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Benefit a Burden for Home Health Care Aides

Employer health benefits used to be an attractive perk for home health care aides in Massachusetts. However, the high cost of complying with the state requirement that all individuals purchase health insurance has inspired some to work less in order to remain eligible for state-funded health care.


“Before health care reform it was attractive [to offer health insurance]. Now it’s not very attractive at all,” says Lisa Gurgone, executive director of the Massachusetts Council for Home Care Aide Services, a trade association.


Many in the industry hope that national health care reform efforts will reduce the cost of health insurance for low-wage workers who make $10 to $15 an hour. While the recession has made it easier for home health care companies to find workers willing to care for elderly patients, some worry that when the economy rebounds they won’t have enough workers to meet demand.


“We have seen a number of employees who cut hours back to no longer qualify for our plan and flip over to the state connector plan,” says Mike Trigilio, president of Associated Home Care in Beverly, Massachusetts. “In some cases it’s lesser cost, but it’s also a lesser plan. But they just want to comply with the requirement.”


Home health care workers face especially high insurance premiums because they tend to be older, female and prone to injury. Federal health care reform legislation could change insurance laws to narrow the cost gap between young, healthier workers and older, sicker ones, as well as provide subsidies. However, it has yet to be seen whether the actual cost of insurance will come down.


Some employer groups have proposed allowing people to buy catastrophic coverage as an affordable way to comply with the requirement that all workers have insurance. Unions and other groups believe a publicly run insurance plan would act as a low-cost alternative for workers.


Either way, affordable health insurance is essential to recruiting the next generation of home health care workers, says Carol Regan, director of government affairs for PHI, a research and advocacy organization for home health care workers. Nationally, there are 3 million home health care aides. As baby boomers age, a million more home health care aides will be needed within the next decade.


“We better figure out a way to make these good jobs, because they are going to be caring for our mothers, brothers, sisters and us,” Regan says.


Workforce Management, March 2010, p. 18 — Subscribe Now!

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Mandatory Health Care a Bitter Pill for Massachusetts Low-Wage Workers

Soon after Massachusetts state legislators passed a law in 2006 requiring full-time workers to buy health coverage from employers that offered it, Mirlene Desrosiers, a home health care worker, traded the state health insurance she could afford for an employer plan she could not.


Because her weekly gross income was a mere $500, she could have dropped insurance altogether and been exempt from paying a penalty. But with two small children and a physically demanding job that regularly entails lifting elderly patients, she felt that going without health coverage would have been irresponsible.


To pay her health insurance premium of $287 a week, she upped her hours, often working more than 120 hours a week at four different health care companies. She says she lives to work and works to pay for health insurance.


“Either way it’s a no-win situation. If you have insurance, you have to pay your life for it,” says Desrosiers, who is 41 and moved to the U.S. from Haiti 23 years ago. “If you don’t have it you still have to pay. So you might as well have it.”


Health care reform in Massachusetts was supposed to help those least likely to be able to afford health insurance. But that has not been the case for some low-wage workers, particularly home health care aides. While Desrosiers’ working life may seem extreme, owners of agencies say runaway health care costs mean that low-wage workers are purchasing insurance that is increasingly unaffordable.


“Most of our employee base does not want health insurance because they are living check to check, week to week,” says Mike Trigilio, president of Associated Home Care and Desrosiers’ employer. “They are barely able to muster enough money together for rent or food, let alone health insurance. In the past, a lot of employees would go without it. Now they are forced to take it, and it puts a strain on them and on our company.”


National health care reform efforts could have significantly improved the lives of low-wage workers like Desrosiers through generous federal subsidies that would help them pay for health coverage. But since the election of Massachusetts Republican Sen. Scott Brown in January to fill the seat vacated by the late Democratic Sen. Edward Kennedy, the passage of the Democrats’ health care plan appears unlikely.


If reforms do pass, they may include changes in insurance laws, including a requirement that all Americans purchase coverage without the subsidies to help them do so. If that happens, the federal government may do to low-wage workers across the country what Massachusetts did in 2006.


To this already complex situation, add an underlying and persistent threat to businesses and workers alike: growing health care costs. As the current impasse over federal health reform demonstrates, it’s easier for legislators—whether in D.C. or in Massachusetts–to extend coverage than to bring down costs.


“We were hoping there would be meaningful cost containment in federal legislation, but there doesn’t seem to be anything there,” says Rick Lord, president and chief executive of Associated Industries of Massachusetts, a business association. “That’s a huge challenge we face if we want to sustain this reform law.”


