In 2009, more than 3 million job-related injury cases were reported in the United States, resulting in approximately
$74 billion in healthcare expenditures. Although workers’ compensation costs annually account for approximately 1.5 percent of employers’ compensation expenditures, workers’ compensation insurance premiums were up 7.4 percent in 2011 compared to 2010. As a result, aggregate workers’ compensation expenditures make up a small yet important component of national healthcare expenses.
Since its inception in 1911, the workers’ compensation system has evolved into a complex entity regulated by each state. Perhaps the most important factor affecting workers’ compensation is healthcare reform. Many economists and insurance providers have speculated that the Patient Protection and Affordable Care Act (PPACA) will create shifts in the workers’ compensation industry. Considering the changes that occurred after the 2006 Massachusetts Health Care Reform Act may provide an idea of what will occur on a national scale under PPACA. The practicing orthopaedic surgeon should be aware of these potential changes when treating patients with occupational-related injuries.
History of workers’ compensation
Before 1911, employees were responsible for proving employer negligence to receive compensation after a work-related injury. Employers used the following three main counterclaims to avoid providing compensation:
- Assumption of risk—Employees understand and accept the inherent risks associated with their occupations; therefore, the employer is not responsible for injuries sustained.
- Contributory negligence—If the employee is responsible in any way for the injury, the employer should not be held responsible for the consequences.
- The fellow servant rule—If one employee harms another, the employer should not be responsible for medical expenses.
In 1908, President William Howard Taft signed the Federal Employers Liability Act to protect railroad workers involved with interstate commerce. Following the law’s enactment, independent commissions were established in each state to evaluate the benefits and drawbacks of the passage of state-level laws. Eventually, employers agreed to cover an employee’s medical expenses for time away from work due to injury incurred at work, and employees agreed not to sue the employer.
In 1911, Wisconsin became the first state to pass a workers’ compensation law; by 1920, 42 states had some version of a law in place. Mississippi was the last state to pass such a law (in 1948).
Since 1917, when the Supreme Court ruled that workers’ compensation insurance was mandatory for businesses to operate, the system has evolved to provide coverage for more industries and more types of injuries, including work-borne diseases and physiologic stress, resulting in an average growth rate of 4.8 percent each year. The number of private insurers offering coverage has increased, and more employers are self-insured.
Healthcare reform and workers’ compensation
The Massachusetts Health Care Reform Act and PPACA share several basic tenets, although differences exist between them.
Massachusetts historically has had a low rate of workplace-related injury compared to neighboring states and the national average. It also has one of the lowest workers’ compensation reimbursement schedules. One estimate suggests that physicians in Massachusetts are paid up to 40 percent less than the national average for treating workers’ compensation claims.
Prior to the passage of the Health Care Reform Act, more than 20 times as many emergency department (ED) visits were billed to workers’ compensation as were inpatient visits—an annual average of 85,000 ED visits versus 3,500 inpatient visits. After reform, the number of ED visits dropped by 7.2 percent.
Beginning in 2005, workplace claim rates steadily declined, according to a study by the RAND Corp. Between 2005 and 2009, claims dropped 16.7 percent, and workers’ compensation hospital costs dropped between 5 percent and 10 percent. Several factors—some of which may be related to the 2006 Health Care Reform Act—contributed to these decreases.
Research has found a significant association between being insured and the frequency of workers’ compensation claims. Patients who incur a workplace-related injury are more likely to file a claim with their newly acquired and mandated insurance rather than make a workers’ compensation claim. Thus, the number of workers’ compensation claims declined 4 percent after reform. Among patients who were identified as “high-cost” because they had conditions that historically placed a greater burden on insurance, the number of workers’ compensation claims declined by 6 percent.
Any increases in workers’ compensation hospital charges since 2006 can be attributed mainly to medical cost inflation, because hospital inpatient billings for workers’ compensation fell nearly 5 percent after implementation of the reform act. Expanding coverage to those previously uninsured resulted in a drop in workers’ compensation costs in Massachusetts, based on using hospital costs as a surrogate measure. Patients who would have used workers’ compensation for coverage were more likely to use their actual health insurance.
Both patients who were severely ill and those who were less severely ill as a result of their occupational injury significantly decreased the frequency of their workers’ compensation filings following enactment of reform. Although the RAND Corp. found no strong evidence overall to suggest that procedure or treatment volumes decreased for those patients who still filed for workers’ compensation, some evidence suggests that in certain years, treatment and procedure volumes did decrease.
