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Poor claim oversight and inflation hurt system.

Poor Claim Oversight and Inflation Hurt System

Health care cost inflation is the most significant generator of workers' compensation costs, maintains Wilson H. Taylor, president of CIGNA and chairman of the American Insurance Association. According to Mr. Wilson, medical losses as a proportion of workers' compensation claims have grown from 34 percent in 1978 to a level of 50 percent in some states. "It's estimated in California, for example, that medical bills for treating workers have increased eightfold over the last decade," he said.

Mr. Wilson cited two reasons for the inflationary dilemma. "First, unmanaged health care costs are increasing at a very rapid rate of more than 20 percent a year, compared with the 4 to 5 percent annual increase reported in the Consumer Price Index," he said. "Second, the managed care techniques that are beginning to take hold in employee benefit plans are rarely used for workers' compensation claims."

Mr. Wilson said the compensation system is getting more than its fair share of claims as providers target it for health care reimbursement. In effect, he maintained, the costs of health care, like water, follow the path of least resistance. As a result, significant cost-shifting takes place from health insurance to workers' compensation.

According to Mr. Wilson, two broad and compatible approaches to health care cost containment are utilization management and flexible provider arrangements, or networks. Through utilization management, an employer or his agent reviews proposed treatments for medical appropriateness, evaluates the care given during treatment and helps workers to lead a productive life again as quickly as possible. Provider networks, like HMOs and PPOs, go beyond such inspection and control mechanisms by allowing employers to selectively contract with providers who meet quality and cost standards. They, in turn, seek to produce administrative, cost and service advantages not seen in a traditional fee-for-service approach.

Impediments that confront the full inclusion of managed care programs in the workers' compensation environment include access, barriers to reducing physician fees and state-managed versus private sector rehabilitation services. In spite of these difficulties, Mr. Wilson said managed care can generate significant results for workers' compensation. "In California, for example, CIGNA has applied medical cost containment techniques to more than 84 percent of our workers' compensation bills," he said. "The use of these techniques produced savings of about 15 percent in 1988, compared with non-managed claims. For the first quarter of 1989, the rate of savings has continued to increase."

Mr. Wilson exhorted attendees to work to ensure passage of legislation that encourages managed health care and against legislation and regulations protecting the income of selected providers. "To do so, serves every party's best interests because managed care reduces wasteful spending that benefits neither employer nor the injured worker," he said. "And by making the system more efficient, we can substantially reduce the costs of what is now the most expensive health care system in the world. By doing so, we can help turn a competitive liability into a competitive asset."
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Title Annotation:1989 Workers Compensation Congress
Publication:Risk Management
Date:Oct 1, 1989
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