The lesson of Massachusetts

Lord knows the situation well. As a board member of the Commonwealth Connector, the organization created by Massachusetts to help residents purchase insurance, Lord has seen that expanding coverage in the state has been relatively simple. Massachusetts requires that individuals carry health insurance and makes most employers offer it. Today just 2.6 percent of the state’s residents are uninsured—the lowest percentage in the country.


But bringing down health care costs has been a much more complex and elusive goal.


“Reform’s been very costly to companies like us,” says Jonathan Morin, comptroller for Intercity Home Care in Salem, Massachusetts. “We’re getting no rate relief. We’ve incurred additional costs for our staff. In the end the workers pay for it.”


Much is made of the fact that an employer requirement in Massachusetts has increased the number of people who receive health insurance through work. Employers had predicted, as they do today, that any requirement to provide insurance harms an employer’s ability to tailor the scope and cost of health benefits to the needs of the business and its employees. They also predicted that employers faced with these costs would rather drop coverage.


But today, 96,000 more people in Massachusetts get their health insurance through their employer than before reform. The reason for this increase is that workers who are required to have insurance have few options. Most must take the health coverage they are offered, at the price offered.


If an employer with more than 50 full-time workers offers a health plan and pays for at least one-third of the premium, employees are no longer eligible for state-subsidized care, regardless of their income. They can forgo health insurance and pay a fine for flouting the law unless their premiums are deemed unaffordable. But if they want health insurance, they must take what is offered to them by their employer.


The insurance may not be affordable to workers, and though legislators could have required employers to pay more toward their workers’ insurance or pay heavier fines for not doing so, such a stance would have doomed the Massachusetts legislation to failure, Lord says.


“Clearly, putting higher spending contributions on employers would have been controversial,” he says.


The state has been hesitant to extend a helping hand beyond the assistance it already provides. This year, Massachusetts is providing subsidies to 180,000 residents who earn up to 300 percent of the federal poverty level, at a cost of $724 million, says Richard Powers, a spokesman for the state’s Commonwealth Connector. There are, however, 600,000 workers who get their health insurance from employers and who earn 300 percent of the poverty level. Had the state allowed into the program workers whose health care premiums were deemed too expensive, the cost would have been enormous, Lord says.


And while many workers presumably receive generously subsidized insurance from their employers, the cash-strapped state, facing a budget shortfall because of the recession, can barely afford to provide insurance assistance to those who are already eligible for it, Powers says.


Work less, get cheaper health care

Some workers nevertheless are trying to get state-subsidized care. To get around the requirement that they purchase their employer’s health insurance, some people have made themselves ineligible by working fewer hours. By becoming part-timers and earning less, they become eligible for state-subsidized health care.


Carol Regan, director of government affairs for PHI, a research and advocacy organization for home health care workers, calls this race to the bottom one of the “perverse employment outcomes” of the state’s health reform law. It creates what economists call “implicit marginal tax rates,” a situation in which subsidies create incentives for people to work less because working more would mean reduced benefits.


In a recent survey, PHI reported that 25 percent of home health care agencies said they reduced workers’ hours or made it harder to become a full-time employee to make the workers eligible for state-subsidized care.


“These disincentives to work are problematic in the home health care industry,” Regan says, adding that workers are in demand. “It’s a fast-growing industry. How do you get enough people to work there?”


While the recession has ensured a steady stream of job applicants, agencies nonetheless acknowledge that some health care aides work several part-time jobs so they don’t become full-time employees. Doing so allows them to become eligible for state-subsidized health care if they meet the income requirements.


“I think people will go where it’s least costly to them,” says Bob Dean, vice president of All Care Resources, a home health care agency in Wakefield, Massachusetts. “If they are working a full-time job, then they’re basically just working to pay for insurance.”


The lesson from Massachusetts is that national health care reform that requires all people to buy insurance coverage must not make it so onerous that working becomes a disincentive.


“If the cost of health care and the cost of living continue to go up, a lot of people are going to just stop working and go on welfare and get the health insurance that the government offers, if that would be in our benefit,” Desrosiers says, speaking a day after Scott Brown was sworn into office as the 41st Republican senator. “I just hope it doesn’t get to that point. I’d rather make my own money than wait for the government to give it to me, you know what I’m saying? I hope all parties get involved and come up with a solution that is best for everybody.”


