Insurance rates drive high costs for state workers' comp
June 23, 2013
A team from the Alaska Workers’ Compensation Board traveled the state June 17 to 20 holding public meetings to discuss rising medical costs associated with on-the-job injuries.
“At our main meeting our board decided it wanted to get out in the community and get feedback from employers, employees, from doctors, from attorneys — from the stakeholders in the workers’ compensation system,” state Division of Workers’ Compensation Director Mike Monagle said at the June 18 Anchorage meeting.
Other meetings were held in Fairbanks, Kenai and Juneau.
Alaska’s total workers’ compensation system costs were $270 million last year, according to division statistics.
A biannual study done by the state of Oregon found that Alaska carries the highest workers’ compensation insurance premium rates in the country, despite a 3 percent drop in premiums in 2012. In 2000, Alaska ranked 28th in workers’ compensation premium rates, but by 2006 it was the most expensive state in the country. Since then, Alaska has been first or second.
Monagle said rising insurance costs are not related to incident rates, which have dropped from more than 30,000 reported workplace incidents in 1994 to less than 20,000 last year. Over the same period employment grew by nearly 90,000 jobs to roughly 320,000 statewide, he said.
“Employment’s going up, (incident) frequency rate is going down. This frequency rate is really important because it’s the only thing that has been keeping Alaska’s premium rates in check,” Monagle said.
The Oregon study found Alaska’s premiums to be 160 percent of the national median.
Premium rates for workers’ compensation insurance tend to be cyclical, Monagle said, and nationally rates have increased over the last two years. So the 3 percent in-state decline may not become a trend. Despite being cyclical, rates never return to their previous bottom, he said.
Monagle reported that nearly 75 percent of “total lost costs” in 2012 associated with benefit claims were medical costs. Of the $260.7 million paid out in Alaska during 2011, $160.4 million, or 62 percent, was for medical benefits.
Nationwide, medical benefits make up 59 percent of total costs, with indemnity, or lost work time accounting for the remainder, Monagle said. He called the annual 8 percent-plus increase in premiums nationwide “unsustainable.”
“Today, in all states, medical is the big cost driver,” he said.
Monagle broke medical costs down into three categories: fees, over-utilization and prescription drugs.
He said specialty medicine costs are disproportionately high in Alaska. This includes treatments such as physical therapy and chiropractor visits. Some states have mitigated medical fees by implementing fee schedules, which help regulate what clinics and hospitals charge.
Most states that have fee schedules are on the lower end of the cost spectrum, Monagle said. Alaska, which has a fee schedule, doesn’t follow the trend.
He likened a fee schedule to car shopping.
“You don’t go into a car dealership and offer to pay full retail, nobody does,” Monagle said.
High treatment cost and high insurance premiums go hand-in-hand, he said.
He declined to offer specific suggestions for further regulatory measures to curb premium costs but said Montana, which had been battling Alaska for the highest workers’ compensation costs in the country, recently instituted legislation that dropped it in the rankings. In 2010, Montana was first in total cost and by last year it had dropped to eighth, according to the Oregon study.
Other states have also looked at ways to mitigate the over-use of expensive treatments to mitigate medical costs, Monagle said.
“Most states are moving towards utilization guidelines,” he said. “For example, ‘for this diagnosis, this is the recommended treatment.’”
He added that many of the doctors his division consults with do not receive workplace injury treatment training, thus they don’t view workplace injuries differently. Monagle gave the example of an individual with a broken ankle being told to stay home for several weeks to allow the injury to heal.
While that may be an effective treatment, he said, it is possible someone in that situation could receive a boot or air cast and return to work in some capacity “off their feet” and save thousands of dollars in indemnity costs.
Monagle said costs associated with prescription drugs account for 20 percent of medical benefits paid in compensation claims.
He said strong, opioid painkillers such as Oxycodone can have a debilitating effect on injured workers prescribed them for intense pain. Monagle said the drugs were never intended for general use, rather they were designed as “end of life” treatment.
The drugs are of particular concern in workers’ compensation cases because patients are highly susceptible to dependency and subsequent depression and other mental health issues, Monagle said. While a worker may be physically healed, they are then mentally unfit for work, he said.
Monagle noted programs that require patients who have been on opioids for more than 60 days without signs of physical improvement to enter treatment programs to prevent dependency.
On the flipside, several states have also instituted drug testing to assure patients prescribed powerful painkillers are actually taking them and not selling them “on the street for $100 a pill,” Monagle said. Alaska does not have such programs.
He cited state figures that estimate prescription painkillers account for 40 percent of all drug costs in Alaska.
Elwood Brehmer can be reached at [email protected].