May 21, 2007

The Comp Success Story in Massachusetts: Who Pays?

Massachusetts recently announced yet another reduction in workers comp rates, this time a double digit 16.9 percent. Since 1990, when the state implemented wide-reaching reforms, the rates have come down well over 60 percent. Employers are paying about the same rates that were in effect in the early 1980s. It's the greatest comp success story among the industrial states. Indeed, with this pending reduction, the cost of workers comp in MA is likely to be among the bottom five states across the entire country.

This impressive performance is even more remarkable when you consider that the state offers some of the highest benefits available to injured workers. It seems paradoxical: very low costs for businesses, very high benefits for injured employees. So the question becomes: who pays? Who bears the burden of the "Massachusetts miracle"?

Any analysis of shifting burdens should focus on comp's key constituencies: injured workers, medical providers, insurance companies and attorneys. Let's take them one at a time:

Injured employees: while MA offers one of the highest indemnity wages in the country, it also has a relatively low rate of reimbursement: injured workers collect just 60 percent of their average weekly wages, tax free. Most states offer at least 66 2/3 and some over 70 percent. You will hear complaints from organized labor in MA that the rate is unacceptably low. To qualify for the maximum indemnity, a worker would have to make over $1,600 a week. With the exception of the skilled trades, most people on workers comp collect nowhere near the maximum amount.

Medical providers: In most states, medical costs in the comp system are soaring, reaching 60 percent of total costs and more. In MA, by contrast, medical costs are still only about 35 percent. Why? The state may be blessed with as good a medical infrastructure as you can find anywhere in the world, but the providers in this system are squeezed to the max by very low rates of reimbursement in the comp system. The rate schedule runs about 20 percent below Medicare. By any standard, that is just unacceptable.

To be sure, when you get beyond primary and emergency care, few self-respecting doctors will accept the deflated rates. To get injured workers into specialty care, insurance adjusters routinely negotiate higher rates. (Try to find a hand surgeon willing to work for a flat fee of $750. If you found one, you would not trust him or her to do the work.)

Insurance carriers: a number of insurers have fled the state, complaining that the rates are just too low. (If the rates were inadequate last year, how will they look after an additional 16.9 percent reduction is tacked on?) The state's remaining carriers are understandably nervous. With the state's aging workforce, the shadow of terrorism and workers comp the potential retirement system of choice for those with no choices, carriers are sweating at the prospect of another rate reduction. As carriers hone their underwriting criteria, we are likely to see a growth in the assigned risk pool (currently running about 15 percent of the market). Add to this mix the fact that data from the state's largest comp carrier, AIG, was not factored into the rate setting, and you have a potential witches brew for a troubled future.

Attorneys: Prior to the reforms, Massachusetts routinely cut settlement checks for injured workers who could not (or would not) return to their jobs. There were about 20,000 such settlements a year. Now we are seeing about 8,000 settlements a year. Settlements are the bread and butter of attorneys, who rarely counsel their clients to go back to work. It's safe to say that attorneys, along with medical providers, are bearing the brunt of the Massachusetts reforms.

Lessons from the Bay State
Is Massachusetts the gold standard for workers comp reform? In many respects it is. We should keep in mind, however, that the world of comp, like everything else in life, is constantly changing. Reform comes at a price. We need to re-evaluate periodically, to work toward an ideal balance. So the lessons learned from the Commonwealth should include some underlying realities:
Injured employees: it's great to set a high ceiling for indemnity and encourage return to work, but the reduced rate for indemnity is unfair and a burden for disabled workers.
Medical providers: Pay a fair rate for services rendered, lest other payers be made to subsidize the real costs of treatment. The rate schedule needs to be revisited.
Insurance companies: as long as carriers continue to offer significant premium discounts (and they do), they undercut their argument that rates are too low. When the premium discounts disappear, the rates will stabilize - and might even go up.
Attorneys: I respect the role of attorneys in the comp system - and I'm confident in their collective abilities to find opportunities in the ever-evolving system.

