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Trends in Workers' Comp

Adoption of Value-Based Care Continues

Tying payment to outcomes will require a paradigm mindset shift in workers' comp.
By: | January 30, 2018 • 4 min read

Over the past decade, value-based care has been on the rise, and the trend toward tying patient results to compensation doesn’t appear to be fading. While in the group health arena insurers are embracing this approach whole-heartedly, workers’ comp continues to lag behind and operate largely through its traditional fee-based model.

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The concept of tying pay to patient outcomes was first kicked around in the 1990s when several professors published their ideas about benefit-based copays. The model didn’t take off until the passage of the Affordable Care Act (ACA) in 2009, which outlined a to-be-implemented Medicare Value-based Purchasing Program and the formation of accountable care organizations (ACOs), which are networks of physicians, hospitals and other health care providers who agree to work together to provide coordinated care for a single payment.

Since that time, the Centers for Medicare & Medicaid Services (CMS) has developed and piloted multiple value-based programs and is increasingly tying Medicare reimbursement to patient outcomes.

Kimberly George
senior vice president, corporate development, M&A, and healthcare, Sedgwick

Although Republican lawmakers are hoping to dismantle the ACA, and many, including former secretary of the U.S. Department of Health and Human Services Rep. Tom Price, R-Ga., oppose tying reimbursement to patient outcomes, Kimberly George, an SVP and senior healthcare advisor for Memphis, Tenn.-based Sedgwick Claims Management Services, Inc., says she thinks the value-based care “train has already left the station.”

“I don’t think anyone wants to get rid of really good metrics around quality and infection rates that aim to improve care for individuals and populations — I don’t see that going away,” she said.

Bob Evans, the vice president of repricing solutions at Rising Medical Solutions, agrees that a significant number of providers and payers believe that value-based care “makes absolute sense” and are unlikely to decelerate the move toward tying more payments to patient outcomes just because there may be fewer federal mandates for them to do so.

“The benefit of value-based health is a win-win-win: Better care, more profitability, more efficiency, and cheaper for the payer,” he said.

While he suspects this trend will continue on the group health side, he does speculate that the move toward value-based care could stagnate on the workers’ comp side, which has several large barriers. These include a litany of differing state regulations and the often higher fee-for-service reimbursement of workers’ comp coveted by physicians who may be reluctant to change.

More Companies Examining Provider Quality Outcomes

Despite some of the state-specific regulatory challenges and potential unwillingness of care providers to move to a value-based care approach, more companies are closely examining the performance of the physicians and developing bundled options in an attempt to reduce costs and improve patient outcomes.

Evans says his firm’s surgical care program charges a single fee for a bundle of care for workers’ comp clients that includes the employee’s surgery, care coordination and post-operative care. The program has expanded to five states, with the largest concentration in Florida, and the company expects to continue to grow the program.

Bob Evans, vice president of repricing solutions, Rising Medical Solutions

“I think it brings a different level of cohesion with providers when they begin to better recognize how the whole health care experience is a combination of what all of them do together,” he said.

While bundled care can reduce the likelihood of cost surprises, it doesn’t necessarily drive quality, says Denise Algire, the director of risk initiatives at Albertsons. In the state of California where Albertsons is based, the company created its own medical provider network (MPN), allowing the company to enforce the clinical quality outcomes it expects from its workers’ comp providers. Providers are continuously monitored, and the company notes everything from the costs of episodes of care to ensuring that treatments provided to workers are within evidence-based guidelines to return-to-work outcomes. Those who make the cut continue to be included in the MPN.

California-based Harbor Health Systems also focuses on physician performance. The company mines data from payer partners to identify the top performing physicians based on costs and patient outcomes so that its clients can identify physicians within a particular specialty who have historically proven to have better outcomes. While some of these top providers may charge slightly more up front, they are able return a patient to work faster, maintain a record of low litigation and generally have reduced other medical expenses associated with the episode of care, says Linda Lane, the company’s president.

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Lane noted that while adoption of value-based care in workers’ comp is slow, she does expect it to continue to grow.

“Many are still in the mindset in the workers’ comp industry that driving down unit cost is how you achieve cost containment,” she says. “In value-based care, we’re talking about a paradigm shift of mindset that’s been so ingrained.”

George of Sedgwick agrees. “Value does drive outcomes … nothing is valued more than less litigation and quicker return to work.” 

Angela Childers is a Chicago-based writer specializing in health care and business management. She can be reached at [email protected]

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Risk Focus: Workers' Comp

Do You Have Employees or Gig Workers?

The number of gig economy workers is growing in the U.S. But their classification as contractors leaves many without workers’ comp, unemployment protection or other benefits.
By: and | July 30, 2018 • 5 min read

A growing number of Americans earn their living in the gig economy without employer-provided benefits and protections such as workers’ compensation.

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With the proliferation of on-demand services powered by digital platforms, questions surrounding who does and does not actually work in the gig economy continue to vex stakeholders. Courts and legislators are being asked to decide what constitutes an employee and what constitutes an independent contractor, or gig worker.

The issues are how the worker is paid and who controls the work process, said Bobby Bollinger, a North Carolina attorney specializing in workers’ compensation law with a client roster in the trucking industry.