Higher costs for older workers

Of course, Desrosiers is determined to work. For now, she prefers to pay higher health care costs by working harder and earning more. So too does Sandra Broughey, another home health care aide. Broughey, 58, could have gone without insurance rather than increase her hours in order to pay the $57 a week required for her insurance premium. And for many years, Broughey did go uninsured.


But a series of health problems—a tumor in her eye, a lump on her chest—changed her thinking. She was glad that reform forced her to get coverage, first through the state, then through her employer.


“I tell my company all the time that I’m so glad I had what I had,” she says.


Trigilio, president of the company that employs both Desrosiers and Broughey, says that three years ago, when the reform law went into effect, he spent 2 percent of his payroll on health care. Today he spends 8 percent. And next year he expects to pay 10 percent of his payroll on health care costs. Most home health care agencies have workers like Broughey—older women who are at risk for on-the-job injuries. The rate increases that the agencies have experienced have put health care further out of reach for their average workers.


“When we go out to get health insurance, we get [killed] on our rates because we have women, they’re mainly middle aged and they work in the health care industry—that alone adds 25 percent to the cost,” says Morin, comptroller of Intercity Home Care in Salem.


Stretched thin

Desrosiers works full time for one agency and part time for three other health care employers and makes $12 to $15 an hour. On a recent Friday afternoon, she was just finishing up a double shift that had begun at 11 p.m. the previous evening at an elderly client’s house. She was hoping to arrive home before her two youngest daughters returned from school.


“When I get home I will cook for my girls, then we’ll do some homework,” she says. After that, she’ll have a quick nap and be out the door before 6 for another overnight shift, which is often quiet enough to grab a snooze.


Since Desrosiers can work only when she is needed and gets paid only when she works, she works whenever she can. Her days off are few and far between. Her dreams of becoming a nurse are on hold.


“When I feel my body getting very tired, I just take the time off without pay,” she says. “Because my job does not have paid sick days, if you take the time off you don’t get paid.”


Democratic health care reform proposals, including the Obama administration’s, provide generous subsidies to workers whose premiums eat up a large chunk of their income. But employers have criticized those proposals for including penalties against businesses while not doing enough to bring down the cost of health insurance.


Trigilio is all for providing health insurance, “but companies like ours can only offer so much,” he says.


Americans wonder whether they will be able to afford health insurance if it is required by law. The same question worries employers as they consider their own financial viability. In Massachusetts, policymakers decided to put most of the burden on workers rather than employers. Federal reform could provide subsidies to low-income workers, but unless it also can bring down health care costs, reform will amount to cost-shifting to businesses and the federal government.


For low-wage workers, especially for home health care aides like Desrosiers and the businesses that hire them, national health reform represents a major test of the employer-based health care system. Desrosiers says she would measure the success of national reform by the size of her savings account. By that measure, reform in Massachusetts has fallen short.


“I thought it was going to help me,” Desrosiers says. “I thought it was a great opportunity for families like mine to have health insurance. We could pay less money for health insurance and have more money for savings. I have a checking and savings account and the savings has nothing. You can’t really save, my friend. You can’t really save.”


Workforce Management, March 2010, p. 17-20 — Subscribe Now!

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Small Firms Face Spiking Health Care Premiums

The recent political firestorm in California, where individuals are seeing increases on health insurance premiums of 39 percent, has galvanized renewed momentum for federal health reform. Yet individuals are not the only ones facing major rate hikes.


Small businesses are staring at premium increases as high as 50 percent with little relief in sight, say employers, brokers and insurance experts.


Health care costs on the whole have moderated in recent years, but that has not given small employers much relief. The federal Centers for Medicare and Medicaid Services reported last month that health care spending rose 4.4 percent in 2008, the smallest increase in nearly 50 years.


In a fall 2009 survey by consulting company Mercer, small companies employing 10 to 499 people expected to see an average health care cost increase of 9.5 percent based on their projections. Actual increases have been more than that, observers say, though no comprehensive surveys exist yet on this year’s renewal rates.


Among the reasons cited for the rate increases are concerns that health care reform would lower profits, a shrinking market that leaves insurers with the sickest members, and increased use of medical services as members lose their jobs and employer-provided health insurance.


“I think anecdotally we are hearing consistently higher increases from our members,” says Amanda Austin, director of federal public policy at the National Federation of Independent Business. “It is possible they are experiencing some frontloading in anticipation of new reforms that may eventually cap these types of increases.”


Gary Klaxton, a vice president at the Kaiser Family Foundation, says health care reform is just an excuse.


