Affordable Care Act: A Workers’ Compensation Update

At the 2015  Workers’  Compensation Educational Conference in Orlando, David North, President and CEO of Sedgwick and Richard Victor, Executive Director of WCRI, spoke about how the Affordable Care Act (ACA) is currently impacting workers’ compensation and how it will continue to impact the industry in the future.

The Affordable Care Act is having a tremendous impact on healthcare in the United States. This year, four of the top five group healthcare providers have been involved in M&A activity. Anything that has such a significant impact on healthcare is going to also have an impact in workers’ compensation.

The phases that workers’ compensation will go through to evolve and adapt to the ACA are:

1. Awareness: Develop an understanding of the ACA and its potential impact.
2. Research: Investigate the potential impact. This is the phase our industry is in right now.
3. Strategy:  Develop strategies to address the impact of ACA.
4. Execution: Implement the strategies you have developed.
5. Analysis: Review the strategies you implemented and make necessary adjustments.

One of the biggest concerns for workers’ compensation is that the ACA will lead to increased cost-shifting from group health to workers’ compensation. A big driver of this could be the Accountable Care Organizations (ACOs) which are networks of doctors and hospitals that share financial and medical responsibility by providing patients with coordinated services. Under this model, the ACO is paid a flat rate per employee covered under the plan. ACO physicians have significant financial incentive to push treatment to workers’ compensation because they will receive no additional compensation for treating the patient under group health, but they will under workers’ compensation. Based on initial WCRI research, in states with significant penetration of capitated ACOs, there has been a 30% increase in workers’ compensation soft tissue injuries due to them being pushed out of group health. This will especially be a problem in states that easily allow for repetitive trauma claims that are not traceable to a specific date, time and place.

There are some potential positive impacts of ACA. The emphasis on wellness and incentives for employers to implement wellness programs will lead to a healthier workforce, which would benefit workers’ compensation. Also, the concept of the ACO models, with providers being incentivized based on outcomes and quality of care, is something that workers’ compensation could benefit from.

QUESTION: Is the ACA leading to higher healthcare costs?

ANSWER: Unquestionably, yes. ACA was intended to increase coverage, not lower costs.

QUESTION: What impact do you believe the Cadillac tax will have on workers’ comp? Will we see additional cost shifting?

ANSWER: It depends. If employers respond to the Cadillac tax by increasing co-payments and deductibles to avoid the tax, then we will likely see more cost shifting to workers’ comp.