The common law test, he said, the same one the IRS uses, considers “whose tools and whose materials are used. Whether the employer is telling the worker how to do the job on a minute-to-minute basis. Whether the worker is paid by the hour or by the job. Whether he’s free to work for someone else.”

Legal challenges have occurred, starting with lawsuits against transportation network companies (TNCs) like Uber and Lyft. Several court cases in recent years have come down on the side of allowing such companies to continue classifying drivers as independent contractors.

Those decisions are significant for TNCs, because the gig model relies on the lower labor cost of independent contractors. Classification as an employee adds at least 30 percent to labor costs.

The issues lie with how a worker is paid and who controls the work process. — Bobby Bollinger, a North Carolina attorney

However, a March 2018 California Supreme Court ruling in a case involving delivery drivers for Dynamex went the other way. The Dynamex decision places heavy emphasis on whether the worker is performing a core function of the business.

Under the Dynamex court’s standard, an electrician called to fix a wiring problem at an Uber office would be considered a general contractor. But a driver providing rides to customers would be part of the company’s central mission and therefore an employee.

Despite the California ruling, a Philadelphia court a month later declined to follow suit, ruling that Uber’s limousine drivers are independent contractors, not employees. So a definitive answer remains elusive.

A Legislative Movement

Misclassification of workers as independent contractors introduces risks to both employers and workers, said Matt Zender, vice president, workers’ compensation product manager, AmTrust.

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered.”

Misclassifying workers opens a “Pandora’s box” for employers, said Richard R. Meneghello, partner, Fisher Phillips.

Issues include tax liabilities, claims for minimum wage and overtime violations, workers’ comp benefits, civil labor law rights and wrongful termination suits.

The motive for companies seeking the contractor definition is clear: They don’t have to pay for benefits, said Meneghello. “But from a legal perspective, it’s not so easy to turn the workforce into contractors.”

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered in the eyes of the state.” — Matt Zender, vice president, workers’ compensation product manager, AmTrust

It’s about to get easier, however. In 2016, Handy — which is being sued in five states for misclassification of workers — drafted a N.Y. bill to establish a program where gig-economy companies would pay 2.5 percent of workers’ income into individual health savings accounts, yet would classify them as independent contractors.

Unions and worker advocacy groups argue the program would rob workers of rights and protections. So Handy moved on to eight other states where it would be more likely to win.

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So far, the Handy bills have passed one house of the legislature in Georgia and Colorado; passed both houses in Iowa and Tennessee; and been signed into law in Kentucky, Utah and Indiana. A similar bill was also introduced in Alabama.

The bills’ language says all workers who find jobs through a website or mobile app are independent contractors, as long as the company running the digital platform does not control schedules, prohibit them from working elsewhere and meets other criteria. Two bills exclude transportation network companies such as Uber.

These laws could have far-reaching consequences. Traditional service companies will struggle to compete with start-ups paying minimal labor costs.

Opponents warn that the Handy bills are so broad that a service company need only launch an app for customers to contract services, and they’d be free to re-classify their employees as independent contractors — leaving workers without social security, health insurance or the protections of unemployment insurance or workers’ comp.

That could destabilize social safety nets as well as shrink available workers’ comp premiums.

A New Classification

Independent contractors need to buy their own insurance, including workers’ compensation. But many don’t, said Hart Brown, executive vice president, COO, Firestorm. They may not realize that in the case of an accident, their personal car and health insurance won’t engage, Brown said.

Matt Zender, vice president, workers’ compensation product manager, AmTrust

Workers’ compensation for gig workers can be hard to find. Some state-sponsored funds provide self-employed contractors’ coverage.  Policies can be expensive though in some high-risk occupations, such as roofing, said Bollinger.

The gig system, where a worker does several different jobs for several different companies, breaks down without portable benefits, said Brown. Portable benefits would follow workers from one workplace engagement to another.

What a portable benefits program would look like is unclear, he said, but some combination of employers, independent contractors and intermediaries (such as a digital platform business or staffing agency) would contribute to the program based on a percentage of each transaction.

There is movement toward portable benefits legislation. The Aspen Institute proposed portable benefits where companies contribute to workers’ benefits based on how much an employee works for them. Uber and SEI together proposed a portable benefits bill to the Washington State Legislature.

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Senator Mark Warner (D. VA) introduced the Portable Benefits for Independent Workers Pilot Program Act for the study of portable benefits, and Congresswoman Suzan DelBene (D. WA) introduced a House companion bill.

Meneghello is skeptical of portable benefits as a long-term solution. “They’re a good first step,” he said, “but they paper over the problem. We need a new category of workers.”

A portable benefits model would open opportunities for the growing Insurtech market. Brad Smith, CEO, Intuit, estimates the gig economy to be about 34 percent of the workforce in 2018, growing to 43 percent by 2020.

The insurance industry reinvented itself from a risk transfer mechanism to a risk management mechanism, Brown said, and now it’s reinventing itself again as risk educator to a new hybrid market. &

Susannah Levine writes about health care, education and technology. She can be reached at [email protected] Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]