24Hour Coverage Can We Get There From Here Considerations for Policymakers

1
24-Hour CoverageCan We Get There From
Here?Considerations for Policymakers

• Mark Webb
• Vice-President, Governmental Relations
• Employers Direct Insurance Company
• December 29, 2006

2
What Are We Talking About?

• Medical Benefit Without Regard to Causation?
• Part of an Employer/Employee Mandated Plan
  Employee Contribution to WC Benefits?
• Can Conflicts with Federal Laws be Resolved?
  (ERISA and HIPAA)
• Builds on Health Care Reforms to be Enacted
  What can the State do Without Implicating ERISA?
  (San Francisco Ordinance already subject to
  judicial challenge)
• Assumes Delivery Model Post-HMO Reforms of
  1998-2000 (New mandates to reflect new
  coverages?)
• 24-Hour Health and Disability Products?
• Turning WC into a disability only benefit?

3
Current Workers Compensation Laws Are Barrier to
24-Hour Coverage Programs

• Worker contributions are prohibited. Labor Code
  3751 Ralphs Grocery Co. v. Superior Court
  (Swanson) 112 Cal.App.4th 1090 (2003) Is there
  a Constitutional issue as well?
• Carve Outs do not allow cost sharing Nothing in
  this section shall allow a collective bargaining
  agreement that diminishes the entitlement of an
  employee to compensation payments for total or
  partial disability, temporary disability,
  vocational rehabilitation, or medical treatment
  fully paid by the employer as otherwise provided
  in this division. Labor Code 3201.5(b)(1)
  3201.7(b)(1)
• Constitution defines a complete workers
  compensation program to include all medical
  benefits. (Article XIV, 4)
• Medical treatment, utilization review, and
  dispute resolution different from health
  insurance mechanisms. Labor Code 3209.3
  (definition of physician), 4600, 4061 et seq.,
  4604.5, 4610, 5307.27
• Provider compensation issues should be examined.
  Labor Code 4603.2 (prompt payment), 4903
  (liens), 5307.1 (OMFS), 5307.11 (contract rates),
  5307.6 (med-legal fee schedule)

4
Federal Laws Are Impediment to State Designed
24-Hour Programs

• ERISA governs employee benefit plans. This
  establishes federal jurisdiction over disputes if
  program relates to a covered benefit plan.
  District of Columbia v. Greater Washington
  Board of Trade, 506 U.S. 125 (1992) Alonso
  Navarro v. AA Farming (Western Growers Insurance
  Co.), 67 Cal.Comp.Cases 145 (2002)
• State regulation of self-insured plans is
  virtually totally preempted by ERISA.
• So-called voluntary plans under ERISA mean
  voluntary to the EE and not sponsored by the ER.
  Workers compensation is a state constitutionally
  mandated ER funded social insurance program. As
  reported in National Underwriter There can be
  no employer contributions, assistance from
  employer staff, link between voluntary benefits
  and other employee benefits or joint marketing or
  promotion, whether overt or tacit, of worksite
  benefit offerings. If the DOL determines the
  benefits to constitute an ERISA program, all
  ERISA requirements for documentation,
  nondiscrimination and compliance with federal
  laws apply. (See O'Hara, Kevin M. National
  Underwriter Life Health v110 no37 p 24 Oct 2,
  2006.)

5
Pilot Projects Inconclusive

• Robert Wood Johnson Foundation sponsored projects
  raised more questions than answered. Workers
  compensation insurance marketplace softening in
  late 1990s reduced interest of ERs to pursue
  24-hour programs.
• ERISA issue was not resolved, although the issue
  was subject of litigation in the State of Maine.
  As indicated in their report, The more
  integrated the plan, the more legal, political,
  and institutional hurdles to be cleared.
• Californias evaluation of its 24-hour Pilot
  Project underscores the ERISA problem Another
  interpretation of our results is that employers
  wishing to enroll their employees in the managed
  care workers compensation programs must do more
  to market the favorable aspects of managed care
  option to employees. Marketing ERISA
  Preemption.
• Pilot Projects pre-date HIPAA. If programs are
  truly integrated, what access does the WC claims
  administrator have to patient information on a
  timely basis? Does HIPAA compel firewalls or
  other mechanisms to address occ/non-occ uses of
  protected information?

6
Who Pays And For What?

• Will the Employer at time of injury still be
  responsible for entire medical costs of claims
  that arise out of employment? If WC becomes a
  disability only program then all medical
  treatment would be on a claims made rather than
  an occurrence basis.
• Will all medical treatment be subject to an
  employee contribution?
• Will all health care be governed by a cure and
  relieve standard or a medical necessity one?
  Will there be coverage issues in a truly
  integrated system that provides less access to
  certain types of treatment than does workers
  compensation? Will there need to be a new set of
  mandates to create an integrated system?
• What is the role of disability assessment in the
  new system? All health care delivery should
  emphasize return to work regardless of nature of
  injury. Should this be mandated?

7
WC Policy Objectives Affected by 24-Hour Coverage

• Will broader spreading of risk reduce safety
  incentives? Will medical costs still be captured
  for purposes of experience rating? How do
  various models for determining health care
  premiums (not based on occupational
  classification) shift the equities in the
  workers compensation system?
• How could risk adjusted rates affect safety
  incentives for small employers? (See Insurance
  Code 10714 relating to premium calculations for
  small employer health plans.) Should small market
  health care reforms be revisited if occupational
  injuries are added to the mix?
• What new incentives would be created by a
  disability only WC system?
• To what degree will the workers compensation
  infrastructure still need to be maintained
  regarding injury and illness reporting to
  Cal-OSHA?
• Special programs will still need to be maintained
  (asbestosis, bloodborne pathogens).

