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WASHINGTON—Provisions in the health care reform bill President Barack Obama signed last week will affect workers compensation claims costs, directly and indirectly, observers said.
Sections of the measure related to benefits for black lung disease and new fees for medical manufacturers will drive up comp costs, they say.
But the law's potential to increase or offset workers comp costs in general won't be clear until loss data emerges and more is learned about possible shifts in injured worker behavior as millions more U.S. residents gain non-occupational health coverage, sources added.
“There could be some positives and unintended (negative) consequences,” that won't be known until the law is implemented, said Rita Nowak, vp of commercial lines and workers comp for Des Plaines, Ill.-based Property Casualty Insurers Assn. of America. “The term "wait until the dust settles' is really appropriate. There are just so many things in flux right now.”
Provisions in the law include changes to the federal Black Lung Benefits Act, making it easier for coal miners and their survivors to tap workers comp benefits, and new fees imposed on pharmaceutical and medical device manufacturers that could get passed on to employers.
Section 1556 of the law President Obama signed last week repeals Black Lung Benefits Act reforms adopted in 1981, according to the PCIAA.
The federal act mandates benefit levels for coal miners. The 1981 reforms eliminated presumptions in the act that miner disabilities and deaths stemmed from pneumoconiosis, known as black lung.
Now the law creates a presumption that a mine worker with 15 years of service who contracted a lung disease contracted it on the job, said Thomas Morelli, president of the global marine and energy unit for Chartis Inc. in New York.
Observers expect it will be difficult for mine employers to argue that any lung ailment is caused by factors other than work, such as years of smoking.
The provision is particularly troublesome for insurers because it applies retroactively to claims filed after Jan. 1, 2005, said Roger Fries, president and CEO of Lexington, Ky.-based workers comp insurer Kentucky Employers' Mutual Insurance.
Insurers across Kentucky, Pennsylvania, Wyoming, West Virginia and southern Illinois did not price policies sold in the past few years to account for the reopening of coal-related claims, Mr. Fries said.
“You just can't open those and pretend they are not going to cost you money,” Mr. Fries said. KEMI estimates it will have to immediately move about $30 million out of surplus to reserve for new claims and the reopening of older claims, Mr. Fries said.
“For our company, that is a pretty big shock,” Mr. Fries added.
Cost estimates for expanding black lung benefits are extremely broad, ranging from several hundred million dollars to $1 billion, said Mr. Morelli of Chartis. “It's very difficult to put an aggregate number on what we think this is going to cost the industry because a lot is unknown about how it's going to play out over time.”
But more black lung claims likely will be filed and approved, Mr. Morelli said.
“You can (foresee) rate increases as a result,” added Mr. Morelli. Chartis is one of the nation's largest providers of workers comp insurance for coal mines.
The health reform law also calls for new taxes on pharmaceutical and medical device manufacturers that are likely to be pushed onto policyholders, said Eileen Auen, chairman and CEO of Tampa, Fla.-based PMSI Inc., a workers comp pharmacy benefit manager, medical products company and managed care provider.
“Ultimately, it will find its way to higher prices for policyholders,” Ms. Auen said.
Any increased pharmacy or medical device costs will likely be nominal in contrast to various indirect affects of the measure, such as a potential increases in workers comp medical care utilization, said Thomas W. Watson, CEO for Dublin, Ohio-based Avizent, a claims and risk management company.
It's difficult to predict to what degree medical utilization could shift between workers comp systems and non-occupational health plans, but workers comp claims frequency actually could rise, Mr. Watson said.
That could happen as workers, knowing that they have health coverage, utilize medical services more frequently and then try and collect comp indemnity payments for injuries unrelated to work. Prior to having medical coverage, the individuals would have been less likely to seek medical treatment unless they were convinced the medical fees would be covered by comp payments, Mr. Watson said.
But data on whether workers file more or fewer workers comp claims as they gain health coverage is lacking, according to ratings agencies and other sources.
Several other factors also could come into play, sources said.
Downward pressure on claims costs could occur, for example, as more people gain access to wellness programs, Mr. Watson added. Overall, healthier employees are likely to file fewer claims and when they do, they are likely to return to work sooner, he said.