Thursday, January 18, 2007

Any Lessons From Workers' Comp Reform?

Today's Boston Globe Op/Ed pages have a frustrating piece by Stephen D'Amato, a former Massachusetts insurance regulator who co-drafted the Workers' Compensation Reform Act of 1991. D'Amato tantalizes us with the idea that our skyrocketing health insurance costs can be brought down just like they were able to bring down skyrocketing workers' compensation insurance rates after 1991. Rather than give us details of what they did then or how they did it, however, he "skip[s] to the happy ending" where workers' comp rates are 60 percent lower than they were before. Yes, he does advocate that the way to get from here to there is for stakeholders to identify "changes that help all parties" and cooperate to an "unprecedented level", but the result is more pep-talk than policy prescription. It's a longer version of "Hey, if we all get together and work real hard at it, we can reform heath care just like we did workers' comp!" Isn't getting the industry together with activist and employer groups how the current health insurance law was born? Am I naive to think that this is not going on currently at the Health Insurance Connector Authority?

So, to fill in the part between Governor Weld's election and the "happy ending", I tried to find out exactly what sort of reforms were passed in 1991 and whether we could learn anything from what was passed then that we might transfer to our current insurance rate problems, whether it be health insurance or auto insurance. As far as workers' comp goes, the Associated Industries of Massachusetts has a very readable historical overview that includes the 1991 reforms. In addition, the Pioneer Institute provides this nutshell synopsis:

Reforms passed in 1991 included a new emphasis on return to work and the establishment of procedures to terminate benefits to those who unreasonably refuse to work. Specific changes included state-appointed impartial medical examiners to replace "dueling doctors," provision for automatic termination of benefits to workers who refuse a bona fide offer of employment, a major reduction in the maximum duration of benefits and a decrease in the amount of weekly benefits, along with administrative improvements.
In other words, they cut benefits and streamlined the process. Analysis done by the Workers Compensation Research Institute showed that "Lower claim volume was the major factor in falling costs". Can any of these be translated to the current health insurance situation? Certainly, there are ways the state can help reduce the administrative costs -- forcing companies to all use the same claim form is one possibility. I'm not sure that the state has any role in trying to reduce claim volume, but perhaps an increased emphasis on preventative health care could result in catching health problems when they are less serious and therefore less expensive to deal with. As far as cutting benefits goes, we'll have to see what Commonwealth Care ends up looking like.

If we are to use D'Amato's analogy, though, it's useful to note that the cause of much of the huge rise in workers' comp premiums was set off by an earlier reform of the system in 1985. The 1991 reforms were largely enacted to counteract the unintended consequences of what was done previously. Maybe this is what will happen with health insurance. It seems likely that after the dust settles on the new law, we'll have to go through and fix things we didn't get right the first time.