For many home health care agencies, Workers’ Compensation coverage is necessary, but is also one of their largest business expenses. A Workers’ Compensation policy covers medical costs and lost wages as a result of an injury or illness that occurs during the course and scope of employment. Medical expenses might include hospital care, surgery, doctor visits, physical therapy, an emergency room visit, prescription medication, etc. When an employee cannot return to work, replacement income is paid after a predetermined waiting period and at a percentage of the employee’s average weekly wage.
Over the last 25 years, medical expenses have gone from representing just over 40%, to 60% of the benefit dollars provided to injured workers nationally, according to the National Council on Compensation Insurance (NCCI). There are several reasons for this, including an increase in medical costs nationwide. This is particularly so in states where insurance carriers are not permitted to direct care through physician panels, fee schedules, etc. Also impacting costs is an increase in the duration of medical benefits due to an aging workforce (requiring longer recuperation periods) and an increase in prescription drug costs, which also represents a significant portion of the Workers’ Compensation medical expense ratio.
There are also ongoing concerns related to Workers’ Compensation spending. For example, there is unfortunately a growing level of misuse and abuse of opioids for on-the-job injuries, with many businesses being hit with legacy Workers’ Compensation claims. A Workers’ Compensation claim can be open for years, even throughout the lifetime of an injured worker. And when an injured worker becomes addicted or dependent on prescription painkillers, the medical benefits portion of the claims increases. This results in higher expenses for a business.
In addition, other issues may further contribute to Workers’ Compensation costs, such as the impact of the Affordable Care Act (ACA) on Workers’ Compensation claims activity, which to date is yet unknown. The ACA provides for the creation of Accountable Care Organizations, or ACOs, which are defined as “groups of doctors, hospitals, and other health care providers, who come together voluntarily to provide coordinated high quality care to their Medicare patients.” Providers in an ACO receive much higher reimbursement rates from Workers’ Comp insurers than they do from group health plans, especially capitated plans that pay a flat rate per patient per unit of time, regardless of the volume of services provided. ACOs also do not have to include Workers’ Comp outcomes in their mandated evaluations. According to the Workers Compensation Research Institute (WCRI), ACOs are increasingly classifying soft tissue injuries like strains and sprains of the back, knee and shoulder as Workers’ Comp cases. As it’s difficult to pin down an exact cause for these types of injuries, providers can easily make a case that the patient’s workplace was the reason behind the injury. That could drive up comp costs.
There are many steps a home health care provider can take to reduce the cost of Workers’ Compensation, including having strong loss control and risk management measures in place. In our next article, we will review some of these measures in detail.
Manchester Specialty provides Workers’ Compensation insurance to home health care, hospice, companion care and medical staffing firms, and is available to assist agents and brokers in securing coverage. For more information about our insurance solutions, you or your local agent/broker may contact us at 855.972.9399.