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The savings potential of 24-hour coverage.

IN TODAY'S BUSINESS ENVIronment, many organizations are grappling with both the exorbitant costs and administrative difficulties associated with maintaining health care plans and workers' compensation. However, a novel approach to this problem has recently been developed and is being widely discussed - the concept of 24-hour coverage. Generally, 24-hour coverage plans are aimed at integrating workers' compensation insurance with employer health benefits programs; the idea is to create one insurance program that covers both on-the-job and non-work-related illnesses and injuries. Many claim that such plans will provide large savings to companies that implement them. According to these claims, savings will primarily accrue from two sources: a reduction of payments on duplicate billings from health care providers to both programs, whether those duplicate bills arise from fraud or aggressive billing practices, and a decrease in the excessive utilization of health care services by beneficiaries through coordinating case management across the two programs.

Recently, stories have been circulating about how 24-hour plans could result in big savings for companies. But despite this anecdotal evidence, there is little concrete information about the actual overlap between workers' compensation and employee benefits programs. A study conducted by William M. Mercer Inc. of two large employers - a public sector organization with 140,000 employees and a manufacturing firm with over 200,000 employees - examined the relationship between workers' compensation medical expenses and claims submitted to health benefits programs. The study focused on three issues: the amount of overlap existing between employees obtaining paid medical services from both the workers' compensation and the health benefit programs, the degree to which overlap exists between health care providers receiving payments from both programs, and whether duplicate payments are being made from both programs for the same services.

For the public sector employer studied, medical payments from workers' compensation for a one-year period totaled $11.2 million. These payments were made on behalf of 5,914 employees who had active claims for work injuries and illnesses. On the health benefits side, payments totaled $195.4 million for the 109,643 active employees who filed claims; an additional $165 million was paid out for medical services to dependents of employees. Over 70 percent of the health care providers on the workers' compensation system appeared as providers to the health benefits program. The overlapping providers generated a substantial portion of expenses for each program $9.1 million (82 percent) of workers' compensation payments and $121.6 million (62 percent) of health benefits payments.

For the manufacturing firm, workers' compensation-paid medical bills for a one-year period amounted to $16.5 million, as compared to health benefits expenses for employees (excluding dependents) of nearly $400 million. Just under 4 percent of employees had a workers' compensation medical bill during the year; a little over 60 percent of workers' compensation claimants did not make any health benefits claims at all. However, the 40 percent of claimants who did have medical bills on both systems had 60 percent more expenses for benefits. These overlapping claimants constituted 33 percent of workers' compensation payments, but only 2 percent of health benefitspaid claims.

The amount of employee overlap between the two programs is insufficient to generate large savings from coordinated case management. The large overlap in medical care providers, however, points to a significant savings opportunity. Specifically, in so far as state regulations permit, employers with aggressive cost containment efforts in place on the benefits side may find that preferred provider and managed care techniques can also be used in the workers' compensation area.

Cutting Costs

One effective cost cutting method is to extend hospital pre-certification and concurrent review programs to cover workers' compensation. To make such programs effective, the employer should work to create the understanding that all hospital admissions are covered by the inpatient utilization program. At the same time, utilization reviewers should be able to recognize if a particular admission is due to a work-related injury or illness, and should then implement the proper disability management procedures for these cases.

Increasingly, employers are implementing outpatient utilization review programs for high-cost or highly discretionary services such as positron emission tomography, magnetic resonance imaging, arthroscopic surgeries, physical therapy services and chiropractic care. Therefore, employers should use the same utilization review program for both benefits and workers' compensation; these programs should be structured to appear to the worker and the health care provider as a single entity, oriented towards assuring both costeffectiveness and quality of care. However, as in the case of inpatient reviews, the employer must ensure that reviewers fully address and deal with the special disability and returnto-work issues that play such a major part in many workers' compensation cases.

Furthermore, employers who enter into preferred provider or preferred network arrangements should take care to ensure that all contracts and procedures cover both benefits and workers' compensation programs. Discounts and fee schedules should be established to cover both programs, even if a differential is required for workers' compensation to reimburse the allegedly greater costs incurred by providers for workers' compensation cases.

Employers can take additional steps to achieve coordination of the two programs. For example, employers should ensure that preferred pharmacy and mail order drug programs are structured so that any prescriptions written for an employee under the workers' compensation program are compatible with prescriptions written under the health benefits plans. And, as a condition for entering into a preferred arrangement with a preferred provider or network, employers should certify that preferred physicians understand the unique features of the workers' compensation system, and are willing and able to provide the appropriate medical management to patients suffering from work injuries. This understanding should extend to disability management issues; knowledge of the relatively poor prognoses and treatment interventions for certain work injuries; and the recognition of the importance of light duty opportunities for injured workers and the return-to-work goal, which are the objectives of any good workers' compensation program.

A similar plan of coordination must be established with any health maintenance organizations (HMOs) that the employer uses. HMOs have tended to view workers' compensation as a lucrative fee-for-service billing opportunity. Therefore, whether through written contracts or ongoing oversight review, employers should ensure that the same managed care principles are applied to workers, regardless of whether the injury occurred at home or in the workplace; also, the special needs of workers' compensation cases must be addressed in a cost-effective manner.

One area where coordinating health plans and workers' compensation may result in significant savings for the employer is in administration. For example, using only one utilization management program instead of separate programs for benefits and workers' compensation can reduce the amount of time a staff must spend on administrative functions. However, employers must ensure that such consolidation will still meet the particular needs of each program.

Moreover, employers will want to avoid some of the major pitfalls experienced by countries that have already integrated health benefits and workers' compensation. In the 1980s, for example, New Zealand created an integrated insurance system to cover accidental injuries, regardless of whether the injury was work-related or not. In subsequent years, disability and lost time costs soared as the wellknown problems endemic to the workers' compensation arena - such as subsidized time off work- expanded into the area of non-work-related injuries. Thus, in order to avoid this perilous situation, employers need to coordinate the two programs without obliterating the distinctions between the programs in regard to disability issues.

Coordinating Claims

The Mercer study discovered that, for both the public sector organization and the manufacturing company, the level of duplicate payments between the two systems is small in terms of percentage; this is apparently due to the vigilance of the claims administrators for the benefits programs. Therefore, although not providing a rationale for integration, comparing paid bills between the two systems on a computerized basis may yield a positive return if done on occasion. Additionally, employers should coordinate claims audit activities for both their benefits and workers' compensation programs; ideally, the auditor should be able to audit the payment integrity for both programs. The auditor should focus on the ability of each program to avoid duplicating payments made to the other system. Given the small number of duplicate payments that are likely if the two systems are well managed, a random sample audit is unlikely to turn up duplicate payments; an automated, computerized cross-check may prove beneficial, however.

In summary, there are costs to maintaining separate systems to cover both work- and non-work-related injuries and illnesses; there are also significant costs associated with achieving coordination - if not integration - of the two plans. Overall, the financial data do not indicate that the overlap between workers' compensation and health benefits is of such magnitude as to justify integration regardless of cost; however, the data do suggest that judicious exploitation of opportunities to coordinate the two programs, especially in regard to managing health care providers, may generate significant savings.

Taylor Dennen is principal of William M. Mercer Inc. in Deerfield, IL.
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:group health and workers' compensation insurance
Author:Dennen, Taylor
Publication:Risk Management
Date:Sep 1, 1992
Previous Article:One company's success with HPR.
Next Article:The truth behind 24-hour coverage.

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