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Packaging Insurance Coverage
Now, four years later, another Florida pilot program that promises more savings on insurance costs is having trouble getting off the ground. Known as "24-hour coverage," the insurance plan combines traditional workers' comp and group healthcare in one policy, or at least in one integrated healthcare delivery system. Many reformers believe it will produce savings in legal and administrative costs, just as managed care produced savings in medical costs. For starters, making workers' comp part of group healthcare would eliminate litigation over whether an injury or illness is compensable under workers' comp - one of the most expensive and wasteful aspects of the current system.
Reformers believe the 24-hour concept also would eliminate duplication of administrative overhead. And many employers and supporters believe that 24-hour coverage would reduce the inherent inefficiency of buying two policies to insure the same worker's health. "I would contend that some employers are probably paying double rates or at least higher rates," says State Rep. John Cosgrove (D-Miami), one of the Legislature's insurance experts. "Why can't you have one system where, regardless if you're hurt on the job or at home, you have coverage?" he asks.
Sounds like a winner, but it hasn't worked out that way so far. In Florida, a two-year pilot project to test the effectiveness of 24-hour coverage has yet to get underway - more than three years after it was authorized in late 1993. Only a handful of companies applied when the Department of Insurance sent out a request for proposals. Then, three of the four companies that qualified for the program dropped out before it could start. With only one company left, the department nearly gave up on the idea, but decided in January to give the project one last try by reopening bidding for interested companies.
After years of hype concerning 24-hour coverage, the ho-hum reception from insurers was unexpected. "I guess I am surprised," says Rep. Fred Lippman (D-Hollywood) who chaired the House Commerce Committee for much of the 1990s. "I'm hoping there still will be a pilot project."
The slow start isn't unique to Florida. "A lot of state programs have moved along quite slowly," says Allard Dembe, a University of Massachusetts Medical Center assistant professor who helps direct grants for reforming workers' comp for the New Jersey-based Robert Wood Johnson Foundation. It has made 24-hour coverage a key focus in recent years. Two highly touted 24-hour coverage pilots in Oregon and California already have produced disappointing results. Each sought about 20,000 insured participants; Oregon signed up about 3,500, California 8,000.
What accounts for the apathy? Partly, some experts say, it's the success of other reforms, like managed care. By reducing pressure on rates, those reforms have robbed 24-hour coverage of its urgency.
But even more significant has been the sheer weight of the existing system, it seems. It's hard enough to manage doctors and hospitals, but even harder to manage the bureaucracy - the lawyers, risk managers, brokers, insurers and state officials - that surround the two types of insurance.
Participants in the Oregon pilot program, which eventually was canceled, "found the process significantly more complex than they had anticipated," concludes a recent study by international consultant Towers Perrin. Among the nagging problems: l What to do about disability payments? As long as they exist for workers' comp but not group health recipients, claims handlers can't fully eliminate the distinction between the two coverages.
What about the deductibles that workers pay for group health coverage but not for workers' comp? How can you write a single policy that eliminates deductibles, but also protects employers from picking up the slack? Or should workers be asked to shoulder some of the cost of workers' comp, too?
And what about benefit eligibility standards? Workers' comp covers treatment for a work-related injury or illness indefinitely. But group health covers treatment only if the worker is eligible at the time the worker seeks it. How to create one definition of eligibility that merges those radically different concepts?
Florida Department of Insurance officials say the near-failure of other states' experiments has influenced their own effort. "There have been problems in other states and we wanted to avoid repeating them," says Don Pride, press secretary at the Department of Insurance.
Susanne Murphy, Florida's deputy insurance commissioner, says: "Part of the problem is that all of us in the insurance industry need to understand it. I'm not sure the market has done that very well."
Adds Gary A. Guzzo, an insurance industry lobbyist: "The insurance industry is very staid and conservative, and anything that has to do with change is always a concern. People like what they know."
The department doesn't acknowledge another factor: the quiet but firm opposition it generates among a few big national workers' comp insurers, such as Liberty Mutual, as well as from some agents and brokers who worry about increased competition. The industry isn't abandoning the idea of 24-hour insurance entirely, however. In fact, more and more companies in Florida and elsewhere are taking the first steps toward 24-hour coverage without waiting for the state's pilot project.
So far, those steps have been modest. For example, Chamber One, a new insurance product available to Florida businesses, provides a single administrator, but two separate policies. United HealthCare of Florida provides healthcare coverage, while workers' comp is written by Reliance National Indemnity Co. Unisource Administrators, based in Sarasota, is the program administrator.
Chamber One is marketed through a partnership of independent agents on the workers' compensation side and a network of more than 3,000 agents affiliated with United HealthCare.
A few companies - Sarasota's Riscorp, for example - have taken the next step toward 24-hour coverage with integrated case management for their workers' comp cases. This approach allows a team of professionals - claims adjusters, medical personnel and field case managers - to coordinate their efforts in each case.
Integrated case management reduces litigation, gets employees into treatment quicker so they can return to work quicker, and discourages worker fraud. For now, the savings for employers from such plans as Chamber One likely will prove to be modest.
"We sell service right now, and the convenience of one-stop shopping," says Andy Olwert, president of Unisource Administrators. Advocates agree that increased integration of the plans could lead to bigger savings down the road. But even the companies that are taking the first steps toward 24-hour coverage wonder if they can market a single policy anytime soon.
"An impossible dream? It's a very difficult dream, I'll put it that way," says Olwert. "There are just so many pieces to the puzzle."
Business Beat - Week of May 10th
