While the Affordable Care Act (ACA) is expected to reduce the number of uninsured and improve personal wellness in the U.S., the law's changes in workforce definitions will significantly impact workforce dynamics, employee hiring, employers' benefits strategies and wellness programs -- requiring a reevaluation of how workers' compensation is accounted for and delivered.

1. The Affordable Care Act and Its Impact
on Workers’ Compensation
While U.S. healthcare reform is helping to reduce the number of
uninsured individuals and promises improvements in personal
wellness, changes in workforce definitions could have a significant
impact on company payrolls — requiring a reevaluation of how workers’
compensation is accounted for and delivered.
Executive Summary
A majority of people in the U.S. obtain health-
care through their employment benefits or the
Medicare/Medicaid system. Yet in recent years, an
alarming percentage of the country’s population
joined the ranks of the uninsured — a trend that
showed no signs of abating until the Affordable
Care Act (ACA) became law. The ACA provides
universal healthcare coverage through employer
benefits, Medicare and Medicaid, as well as newly
minted healthcare exchanges.
The ACA, one of the largest efforts by the U.S.
government to improve the affordability and
quality of the country’s healthcare system, is
expected to reduce the number of the uninsured
and increase healthcare coverage for the general
population. (See Figure 1, page 2). The ACA also
aims to lower healthcare costs as a percentage
of the U.S. Growth Domestic Product (GDP). The
cost to the public is estimated at $1.207 trillion
over the next ten years.1
The availability and affordability of universal
healthcare is expected to affect workforce dynam-
ics, employee hiring, employers’ benefits strategies
and wellness initiatives alike. While the ACA has
caused disruption in the traditional health-insur-
ance space, workers’ compensation insurers must
also be aware of the law’s impact on business.
The Affordable Care Act’s Effect on
Workers’ Compensation
The steady growth of the uninsured triggered
a cost-shift from personal health insurance to
workers’ compensation policies. People with no
health insurance or with poor coverage tended to
file claims for workers’ compensation. Now, as a
result of the ACA, more people will have access to
health insurance, and less reason to file claims for
workers’ compensation.
The ACA has also made provisions for supporting
wellness Initiatives aimed at improving the gen-
eral health of companies’ workers, which should
help reduce overall healthcare costs. The inten-
tion is to prevent chronic diseases and avoid the
expenditures associated with costly treatments.
As part of this incentive, employers will receive
up to a 30% discount on healthcare costs and up
to a 50% discretionary discount for implement-
ing successful wellness programs. This, along
with the fact that research shows a powerful cor-
relation between unhealthy workers and higher
• Cognizant 20-20 Insights
cognizant 20-20 insights | july 2015

2. workers’ compensation claims, should serve as
a strong motivation for employers to keep their
workforce healthy and potentially lower the costs
of workers’ compensation claims.
Another provision of the ACA changed the defi-
nition of a full-time employee to increase the
number of individuals who qualify for health
insurance. Additionally, the rebates and allow-
ance provisions under the act will affect payroll
and thus the premium calculation by workers’
compensation insurance providers.
This white paper assesses the potential impact of
the Affordable Care Act on the workers’ compen-
sation space by comparing emerging scenarios
with Massachusetts’ healthcare reform program
— considered the model for the ACA. By helping
employers understand the significance of the
ACA, workers’ compensation insurers can miti-
gate its disruptive impact.
AFFORDABLE
CARE ACT
Reduce Healthcare Costs
Reduce Uninsured Population
Increase Quality of Healthcare
Increase Affordability of Healthcare
The Promise of the ACA
Figure 1
Addressing the Rising Costs of Healthcare in the U.S.
Rising medical costs are a huge drain on the U.S. healthcare system, as well as the nation’s economy. It
is estimated that the U.S. government spends nearly 18% of its Gross Domestic Product (GDP) on health-
care (see Figure 2). Healthcare expenditure per capita in the U.S. is $8,508, which is much higher than
most other developed nations.2
What’s more, 50% of that expenditure is spent by public or government
sources.
Given the increasing cost and restrictive nature of U.S. healthcare coverage, the number of the nation’s
uninsured is growing. In fact, it is estimated that a total of 13.4% of the U.S. population was uninsured
in 2013.3
Quick Take
0
2
4
6
8
10%
10
15
20%
HealthcareCostsas%ofGDP
HealthcareCostInflation%
2000 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13
U.S. Healthcare Costs
Source: Center for Medicare and Medicaid Services
Figure 2
cognizant 20-20 insights 2

