2014: Workers' Compensation Medical Costs - Reforms That Make a Difference


Price : $1,750.00



Over the past several years, significant legislative reforms have been instituted by large and small states alike in an attempt to control medical costs. This study focuses on those medical treatments, pharmaceutical dispensing processes, and medical management reforms where insurers have been most successful in reducing operating expenditures. Examining the 20 largest workers’ compensation states, Conning highlights those reforms that have been adopted and the different results that have been produced. The study concludes with an analysis of how insurers can better prepare themselves to operate within certain medical management environments in order to realize sustainable cost savings and facilitate improved medical outcomes for injured workers.

1. Introduction

2. Executive Summary

3. State Conditions Create Impetus for Reform
 

  • Direct Premiums Written by State
  • Loss Costs Vary Widely by State
  • Considerable Variation in Maximum Weekly Benefits by State
  • Premium Rates per $100 of Payroll
  • State Funds’ Market Share Can Affect Financial Performance
  • Individual Company Loss Results Equally Divergent
  • Reforms Contribute to Variability
  • Summary

4. Common Themes in State Reforms 

  • Levers in the Workers’ Compensation System
  • Controlling Prescription Drug Costs
  • Employer-Directed Care/Medical Provider Networks
  • Medical Cost Management
  • Summary

5. Controlling Prescription Drug Costs
 

  • State Efforts Limited in the Control of Rx Drug Costs
  • Narcotic Prescription Drugs
  • Physician-Dispensed Rx Drugs
  • Compound Prescription Drugs
  • Summary

6. Employer-Directed Care/Medical Provider Networks 

  • Evidence-Based Medicine and Employer-Directed Care
  • Summary

7. Medical Cost Management
 

  • Utilization Review and Independent Medical Review
  • Medical Fee Schedules
  • Summary

8. Key Takeaways and Considerations for Insurers 

  • Suggested Insurers’ Responses to Rising Rx Drug Costs
  • Suggested Insurer Responses to Medical Provider Networks
  • Suggested Insurer Responses to Medical Dispute Resolution
  • Summary

Introduction

Over the past two decades, the workers’ compensation insurance industry has suffered from a prolonged period of underwriting losses. The industry has produced combined ratios less than 100% only in three of the past 20 years (1995, 1996, and 2006). Furthermore, Conning estimates that underwriting losses will only worsen through 2016. According to Conning’s most recent forecast, premium growth is slowing, while loss costs are poised to increase more rapidly over the next few years, further straining operating results.

Over the past several years, significant legislative reforms have been instituted by large and small states alike in an attempt to control medical costs. Multiple legislative reforms have been adopted that raise wage replacement benefits, reduce medical treatment costs, bolster return-to-work efforts, and streamline administrative processes. These reforms have attempted to benefit employees (in the form of improved medical outcomes), employers (in the form of reduced accidents and better return-to-work percentages), and insurers (in the form of cost reductions across the entire workers’ compensation system). Some of these reforms have proved successful, while others have not. Several reforms have produced unintended consequences that have increased costs in the workers’ compensation system.

Almost all of these reforms have included increases to wage replacement benefits. In addition, many of the reforms have concentrated on reducing medical treatment expenditures and medical administrative costs. In examining these reforms, Conning concluded that some reforms produced meaningful cost savings, especially those based on an objective standard of medical care. Other reforms had limited success in reducing lost costs or administrative expenditures.

This study focuses on those medical treatments, pharmaceutical dispensing processes, and medical management reforms where insurers have been most successful in reducing operating expenditures. Examining the 20 largest workers’ compensation states, which account for approximately 80% of total direct premium volume, Conning highlights those reforms that have been adopted and how different results have evolved, depending on how a specific reform was implemented. The study concludes with an analysis of how insurers can better prepare themselves to operate within certain medical management environments to be in a better position to realize sustainable cost savings and to facilitate improved medical outcomes for injured workers.