Co-ordinated Approach To W.C. Under National Health Care Reform Favored Over Merged System.

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A co-ordinated approach to workers' compensation under national health care reform will he substantially less costly than a fully merged system, according to a recent study.

David Appel, Ph.D., principal, Milliman & Robertson, Inc., an actuarial consulting firm, compared the costs of coordinating the medical care component of workers' compensation with a merged approach. He addressed the 18th annual research seminar of the Insurance Information Institute.

Under the co-ordinated approach, Appel explained, the existing state-based systems would continue to be separate with insurers managing both medical care and cash benefits to injured workers. Insurers would contract with health care providers for the treatment of work-related injuries, applying many of the cost reduction and quality assurance features of national health care reform to workers' compensation, he said.

Appel said that under a merged approach, occupational and non-occupational medical care would be combined in a single system, with medical care provided for work-related injuries in the health care plan chosen by the employer.

Because insurers would still be responsible for managing both the medical care and the wage cost components of workers' compensation, he said, the co-ordinated approach will result in substantial savings compared to the costs of a merged system, said Appel. "Medical costs would be approximately 37 to 40 percent lower and wage loss costs would be 24-49 percent lower in a coordinated system, depending on the industry group," he said. "Altogether, total claims costs are estimated to be 30-44 percent lower."

Appel explained that the coordinated approach provides substantial opportunities to use managed care in the treatment of workers" compensation claimants. "It is doubtful that these opportunities will exist in a merged system, particularly if there are few disincentives to the fee-for-service plans for non-occupational health care needs," he said.

Under the merged system, said Appel, the introduction of community rating to determine workers' compensation premiums for medical costs would reduce the incentives for workplace safety programs and shift employment from low-cost to high-cost industries. "These changes would increase lost work time clue to injury by approximately 11.5 percent," he said.

In a merged system, said Appel, employers with good safety records would subsidize employers with poor safety records because premiums for the medical portion of...

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