In physics, every action has an equal and opposite reaction. The insurance industry also operates with this principle in mind, offering policies with premium rates
adjusted to offset the total risk associated with consumers. Most insurers are typically careful enough to provide just enough coverage to their clients without affecting premiums.
So what happens when profit and convenience are prioritized without thought for client risk?
A recent report from the Workers’ Compensation Research Institute [WCRI] revealed that injuries of an uncertain origin are more likely to be classified as workrelated injuries, qualifying them as workers’ compensation cases rather than under group health insurance.
WCRI researchers observed that this trend popped up most often in states where fee schedules are significantly higher. Indeed, the report found that a 20% increase in workers’ comp reimbursement rates for physician services was enough to cause a 6% increase in the likelihood of soft-tissue injuries being classified as workrelated.
By classifying an injury as work-related, physicians and other healthcare professionals attending the patient enjoy the higher reimbursements associated with such cases. Patients of work-related injuries are also free from having to settle deductibles and co-pays.
“The doctor gets paid more, and the patient doesn’t take out his wallet, so everyone wins,” says Michael Gavin, president of Prium, a firm that handles medical cost management.
While it might seem like everyone benefi ts whenever a soft-tissue injury gets treated as a work-related case, an unintended consequence – the industry’s opposite reaction – is rearing its ugly head. The WRCI observed that in states with large populations, like California, if just 1% of group health cases are reclassifi ed as workers’ comp cases, costs would surge by more than $80 million. Smaller states, like Iowa, would experience an increase of around $9 million – still a signifi cant number.
To pay for these costs, workers’ comp insurers will have no choice but to raise their premiums, ultimately hurting all clients.
The WCRI had previously anticipated this trend last year in another study, holding accountable care organizations potentially responsible for pushing regular group health cases to workers’ comp to take advantage of higher fee schedules. Despite these allegations, some professionals don’t think the trend will inevitably lead to higher workers’ comp premiums.
Health Strategy Associates principal Joseph Paduda suggested that physicians do not necessarily “know how to purposely benefit financially” from pushing claims to workers’
comp. Paduda cited a RAND study that suggested physicians do not like fi lling out workers’ comp forms, and would rather forfeit the incentives from treating workrelated injuries than go through all the required paperwork.