“They are charging more money because they want to charge more money and they want to blame someone else,” he says.


Ben Geyerhahn, New York project director for Small Business Majority, a group supporting health care reform, says his company’s policy to cover five people will cost 20 to 30 percent more this year. He says that in New York, small businesses with fewer than 100 employees on average spend about 18 percent of their payroll on health insurance.


According to statistics from the New York Department of Insurance, small businesses faced rate increases as high as 58.67 percent at Group Health Inc. A spokeswoman for the company says that rate increase was an aberration due more to the fact that the product, an HMO, had few members, most of whom had high medical costs.


The high rate increase is emblematic of the small group market as a whole, where those who remain are the sickest individuals and the most in need of insurance. They are also the most expensive to cover.


Lisa Horowitz, a broker in New York City with 22 years of experience, says the last year has been particularly hard for small employers in New York state, where rate increases are based on an insurer’s book of business for a geographic area.


“What I have seen this last renewal cycle starting this time last year until now has been astronomical,” Horowitz says. She has seen routine rate increases around 20 percent.


New York state insurance regulators don’t have the power to approve rate increases before they are issued, though legislation has been introduced to give them so-called prior approval of insurance rates.


Instead, the department investigates whether a rate increase was justified at the end of the year. Often it is not, says John Powell, assistant deputy superintendent for health at the New York Insurance Department.


From 2000 to 2008, the state’s insurance regulator ordered insurers to return $48 million to plan members.


Powell says such refunds are not given to small businesses whose rate increases forced them to drop coverage.

—Jeremy Smerd


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Benefits Administrator Charged With Taking $40 Million in Union Health Care Funds

Federal prosecutors in New York indicted a benefits administrator on charges of embezzling more than $40 million from a union’s health care and pension funds.


In the indictment filed Wednesday, February 17, in federal court in Manhattan, U.S. attorneys charged Melissa G. King with taking millions of dollars from a union representing construction workers who dig New York’s subways and water tunnels.


King had been hired to administer three benefit funds for the union, formally known as the Compressed Air and Free Air Foundations, Tunnels, Caissons, Subways, Cofferdams, Sewer Construction Workers Local 147. The funds were used to pay retirement benefits, pension annuities, certain medical expenses, unemployment and death benefits, workers’ compensation and severance payments.


King, 58, was hired by the union to collect union dues, fund and maintain the union’s various bank accounts and make filings with regulatory agencies.


The union paid King about $3.8 million from 2002 to 2008 for these services, prosecutors say.


The 12-count indictment handed down by a grand jury, however, alleges that during that period, King transferred more than $40 million into various nonunion bank accounts she used to spend on personal items.


King allegedly spent $5 million on at least nine horses and “horse expenses,” amassing a large collection of show horses.


King allegedly also used the money to hire housekeepers and pay the mortgage on a $900,000 property. The indictment states she spent millions of dollars on clothing, jewelry and luxury cars, including a Porsche Cayenne sport utility vehicle, with funds diverted from the union.


Preet Bharara, the U.S. attorney for the Southern District of New York, said that King then deposited $11 million into various bank accounts held by her company, King Care. Bharara also said King used the union money to pay for more than $7 million in personal expenses on a credit card.


King has denied wrongdoing, according to press reports.


Prosecutors first unveiled the case in a criminal complaint in December.


Irregularities had also been found in King’s previous dealing with another union, the United Probation Officers Association; she managed its health care benefits funds.


An audit performed by the New York Comptroller’s Office found that the probation officers union had allowed King to charge the union $776,000 for computer equipment that should have come out of the fees previously paid to King for her services, according to The New York Times.


—Jeremy Smerd


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Extension Likely for COBRA Subsidy

Experts say employers should brace for another extension of the federal subsidy of COBRA health insurance premiums for involuntarily terminated employees, with President Barack Obama and top Senate Democrats adding their support to the plan.

The Obama administration included the extension in its proposed fiscal 2011 budget, which it sent to lawmakers February 1.

In Congress, key lawmakers also are backing an extension. Senate Majority Leader Harry Reid, D-Nevada, and Finance Committee Chairman Max Baucus, D-Montana, and several other top Senate Democrats have distributed a description of a soon-to-be-introduced jobs bill that would include extending the COBRA subsidy, but provided no specific details. One proposal under discussion, sources say, would extend the subsidy an additional three months so employees laid off in March, April and May would be eligible.

