By Maria K Todd, MHA PhD

CEO & Founder
Mercury Healthcare International, Inc.

The 3rd edition of Aon’s biennial Health Care Workers’ Compensation Barometer report, which explores trends in frequency, severity and overall loss rates related to workers’ compensation in the health care industry. The report finds that for the 2017 accident year, health care systems will face a complex environment of emerging risks that will have a direct impact on workers’ compensation. This should be of interest to healthcare providers, insurers and healthcare organizations.

Nurses work in the hospital, clinic and home care settings.  Nurses tend to spend the most time with the patient, assuming an active role of facilitating medical care, medication, and are often the ones tending to the patient’s various needs. Due to the direct interaction with patients, it is not a surprising result that nurses are the most frequently injured workers in health care.

What we learned

  • 70% of employers surveyed have a qualified self-insured program for workers' compensation injuries and permanent loss settlement funding.
  • 53% of American nurses are over the age of 50.
  • 65% of nurses worked shifts of 12–13 hours.
  • A majority of claims result from injuries to shoulders and back injuries - accounting for 71% of claims reviewed.  For workers over 50 years old, these injuries are 29% more costly than those 50 and under.
  • Approximately 80% of all work injuries are strains and sprain injuries.
  • The average medical cost of employees aged 51 and older is $4,300 and the total average cost of the claim is $8,200.
  • Safe Patient Handling and Mobility (SPHM) standards lower claims costs – $6,000 versus $7,800 – and have reduced the incidence of health care worker injuries by up to 95 percent.
  • The average cost of claims for health care systems where more than 25% of their staff is certified is $4,200 versus $7,300 for a system that has less than 25% of their staff certified in SPHM.
  • Health care systems will experience an annual loss rate of $0.75 per $100 of payroll, nationwide assuming a $500,000 per occurrence limit.
  • Loss rates are projected to increase at a 1% annual rate.
  • The frequency of workers compensation claims has been slowly and consistently decreasing over the past ten years.
  • Claim frequency is projected to decrease at an annual trend rate of 1% while claim severity, including medical, indemnity, and expense costs, may increase at 2% per year for 2017.
  • 50% of survey respondents use their TPA (Third Party Administrator) for pharmaceutical review. The average total cost of a claim is $5,600 versus $8,600 for those not utilizing this type of review
  • Liability payments are paid separate from the medical expense costs. These amounts are often paid for lost time from work, and travel expense to and from treatment sites.  In 2015, the average liability (indemnity payment to make one whole) was $22,600 for closed case files.
  • Average medical paid for closed case files in 2015 was $4500. Average expenses paid for closed case files in 2015 was $1360. 
  • Home care nurses had the highest average losses on lost time liability claims due to on-the-job injuries.   However, a different cause of loss is the third most frequent for the Home Health department and that is Vehicle Related claims.  This higher exposure to automobile accidents makes vehicle related claims the third most frequent cause of loss for the home health care department at 12.6% of all home health workers compensation claims.
  • Surgical nurses reported 33% of all injured nurse claims while ER accounted for 12.7% and ICU accounted for 12.1% of  on-the-job injuries
  • Healthcare is a fast-growing sector right now, and workers in this industry face a myriad of hazards on the job. Employers must measure their workers’ compensation exposure against their peers, maintain standards of practice and safety levels and reduce the overall cost of risk.

Domestic medical tourism may be an alternative worth consideration in a small number of cases:

  1. Removal of the injured worker from the local healthcare scene eliminates gossip, maintains privacy, and reduces bias in treatment and disability decisions
  2. May save money and simultaneously improve outcomes at a regional center of excellence (critical in rural and remote care settings where specialists may be scarce or limited)
  3. Employees feel appreciated and valued when their employer sends them to the best possible Center of Excellence instead of the in-house "company clinic" (even if the company clinic is excellent).
  4. Based on closed case file cost statistics, cross border health services rarely make sense or save money in this setting, and domestic medical travel may make sense in a small percentage of the surgical cases for the most severe injuries. Most cases are resolved with outpatient physical rehabilitation, bracing and splints, modest pain management, and work hardening programs sourced locally.
Distribution of Claim Counts and Incurred Dollars by Size of Loss
Size of loss % of Claim Counts % of Total Incurred
Less than $5,000 85.7% 10.5%
$5,001 to $50,000 11.0% 25.6%
$50,001 to $100,000 1.8% 17.0%
$100,001 to $250,000 1.1% 23.7%
$250,001 to $500,000 0.3% 14.2%
Greater than $500,000 0.1% 9.1%

