Health reform aims at workers' comp - worker's compensation

Nation's Business, May, 1993 by Roger Thompson

Workers' compensation, the last blank check in American health care, may soon be put on a financial leash. The Clinton administration is trying to figure out how to bring workers' comp medical benefits, which are free and unlimited to all workers, into national health-care reform.

The goal is to create a single healthbenefits package that would cover all illnesses or injuries regardless of whether they arise on or off the job. In insurance lingo, the concept is known as 24-hour medical coverage. It would scrap the current system, dating from the turn of the century, under which workers' comp covers job-related injury and illness while employer-provided group health insurance covers everything else. The disability-benefits portion of workers' comp would remain unchanged.

In theory, 24-hour coverage would save billions of dollars by combining the administration of two separate health-insurance programs, reducing litigation over which system pays the tab, and applying money-saving managed-care techniques to workers' comp claims.

Medical claims paid by workers' comp totaled about $20 billion last year, accounting for 41 percent of all workers' comp benefit payments, up from 33 percent in 1980.

Ira C. Magaziner, manager of Hillary Rodham Clinton's Task Force on National Health Care Reform, acknowledged in mid-March that the group is "looking very carefully" at the idea of integrating the medical portion of workers' comp with health insurance.

Compared with national health expenditures last year of $832 billion, workers' comp medical claims appear small. Placed in a business context, they grow in significance, representing 10 percent of the roughly $200 billion employers paid last year for health care.

The administration's interest in 24hour coverage caught almost everyone by surprise, especially the property-casualty insurers who write workers' comp policies. "No one understood that this was one of the things that they would take seriously," says Eric Oxfeld, assistant general counsel for the American Insurance Association, which represents 250 property-casualty insurance companies.

Once alerted, insurers have hurriedly assembled a new coalition of like-minded trade groups to defeat the idea. Says Oxfeld: "Pulling medical out of workers' comp would ruin workers' comp."

Some experts outside the insurance industry are less critical, but skeptical nonetheless. They see workers' comp and health insurance as distinctly different, if not incompatible. (See the box on Page 36.)

"It's promising but scary," says Edward M. Welch, director of Michigan's workers' comp bureau from 1985 to 1990 and currently a professor of labor and industrial relations at Michigan State University. "I'm glad they are talking about it. It's no panacea."

Richard Victor, executive director of the Workers Compensation Research Institute, in Cambridge, Mass., agrees. "I don't think there is a compelling reason from a workers' comp point of view for [24-hour coverage] to happen," he says.

Others champion the idea. John F. Burton Jr., a professor of industrial and labor relations at Rutgets University and author of a widely respected workers' comp newsletter, drafted 1990 Florida legislation that permits the state to conduct pilot projects in 24-hour coverage. Burton has written that after more than 75 years of operation, "certain features of the present workers' compensation program may no longer be appropriate." As a paid consultant to the White House task force, however, Burton says he is barred from speaking about the issue until after President Clinton announces his reform proposal in early May.

Employers also like the idea of 24-hour coverage. "Our members strongly supported [a state pilot project], as long as it is voluntary," says Jim Brainerd, general counsel for the Florida Chamber of Commerce. In a survey of 716 midsize companies last year, the Towers Perrin consulting firm found that 63 percent saw advantages to treating occupational and nonoccupational injury and illness under the same health-care program.

According to some observers, the motivating force behind the administration's interest in 24-hour coverage is politics, not health policy. "The task force sees melding workers' comp into health-care reform as an attractive provision for small business," a key constituency to please, says Mike Dineen, vice president for federal relations for the Kemper National Insurance Companies.

Whatever the motivation, small business comes out a winner if paying one health premium in fact costs less than the present total cost of separate coverage. Promoting 24-hour coverage as a cost saver is the kind of sweetener the administration needs for convincing small business to swallow a bitter reform pill that almost certainly will include mandated coverage of all workers and minimum employer contribution levels.

Details of the administration's plan still have not been worked out. The veil of secrecy imposed by the task force makes it impossible to assess what President Clinton ultimately will propose. But this much is clear: Even among opponents of the 24-hour-coverage idea, there is broad consensus that national health reform must somehow deal with workers' compensation.