use of a utilization schedule based on the American College of Occupational and Environmental Medicine evidence-based treatment guidelines.
Together with capping utilization of high-volume services such as chiropractic manipulation, establishing designated medical provider networks and dispute resolution solutions, the application of evidence-based guidelines has been effective in constraining medical care costs. In 2003, employers paid an average of $6.47 per $100 for coverage – the highest in the nation. By the first quarter of this year, the cost had fallen to $2.93.
Only a handful of states have adopted similar extensive reforms, and getting more on board will be an agonizingly slow process.
••Declining rate cycle to bottom out. The expectation that rates will remain low belies logic. After price-driven reforms take hold, it does not take long for complacency to set in.
All eyes are turned again to California, often a precursor for the nation, where a key insurance industry group is urging the Insurance Commissioner to recommend a 4.2-percent rate hike in 2008, citing the cost of legal work, fraud investigation and other claims management tasks.
While dramatic rate increases are unlikely, the tide is turning and the days of double-digit percentage rate reductions may well be over.
• Unnecessary loss of skilled workers. While studies show that 90 to 95 percent of injured employees should be back to work by the fourth day following an injury, nationally, 24 percent of workplace injuries result in lost time greater than three days. The delay is driven by a system that drags out the diagnosis and treatments. If employees are off the job for more than 12 weeks, there is only a 50-50 chance that they will return.
• Injuries to older workers will continue to cost more. By the year 2012, approximately 20 percent of the work force will be 55 years or older.
Now is the time to become attuned to the implications of the maturing work force and implement programs that foster retention and prevent injuries.
• Drug use will continue to plague the workplace. A recent study by the U.S. Health and Human Services Department found that one in 12 full-time U.S. workers acknowledged using illegal drugs in the previous month. While greater vigilance by employers in the use of drug testing has made inroads, substance abuse remains a daunting problem, with alcohol topping the list.
• Wellness programs require continued commitment. A Duke University Medical Center analysis found that obese workers filed twice the number of workers’ compensation claims, had seven times higher medical costs from claims and lost 13 more days of work a year from work-related injuries or illness than did non-obese workers.
Recognizing the high economic costs of poor health, many employers are implementing wellness programs. Employers are still grappling to understand what particular interventions, programs and incentives yield the greatest return on investment. No matter what, however, the effort needs to be constant – much like the anti-smoking campaigns – in order to be effective.
• The bar will be raised on return-to-work programs. While an early and safe return to work is a recognized “best practice” in workers’ compensation, there are still employers who resist transitional work assignments, offer demeaning or “make-work” jobs or run ineffective programs. Simply getting the employee back to work is not enough. Only those employers who recognize the value of return-to-work programs in retaining employees, improving productivity and reducing costs will commit the time and resources required.
• Technology is limited as a cost-containment tool. Sophisticated Internet tools, software and online access to information are available to help employers quickly respond to injuries, predict claims that are likely to spiral out of control, monitor benchmarks, detect fraud and improve communication and collaboration. Insurance agents need to become the early adopters and take the lead in using the tools and educating employers. •
Frank Pennachio is a co-founder and director of curriculum at the Institute of WorkComp Professionals. He can be reached at info@workcompprofessionals.com.