Saturday, December 29, 2012

Workers' Compensation Insurance vs. Group Health Insurance: The Employer's Dilemma is which to file

An employee suddenly develops a back problem, a serious one like a herniated disc. It does not occur from an accident that anyone noticed but his/her employer becomes aware of the condition. The employer also knows that the employee's condition is probably job-related because the job requires lifting, packaging, and standing for significant amounts of time and therefore likely developed or occurred while working. 

Perhaps, more often than obvious injuries and perhaps more total expense in aggregate are the 'conditions' such as carpal tunnel, trigger finger, herniated disc, asthma, COPD, loss of hearing, etc. These might be work-related; it depends upon the type of work employees do and non-work lifestyles they live. So why deny them at greater expense as an employer and less benefit as employee? It's a different way of thinking.

What should the employer suggest: 
(a) Encourage the employee to officially report this as a job-related condition and, therefore, generating a Workers' Compensation insurance claim ... or 
(b) Encourage the employee to get care solely through his/her employer-sponsored group health insurance plan?

Unless an injury obviously occurs on the job, there is a choice here ... a dilemma. The direction could go either way. A likely job-related injury or disease can qualify for Workers' Compensation, so the choice is not clear.

If the employee goes through the group health insurance plan with extensive treatments from surgery to physical therapy, then the company's health insurance premiums likely will rise, especially if other employees and their families have been getting ill or having injuries.

If the employee goes through the Workers' Compensation insurance then the premiums are less likely to rise but the workplace safety record ... and that sign so many companies post with pride that tells how many days without a reported workplace injury will have to be reset to "0". 

My convenience sampling over the years, especially while Executive Director of the New Jersey Council on Safety & Health, shows that most employers prefer their employees go the group health plan path. They do not want to see their workplace safety record impacted. It might hurt morale and lead to issues with OSHA.

New Jersey Advisory Council on Safety and Health

You see, most small group employer health plans are not experience rated but medium and large-sized employer groups often are experience rated. After the initial year or two, Workers' Compensation plans tend not to be experience rated and do tend to be industry rated and/or job rated they comprise. So the one injury likely will have no effect on the this employer's premiums. 

In short, all employers are required to have Workers' Compensation insurance plans to cover every employee, including governments. Usually, Workers' Compensation benefits are more plentiful than group health plans but they more strictly oversee treatments, hence expenditures. Workers' Compensation plan benefits vary by state. In New Jersey, where I live, benefits include: (a) medical care; (b) wage replacement (to a point); and (c) permanent injury payment. 

NOTE: Medicare eligible employees must reimburse Medicare from any settlement or judgement for related expenses paid. Click here to see a summary of the rules.

So, in New Jersey, and in our example, the employee with the back injury, under Workers' Compensation plan, would have 100% of his/her medical costs paid forever as long as they relate to this injury, receive weekly salary replacement checks up to a maximum, and a permanency payment.


Only the permanency is negotiable ... once the fact of work-related is accepted by employer or ruled by the judge in the special insurance industry paid for Workers' Compensation Court system.

New Jersey Workers' Compensation Law and its court system might be among of the best public-private cooperative entities.

The NJ Workers' Compensation system is funded by 2% of all Workers' Compensation insurance premiums so it costs the government nothing. Additionally, that 2% covers the NJ Second Injury Fund ,  a clever mechanism for covering treatment related to the original injury, fully and for life, so that subsequent employers are more willing to hire a previously injured employee without fear of the potential additional costs. 

Compare that to the employee under the group health plan who just gets medical cost coverage and still pays whatever copays and deductible & coinsurance is in their particular plan. Compare the costs of an employer's Workers' Compensation insurance policy.

Financially, the Workers' Compensation route benefits both the employer and employee. So why do most employers prefer that their employees go the group health route? How much are "(Lots of) Days Without Reported Injury" signs worth?

By Steve Reichenstein

Friday, December 28, 2012

Malpractice Insurance, Medicaid Savings, and Physicians for the Poor

What I consider to be the most promising idea was a proposal brought to the Board of the NJ Taxpayers' Association in 2012 by Dr. Alieta Eck, co-founder of the Zarephath Health Center in Somerset, NJ. Dr. Eck proposes that the State of New Jersey to offer physicians free medical malpractice insurance in return for volunteering to care for the poor in a deal that would significantly lower the State's annual Medicaid spending tab.

To give this proposal added weight, and credibility, look back as recently to the early 1960's when all physicians were required to voluntarily treat the poor. Many, if not most, hospitals demainde a certain number of hours of "clinic" care in return to hospital practicing privileges. I remember this as a child ... and I'm not that old. So a deal for free medical malpractice insurance in return for volunteering to treat the poor -- either in-office or at free clinics like the Zarephath Health Center.

When I looked further into her numbers and then some more facts, such as those listed below, I began to see substantial savings in physician, hospital, and diagnostics payments. Much of these savings will be derived from the benefits of more use of primary care physicians for primary care and prevention rather than the emergency rooms for primary care and hospital stays & drugs for late-stage disease & chronic care.

Dr. Alieta Eck has testified before the U.S. Senate Subcommittee on Health, Education, Labor, and Pensions as well as being interviewed and writing op-eds in various publications. Doctors Alieta and John Eck  has a private practice in Piscataway, NJ and serves as president of the New Jersey Chapter of the Association of American Physicians and Surgeons.

According to the our Doctors Alieta & John Eck's Zarephath Health Center proposal, New Jersey physicians pay a total of about $300 million annually in medical malpractice insurance premiums.

If all NJ physicians opt in, then NJ State would self-insure (with stop-gap) the equivalent of the $300 million annually for medical malpractice. If 10% of NJ physicians opted for the deal, then the State of NJ would self-insure the equivalent of $30 million annually. Of course the actual out-of-pocket costs to the State, likely will be much less.

On the other side of the equation, the according to the Kaiser Family Foundation (as in Kaiser Permanente founders) the State of New Jersey's expenditure on  Medicaid and will see substantial savings under this proposal's idea.

According to the Kaiser Family Foundation's "":
-- The State of New Jersey pays 48% of residents' Medicaid spending as of 2009.
-- The state of New Jersey spent $10+ billion annually on Medicaid in 2010,

That's right. The State of New Jersey's 48% share of the statewide Mediaid tab runs about $10+ billion annually. A mere 1% savings on that would be $100 million!

More specifically, of that $10+ billion annually spent by the State on Medicaid,, the $6+ billion spent on physicians, hospitals, diagnostics, and drugs (acute care), likely would see some savings immediately and substantial savings over the next 10+ years as the greater use of primary care physicians both reduces emergency room visits and hospital stays. The portion of that paid directly to physicians, an estimated $50 million annually, would be slashed immediately.

This looks like a good deal to me: More available physicians, greater use of primary care physicians, lower State of NJ outlay for Medicaid, and lower medical malpractice premiums for participating physicians.

Are you willing to learn more about this Medicaid-Malpractice solution proposal? Would you sign a petition, write letters-to-the editor & articles, share Dr. Eck's post on Facebook & Twitter, and contact your state & federal legislators?

By Steve Reichenstein