Medicare seeks stricter Reporting of workers comp and other types of incidents

March 25, 2011
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As part of its spending crackdown, the federal government has Medicare carefully reviewing workers-compensation settlements. The government believes there has been an illegal shift of medical benefits from workers-compensation insurers to the health insurance program that covers those who are 65 years of age and older.

Workers compensation insurance covers an employee who is injured on the job and becomes unable to work. The coverage reimburses wages, pays for medical bills and hospital charges, and can even provide a death benefit in the most serious incidents.

But according to IRMI.com, an insurance industry resource, Medicare’s interest may end up causing headaches for all participants in a workers-compensation system. A report posted at IRMI claimed that Medicare wants to examine all settlements — even those of individuals who don’t qualify for the insurance program — and it concluded that Medicare may be overstepping its regulatory authority. In addition, this governmental move may impact the cost employers pay for comp coverage.

“So an individual that gets injured today, their employer may or may not elect to report that claim. By not reporting that claim, it limits their future workers-compensation premiums by a factor called an experience modification factor,” said John Karle, an executive vice president with Crosby and Henry Inc., who added that the experience modification factor is also called a “mod” in the insurance industry.

“This factor takes into consideration all of the workers-compensation claims that are reported to the commercial clients’ insurance carrier, and those carriers pass that information on to the state of Michigan. The state of Michigan, along with the insurance companies, promulgates these mods,” he added.

A mod contains the number of times an employer files a workers compensation claim, and that number can affect a company’s premium cost for a policy. As would be expected, those companies with a large amount of claims will likely be charged higher premiums for coverage.

“The more claims someone has and the severity of those claims drive that mod. That experience modification factor then determines the premium that an employer is going to pay going forward. I’ve seen those as low as 0.50, so they’re getting a 50 percent reduction in their workers-compensation cost. I have seen ones that are over 200 (percent) and that doubles the premium,” said Karle.

In an effort to keep premiums low, Karle noted that some employers may not report a minor on-the-job injury, choosing to directly pay the medical bill and lost wages rather than filing a claim. But now, he said, Medicare wants to know about that minor injury, if the injured employee is eligible for its insurance coverage. Medicare doesn’t want to pay a bill that it feels commercial carriers should pay.

“That’s why they’re so anxious to monitor the situation,” said Karle.

“That not only applies to work comp, but also to a liability claim. So if a visitor comes to an office and slips and falls, and is Medicare eligible, that would be a triggering event. So would an auto accident with a Medicare-eligible senior citizen. So it’s not just limited to work comp.”

With seniors staying in the work force longer, an employer might not choose to file a compensation claim if one suffers a minor injury on the job. But Karle felt that would be a mistake for a worker who is Medicare eligible.

“It has to be reported. If it’s not there is a $1,000-per-day fine.” Conversely, reporting that injury could result in a higher premium for an employer.

Karle used Wal-Mart as his example. The retail giant has a lot of Medicare-eligible seniors on its payroll, with most working as greeters. He said if the firm reported every minor incident, such as a twisted ankle that required $250 in medical attention, the number of claims Wal-Mart would file could very well soar — as could its premium for workers-compensation insurance.

“They might have paid those claims out-of-pocket before, but now they have to report those. Frequency is a bigger trigger in that experience modification factor, when factoring the calculations that go into it, than a severe workers comp case is,” he said.

Karle felt the time-worn adage of “damned if you do and damned if you don’t” was a good description of where employers could find themselves with this Medicare push.

“If anything, it’s pretty challenging for an employer,” he said. “With HIPAA, how is one supposed to know who is eligible? So, you may not know if someone is Medicare eligible and it might have been a smaller claim that you might have considered paying.”

What should employers do in this case? “To the extent that they can, have a relationship with their employees, and, to the extent that they can, determine if they’re Medicare eligible,” said Karle. “And they need to report those claims.”

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