Under the extension proposed by the administration, employees laid off from March 1 through December 31, 2010, would be eligible for the 65 percent subsidy for up to 12 months.

Previous subsidies affected employees laid off from September 1, 2008, through February 28, 2010. Those individuals, who are eligible for 15 months of premium subsidies, would not be affected by the extension proposed by the White House.

Driven by administration and congressional support, along with the nation’s continuing high unemployment rate, another COBRA subsidy extension is almost certain, Washington observers say.

“All signals say to me that employers should prepare for another extension,” said Frank McArdle, a consultant in the Washington office of Hewitt Associates Inc.

“There is huge public pressure on legislators” to pass another extension, said Kathryn Wilber, senior counsel-health policy with the American Benefits Council in Washington.

Congress included COBRA premium subsidies as part of a broad economic stimulus package it approved and Obama signed into law in February 2009. The American Recovery and Reinvestment Act of 2009 included a 65 percent COBRA subsidy up to nine months for employees laid off from September 1, 2008, through December 31, 2009.

Congressional researchers estimated the subsidy would benefit about 7 million former employees and their families and cost about $25 billion.

Then in December, Congress approved and Obama signed into law a Defense Department spending bill with a provision extending the subsidy to a total of 15 months for employees laid off from September 1, 2008, through February 28, 2010.

The 65 percent subsidy has been a boon for millions of laid-off employees and their families who, in many cases, would have been hard-pressed to pay the entire monthly premium, which typically is about $400 for individual coverage and $1,200 for family coverage.

The availability of the subsidy has sent COBRA opt-in rates soaring. In a survey of 200 large employers, Hewitt found that the percentage of laid-off employees opting for COBRA more than doubled to 39 percent from March 1, 2009, when the subsidy generally first became available, through November 30, 2009. In contrast, from September 1, 2008, through February 28, 2009, an average of 19 percent of involuntarily terminated employees opted for COBRA.

The original COBRA subsidy law, which went into effect almost immediately after passage, put enormous pressure on employers to locate and inform former employees who initially declined COBRA of their new right to obtain subsidized coverage.

“Initially, there was huge turmoil,” recalled Gretchen Young, vice president of health policy with the ERISA Industry Committee in Washington.

Over time, though, administrative and other problems eased as employers and their consultants put systems in place and as federal regulators provided guidance that resolved many questions, not the least of which was defining situations that qualified laid-off employees for the subsidy.

“Within about six weeks to two months, problems eased,” said Scott Keyes, a senior consultant with Towers Watson in Stamford, Connecticut.

In December, when the initial nine-month subsidy started to run out, employers and administrators had another period of uncertainty, not knowing whether Congress would extend the assistance. Many employers, uncertain of whether the subsidy would be extended, charged the full premium for beneficiaries whose nine-month subsidy eligibility had run out.

In mid-December, Congress extended the subsidy, requiring employers to again notify beneficiaries of the change. For those who were overbilled because they paid the entire premium for December, beneficiaries typically received a credit applied to the next COBRA premium payments along with an explanation of the adjustment, said Jennifer Henrickson, a legal consultant with Hewitt in Lincolnshire, Illinois.

Depending on when and how Congress extends the subsidy, employers and administrators could again face some of those same issues.

Aside from administrative issues, experts say the subsidies have boosted employers’ costs, though definitive statistics are not yet available.

That is because those opting for COBRA typically are above-average users of medical services. While the risk pool has almost certainly improved because of the subsidy, premiums certainly are not covering the cost of claims, says the ERISA Industry Committee’s Gretchen Young.

The cost can be significant, especially for employers who have laid off large numbers of employees, Young said.


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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Analysis Finds Defined-Benefit Plans Outpace 401(k) Returns

Defined-benefit pension plans are consistently earning higher rates of return than 401(k) plans, according to an analysis by consulting firm Towers Watson.


The median annual rate of return from 1995 through 2007 for defined-benefit plans was 10.13 percent, compared with 9.06 percent for 401(k) plans, Towers Watson found.

Towers Watson consultants say it isn’t surprising that rates of return in defined-benefit plans have topped those of 401(k) plans.

Participants in 401(k) plans “often do not optimize their investment strategies. Even with investment education and better default investment options for 401(k) plan participants, DC plans do not replicate all the advantages of DB plans and are unlikely to outperform DB plans, which generally have extended investment horizons and economies of scale,” said Mark Warshawsky, director of retirement research at Towers Watson.

