Insight: An Agent Resource

Industry Featured: Nursing Homes and Related Health Care

This is the third in a series of articles that highlight the advantages and disadvantages of the Texas Nonsubscription Option.

Nursing homes as an industry have pioneered many of the practices that are fundamental to nonsubscriber programs today. Many nursing home groups implemented in-house nonsubscriber programs even before insurance was available for this risk. Currently, well over 90 percent of nursing homes in Texas are nonsubscribers.

All of the above is due to the fact that traditional workers' compensation often seems incompatible with many of the features of nursing home operations. Most nursing homes have large numbers of minimum-wage and low-wage-earning employees. When these employees are off work due to a job-related injury and workers' compensation is in place, the employees discover that temporary income benefits payable by the workers' compensation carrier are not taxable. The IRS has determined that these benefits are "insurance compensation" rather than "wages." The employee quickly realizes that these benefits are equal to or greater than their regular take-home pay.

Complicating this situation is the ability of an injured worker to extend their receipt of temporary income benefits. Under traditional workers' compensation, an injured employee has the choice of treating doctors. Consequently, the employee is often able to find a physician who will state that they are unable to return to work. Obviously, this practice presents challenges to motivate injured employees to return to work under these conditions.

Under a nonsubscriber plan, the employer has the ability to require that benefits only be paid while the injured worker is under the medical care of an approved physician. A nonsubscribing nursing home can also instruct the treating doctor to provide an "activity report" outlining what the employee can and cannot do while recovering, rather than simply stating that the employee can or cannot work. This provides the employer with the ability to bring the employee back to "modified duty." If the physician states that the employee can return to work in any capacity, no wage-continuation benefits will be payable whether the employee actually returns to work or not.

Nursing homes typically have a relatively high employee turnover rate, making pre-employment background checks, drug screens and pre-employment physicals cost-prohibitive. Costs are a major consideration for most businesses, but even more so among nursing homes, which are among the most highly regulated businesses in the state. To comply with an overwhelming number of regulations, particularly in homes that accept Medicare/Medicaid, controlling costs is critical. Nursing homes choose to be nonsubscribers for two principal reasons: program costs and management of claims. Nonsubscriber insurance has historically been more cost-effective than traditional workers' compensation coverage.

A large number of nursing homes in Texas are in small towns or in regions outside major metropolitan areas. Because of their location, these facilities often have a limited number of physicians available and willing to participate in occupational injury programs. However, the unique features of a nonsubscribing plan can allow an employer to overcome this challenge. By offering attractive fees to physicians and highlighting that fewer forms and less paperwork are required, physicians are often much more inclined to participate in nonsubscriber occupational injury programs. Additionally, a nonsubscribing employer can also offer a physician more prompt payment than traditional workers' compensation due to the less bureaucratic manner that payments are handled and the fact that payment is made directly by the employer rather than by an insurance carrier that is often out of state.

In some instances, the nursing home and similar health care facilities also have the opportunity to reduce medical costs by providing treatment with their own in-house physical therapists, clinical laboratories, pharmacies, etc. In workers' compensation, common ownership of the medical provider is typically not allowed; therefore, this may be an advantage available only to the nonsubscriber.

Due to the extensive regulations imposed on nursing homes by governmental entities, and the difficulty often encountered in collecting from Medicaid/Medicare and other insurers, cash-flow issues and problems with profitability are not uncommon. This results in the average nursing home changing ownership approximately every five years. It also means that management must be very skilled with their oversight of all aspects of the business operations.

The use of an appropriate nonsubscriber program which includes an effective safety program and claims management system can add stability and flexibility to the challenging environment of nursing home administration.

Health Care Reform and Workers' Compensation

It is too soon to know whether the American Healthcare Act of 2017 as it stands today would have an impact on workers' compensation premiums and claims. The act was narrowly passed by the U.S. House of Representatives in May to replace the Affordable Care Act. The new bill is now being considered by the U.S. Senate, and several prominent senators have said the House bill will not pass the Senate without being amended.

Although the House bill does not contain any provisions specific to workers' compensation, it does retain a provision from the ACA that is expected to help mitigate workers' compensation costs over time. Under the House version, employers would still be able to offer wellness incentives to help reduce the nation's obesity problem. According to the National Council on Compensation Insurance, reducing the nation's obesity rate to 25 percent, from 35 percent, would result in workers' compensation medical costs declining 3 to 4 percent. Numerous studies have shown that injuries to obese workers cost more to treat and result in longer time away from work than do injuries to nonobese employees.

Employers can offer employees up to a 30 percent reduction in employer-sponsored health plans if the employee meets certain specified wellness goals.

There is concern about so-called cost shifting that can occur as a result of health care reform legislation, resulting in higher workers' compensation costs. A study by the nonpartisan Congressional Budget Office says the new act would result in 23 million fewer Americans with insurance. That could increase the number of workers' compensation claims as workers without health insurance try to get their medical procedures covered under workers' compensation, regardless of whether they are work-related.

For those who do have health insurance coverage, a lack of deductibles and co-payments for a workers' comp claim can contribute to an attempt to have medical treatments covered as a work-related injury. Because workers' compensation payments for certain medical procedures are higher than group health insurance reimbursements, an increase in workers' comp-related claims could result in overall higher medical-related costs for an employer.

A 2014 Marsh Risk Management Brief suggested employers consider the following steps to manage potential negative effects of the Affordable Care Act:

  • Increase efforts to identify medical providers that can provide the best quality care for injured workers, and take the necessary steps to ensure the workforce has access to these providers.
  • Carefully manage the approach to health care premium rebates, which could affect how payroll is calculated under workers' compensation.
  • Closely monitor any shifts in injury claims to workers' compensation. Despite the ACA's promise of greater access to health insurance coverage, there remains a financial incentive for employees to seek treatment under workers' compensation rather than group health.
  • Remain committed to loss-control efforts. Don't let concerns over the ACA cause a loss of focus on this key area.

The same suggestions may be useful in navigating the effects of round two of health care reform currently under consideration in Washington.

All About You: Bad Habits

You know what a bad habit is. Smoking, biting your nails, eating junk food. But what about the less obvious habits? The ones we don't even know we have. You're probably thinking, "I know about all of my habits, bad or otherwise." But do you? Here are the telltale marks of an unknown bad habit:


  1. Something that causes you to feel routinely anxious or guilty
  2. A behavior or action that isolates you from your friends, family and/or co-workers
  3. Anything that regularly keeps you from accomplishing or working toward your goals
  4. Something that makes you feel self-loathing, self-hatred or low self-esteem

Maybe you're checking your phone, email or social media accounts so often your spouse feels ignored. Or you spend so much money eating out you aren't hitting your personal financial goals. Or you habitually make up an excuse not to go to the gym. Sound familiar?

Fortunately, bad habits like these are easily broken. Often all we need is to recognize a habit is a habit and that it is negatively impacting our lives for us to make a change.

Challenge: Identify one of your own bad habits. Sit with it for a while. In a week or so, come up with a plan for how to get rid of it.