Integrating Benefits

Risk Management, September 1995 | Go to article overview

Integrating Benefits


Integrated benefits, also known as 24-hour coverage, is loosely defined as any combination of traditional health and workers' compensation insurance that dissolves the occupational and non-occupational boundaries between the two forms of coverage.

For example, if an employee breaks a leg away from the workplace, his or her medical treatment will be covered by the company's health insurance. But if that same injury occurs on the job, it will fall under the state's workers' compensation system, where employers have virtually no ability to control or reduce their costs.

Integrated benefits has been getting considerable attention over the past several years from risk managers interested in determining whether the expense controls that have reduced runaway group health premiums recent years can also rein in workers' compensation costs.

There are some employers for whom an integrated benefits approach could make good sense. Others may see it as a costly and burdensome intrusion into established business practices. This mixed reaction is not surprising. The integrated benefits concept is currently at an early stage and is not widely available.

In a white paper on 24-hour medical plans presented to the Minnesota Legislative Oversight Commission on Healthcare Access, Milliman & Robertson Inc. suggested that the cost impact of a 24-hour medical plan could range from 3.5 percent in savings to 2 percent in increased costs. The report also suggested that if occupational and non-occupational disability costs were included within a 24-hour plan, concerns regarding workers' compensation indemnity costs could decrease and a savings could be effected in non-occupational disability costs. By their estimate, disability duration could be reduced by as much as 15 percent to 25 percent by integrating these benefit plans.

VARIATIONS ON THE THEME

Because group health benefits and workers' compensation coverage are so different, there is no clear consensus on the best way to hammer the two systems together. Many variations on the 24-hour coverage theme have been created. The three most common models currently being evaluated in this country follow:

Integrated management of an employer's workers' compensation and group health insurance claims is the first model. In this case, insurers coordinate the claims settlement process to eliminate duplicate claims. In some states, insurers are allowed to use discounted rates secured under a health plan to pay reduced workers' compensation medical fees. Those insurers continue to provide separate contracts.

This model is currently marketed by some multiline insurers and also appears in the self-insurance market. Some organizations that self-insure health and workers' compensation coverage combine administrative services and excess coverage to coordinate benefit delivery.

A single policy can also be written to cover medical benefits for all employee claims, whether or not injuries are related to work. Disability benefits are provided only for occupational injuries or diseases.

All-inclusive medical and disability coverage can be purchased for all claims. Under this arrangement, all benefits would be merged and common management principles would be applied to both disciplines. Although this is the most difficult approach to implement, it could afford the greatest savings.

Oregon was one of the first states to test an integrated benefits system. Under Oregon's first pilot plan, operational since January 1994, an employer receives two separate contracts. Workers' compensation insurers and health plans use the same managed care networks and payment schedules.

Another Oregon plan, implemented in April 1994, is a partnership between an HMO and some employers that are self-insured for workers' compensation. Plan members receive all medical care through the HMO, and the HMO accepts capitated payment for all services.

Four integrated benefits pilot projects are under way in California. …

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