HEMIC CEO on Rising Medical Costs

From WorkersCompensation.com

Workers’ compensation insurers face big challenges in the face of soaring medical costs. A combination of a general increase in medical costs and rising bills relating to more prescriptions being written by physicians are pushing costs to levels that insurers will struggle with.

This is the view of Martin Welch, chief executive of Hawaii Employers’ Mutual Insurance Company. As a workers’ compensation insurer, he says his business faces a number of specific issues that impact its ability to effectively and fairly serve the needs of employers and injured workers.

He says in addition to rising pharmacy costs driven by an increasing volume of prescriptions written by treating physicians, there are also issues relating to the over-prescribing of narcotic drugs and the dispensing of repackaged drugs, which results in insurance reimbursement at much higher rates than usual under customary medical fee schedules, adds Welch, who says legislation is needed to help control spiraling costs.

“Industry legislative efforts need to continue to promote implementation of scientific evidence-based treatment guides, including a workers’ compensation prescription drug formulary, which will control costs and ensure appropriate treatment to injured workers,” he says.

Other costs hitting workers’ compensation insurers include the knock-on effects of an aging workforce and the high costs associated with medical advances.

“While we certainly applaud continued medical advances that improve or accelerate treatment, reduce pain and improve length and quality of life, such medical progress still brings with it a higher cost,” Welch says. “That is why reducing and eliminating redundancies, waste and outright fraud are so important to maintaining a fair and stable workers’ compensation insurance system.”

In order to remain profitable, Welch says that many workers’ compensation insurers, including his own, have implemented rigorous cost-containment measures as well as active anti-fraud initiatives.

“In addition, our industry must continue to support legislation that promotes fairness among all stakeholders. A good example of this was California’s passage of AB 378 in 2011, which addressed the issue of price gouging in compound drugs,” he says.

Welch says that everyone must support measures that will control medical and pharmacy costs, while ensuring that injured workers receive appropriate and effective treatment.

“Only within such an environment can the workers’ compensation system continue to provide injured workers with the best care available so they are able to return to work as soon as they are able and continue to be productive members of society,” he says.

Welch also praises the reinsurance community, which he says has historically been extremely supportive of his business.

“They understand the risks we take and the human and financial services we provide to US employers and their employees. I personally hold the reinsurance community’s counsel and underwriting expertise in high regard, including their grasp of the external issues we face. Their continued support and advocacy of these issues is appreciated,” he says.

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