Healthcare Reform

Since its passage in 2010, the Affordable Care Act (ACA) has been the subject of intense political debate and a source of anxiety for many retailers. While most of the attention has focused on the law’s health benefit requirements, there is little doubt that the ACA will also influence workers’ compensation costs, which are often the second highest expense for retailers after payroll. By taking steps now to understand and manage how the ACA will likely affect costs, payroll, and claims filings, retailers can lessen any potential negative impacts.

Probably the most predictable outcome of the ACA is that the number of individuals in the United States with health insurance coverage will increase. Proponents contend that this increased access to care will result in a healthier society and ultimately help curb rising workers’ compensation costs. In reality, however, the result is more likely the opposite.

For example, as the number of individuals seeking medical treatment rises, it has the potential to put additional stress on a healthcare system that is already short on doctors. This is particularly troubling as it relates to specialists and the potential for delays in obtaining diagnostic tests and scheduling surgeries and other procedures. Longer periods of disability and complications as a result of such delays would ultimately drive workers’ compensation costs up.

At the same time, proponents of the ACA say that because more people will have access to health care, there will be a reduction in comorbid diseases and disorders among individuals. To be sure, comorbidities can complicate workers’ compensation claims and have been shown to result in higher-than-average benefit payments. However, there is no significant evidence to support the contention that an employee is healthier and less likely to file a workers’ compensation claim simply because he or she is insured. For example, data from the Centers for Disease Control and Prevention indicate that heart disease remains the leading cause of death in the United States and that the percentage of Americans with a high body mass index has steadily climbed over the last 50 years — two trends that are not confined to the uninsured population.

In addition, greater access to care is also unlikely to reduce cost shifting, as some proponents have claimed. Retailers have long been concerned that non-work-related injuries are being shifted to the workers’ compensation system. While an uninsured employee injured outside of work may be tempted to file a workers’ compensation claim in order to receive benefits, there is still the temptation to shift non-work-related injury claims to the workers’ comp market due to the higher reimbursement rates and lack of deductibles and co-payments. Not only is it clear that the ACA will not result in every American having health insurance, these financial incentives will continue under the new law.

On a more positive note, the industry’s shift to quality care and better patient outcomes as a result of the ACA do have the potential to offset rising workers’ compensation costs. Traditionally, the healthcare industry’s focus has been on volume: more patient admissions, tests and procedures translated to higher revenues. Post-reform, however, the industry has shifted its focus to improving standards of care and achieving better patient outcomes.

If this transition results in less emphasis on costly procedures, which often produce questionable results, workers’ compensation costs could be reduced. Although it remains to be seen whether the standards of care developed under the ACA for group health care would be enforced under workers’ compensation, this is a promising development for retailers.

Another area under the ACA that retailers need to remain aware of has to do with premium refunds. The ACA allows insurers to rebate premiums to employers that have better-than-expected performance with their healthcare programs. Employers can either refund such premiums back to their workers or use them to offset future premiums. The National Council on Compensation Insurance (NCCI) has indicated that if premium refunds are given to workers, this would be considered payroll under workers’ compensation premium calculations.

Retailers need to keep this in mind when deciding what to do with healthcare premium rebates that may be received.

Until the ACA has been fully implemented, the full impact of the law remains unknown. However, retailers can take steps now to lessen any potential negative consequences. These include:

• Increasing efforts to identify medical providers that can provide the best quality care for injured workers, and taking the necessary steps to ensure the workforce has access to these providers.


• Carefully managing the approach to healthcare premium rebates.


• Closely monitoring any shifts in injury claims away from group health to workers’ compensation.


• Remaining committed to loss control efforts.

Mark Walls is senior VP and workers’ compensation market research leader for Marsh USA, the world’s leading insurance broker and risk adviser.

The ACA will influence workers’ compensation costs, which are often the second highest expense for retailers after payroll.