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The move to integrated managed care.

IN THE SEARCH FOR ways to control the skyrocketing costs of workers' compensation, risk managers are increasingly turning to managed care as a solution. By borrowing successful managed care techniques from group health plans and applying them to workers' compensation medical claims, risk managers have been able to help their companies achieve significant cost savings in an area where double digit annual increases in medical care costs are the norm.

However, risk managers can help their companies achieve even greater cost savings by integrating the company's workers' compensation and employee benefits administrations into a single managed care program. This integrated managed care approach can reduce the duplication and expense that result from the maintenance of two separate administration systems and two health care networks.

Yet despite the great potential of these integrated managed care programs, so far few employers have tried to implement them. In fact, a 1990 Tillinghast survey of 576 employers found that only 17 percent had attempted to coordinate their workers' compensation and employee benefits programs. However, of the companies that had coordinated their programs, 87 percent reported that the arrangements were effective.

If such a large percentage of employers rated an integrated program as effective, why are so few companies using this approach? Generally, this type of program has not been available from insurance companies or third-party administrators until very recently, since most managed care networks are contracted to handle either employee benefits plans or workers' compensation programs, but not both. However, although integrated managed care programs are still in the early stages of development, they are nevertheless beginning to gain acceptance as a way to effectively stabilize spiralling workers' compensation costs. Consequently, risk managers may find that these programs can result in cost savings through coordinating claim administration, applying consistent medical management for both occupational and non-occupational claims, and allowing for negotiated arrangements with health care providers. These programs also offer benefits to employees such as easier access to treatment and simpler claim handling for both occupational and non-occupational claims.


Before proceeding with an explication of the benefits offered by a good integrated managed care program, it is important to note that these programs differ somewhat from the concept of 24-hour coverage. In essence, integrated managed care involves combining the administration of non-occupational benefits such as medical, short-term and long-term disability with the administration of the company's workers' compensation system. However, these programs combine only the administration of these two plans; the workers' compensation and benefits plans themselves remain separated. The advantage of this approach is that in order to set up a new program the employer does not have to try to reconcile state workers' compensation regulations with the federal Employee Retirement Income Security Act regulations that govern employee benefits plans. In this way, an integrated managed care program continues to satisfy both state and federal requirements.

In contrast, some 24-hour coverage proposals involve the paying of either medical or disability benefits for all diseases and injuries regardless of where they happened, thereby blurring the distinction between employee health benefits and workers' compensation. This approach has the drawback of eliminating experience rating for workers' compensation plans, and thus some of the incentives for employers to maintain a safe, healthy workplace. These programs could also reduce incentives for employers to maintain return-to work-programs. Also, while all employees qualify for workers' compensation benefits, some employees - such as parttime workers -- are excluded from group health plans. Therefore, employers need to differentiate an integrated managed care program from 24-hour coverage if they have a large number of employees who do not qualify for their employee benefits plan.


A well-structured integrated managed care program can greatly facilitate the functioning of a company's workers' compensation and health care plans. If properly created and administered, an integrated managed care program results in improved coordinated claim handling, consistent medical management, consistent health care provider quality, negotiated fee arrangements and ease of access to health care for employees.

Coordinating the administration for both occupational and non-occupational claims is one of the primary ways that an integrated managed care program can result in cost savings. Currently, most employers use a number of internal units and several insurers or service companies to administer their workers' compensation, disability and employee benefits plans; these arrangements usually result in duplication of work and overlapping or inconsistent benefits. However, through the use of an integrated managed care program, the company can cut both claim and administrative costs. To accomplish this, an integrated managed care program uses a single, dedicated claim unit to process all claims.

The use of a single administrative system allows claim functions performed in both systems, such as hospital bill audits, to be combined wherever possible. This system also allows the administrators to detect any incidence of "double dipping," or attempts to collect benefits for the same injury under both workers' compensation and group health plans.

Under a coordinated claim system, the vast majority of claims can be handled from the same location, and all claims can be reported to just one phone number or mailing address. While such an arrangement has usually been the case for non-occupational claims, it has not been the norm for workers' compensation. However, although all claims are processed by a single administrative body, an integrated managed care program does not compromise the effectiveness of the workers' compensation system; injured employees can continue to be served by a network of local workers' compensation claim representatives who visit work sites to investigate injury reports and perform other functions at the local level. Nevertheless, by establishing common points for both workers' compensation and employee benefits claims, duplication of work can be greatly reduced.

Integrated managed care also allows employers to coordinate medical coverage for both health care and workers' compensation. By using the same medical criteria and treatment for both workers' compensation and non-occupational claims, an employer can achieve a significant reduction in medical costs.

For example, a study conducted in 1990 by the Minnesota Department of Labor and Industry found the median cost for treating back injuries under workers' compensation was $308 with a treatment duration of 21 days; however, under a Blue Cross medical plan, the median cost was only $132 over a treatment period of 10 days. The reason for this discrepancy is that group health utilization programs often set more narrow parameters on treatment, whereas workers' compensation laws often do not prohibit liberal utilization of medical care. An integrated managed care plan would apply the same medical criteria to both plans, thus offering employers the potential for great savings.

