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Uncertainties on rising medical and indemnity costs, along with the continuing opioid crisis are among some of the top concerns of workers compensation experts going into 2020.
With rising wages, increasing medical facility fees and new and expensive changes in medical care and pharmaceuticals, many in the industry are concerned about how costs may affect comp in the coming years.
“Facility costs continue to pose challenges,” said Kimberly George, Chicago-based senior vice president of corporate development, mergers and acquisitions, and health care for Sedgwick Claims Management Services Inc. “Fee schedules do not always account for facilities and drive up costs significantly.”
According to the Workers Compensation Research Institute’s 20th Edition CompScope Medical Benchmarks, facility costs in certain states accounted for a significant share of an overall workers comp medical payment. For example, in Louisiana, facility payments accounted for more than a quarter of total medical payments in 2017 — the most recent data available — whereas the median state average for facility costs was 17%. In California, facility costs grew 14% in 2017, according to research from Cambridge, Massachusetts-based WCRI.
“The fee schedules don’t always address in-patient and out-patient facilities,” said Ms. George. While the language of the law may charge the payer a percent of total billed costs, Ms. George noted that some facilities will inflate that cost.
“You still have to pay the percent of that, even if it’s 200 times what is reasonable,” she said. “In some states, that’s a significant issue.”
The emergence of new medical technology and treatments and how that can impact workers comp costs is also something that the industry will be keeping top of mind in 2020, said Jeff Eddinger, senior division executive, regulatory business management at Boca Raton, Florida-based National Council on Compensation Insurance Inc.
“A lot of people don’t necessarily know what is going to drive medical costs,” he said. “There’s the concern that the emergence of new medical technology or treatments may be much more expensive.”
Wage increases, spurred by increases in minimum wage rates, have a direct impact on indemnity costs – another issue to watch, according to experts.
Over the past four years, wages have risen faster for low-wage workers than higher-paid workers, according to research published in the fourth quarter of 2019 by the NCCI. Since low-wage workers tend to have higher rates of workers compensation claims, according to NCCI data, indemnity payments may rise faster than average wage growth if wages continue to increase at a faster pace for those workers than for higher-income workers, said the research.
“There is a lot of demand for skilled people and those skilled people are being able to command higher wages,” said Brian Allen, Salt Lake City-based vice president of governmental affairs, pharmacy solutions for Mitchell International Inc. “Workers comp costs are going to go up — how much that will be impacted, we don’t know.”
“People are getting paid better, and we’re seeing rising wages” which is putting upward pressure on premiums and may hit certain industries more than others, said Gary Anderberg, New Hope, Pennsylvania-based senior vice president of claims analytics at Gallagher Bassett Services Inc.
Despite some of these cost increases, there has been better control of overall medical costs, particularly regarding pharmacy controls and opioids, said Mr. Anderberg.
“We still have a hangover as we figure out what to do with claimants who basically got hooked on opioids several years ago,” he said.
Finding effective ways to treat chronic pain will continue to be a big issue in 2020, said Ms. George.
“The challenge we have is thinking that opioids go away and pain goes away,” she said. “The biggest challenge is addressing the claims that remain and finding the individualized solution to ongoing pain.”
“There’s more uncertainty as to what insurers will approve, what the doctors will approve,” which is making navigating opioids and their alternatives in the system more challenging, said Mr. Eddinger.
But the hard line on opioid prescribing may be loosening a bit, said Mr. Allen.
Some providers, out of an abundance of caution not to end up on any state authority’s radar took patients who had been on opioids for 20 years off their medications.
“Payers have always been willing to pay for weening and tapering, but I think what you’re really seeing is more organized pushback on (opioid) limits, especially for those who are chronically ill and taking opioids for a long period of time,” he said. “Maybe it’s time for the pendulum to swing back a little.”