Predicting changes under PPACA
One direct change resulting from PPACA is the Black Lung Benefits Act, which will facilitate the filing of claims and obtaining of benefits for coal workers who are injured. Understanding other changes to workers’ compensation under PPACA, however, is largely speculative at this point and depends on a variety of factors. These factors include specific cost shifts in the system, the success of coverage expansions, and benefits changes enacted under the law.
Some predictions can be made, however, in supporting the opposing notions that workers’ compensation costs may either increase or decrease by using Massachusetts as an example and considering that the Massachusetts Health Care Reform Act and PPACA share many similar provisions.
Some studies have shown that working Americans who lack insurance are more likely to seek coverage under workers’ compensation statutes. The decrease in the number of uninsured Americans could prompt cost shifts—reducing costs in the workers’ compensation system as more Americans use their normal health insurance to cover injuries stemming from work—similar to those seen in Massachusetts.
Furthermore, increasing access to care under PPACA and expanding preventive services and wellness initiatives should make the overall working population healthier. This could potentially decrease both the prevalence of comorbidities such as smoking, diabetes, and obesity and the number of workers’ compensation claims.
Fraud can also be decreased by potentially deterring uninsured employees from using workers’ compensation for nonoccupational injuries or preexisting conditions because the individual mandate requires enrollment in a health insurance plan. Therefore, treatment of these conditions will not drain workers’ compensation resources. Further trickle-down effects from tax rebates to the pharmaceutical industry will allow greater access to generic drugs for patients, which may enable these patients to treat their preexisting conditions without needing to use the workers’ compensation system for care.
In addition, although workers’ compensation insurers historically have provided higher reimbursements than Medicare, some states couple their workers’ compensation fee schedules to Medicare’s. Lowering Medicare fee schedules may affect reimbursements under workers’ compensation insurance, resulting in limiting coverage payouts.
With shifts to global payment systems and greater regulations on premium increases, workers’ compensation costs may decrease if pilot programs enacted under PPACA spill over into the workers’ compensation sector. Finally, increased coordination of benefits and new reporting standards called for under PPACA may affect workers’ compensation as well, decreasing costs by reducing administrative and overhead spending.
On the other hand, however, PPACA could increase workers’ compensation costs over time. For example, PPACA may strain primary care services, resulting in longer wait times for treatment for patients with occupational injuries. Changes in the supply of available physicians in certain disciplines—such as a projected shortage of primary care physicians—may make it more difficult for occupationally injured workers to find an available physician. This may adversely increase workers’ compensation costs by increasing the time spent away from work as employees wait to see a physician.
Furthermore, if the Independent Payment Advisory Board decreases Medicare reimbursements, some experts speculate that hospitals and care providers may shift costs to other medical entities such as the workers’ compensation system. Most economists agree that PPACA will likely increase insurance costs nationally, and because the workers’ compensation system does not include copayments or deductibles and employers must bear these costs, the influx of patients in the workers’ compensation system may increase.
A slight increase in costs may result from excise taxes on medical devices imposed by PPACA if such devices are required in the treatment and care of patients who are occupationally injured. Furthermore, the elimination of the “donut hole” under Medicare Part D may have trickle-down effects into the workers’ compensation system by increasing the demand for prescription drugs, which will consequently increase costs for patients seeking compensation.
Under the Massachusetts Health Care Reform Act, costs within the workers’ compensation system decreased. Although PPACA is more complex, similar provisions between the two laws enable a prospective comparison of what may happen to the workers’ compensation system as more elements of PPACA are implemented. It must be noted that Massachusetts already had one of the lowest workers’ compensation fee schedules in the country and that quantifying the changes under PPACA may take time.
Nevertheless, the practicing orthopaedic surgeon should be aware of the actual and potential changes to deal appropriately with workers’ compensation claims and changes in reimbursement schedules. Anticipating a changing demographic pattern—in terms of how patients will be treated under which insurance system—is vital for orthopaedic surgeons who see a variety of musculoskeletal conditions associated with workplace injuries.
Vasanth Sathiyakumar, BA; Daniel J. Stinner, MD; William T. Obremskey MD, MPH; A. Alex Jahangir MD; and Manish K. Sethi, MD are associated with the Vanderbilt Center for Health Policy.
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