Key Reasons to Convert to ICD-10 Codes

Workers' comp practitioners aren't required to convert to ICD-10 codes, but that could lead to chaos.

By: Nancy Grover | April 7, 2014

Starting Oct. 1, the International Classification of Diseases, 10th Revision officially replaces the ninth revision for all entities covered by the Health Insurance Portability and Accountability Act (see box). Since workers’ comp is not a covered entity, practitioners are not required to make the conversion and would continue using ICD-9.

But chaos, costs, and catastrophe may await those who ignore the change, according to some experts. Those that do not switch to ICD-10 will be using a different coding system than many of the providers and vendors with whom they collaborate.

Reasons to Convert

“The greatest impact that needs to be considered and addressed is the negative impact to the injured workers and the potential for reduced provider participation to care for these injured workers,” said Sherry Wilson, a member of the Workgroup for Electronic Data Interchange and the executive vice president/chief compliance officer of Jopari Solutions. “This could result in additional burdens to the already injured worker that may include longer drives to see a physician, longer wait time for authorizations, and longer lost time from work.”

The Workgroup for Electronic Data Interchange is named as an advisor to the Department of Health and Human Services under the HIPAA regulation. Wilson’s comments during a recent hearing before an HHS panel related what many observers fear will happen to workers’ comp payers that do not convert to ICD-10 diagnostic codes before the change takes effect.

“I think what’s going to happen is it will create confusion; it will slow things down,” said Jennifer Wolf-Horejsh, executive director of the International Association of Industrial Accident Boards and Commissions. “It will create a backlog because you are going to require providers to be coding in two systems. There’s not an easy crosswalk. It will become cumbersome to maintain.”

The IAIABC has been instrumental in working with states to ensure jurisdictional statutes and regulations don’t impede the process. While some jurisdictions do not include ICD codes in their rules or data requirements, many do. To date, at least 20 states have adopted the required changes to enable the use of ICD-10 codes by Oct. 1.

Workers’ comp payers that don’t convert to ICD-10 may find pushback from their providers. “Why would they want to give you both codes,” said John Sarich, vice president of strategy at VUE Software. “Your problem is not their problem. They have to comply with the law.”

Resistance to Change

Among the reasons for not planning to convert are the effort and money that is required to change systems. Estimates range from tens of thousands to millions of dollars.

“It means very big software changes because you’re going from a five-digit diagnostic code to a seven-digit code that is alpha numeric,” Wolf-Horejsh said. “Then there is a lot of training and business process engineering. It’s not as simple as a switch of a code. It’s just a very different structure.”

But maintaining two systems won’t be easy for payers either because they will need to train and retain staff fluent in two medical coding languages and spend time translating and working on a now-dead language.

Sarich says workers’ comp payers who resist the conversion are avoiding the inevitable. He likens it to another law that did not require participation from the workers’ comp industry.

“I remember when HIPAA went into effect and insurance companies said ‘I don’t have to worry about HIPAA,’” he said. “I said, ‘you’d be smart to worry.’ That was a tough sell to get P&C companies to understand.”

Hearing the same argument about ICD-10, Sarich is telling carriers that they don’t operate in a vacuum. “I say, ‘you’re a payer, and doctors are not going to submit codes with ICD-9 and you are not going to have a clue and your systems won’t hold it. They are legacy systems,’” he said. “Going to 72,000 codes — you aren’t going to do that just off the back of a napkin.”

Benefits to Workers’ Comp

The increase in the number of codes from ICD-9 to ICD-10 — from about 14,000 to 70,000 or more — is among the biggest changes. Included in ICD-10, for example, is the side of the body on which the injury occurred.

“It can give you more specific data,” said Wolf-Horejsh. “That will empower you to do better analyses and better understand the health outcomes.”

Supporters also say it can help practitioners do a deep dive into their data. Sarich said he was working with a client several years ago who wanted to know how to find out more about what goes on during a claim.

“At any point in time in our active files we have 10 people who lost their left arm in an industrial accident. All 10 have different outcomes. Is it because of the physician, the lawyer, the hospital? Why is there such a range of difference in cost?” he said. “This is what ICD-10 is going to get you. To see that granular data and understand the best providers you can be working with and it very well may be it will help comp carriers restructure their businesses and work with providers with better outcomes for certain kinds of accidents. In the long term, that will save money and reduce costs. But getting there is going to be the challenge.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.

ACA Impact on Comp