Employer Decisions About Health Reform May Increase Workers' Compensation Costs

Just when employers begin to feel they are getting a handle on Patient Protection and Affordable Care Act (PPACA), an analysis by the National Council on Compensation Insurance, Inc. (NCCI) injects another consideration. This analysis, completed in March, concludes that decisions by employers on the implementation of the PPACA could affect Workers' Compensation premiums.

The NCCI advisory states that since administrative options influence underwriters' tabulation of policy holders' payrolls and premiums, how employers comply with the law will have the potential to affect an employers' Workers' Compensation delineation. Employers' total payroll is a major determinant of premium in NCCI-rated states. Any cash an employer gives to employees as part of their gross wages to buy their own insurance, such as through an exchange, would be considered payroll.

In contrast, employers' payments to group health plans would not be included as payroll when determining Workers' Compensation premiums. Rebates employers may receive from health insurers, which do not meet the premium percentage thresholds for spending on claims and quality improvements, will also be a factor. This is known as the Medical Loss Ratio (MLR).

When employers that receive a MLR give the full rebate - or even just a portion - to employees, the rebate amount is included in payroll for the purpose of determining the employer's Workers' Compensation premium. On the other hand, if an employer receives the MLR rebate from the provider and uses any portion of the rebate for future health insurance premiums that portion is excluded from payroll for the purpose of determining the employer's Workers 'Compensation premium.

The advisory also notes: "With regards to the employer handling of MLR rebates and health insurance coverage payments or contributions, it is important to note that per NCCI's standard Workers' Compensation and Employers Liability Insurance Policy, Part Five-Premium, an employer is required to keep records of information needed to compute premium. In addition, the employer must provide those records to the carrier, when requested, for the purpose of auditing the employer's Workers' Compensation policy."

NCCI provides rating service for 38 states and undertook this analysis to help insurers and agents understand the payroll effect. They also hope it helps employers learn how their group health insurance purchasing decision might influence Workers' Compensation costs.

Communicate with employees

With all of the major health care reform planned for 2014, many employees are unaware of how this new marketplace will affect them. Employees are receiving many mixed messages from friends, media, co-workers and others that can be misleading or confusing.  It's important that employers get in front of the necessary communication now about the anticipated changes.

Very soon, employees are expected to receive an avalanche of marketing materials from insurers, health insurance exchanges and government agencies, in anticipation of health care reform. All of that on top of your company's benefits plan information. Since a recent survey by Colonial Life & Accident Insurance Co. showed that most workers think their employers are not communicating effectively, it's particularly important to take a lead role now.

Think about the commercials for car insurance and imagine the same creative, targeted marketing for health insurance. Under the individual mandate of the 2010 Patient Protection and Affordable Care Act, all Americans will have to purchase health care insurance in 2014.

Jackie Cuthbert, principal at Mercer, a human resources consulting firm in New York City, recommends making a list of terminology that employees are seeing, such as exchanges, individual mandate, affordable coverage, essential health benefits and premium subsidies as well as a Frequently Asked Questions (FAQs) handout. A microsite can also be a helpful tool to keep information up-to-date.

After the survey, Colonial Life & Accident Insurance Co. offers these suggestions to keep your employees in the know:

• Provide benefits information employees can access at home or at work, with 38% of employees saying this change would be helpful to them

• Providing benefits information that's easier to understand was equally desired at 37%

• Providing an opportunity for employees to talk with a benefits expert on company time was something that more than a third, 34% of employees would like their employer to do

Other changes employees said would help included having choices to customize the benefits package (59%), receiving benefits information more frequently (31%) and receiving benefits information that's more personalized to their needs (30%). 

This article was provided by the Institute of WorkComp Professionals, P.O. Box 5437, Asheville, NC 28813. Sign up for their free e-newsletter at www.workcompprofessionals.com.