3. cognizant 20-20 insights 3
Framing the Affordable Care Act
When it went into effect in 2010, The Patient
Protection and Affordable Care Act (ACA) — often
referred to as “Obamacare” — represented a sig-
nificant overhaul of the U.S. healthcare system.
These changes are expected to significantly
improve people’s health and wellness and reduce
healthcare costs.
The ACA removes restrictions around obtaining
health-insurance coverage based on preexist-
ing conditions, and makes preventive care more
accessible to the U.S. population. According to
estimates from the Congressional Budget Office
(CBO), cost declines will be spurred by a decrease
in the uninsured population. Wellness and health
improvements are expected to be driven by the
ACA’s wellness programs for companies’ workforc-
es. Better access to preventive care and expanded
coverage will benefit the general population.
Once the ACA is fully implemented in 2016, the
government predicts that the insured U.S. popula-
tion will grow from approximately 85% to 89%.4
The number of uninsured people is expected to
fall by 25 million. The ACA will also bring 13 mil-
lion additional people under Medicaid coverage.
A reform of the magnitude of the ACA impacts
businesses in the following ways:
• Providing health insurance coverage for
employees is mandatory.
• Employees are no longer dependent on
employment for health insurance.
• Expanded coverage can potentially result in a
healthier workforce.
A recent U.S. Chamber of Commerce survey
suggests that 49% of businesses reported that
healthcare reform is their top concern — even
ahead of economic uncertainty.5
Businesses are
responding to ACA’s mandates by making chang-
es in the following areas:
• Workforce hiring.
• Employee benefits.
• Workforce health behaviors.
With the ACA, people will rely less on their employ-
ers for health insurance. This will likely result in
more workers opting to work part-time, since
they can obtain their health insurance direct-
ly through the ACA. In fact, recent figures from
the Congressional Budget Office reveal a poten-
Medical Loss Ratio (MLR)
Insurers should spend a
minimum of 80% of
premiums on medical
care to maintain the
Medical Loss Ratio (or
MLR) requirement, which
limits the portion of
premium dollars insurers
can spend in non-health
care-related areas
(administration, market-
ing, etc.).
Individual Mandate
All individuals should
acquire health
coverage, or else have
to pay a penalty.
Insurance Exchange
An online marketplace
for individuals to
acquire low-cost
health insurance.
Employer Mandate
Companies employing
50 or more people must
offer health insurance
or pay a penalty.
Insurance Exchange
An online marketplace
where small businesses
can purchase low-cost
health insurance.
Employee Wellness
Initiatives to support
and encourage employ-
ee wellness programs.
Small-Business
Tax Credits
Small businesses qualify
for tax credits to offset
health insurance.
Guaranteed Issue
Healthcare insurers are
prohibited from denying
coverage based on
pre-existing conditions.
Minimum Standards
Insurance coverage must
provide essential health
benefits.
Insurance Premiums
The same premium
applies to all applicants
of the same age and
from the same
geographical area.
Medicare and
Medicaid Reforms
Changes to Medicare
payment schedule,
Medicaid coverage.
INDIVIDUAL EMPLOYER HEALTH INSURER PROVIDERS
Provisions of the Affordable Care Act
Figure 3

4. cognizant 20-20 insights 4
tial loss of two million full-time jobs by 2017 due
to employees choosing to work part-time rather
than full-time.6
Figure 3 (previous page) highlights key elements
of the Affordable Care Act.
The ACA’s Impact on Industries
Redefining Part-Time and Full-Time Employees
With the Affordable Care Act in place, employees
working more than 30 hours a week will be cat-
egorized as full-time employees, and thus eligible
for healthcare and full-time benefits.
The ACA has also redefined part-time employees
as those who work between 1 to 30 hours a week
(from 1 – 34 hours a week).7
Retailers and res-
taurants are among the industries that depend
on part-time employees. The reduction in part-
time workers’ hours will impact work schedules,
as well as hiring practices and employee ben-
efits. Employees working on average 30 hours a
week will be categorized as full-time employees,
and entitled to healthcare and full-time benefits.
A few large companies have attempted to side-
step this change by reducing full-time employees’
hours to less than 30 hours a week. This strategy
backfired — resulting in sub-standard work and
negatively impacting customers due to employee
churn and training issues.8
As a result, many industries are working to identify
the best hiring plan and compensation structure
before the employer mandate for health insur-
ance goes live in 2016.
Industries with Higher Claim Frequency
In some industries, universal coverage for
employees will have a major impact on workers’
compensation. For example, the construction
industry has historically experienced high lost-
time claim frequency relative to payroll, but it
also generates a low premium. Construction
companies have more uninsured workers than
most other job categories. The Center on Policy
Initiatives found that 27% of construction work-
ers were chronically uninsured for a year, and
more than 40% were uninsured at least part
of the year. Construction workers were also 4.6
times more likely to die on the job than the aver-
age private industry worker, and over a month,
more than 20% reported health problems that
affected their work and other activities, accord-
ing to the study.9
Therefore, universal health insurance coverage in
the construction industry will be a major benefit
to workers’ compensation insurers, with a gener-
al rise in the overall health of the population and
less incentives for employers to use workers’ com-
pensation insurance for non-work-related injuries.
The Impact of the Affordable Care Act
on Workers’ Compensation
Figure 4 below reveals the ACA’s expected impact
on workers’ compensation.
The ACA’s Expected Impact on Workers’ Compensation
Figure 4
Reduction in Cost-Shifting
Due to universal health coverage, less
likelihood of non-work-related injuries
being acknowledged as work-related.
Premium Impact
Workers’ compensation
premiums affected due to
certain ACA provisions.
Wellness and Preventive Care
Improvement in workers’ health
due to employee wellness programs
and preventive care.

