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Workers' Comp Paid Higher Prices vs. Commercial Insurers
Research highlights need for states to set appropriate medical fee schedules

By Stephen Miller, CEBS  7/17/2013
 

The prices that state workers' compensation programs paid for surgical care provided to injured workers in nonhospital facilities (such as ambulatory surgery centers or physicians' offices) were higher than the prices that group health insurers paid for the same surgeries in almost all states, a study from the nonprofit Workers Compensation Research Institute (WCRI) found.

In several states the workers’ compensation program prices for common surgeries were 2 to 4 times higher than those for group health insurers, according to A New Benchmark for Workers’ Compensation Fee Schedules: Prices Paid by Commercial Insurers?, published in June 2013.

In contrast, the prices paid for office visits under workers’ compensation programs were typically within 30 percent of the prices paid by group health insurers.

Generally, the cost of nonhospital surgery is lower than hospital-based surgery, with ambulatory surgery centers receiving higher reimbursements for the same procedures done in physicians' offices—primarily due to a facility fee.

The 22-state study focused on the median nonhospital price paid for five common surgeries and four common services performed during patient office visits. The prices for professional services were billed under a specific current procedural terminology (CPT) code.

Among the findings: Workers’ compensation prices were very much shaped by state fee schedules or their absence. Typically, workers' compensation medical-fee schedules are set by state authorities and describe the maximum amounts that must be paid for reasonable and necessary medical services. However, not all services are listed in the fee schedule, and not all states issue fee schedules.

Not surprisingly, in states with higher-than-average fee schedules, charges to workers’ compensation programs were usually greater than those paid by commercial insurers. In states without fee schedules, prices paid by workers' compensation programs were also generally higher than those paid by commercial insurers.

“In a typical year, five to 10 states have significant public-policy debates about enacting new fee schedules or making major revisions to existing ones to regulate prices paid in workers’ compensation,” said WCRI Executive Director Richard Victor. “Often, the central question debated is how high or low the fee schedule rates should be.” He added that the new findings should “help policymakers and other stakeholders ground the debate.”

Hospital Care

A companion WCRI report, Comparing Workers’ Compensation and Group Health Hospital Outpatient Payments, based on a 16-state study, found that in many states, hospitals received at least $2,000 more for common surgeries for injured workers than for typical patients. Moreover, in half of the studied states, hospital outpatient payments for shoulder surgeries paid by workers’ compensation programs were at least $2,000 (or 43 percent) more than those paid by fully insured or self-funded group health plans.

“These are large differences in costs in many states,” Victor observed. “Policymakers looking to contain medical costs in these states may want to ask if the difference is necessary to induce hospital outpatient departments to treat injured workers.”

The study also revealed that workers’ compensation payments most exceeded group health payments in states where the price regulations were based on a percentage of the hospital’s charges or in states that had no hospital price regulation.

Tracking Inflation

And, according to a third WCRI report, Medical Price Index for Workers' Compensation, also published in June, the national medical price index is a poor measure of workers’ comp price inflation in most states.

The consumer price index for medical care (CPI-M) for professional services poorly tracked workers’ compensation price trends in states with fee schedules. For states with no fee schedules, growth in CPI-M was similar to workers’ compensation price trends.

This report includes 25 large states that represent nearly 80 percent of the workers’ compensation benefits paid in the U.S. and covers nonhospital, nonfacility services performed by physicians, physical therapists and chiropractors from 2002 to 2012.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related SHRM Articles: 

Workers’ Comp and Pot: A Toke Too Many?, HR Magazine, July 2013 

Depressed Employee May Receive Comp Benefits, SHRM Online Legal Issues, July 2013

Managing Workers’ Compensation Costs and Caseload, SHRM Toolkits, March 2013

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