An integrated managed care program also allows utilization review procedures to be used for both workers' compensation claims and employee benefits claims. With a single administrative structure, an employer can use one set of nurses and physicians for all utilization reviews while ensuring that the reviews are applied consistently to both plans where allowed by law, including hospital and surgical precertification, outpatient procedures and treatment, concurrent review, and discharge planning. These techniques, which have proven successful at reducing the increase in costs for non-occupational injuries, can also be applied to workers' compensation cases.

A program such as this also allows one of the strengths of workers' compensation claim administration - disability management - to be applied to non-occupational injuries. Traditionally, employers and workers' compensation administrators have done a good job of returning injured employees to work as early as possible and, when warranted, finding light duty tasks or even new positions for the recovering worker. On the group health side, there has been less emphasis on return-to-work programs for employees on short- or long-term disability. However, the use of an integrated managed care program gives employers the opportunity to apply disability management techniques to non-occupational injuries where appropriate.

There is also the advantage of streamlining the delivery of health care services. For example, the use of the same preferred provider organization network for both group health and workers' compensation allows consistent credentialing and privileging of providers, while maintaining the same quality standards for both plans. This results in provider compliance with utilization review procedures for both group health claims and workers' compensation claims. Under an integrated program, a managed care company or service provider would re-contract with providers who have previously agreed to provide utilization reviews for group health plans to do the same thing for workers' compensation plans.

Another benefit to an integrated program is that it also offers employers the potential to negotiate fee arrangements with health care providers for workers' compensation cases. However, it is important to realize that discounts alone are not the answer to controlling costs; in order to be truly effective, discounts must be combined with utilization review procedures, as has been the case in the group health arena as the concept of managed care has evolved. An integrated managed care program also allows employers the opportunity to apply alternatives currently being used in managed care plans - such as individual case management of catastrophic injuries and home health care - to their workers' compensation cases. Negotiated fee arrangements can also be made with drug vendors and durable medical goods vendors.

Finally, an integrated managed care program offers employees ease of access to medical care. With a single administrative structure, employees can use one directory of health care providers for both workers' compensation and non-occupational illnesses and injuries. Additionally, they can use one phone number to call for utilization management and claim administration, regardless of whether their claim falls under the workers' compensation or employee benefits plans.

Employees can also maintain relationships with the same doctor for most of, if not all, their health care needs. From the employee's perspective, this advantage of an integrated managed care program is perhaps the most important factor of all; in fact, the employee's ability to use the same doctor for almost all illnesses and injuries can help minimize the adversarial relationship that often develops between employees and their employers regarding workers' compensation claims.

Risk managers will find that integrated managed care is a new concept that will be tested and refined as more employers attempt to incorporate it into their operations. Although some of the basic elements of integrated managed care may change as companies adapt these programs to fit their specialized needs, two facts are clear: First, managed care has proven its worth in reducing health care costs in the employee benefits arena, and second, workers' compensation costs will continue to spiral upward.

For most employers, the high cost of workers' compensation is continuing to have a significant impact on the bottom line; consequently, any efforts to bring managed care into this line of business will result in significant cost savings. In the near future, integrated managed care could be the best way to control overall benefit costs for employers and ensure that the workers' compensation system survives into the 21st century.


Despite the numerous advantages offered by integrated managed care programs, risk managers need to examine several aspects of their operations to determine if such a program is appropriate for their needs. First, risk managers should examine the workers' compensation regulations in the states where their companies operate to determine if existing laws permit employers to direct their employees to specific health care providers for workers' compensation injuries. Currently, about half the states allow employers to direct employees to specific health care providers for treatment; in employee-choice states, many employees would probably select network providers if they received proper communications about program benefits.

Second, employers with the ability to self-insure will find that they are good candidates for an integrated managed care program. The main reason is that under a traditional insurance program, an employer may present different risks to insurance carriers for workers' compensation and group health coverage; as a result, it could be difficult to find one carrier who would be willing to underwrite both types of benefits. In addition, being self-insured makes it easier for an employer to integrate the administration of workers' compensation and employee benefits.

Third, the employer should examine its work force and determine how many of its employees would be eligible for the company's health care coverage. For example, an employer with a large part-time work force that is not eligible for group health benefits would probably not be a good candidate for integrated managed care. While it is not mandatory that an employer have all of its work force covered under an employee benefits plan, the employer should determine what percentage of its work force needs to be covered under a group plan for an integrated program to be beneficial.

Fourth, an employer should examine the benefits available under its health care plan and compare them to workers' compensation benefits to determine where gaps exist. Then, the employer needs to decide if it wants to mend the gaps if the scope of benefit levels is broader in workers' compensation, although in some cases the cost of doing so may be prohibitive. However, while it is not necessary to fill in all coverage gaps to have an integrated managed care program, the employer should nevertheless aim to have similar benefit levels for both plans; by doing so, the employer reduces the incentive for employees to report non-occupational injuries to the workers' compensation plan in order to receive its more liberal scope of benefits.

Finally, employers with large employee populations located in one geographical area will find it easier to start an integrated managed care program than companies whose employers are located in sites all across the country. This is because it is easier for a company to negotiate an integrated managed care program with health care providers who are located in one particular area. An employer might also consider starting an integrated managed care program in one location as a pilot program and then evaluate the results.
COPYRIGHT 1993 Risk Management Society Publishing, Inc.
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Title Annotation:includes related article on deciding if managed care is indicated for a particular company; workers compensation
Author:Mann, Gary
Publication:Risk Management
Date:Jan 1, 1993
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