8
Is Coordination the Better Way?

• How would workers compensation medical treatment
  affect reimbursement models for health care?
  Capitated WC medical programs were found not to
  be viable post-1993 reforms due to a variety of
  factors, including EE choice, transient enrollee
  population, and HCO complexities. Still little
  evidence to show that capitation is being used in
  WC post-SB 899. Fee for service arrangements
  continue to raise issues of over utilization.
• Capitation worked in a WA managed care pilot
  project that steered injured workers to a managed
  care model with occupational specialists. See
  Teleki, Stephanie S., et al., Research Colloquium
  on Workers Compensation Medical Benefit Delivery
  and Return to Work, pp. 74-77, RAND Institute for
  Civil Justice (2006) The report contains
  impressive findings in terms of outcomes, but
  also suggests that the importance of return to
  work programs may require specialized
  occupational medicine services.
• Most states implementing WC managed care certify
  the entity that delivers the benefits (health
  care service plan or insurer) rather than the WC
  claims payer. HCO statutes are a good starting
  point. URAC role in oversight/development of
  standards?
• Coordination is implicit in a number of statutory
  programs. Labor Code 3201.5, 3201.7 (carve
  outs) 4600(d) (predesignation) 4600(d)(3)
  (IMR) 4600.3 (HCO enrollment process) 4600.5
  (HCO application process) 4616(a)(1)
  (non-occupational physicians in MPNs) 4616.4
  (IMR) 4616.7 (MPN application process)

9
Coordination of Disability Programs

• Private carriers already integrating STD/LTD/WC
  programs where insurer has a disability and WC
  certificate of authority or pursuant to joint
  marketing opportunities. STD/LTD may or may not
  be ERISA plans given that the programs are
  coordinated rather than integrated. Back room
  claims management can still provide efficiencies,
  even though separate systems are maintained, by
  enhanced communication and coordination of
  treatment, evaluation, and oversight.
• The risk in disability programs is currently
  measured by the payroll exposure. Consequently,
  the 24-hour program would have a different
  premium measurement along the lines of group
  health, continuing the expenses necessary to
  maintain the two systems.
• All non-WC disability programs have some form of
  offsets including SDI. How is this to be
  maintained in an integrated disability program?

10
Were the State of California were
different.

• Yes indeed. The State of California is exempt
  from ERISA and is legally uninsured for workers
  compensation. This allows for far greater
  flexibility in fashioning benefit programs.
• State is already offering private sector
  administered voluntary LTD programs where
  benefits are offset by workers compensation,
  social security, and other payments including
  CalPERS and STRS disability retirement income.
  Program is offered for excluded employees.
• IF a pilot project is to be considered, it would
  be better considered from a public agency.
• Portability issues will still have to be
  addressed if a traditional WC program is
  maintained outside a State program.
• What program would spouse/partner fall under? If
  spouse/partner ER has to pay disability, still
  needs coordination with policyholder/enrollees
  health care provider.

11
What Does the Constitution Say?

• The workers compensation system must have, full
  provision for such medical, surgical, hospital
  and other remedial treatment as is requisite to
  cure and relieve from the effects of such
  injury How does this affect a policy decision
  to make workers compensation a disability only
  benefit? Without constitutional amendment, the
  medical treatment is still part of workers
  compensation regardless of how it is delivered
  and ERISA issues will still arise.
• The Legislature has broad authority to establish
  a dispute resolution process, but, all
  decisions of any such tribunal shall be subject
  to review by the appellate courts of this State.
  How does this affect IMR?
• Workers compensation benefits are to be applied,
  irrespective of the fault of any party If
  medical care is taken out of the workers
  compensation system will an injured worker be
  able to sue the employer for negligence? Will a
  bifurcated system have separate rules for
  employer liability for workplace injuries?

12
Disability Only for WC?

• Constitution would have to be amended. (Article
  XIV, Sec. 4)
• Legacy claims would have to be funded for
  potential medical cost inflation.
• Guaranty Fund structure would have to be revised
  and adjustments made for reduction of assessable
  premiums, assuming that an integrated medical
  program would not be subject to assessment for WC
  insolvencies.
• What type of policy is this? Disability
  policies are considered health insurance.
  (Insurance Code 106)
• Workers compensation limited policies may
  currently be sold. (Insurance Code 11657,
  11659, 11660) There were X-Med policies sold at
  one time (excluding medical) but the claims
  coordination experience was poor and those
  products likely are not available in the
  marketplace.
• Will Knox-Keene Plans be subject to civil
  liability when delivering services for
  occupational injuries or illnesses? (Likely if
  occ/non-occ distinction is eliminated.)

13
Conclusion

• Objectives need to be clearly defined. What does
  a 24-hour medical program eliminate in terms of
  costs when there is still an obligation on the
  part of the employer to provide lifetime
  benefits, still a need to make specific
  determinations for the purposes of disability
  evaluation, and the need to maintain two sets of
  medical records to address privacy concerns under
  HIPAA.
• Do we intend to say that occupational medicine is
  no different from non-occupational medicine or
  that both can be embraced in the concept of
  medical necessity?
• As noted by the State of Maine, the more the
  programs are integrated, they more legal
  conflicts are created.
• A review of current laws governing workers
  compensation medical treatment could result in
  recommendations that further the goals of
  providing prompt quality medical care without
  raising preemption issues.