Will the Affordable Care Act Shift Claims to Workers’ Compensation Payors?

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Hundreds of millions of dollars could shift from group health to workers’ compensation as Accountable Care Organizations (ACO) expand under the Affordable Care Act (ACA), according to a new study―Will the Affordable Care Act Shift Claims to Workers’ Compensation Payors?― from the Workers Compensation Research Institute (WCRI).

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To what extent do the financial incentives facing providers and their health care organizations that arise out of capitation (given that workers’ comp pays fee for service) influence whether or not a case is deemed to be work-related?

Hundreds of millions of dollars could shift from group health to workers’ compensation as Accountable Care Organizations (ACO) expand under the Affordable Care Act (ACA), according to a new study―Will the Affordable Care Act Shift Claims to Workers’ Compensation Payors?― from the Workers Compensation Research Institute (WCRI).

Although pundits have written about “cost shifting” to workers’ compensation, a significant underappreciated effect of the ACA is “case-shifting” from group health to workers’ compensation. The ACA seeks to greatly expand the use of ACOs―where providers are rewarded for meeting cost and quality goals. This will expand the use of “capitated” health insurance plans. Under these plans, providers are paid a fixed insurance premium per insured regardless of the amount of care provided to a given patient during the year. Under traditional fee-for-service insurance plans, providers are paid for each individual service rendered.

“The question we are addressing in this study is to what extent do the financial incentives facing providers and their health care organizations that arise out of capitation (given that workers’ compensation pays fee for service) influence whether or not a case is deemed to be work-related,” said Dr. Richard Victor, president and CEO of WCRI.

The study found that a back injury was as much as 30 percent more likely to be called “work-related” (and paid by workers’ compensation) if the patient’s group health insurance was capitated rather than fee for service. The study can be extrapolated to different states―for example, the study predicts about a $100 million increase in workers’ compensation costs in a state like Illinois if the share of capitated patients rises from 12 to 42 percent.

When a patient is covered by a capitated group health insurance plan, the doctor and the health care organization to which that doctor belongs have very different financial incentives about key decisions, compared with treating a patient covered by a fee-for-service plan. For example, when the capitated patient has back pain, the provider and his or her health organization generally do not get paid for additional care since they were paid a fixed amount for that patient at the outset of the policy year. By contrast, if a group health fee-for-service patient has back pain, the provider and health care organization are paid for each new service rendered.

Case-shifting was more likely in states where a higher percentage of workers were covered by capitated group health plans. In a state where at least 22 percent of workers had capitated group health plans, the odds of a soft tissue case being called work-related were 31 percent higher if the patient was covered by such a plan compared with similar workers covered by fee-for-service group health plans. By contrast, in states where capitation was less common, there was no case-shifting seen. This is more than just the result of having fewer capitated patients seeking care. It also appears that when capitation was infrequent, the providers were less aware of the financial incentives.

This study relies on workers’ compensation and group health medical data coming from a large commercial database. This database is based on a large sample of health insurers and self-insured employers. It includes individuals employed by mostly large employers and insured or administered by a variety of health plans. The database is unique in that, for a given employee, it contains information on both the group health services used and the workers’ compensation services used.

For more information about this study or to purchase a copy, visit http://www.wcrinet.org/result/will_aca_shift_wc_result.html.

The Cambridge-based WCRI is recognized as a leader in providing high-quality, objective information about public policy issues involving workers' compensation systems.

ABOUT WCRI

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA. Organized in late 1983, the Institute does not take positions on the issues it researches; rather, it provides information obtained through studies and data collection efforts, which conform to recognized scientific methods. Objectivity is further ensured through rigorous, unbiased peer review procedures. WCRI's diverse membership includes employers; insurers; governmental entities; managed care companies; health care providers; insurance regulators; state labor organizations; and state administrative agencies in the U.S., Canada, Australia and New Zealand.

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Andrew Kenneally
Workers Compensation Research Institute
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