The analysis, which is based on pension plan reports employers file with the federal government, looks at individual years. In 2007, the most recent year included in the analysis, it found that the median rate of return for defined-benefit plans was 7.71 percent, compared with 6.78 percent for 401(k) plans.

The biggest difference during the 13-year period was in 2000, when the median rate of return for defined-benefit plans was -0.01 percent, compared with a 401(k) plan loss of 2.76 percent.

The highest rate of return for defined-benefit plans during the 13 years was in 2003, with a median rate of return of 21.35 percent. During the same period, 401(k) plans registered a 19.68 percent median rate of return.

The top year for 401(k) plans was 1997, when the median rate of return was 19.73 percent, compared with 18.82 percent for defined-benefit plans.

In all, median rates of return for defined-benefit plans were higher than 401(k) plans in nine of the 13 years analyzed by Towers Watson.

Still, despite generating higher investment returns, the number of defined-benefit plans open to new employees continues to fall. As of May 2009, 45 percent of Fortune 100 companies offered a defined-benefit plan to new salaried employees, down from 90 percent in 1998, according to an analysis last year by Watson Wyatt Worldwide prior to its merger with Towers Perrin. By contrast, 55 percent of Fortune 100 companies offered only a defined-contribution plan to new salaried employees last year, compared with 10 percent in 1998.

Employers cite many reasons for moving away from defined-benefit plans. One is  the unpredictability of the amount of required contributions, due to the swings of investment results and interest rates. Another is their concern about future costs as plan participants live longer.



Workforce Management. To comment, e-mail editors@workforce.com.


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Recession, Demographics Hasten Shift Away From Employer-Based Health Care

Newly released federal estimates show how the recession has quickened the decline of employer-based health care benefits.


As soon as next year, public spending on health care will outstrip spending by employers and insurers for the first time. The trend toward greater spending on health care by the government has been long in the making, growing steadily as the U.S. population ages into Medicare coverage. Last year, however, researchers predicted that shift would happen in 2016, an estimate that has now been moved up to 2011 or 2012.


Private-sector job losses the past two years have sped up the shift to government payment. Last year, the number of people who received their insurance through the private market declined by 1.2 percent, despite generous federal subsidies in the stimulus bill to help laid-off workers continue their employer-based coverage.


The report by the Centers for Medicare and Medicaid Services, published Thursday, February 4, in the journal Health Affairs, said that national health care spending grew to a new high in 2009: $2.5 trillion.


The 5.7 percent year-over-year growth, combined with a projected decline in gross domestic product, means that more than 17 cents of every dollar of economic output is consumed by the health care sector, also a new high. In 2008, by contrast, health care spending grew 4.4 percent, which was the lowest rate in nearly 50 years.


“I think the slow erosion of employer-based health insurance has been underway since 1980,” Jon Gabel, senior fellow at the National Opinion Research Center, wrote in an e-mail. “When we have an economic recession, we show more dramatic decline.”


Government health care spending, meanwhile, grew 8.7 percent last year, compared with 2 percent among private health care payers. The increase was driven by growth in Medicaid enrollment as a result of unemployment. Increased government spending is expected to continue this year as subsidies to help laid-off workers stay on their employers’ health plans expire and as unemployment remains high.


Even if the recession had not occurred, public-sector health care spending was expected to be larger than private-sector spending—a consequence of the baby boomers becoming eligible for Medicare.


“No surprise there,” said Paul Fronstin, director of health research and education at the Employee Benefit Research Institute. Of greater consequence is the growth in Medicare spending, Fronstin said.


A year ago, the Medicare Board of Trustees sped up by two years its timetable for when the Medicare trust fund would become insolvent because of a drop in tax revenue due to job losses. The health care program for retirees is expected to run out of money in 2017.


Job losses and the shrinking market for private insurance have also increased premiums for enrollees, the report by the Centers for Medicare and Medicaid Services said. An improved job market, on the other hand, is likely to increase the number of people who get health insurance through their employers.


The report did not account for proposed changes in law contemplated as part of the Democrats’ stalled health reform legislation. The authors said they would write a new analysis if and when health care laws are reformed.


—Jeremy Smerd


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Kraft Cant Cut Claimants Workers Comp Benefit, Court Rules

Kraft Foods Inc. failed to provide sufficient evidence of available alternative employment when it attempted to reduce a workers’ compensation claimant’s partial disability benefits, a Pennsylvania appeals court ruled Friday, January 29.

