If Upheld, Workers’ Comp Ruling to Spike Costs

Last fall the Connecticut Workers’ Compensation Commission (WCC) ruled that many workers’ compensation insurers and self-insured employers must pay the full rates billed by hospitals for medical services provided to claimants.

The decision came in response to cases brought to the commission by two hospitals.

The case is currently on track to be heard before the Workers’ Compensation Review Board in April 2013.  If the ruling stands it will increase medical payouts in many workers’ comp cases significantly, which in turn will drive up costs for employers in the state.

Prior to the ruling, and since 1991, nearly all workers’ comp payors have negotiated the rates to be paid. This is important because it is normal practice for hospitals to bill substantially higher than what their costs are or what they expect can be paid.

For example, a hospital recently billed a Connecticut town $44,000 in charges for a medical procedure. If this had been under the town’s healthcare policy, the town would have been obligated to pay just $4,000;  under the customary workers’ comp negotiated process, the rate paid was $14,000.

This example demonstrates that even under the customary negotiated process, hospitals are still able to make a profit from workers’ compensation cases.

In fact, while workers’ compensation medical expenses account for less than 1.5% of healthcare costs in the United States, they comprise almost 16% of hospitals’ profits. 

In 2007, workers’ compensation insurers and self-insured employers paid hospitals roughly $9.1 billion, of which $3.9 billion was profit.

This year, workers’ compensations costs in Connecticut have risen, on average, more than 7%.  The commission’s decision will likely spark additional increases. 

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or bonnie.stewart@cbia.com.