|Author||Subject: Workers' Compensation "Reform" May Cause Dramatic Cost-Shifting To Health & Welfare Funds|
|Advocate|| Posted At 08:41:56 03/21/2000
Workers’ Compensation "Reform" May Cause Dramatic Cost-Shifting to Health & Welfare Funds
By Dominick J. Tuminaro, Esq.
LRA Board Member, Attorney
Experienced benefit fund administrators are well aware that despite their best efforts at diligent claims management, some cost-shifting from the workers’ compensation arena to private health insurers and collectively bargained funds does occur as certain work-related injury and illness claims are paid where no workers’ compensation claim is filed. Now as employers push for so-called workers’ compensation "reform" measures in order to reduce costs, there is serious potential for cost-shifting on a much greater scale.
While the major focus of such "reform" is often presented as an effort to introduce managed care techniques to reduce medical costs, the real potential for cost-shifting is in cuts in the indemnity portion (wage replacement) of workers’ compensation benefits as opposed to the medical treatment side. If many of the proposed reforms are enacted, it is clear what a potential toll it may have on health and welfare benefit funds. Once workers begin to realize that their access to compensation (monetary) benefits is blocked or sharply reduced, greater numbers of workers will avoid the increasingly litigious experience of filing workers’ compensation claims and seek medical treatment through their private health insurance. Even benefit funds that have made an effort to identify potentially work-related conditions may be faced with pressure from their insureds to ignore such work-relatedness and process claims for medical treatment. The potential for destabilization of benefit funds due to such cost-shifting is dramatic.
Our experience representing workers in compensation claims in New York, a state that has not yet experienced the most draconian of the "reforms," demonstrates that cost-shifting from workers’ compensation insurance carriers to benefit funds has always been a problem. Take the common example of work-related hernia claims. Before the advent of union benefit funds, the great majority of hernia claims, usually precipitated by heavy lifting at work, were processed under the workers’ compensation law. But such claims posed certain difficulties to both the worker and the health care provider. Weekly wage benefits were difficult to obtain due to frequent controversion of such claims by carriers. Providers not only had to obtain prior authorization from the comp carrier to perform the appropriate procedure, but they were paid in accordance with rather conservative fee schedules. Notwithstanding these and other problems, such claims were processed as comp claims because alternative forms of insurance coverage were unavailable. By contrast, now, most work-related hernia claims are being paid through benefit funds.
Work-related accident claims, such as hernias, are just the tip of the iceberg in terms of cost-shifting. The most considerable costs result from occupational illnesses, such as repetitive strain injuries. These claims tend to be longer in duration and far more costly in terms of medical treatments than many accident claims. Workers’ compensation insurance carriers routinely controvert occupational illness claims. For example, a study conducted by the Mt. Sinai Occupational and Environmental Health Clinic in New York found that 80% of their patients’ carpal tunnel syndrome claims were initially controverted by carriers. Of those challenged claims, 96% were later found to be compensable. Workers frustrated by denial and delays in medical treatment for work-related conditions frequently turn to their primary health insurers to cover the costs of their medical care.
A study presented at the most recent American Public Health Association annual meeting and reported in BNA’s Workers’ Compensation Monitor (Vol. 10, No. 26), indicated that cost-shifting connected to work-related upper extremity cumulative trauma disorders (CTDs) from workers’ compensation carriers to health plans may be substantial. This study of workers’ in the Maryland workers’ compensation system found, that of patients treated in private practice for CTDs 59% said that their medical care was paid for by health insurance. Of union members 55% said that their health benefit fund paid for their care. The study concluded that "the comp system is not footing its share of wage replacement and medical costs for some workers believed to have work-related injuries." Yet the types of workers’ compensation ‘reform’ proposed by employers and insurers, and already implemented in some states, exacerbates the problem of cost-shifting.
In New York, a third attempt to enact such "reforms" is pending in this legislative session. The proposed legislation, Senate Bill 5873, mirrors others that have appeared throughout the country. The real consequences of such reform agendae, as noted above, is the resulting sharp reductions in workers’ compensation indemnity benefits. In a nutshell, the proposal will arbitrarily cap the amount and duration of wage replacement benefits injured workers may receive regardless of whether or not they can return to work. The proponents of this "reform" claim it will save New York employers $1 billion, but in reality this savings will come out of the pockets of injured workers and at the expense of health and welfare funds and private health insurers.
The most relevant effect of this workers’ compensation "reform" for benefit fund administrators will be a dramatic aggravation of the cost-shifting problem. With limited access to wage replacement (indemnity) benefits, part of the incentive workers have to file workers’ compensation claims will be significantly reduced. Therefore, many more workers will choose to pursue the path of least resistance to get needed medical care for their work-related injuries and illnesses–they will bill their health benefit fund.
Fund administrators should be attentive to proposals to ‘reform’ workers’ compensation laws and oppose legislation that is both anti-worker and has the potential of siphoning away significant resources from benefit funds. As was mentioned, in New York a renewed attempt to "deform" compensation law is pending in the coming legislative session. While we are fortunate to have a strong labor movement in New York that has placed the defense of workers’ compensation high on its agenda, organized labor can certainly benefit from the support of other parties with an important stake in this issue as well.
Dominick Tuminaro is a member of the Labor Research Association Board of Directors. He is also senior partner in the firm Brecher Fishman Pasternack Popish Feit Heller Rubin & Reiff, P.C. He edits the weekly fax Workers' Comp: Myths & Realities, a newsletter published by the Center on Worker Injury Policy and is concurrently an adjunct faculty member in the Department of Work Environment of the University of Massachusetts, Lowell.
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