The Commonwealth Court of Pennsylvania in Kraft Foods Inc. and ESIS-Wilmington WC v. Workers’ Compensation Appeal Board  upheld an appeal board conclusion that evidence establishing a claimant’s earning power must consider the claimant’s capabilities and evidence of actual job listings.

The decision comes after a February 2004 accident in which claimant Leonard Anterola injured his right knee while employed by Kraft Foods as a utility worker. He received compensation benefits.

But in 2007, Kraft filed a petition seeking to modify those benefits alleging “work was generally available” for the claimant,” court records show. A workers’ compensation judge allowed the modification, but the employer appealed when the appeal board overturned the judge’s finding.

Kraft argued that under a Pennsylvania law requiring employers to provide evidence that jobs are available, it could rely on a testimony from a rehabilitation counselor that, in general, entry-level jobs were available in the labor market and that the claimant’s experience, education and sedentary restrictions qualified him for work paying $7 to $10 per hour.

The employer’s argument lacks merit because the law requires employers to show “existing actual jobs are open and available,” the appeals court ruled. That burden does not change when an employer relies upon a claimant’s own evidence, the court said.



Filed by Roberto Ceniceros of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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10 Ways to Find Dollars in Workers Comp Loss Run Reports

Attorney and orator Russell Conwell earned more than $6 million delivering his famous “Acres of Diamonds” speech, whose moral was that most people spend their lives looking far and wide for riches that can most often be found right in front of them.


It’s the same in workers’ compensation. Employers get excited about lower premiums while completely missing the big money that’s right in front of them in their loss run reports, which are prepared by insurance providers and show the costs associated with reported claims as of a certain time period.


By paying careful attention to loss run reports, employers provide themselves with a road map for finding and recapturing workers’ comp dollars.


While it’s true that a single field in a loss run report cannot provide meaningful overall information, an employer can spot a trend if that same field is reported multiple times. With this information, the picture takes clearer shape and can be examined, understood and used to make corrections.


Here are 10 types of information found in loss run reports that can help an employer improve performance and reduce workers’ comp costs:


1. The length of time between a loss and when it’s reported. Data fields such as date of loss and date reported tell a story about the importance of accidents to the employer. A long time between the two dates can be seen as a clear message to injured employees (as well as co-workers): Job-related accidents are not a priority or important to their employer. Employers who care make sure reports are submitted within 24 hours of an injury. This lets employees know that the company takes injuries seriously.


2. New-hire injuries. Injuries within the first 90 days of employment may point to a need for the review of training procedures. If injuries involve machinery, it could indicate improper technique or the need for additional training in the performance of the job.


3. The percentage of lost-time claims. When reviewing a loss run report, the number of lost-time claims should be scrutinized against the total number of claims. The national average for lost-time claims is in the range of 20 to 25 percent of total claims. A percentage higher than that may indicate that a review of the entire return-to-work process and policy is warranted.


4. Percentage of litigated claims. Good loss run reports indicate whether or not a claim is litigated. A high percentage of litigated claims can be a red flag, and may indicate an overall lack of trust that employment might not continue, fear relating to other employment issues, or an overall misunderstanding of the workers’ compensation process.


When distrust, fear and lack of understanding exist, injured workers may feel they need to retain the services of an attorney to receive the benefits they deserve. If the litigation rate is in the double-digit range, then an employer definitely needs to address the trust issue.


It’s worth noting that the workers’ compensation process is based on the “exclusive remedy” premise; so, if litigation is involved in the claim process, it would seem to indicate some other part of the process is not performing as it should be.


5. Repetitious claims. There should be a discussion with any employee who has more than one accident a year. You need to try to determine the cause of these accidents. Statistically speaking, more injuries are caused by unsafe acts than by unsafe conditions.


Try to identify what might be driving the unsafe act. Was it a true random accident, or when looking at accidents in total, was it a clear call for attention to a deeper issue? If employees are not paying attention to their jobs to the extent that they are sustaining injuries, the employer should find out why.


6. Claims with small amounts of indemnity paid. If a claim shows less than $1,000 paid for lost wages, it could be pointing to a missed opportunity for a modified return-to-work arrangement, since the amount probably represents lost time of one to two weeks or less. It might not always turn out that a modified return-to-work solution was possible, but it’s worth checking out.


7. Percentage of open claims. For a specific policy year, what percentage of the total claims remains open? The goal should be to close out all claims as quickly as possible. The longer a claim remains open, the more it costs.


