The first quarter of 2021 has revealed the continuation of rising insurance premiums, negatively impacting the total cost of risk (TCOR) for many organizations. Already reeling from COVID-19’s impact on fiscal 2020, many risk managers are looking for ways to combat high single to double-digit increases in property, general liability, directors and officers, and auto insurance. Even workers compensation premiums, which have been a bright spot for the past few years, are starting to tick up.
Workers compensation often represents the largest share of an organization’s TCOR. Accounting for about 50% to 70% of some risk budgets, it is also an exposure that offers many opportunities for mitigation along the continuum of loss prevention to loss control.
From a post-loss perspective, companies employ a variety of tactics to minimize claim cost. Starting with a strong in-house or third-party claim adjusting program, and utilizing effective nurse case management strategies, resources are usually heavily focused on lost-time claims. Lost-time claims typically represent anywhere from 15% to 20% of claim frequency, but account for upwards of about 80% of severity.
The Standard Toolbox
Many large organizations deploy internal resources to support lost-time claims management. These “return-to-work” coordinators act as a liaison between the employer, injured worker and claims adjuster. They facilitate return-to-work by offering light-duty or alternative task solutions, keeping the lines of communication open, and encouraging the injured worker. They effectively utilize best-practice “tools” to achieve return-to-work goals, including telephonic and field case management, vocational rehabilitation, independent medical exams, occupational therapy and functional capacity exams.
A less-common strategy is the use of an approved provider network. Virtually all workers compensation carriers and claims administrators utilize an occupational health network. Most employers have location-specific posters on-site directing employees to approved providers in the event of an injury. Pre-authorization protocols are in place for specialist and ancillary referrals. Appropriate, evidence-based-treatment is critical to obtaining the best outcomes for injured employees. The extent to which care can be directed depends on state workers compensation laws, and, in states like Texas, whether an employer can offer their own injury benefit plan.
In many sold-plan discussions with risk managers, the network value proposition is an afterthought, if a network is even utilized. The Texas Department of Insurance (TDI) 2020 report on workers compensation networks shows that only 48% of new claims were treated in network, despite evidence that, when treated in-network, medical costs are about 9% lower on average, and 95% of employees reported returning to work.
The sold-plan discussion focus is usually on premiums, claim handling charges, bill review rates, fees for allocated costs and collateral obligations. While these are all important and material, network access is often a “hidden” cost, allocated to the file as a percentage of savings on bill review. Risk managers often consider network penetration as the barometer of success, and correlate high percentages with the ability to leverage discounts within the network.
Discounts are certainly important, but approved provider panels designed around ZIP codes and discounts offered sometimes fall short. Improperly managed medical providers may deliver poor outcomes despite deep discounts on rate.
Utilizing Networks More Effectively
All networks are not created equally. The TDI report benchmarks key metrics across the certified workers compensation networks operating in the state. While network outcomes are generally better than non-network treatment, the report reveals varying degrees of performance, suggesting that network utilization should be strategically managed. When a risk manager is evaluating a program, he or she might consider separately analyzing the value-proposition of the various components, including claims handling, insurance coverage, loss control, risk management information systems and managed care, as well as the occupational health network. Questions that might help determine network efficacy:
- Are providers recruited based on their experience in occupational medicine and commitment to evidence-based practices, or are they added to the network based on their footprint and willingness to offer discounts?
- How are providers held accountable for results?
- Do providers commit to treatment strategies with a return-to-work focus and cooperate with the claim adjuster, providing releases as medically appropriate?
- What are the network’s credentialing standards for providers and frequency of review?
- Does the network offer training for providers to improve communication and return-to-work outcomes?
- What protocols exist to manage often over-utilized ancillary services like physical therapy and diagnostics?
- Are protocols in place to reduce or eliminate conflicts of interest, such as a primary provider ordering therapy or diagnostic scans to be completed in-house?
- Does the network provide access to physicians by the adjusters or other responsible parties?
- Is the network built around the employers’ business model and culture, or is it one-size-fits-all?
- Will the risk manager have direct access to network management when interventions are needed?
- Is there transparency in the actual cost to access the network?
When providers commit to return-to-work as a strategy for recovery, patients and employers can experience better outcomes. The recruiting process for providers is important, as is training and communication, with accountability oversight from network management. Risk managers can benefit from a network that partners with them to improve the care for their injured workers.
Too often, network solutions are behind the scenes. Instead of paying for quality managed care, risk managers may end up simply paying for the privilege of PPO discounts. Actual cost is difficult to quantify, providers can be unresponsive or unwilling to partner with the third-party administrator, and benefits beyond the discounted rates are hard to see.
Proactively managed network solutions have been found to consistently return double-digit savings on the total cost per claim as compared to those solutions designed to simply access discounts. A properly leveraged and accountable network can function as an extension of the organization’s risk management team, and the experience created for injured workers by the network’s providers can have long-ranging impacts, beginning with improved employee morale and extending to greater productivity and better customer service.