Schwarzenegger proposal suggests combining workers’ comp with group health coverage

As part of his health care reform plan unveiled in early January, California Gov. Arnold Schwarzenegger is proposing a “24-Hour coverage” program that would combine the medical treatment component of workers’ compensation with group health coverage. State and local government employees would obtain medical care under the California Public Employees’ Retirement System (Cal-PERS) through the same providers used in the state run Cal-PERS managed care/HMO program for work and non-work-related health care.

Private sector employers would be permitted to opt into the five-year pilot program, but would not be eligible to participate in Cal-PERS group health plans, according to Schwarzenegger spokeswoman Sabrina Lockhart.

The 24-hour care pilot appeared on page eight of Schwarzenegger’s 10-page proposal, presented as a way to reduce regulatory barriers to spur more efficient health care delivery. The goal of the administration’s plan is to provide at least catastrophic health coverage with a $5,000 deductible for all Californians through assessments on employers, medical providers and individuals. Employer groups, medical providers, consumer groups and most group health care providers oppose it.

The 24-hour care proposal has drawn criticism from the California Chamber of Commerce, which is concerned it could water down medical utilization controls of the administration’s 2004 workers’ comp reform legislation, SB 899.

Schwarzenegger spokeswoman Lockhart denied this. “The same [utilization control] protocols would apply, so you could still measure utilization,” she said.

Schwarzenegger’s health care reforms were not put into draft legislation in time for it to be heard in legislative policy committee hearings this spring, but it could be introduced later this year or possibly held over until 2008, the second year of the current two-year legislative session.

“The administration is continuing to meet with legislators and those who have a stake in health care, so it’s difficult to say when a bill will come down,” Lockhart explained, adding the 24-hour care element is “still being flushed out as well.” Lockhart said the concept could produce administrative savings by eliminating the need to determine if an injury or illness is work related in the course of providing medical treatment.

The Schwarzenegger administration’s 24-hour care proposal came out about a month after the California Commission on Health and Safety and Workers’ Compensation, a legislatively created joint labor-management body that oversees and recommends improvements to the workers’ compensation system, conducted a roundtable discussion on the topic last December. At the roundtable, employers, labor representatives, medical providers and insurers discussed operational and technical aspects of how 24-hour care would work.

The administration’s 24-hour care pilot proposal coincided with one of the recommendations of a draft report the commission issued in February summarizing the roundtable discussion. The commission is also reportedly attempting to launch its own 24-hour pilot, recruiting employers, employees, health insurers, workers’ compensation insurers and medical groups as participants.

The commission report described 24-hour care in three variations: integrating health care delivery while keeping workers’ comp medical care and group health insurance separate, wholly integrating both kinds of insurance into a single form of coverage, and integrating medical and disability coverage.

One goal in the report was to identify to what extent the current system could be modified to keep both group health and workers’ comp insurance separate while merging medical care delivery. The report added that some believe California’s current workers’ comp system already does this to some extent. Those who believe that point to provisions that allow workers to predesignate their personal physicians and employers and insurers to form managed care medical provider networks to treat vocational injuries and illnesses.

The commission’s draft report noted at least 10 states have adopted legislation permitting 24-hour care pilots. Only two states, Oregon and California, succeeded in making the pilots operational, the report added. A California pilot program launched in 1995 involving the State Compensation Insurance Fund and Kaiser Permanente produced significant medical treatment and disability cost savings, according to a 2003 study by the commission.

Despite the conceptual appeal of the notion of combining medical treatment regardless of whether the need arises out of vocational or non-vocational circumstances to reduce treatment delays and disputes, real world implementation has proven problematic. It has faced various legal, institutional and cultural impediments.

Breaking down the barriers would require revising the California Constitution, some observers have said. They noted the state’s constitution guarantees medical care for all injured workers. By contrast, many do not have group health insurance and those that do are subject to co-pays, deductibles and limits that are not permitted for workers’ comp medical treatment.

Others noted integrating vocational and non-vocational medical care would require a major attitudinal shift among employers and employees to eliminate the distinction and regard medical treatment in a more holistic manner. Injured workers who often expect to be off work following a vocational injury would also have to adopt a mindset of rapid return to work.

“Is universal care a good idea?” asked Roy Little, president and CEO of the Insurance Educational Association, while moderating a panel on “Has Workers Compensation Reform Gone Too Far?” at the recent Insurance Industry Charitable Foundation Insuring the Future Forum.

“That’s an awfully big question,” said Sean McNally, human resources director for Grimmway Farms and former defense counsel who worked in the workers’ comp industry for Hanna Brophy. Speaking on the workers’ comp reform panel at the Forum, McNally noted that it takes doctors years of experience to understand American Medical Association guidelines for workers’ compensation treatment. “It will take time to get doctors who don’t do occupational medicine to understand the AMA guides.”

Bernyce Peplowski, senior vice president and national medical director for Zenith Insurance Co., agreed. You can’t expect a family doctor to have the knowledge to address workers’ comp issues such as permanent disability and future medical recommendations, she noted.

Furthermore, “Disability costs are a lot higher on the non-occupational side of the house,” Peplowski added. “A hybrid system could work, but it leaves lots of unresolved issues,” she concluded.