Once a policy year expires and a new policy year begins, special attention should focus on the claims that remain behind. The number and costs of these claims should be monitored monthly, with an eye toward what actions are needed to resolve them. Constant monitoring results in lower costs.


8. Total costs incurred for each claim. This represents the combined total of what was paid and the estimate for what will be paid by the time the claim is closed.


The major issue is this: What can be done to reduce the “expected to be paid” expenses? Understand what the insurance company expects to occur and then analyze what might be done to change that expectation or result. You can monitor this by simply watching the average cost per claim (obtained by dividing “total incurred” by total number of claims.


Small incremental increases in this number are to be expected, but large spikes should draw attention to the claim detail for that policy year. Locate the claims involved to determine the specific claim that’s driving up the expenses. Ideally, you would already be aware of this claim and understand why it is a cost driver. If not, it’s time for more regular conversations with your insurance company’s adjuster about your losses.


Try to operate on the “no surprises” principle. The first time you find out about a serious claim should not be when you receive your loss run reports. It’s probably far too late to have much of an impact on the results.


9. Departmental comparisons. You should of course look at the frequency and severity of accidents by department to identify problem areas. But it’s actually more important to look at the departments that perform similar functions while maintaining low frequency and severity of accidents. They are doing a whole lot right! This is an opportune time to find out why one department may be functioning at a higher level than the others and then apply the best practices to other departments.


10. Policy-year totals. The number of claims and “total incurred” (that is, funds already spent plus funds expected to be spent in the future for each policy year) can help determine whether your program is following the same track, be it positive or negative.


The average cost per claim (“total incurred” divided by the total number of claims) may not be the same from year to year. The older policy years may have higher numbers, since they have been open longer. However, the movement of the average costs from policy year to policy year can be a good indicator.


In the same way, major changes from policy year to policy year may also reflect changes in a company’s structure or restructuring. For example, I recently reviewed a loss run report for an employer who ran a second shift for three years with an average cost per claim in excess of $15,000 each year. The fourth year the average cost per claim dropped to about $5,000. Such a change should have prompted questions—what happened in that fourth year?


These 10 tips for searching loss run reports will help you identify problem areas and resolve them. That’s like finding diamonds in your own back yard.

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Regulations Clarify Mental Health Parity Act

Employers would no longer be permitted to require separate deductibles for mental health and medical treatment under new proposed parity rules issued last week by the departments of Health and Human Services, Labor and the Treasury.

Mental health and substance abuse treatment also must be equivalent to that provided for medical and surgical care within benefit classifications and coverage tiers, such as in- and out-of-network care, emergency care and prescription drugs, according to the rules, which implement the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act. That 2008 law requires group health care plans offered by employers with more than 50 employees to provide the same coverage for mental health care services as for other medical, surgical and substance abuse services.

In addition, employee assistance programs cannot serve as gatekeepers, restricting or directing mental health care, unless a similar form of medical management is applied to medical and surgical benefits, according to benefit consultants’ preliminary interpretations of the new regulations.

“If you don’t have to jump through those hoops for medical/surgical, these regulations would prohibit this requirement for mental health and substance abuse treatment,” says Sharon Cohen, an attorney with Towers Watson in Arlington, Virginia.

Employers also cannot require employees to exhaust EAP benefits before they can access mental health care if a similar requirement does not exist for accessing medical care.

The regulations also appear to prohibit charging higher “specialist” co-payments for mental health providers.

“Our interpretation is that mental health care providers are specialists, but that does not seem to be the case in these regulations,” says Kathy Mahieu, a senior consultant in Hewitt Associates Inc.’s health management consulting practice, based in Norwalk, Connecticut.

The new regulations give employers until the first plan year beginning on or after July 1, 2010, to meet the requirements. The law took effect October 3, 2009.

The extended effective date also could give plan administrators time to develop systems for tallying up the value of mental health and substance abuse treatment and medical/surgical treatment, something that is not always done when the two benefit programs are administered separately.

“There are issues around the timeliness of sharing information. If someone gets an [explanation of benefits] that says they haven’t met their deductible because it doesn’t include the mental health care used,” then the plan would not be in compliance, according to Cohen.

Although the parity rules were developed based on the three departments’ review of more than 400 public comments received, additional comments still are being sought on such areas as “nonquantitative” treatment limits, such as precertification and utilization review; and how coverage for prescription drugs is determined, such as whether step therapy can be required for prescription drugs used to treat mental health conditions.

Comments are due May 3.



Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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