Finally, let's not forget the unprecedented employer education project that anchored the reforms in Massachusetts. The Qualified Loss Management Program (QLMP) offered signficant premium discounts to employers in the assigned risk pool who agreed to learn how to manage the costs of workers compensation. With over 60 percent of the state's employers in the pool during the early 1990s, the QLMP program transformed the way employers viewed workers comp. They began to perceive comp as a manageable aspect of business. They understood the relationship between their losses and their future costs. They learned that loss prevention was worth every reasonable effort. And they also recognized that by using temporary modified duty to speed recovery, they were helping their workers and helping themselves by lowering the future cost of insurance. This unprecedented education project is the heart and soul of the state's comp success story.

Any state wishing to duplicate the wildly successful reforms in Massachusetts should keep the QLMP employer education component firmly in mind. Employers are key players in the workers comp system. If you really want to improve your results, employers must be the centerpiece of your effort.



Why the reduction again? MA comp., as is that in most states, is wholly biased against the injured worker.

If an employer is being hard-nosed about an injury, perhaps as a result of QLMP, the injured worker will be demonized and villified.

Injuries are not accepted, benefits are cut after the pay without prejudice period, medical care is denied. Delays for conferences and hearings contribute to morbidity. Bogus exams by well paid insurance whore doctors lead to more cost and wasted time.

When injured workers come up against such corruption, and need the medical care, many have no choice but to be forced into any type of settlement just to have their injuries treated and surgeries done.

Comp treats human beings worse than we would treat an injured dog by the road or a race horse who breaks a leg.

When you can't put food on the table you mortgage your home, use all avaialble lines of credit, move in with relatives, sell your car, go to the food other words, you do what you need to do to survive.

The WC ins. carriers would love to see more of this. They wouldn't mind if the IW died on the street. They want to squeeze every penny of profit out despite the human toll. They have no heart and never will.

Who pays, you ask? Private insurance companies who pick up the costs of care after settlement. The injured worker who assumes his or her share of their insurance premiums, co-pays, deductibls, etc. The state, when these people run out of options and apply for public assistance.

But who is the state? You, me, those employers who are rubbing their greedy hands together because they squeezed out another injured worker.

Think again about villifying the attorneys; they will be paid nothing if a client receives Total Permanent. They are only too quick to suggest puny settlements so they can get their 15 or 20%.

But then, no one really knows how the quasi-state DIA runs. Is there a separate fund out of which lawyers are paid that we know nothing about? Who really "owns" the DIA - ins. cos., lawyers, politicians? There is blood on all of their hands.

It is time to wake up and stop acting as if no injured worker could possibly really be injured. Time to stand up and live up to your responsibilities; time to take care of the workers you pretend to value.

Ah, yes, I forgot, this is the land of Oz.

If "no self-respecting provider" will accept these unacceptable rates (20% below Medicare), than how can Mass's success really be a success? I notice no mention of rates of return to work. The success is reduced costs due to reduced benefits. It is one thing to say that the plan offers so-and-so, but if no provider will accept the rate, how is so-and-so being provided and by whom? As a hand therapist, I am aware of surgeons in my region that I would not allow to operate on my pets. Is this were the patients are going?

M Reith: You raise an interesting point. Yes, the state rates for services are too low. The fact is, many specialists refuse to accept these inadequate rates. They end up negotiating with insurers for higher rates of reimbursement. In effect, insurers pay the market rate for quality services. Surveys indicate that injured workers in the state are generally satisfied with the medical services they receive.
Regarding the return to work issue, return to work outcomes in Massachusetts are strong. So it does not appear that success in MA comes at the expense of injured workers - they are pretty satisfied (with the exception, of course, of the relatively low indemnity rate).

Does anyone know whether a Mass. company that has WC coverage and then receives OSHA safety citations must pay an increased premium simply because of the issuance of these citations?


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This page contains a single entry by Jon Coppelman published on May 21, 2007 1:22 PM.

Immigration Reform and Family Values was the previous entry in this blog.

Workers compensation state of the market: great! (but cross your fingers) is the next entry in this blog.

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