Sarasota, FL (CompNewsNetwork) - Medical
costs are rising much faster in workers comp than in group health. Over the last ten years,
WC medical trend has been going up more than twice as fast as overall medical inflation.
Medical is now almost 60% of claims costs and is projected to hit 70% within ten years.
Simple, really. Workers comp payers just don't get it. They don't understand that
medical drives everything. Sure, they may pay it lip service, may 'think' they are
controlling medical by implementing discount-based PPO networks, bill review, and case
management/UR, but these programs have been in place for years - and medical trend has
increased during those same years.
If the industry doesn't figure it out, they will go the way of the group health
indemnity payers - the Home Life's, Phoenix', Mutual of Omaha's, Travelers', and Met
Life's. These insurance companies and their competitors dominated the group health
industry in the eighties. To these insurance companies, 'medical' was a line item on a
loss run, a cost of doing business, a black box to be addressed with 'cost containment'
Now, almost without exception, these big insurers are out of the health business, killed
off by HMOs who understood that their business was not insurance, but health care.
We are now at that point in workers comp. Most of the senior people in workers comp
payers don't understand that they are in the medical business. They think they are
insurance companies that prosper by risk selection and financial wizardry. They evaluate
their managed care programs by network penetration and savings below billed charges, by
denied procedures and slashed bills.
They are saving themselves to death. Instead of bill reductions, payers should be
looking at cost per claim. Replace network penetration with physician performance
evaluation, based on total outcomes. Stop looking at denied procedures and start
identifying the providers who do a great job, send claimants to them, and leave them alone.
What is scary is that many in the industry think they are making progress. They are
plodding deliberately along, studying, evaluating, debating, discussing, re-organizing,
considering, meeting, presenting, recommending.
Just like the indemnity insurance companies did right up until United HealthCare ate
What does this mean for you?
In ten years, many of today's largest workers comp payers will be out of the business.