Almost 86% of claims contributed less than 11% to the total incurred dollars.

Source: Aon, 2016

 

Overall impression with the study

My overall impression of the study was that it was well-developed, reasonable and informative. We congratulate Aon and its associates for the laudable work done on this biennial study.

Percent of claims by body part

Body part - injury
% of claims
Back 51.34%
Shoulder 20.06%
Wrist 6.74%
Arm 4.16%
Knee 3.98%

Source: Aon

Average severity
by Age Group
Average

Total Cost

Unlimited

Average

Medical Cost

Unlimited

<25 2300  1600
26-30 3000 2000 
31-40 5000 2800
41-50 7700 4100 
51-60 8100 4100
61-70 8500 4600 
70+ 9200  5700

As shown above, the average total workers compensation cost, including indemnity, medical, and expense, for the 51 and older age group is around $8,200 per claim with a corresponding average medical cost of $4,300.

Source: Aon, 2016

 

Self-insured risk for workers comp in healthcare organizations

For the vast majority of health care organizations, workers compensation risk involves a self-insurance program, whereby the health care system retains risk for claims up to a per occurrence “attachment point.” Systems establish a self-insured retention by qualifying under respective state laws. Workers compensation is slightly different than other lines of business in that it’s highly regulated by the government to ensure employers are able to fund their workers compensation costs. There are multiple vehicles health care systems can use to fund the retained portion of their workers compensation costs. According to the Aon survey, the most frequently used funding mechanisms are balance sheet entry, a captive, and a trust.  Commercial re-insurance coverage is usually purchased to cover amounts in excess of the attachment point subject to a per occurrence policy limit. the listing of these insurers is then included on Schedule A of the Form 5500.

29% of employers fund their deductible or retention through captives and 19% use a trust. The remainder use balance sheet entry.

In a typical large deductible program, the commercial re-insurer provides coverage up to a certain per occurrence policy limit and then seek reimbursement for the deductible portion of the claim.  Aon identified that about 30% of healthcare organizations have a large deductible program and 70% have a self-insured retention.

The selection of attachment points and insurance limits is the product of negotiation between insurers and insureds. The system’s risk taking philosophy and claim history are all important factors in the determination of attachment and limit. For smaller health care systems, having less than 750 physical hospital beds, do not have retentions or deductibles higher than $1 million, however, for larger systems, having greater than 750 beds, approximately 40% have retentions greater than $1 million.

No mention of how lasered claims were handled by the commercial reinsurers.

Program management, contracting authority and settlement in direct supplier relationships

Administering a workers compensation program involves developing, maintaining, and managing the program. Employers approach the workers' compensation program management in a variety of ways. The employers who are self-insured are responsible for establishing standards and procedures for all matters relating to workers compensation, including provider contracting, claim investigations, settlements, and litigation. They are also responsible for effective communication with all parties involved, including employees, managers, insurance carriers, medical personnel, and even lawyers.

  • 34% use a TPA for legal bill review. This function is solely to examine legal bills associated with workers compensation claims. 
  • 13% use a return-to-work vendor (an outsourced case management service)
  • 5% use a nursing hotline before treatment
  • 48% use pharmaceutical review outsourced service

Many states use a utilization review service to determine if a proposed treatment for an injured worker is necessary and/or appropriate. In California, this step is mandatory for every treatment request.

Who handles the program management?

  • Various means 22% (TPA, ASO, etc.)
  • Risk Management Department 39%
  • Finance 0%
  • HR or Legal 39%