Medical Cost Containment for Workers' Compensation Introduction Workers' compensation affects everyone--even employees who never suffer a job-related illness or injury, or employers who never have to handle a workers' compensaton claim. Why? Because the cost of this state-mandated coverage, together with the cost of workers' compensation claims, is part of the cost of doing business. Higher workers' compensation costs result in higher prices for consumers. So everyone has a stake in what is happeing in this arena. While most people are aware that health costs, in general, have been skyrocketing over the past decade, the lion's share of the attention focused on the problem has been aimed at the employee and individual health care arenas. And not without reason. Inflation in this area is running about 10 percent annually--well ahead of the general inflations rate--for a staggering total national expenditure of about $620 billion in 1989. That's a frightening 11.5 percent of America's Gross National Product. However, the inflatin rate in workers' compensation medical claims is even worse, about 14.9 percent annually. And it's time that employers, employees, insurers, academicians, and regulators alike turn their attention to this problem. Just a decade ago, medical costs accounted for about one-third of workers' compensation paid losses. Today, they are almost half of paid losses, more than any other category of workers' compensation costs, including permanent injury claims, indemnity benefits and litigation, according to the Workers' Compensation Insurance Rating Board. Costs of this kind have tremendous impact on companies. Obviously, the higher the costs, the more it hurts competitiveness. And, as has already been pointed out, it comes back to haunt consumers in the form of higher prices. That's the bad news. The good news is, it's possible to do something about t. And now is the time to do it, improve our nation's ability to compete in world markets and keep a healthy economy here at home. The additional good news is, there are techniques for containing or reducing workers' compensation medical costs that will also help ill or injured employees receive better care. This article describes some of the techniques CIGNA is using to achieve these objectives. But, first, some background will help put both the problem and its remedies into context. A mere 76 years ago, there were no compulsory insurance coverages or other first party compensation programs for those who suffered injuries or developed an illness as a result of their work conditions. If they could not work, they were simply out of luck except for possible third party claims against their employer and such claims were usually unsuccessful. Today, in all 50 states and the District of Columbia, workers' compensation provides two basic types of benefits: medical and indemnity as a result of a compensable illness or injury contracted or suffered on the job. Indemnity benefits pay claimants for a portion of wages lost. Medical benefits are payable for necessary medical care, even if no indemnity beneftis are payable. Beyond these basics, however, there are more diferences than similarities among workers' compensatin regulations. Benefit levels, administration and procedures for delivery of care to claimants all vary from state to state. For example, some states specify only that the amount of medical benefits paid on behalf of an ill or injured employee be fair and reasonable, or usual and customary, while others have developed extensive fee schedules. Some statutes provide the injured or ill workers with free choice of medical care provider. Others give the employer the right to direct the injured employee to a particular physician or medical facility. And still others mandate the use of state-approved doctors and facilities. These differences stem from the age of the workers' compensation system, as well as from th e fact that is was created on a piecemeal, state-by-state basis. …