5. 5cognizant 20-20 insights
Reduction in Cost-Shifting
Cost-shifting from health insurance to workers’
compensation occurs when a non-work-relat-
ed injury is acknowledged as a work-related
injury and paid through workers’ compensation.
Workers’ compensation is among the insurance
industry’s top-three lines of business with ques-
tionable claims. Workers’ compensation fraud
was estimated at $7.2 billion in 2011. Furthermore,
workers’ compensation is said to make up 25% of
total insurance fraud.10
Before the ACA was enact-
ed, the uninsured generally sought treatment at
the nearest emergency room, since in those situ-
ations, care cannot be denied based on a patient’s
lack of insurance. At the same time, emergency
care is one of the most expensive forms of health-
care — creating an unintended increase in the cost
of healthcare for all.
Historically, many people turned to workers’
compensation insurance to obtain at least some
healthcare for a pre-existing condition that oth-
erwise would not be covered by health insurance.
Universal Health Coverage
The ACA will make health insurance available for
all individuals, decreasing the number of unin-
sured workers. In 2011, it was estimated that
employer-provided health insurance covered only
57% of the working population.11
During the first
year the ACA was in place, the number of unin-
sured people fell by 9.3 million.12
The number of uninsured workers is greater
at small firms, due to either the absence of an
employer-provided health insurance plan or rela-
tively high health insurance premiums. The ACA
will provide tax credits to small businesses that
provide health insurance to their employees. All
companies employing more than 50 workers
are required to provide health insurance. The
guaranteed issue requirements of the law would
ensure coverage for people who were denied cov-
erage earlier, and would also prohibit insurers
from denying coverage based on a pre-existing
condition.
Non-Elderly Uninsured Population %
0
5
10
15
20%
Massachusetts U.S.
2006 2007 2008 2009 2010
17.1%
16.6%
16.7%
18.2% 18.4%
10.9%
5.5% 5.7%
5.1%
6.3%
Massachusetts’ Healthcare Reform Law
The effect of the reduction in cost-shifting can be drawn from Massachusetts’ experience (see Figure 5
below). In 2008, the state enacted a healthcare reform law that is very similar to the ACA. It mandates
that all citizens of Massachusetts be insured. It also requires employers to provide health insurance to
their employees in a manner similar to the ACA. After the passage of healthcare reform, the number
of Massachusetts’ uninsured dropped significantly — from 10.9% to 6.3%. Prior to the passage of the
Massachusetts Health Care Reform Act, more than 20 times as many emergency department (ED) visits
were billed to workers’ compensation, as were inpatient visits — resulting in an annual average of 85,000
ED visits versus 3,500 in-patient visits. Following the passing of the reform, the number of ED visits
dropped by 7.2%.14
Quick Take
Figure 5

6. The availability of universal health coverage will
lessen the motivation to file non-work claims in
workers’ compensation; in fact, most eligible
claims will be filed as health insurance claims.
Hence, the ACA could reduce or potentially stop
the cost-shifting to workers’ compensation for
the following reasons:
• Workers generally prefer health insurance
over workers’ compensation due to the latter’s
rigid controls. They dislike having to interact
with claims adjusters and workers’ payment
systems, and being forced to select physicians
from employers’ medical networks.
• For physicians, providing treatment under
workers’ compensation means having to
provide more justification for treatment,
prepare formal reports and deal with even
more paperwork. In some cases, they may be
required to testify to receive reimbursement
from the workers’ compensation insurer.
Reduction in Workers’ Compensation
Claims and Costs
The ACA is also expected to reduce the number
and cost of workers’ compensation claims. A 2012
RAND report on the ACA found considerable
impact on these claims, beginning with health-
care reform in Massachusetts. Between 2005 and
2009, workers’ comp claims in Massachusetts
declined 16.7%; workers’ compensation hospital
costs fell between 5% and 10%.13
Medicare reimbursement rates play a large role
in workers’ compensation medical costs because:
• Medicare represents a significant share of the
U.S. healthcare system (covering 49 million
people, or one-sixth of the U.S. population),
with the ability to significantly impact the cost
of medical services.
• Many states adopt Medicare reimbursement
rates for workers’ compensation medical fee
schedules.
The ACA seeks to control healthcare costs by con-
trolling Medicare reimbursement rates. With the
implementation of the ACA, Medicare reimburse-
ment rates are expected to either hold steady or
drop further. This means that the cost of workers’
compensation claims may profit from the reduc-
tion in those rates.
Employee Wellness Programs and
Preventive Care
The ACA aims to control healthcare costs from the
supply side, and manage the impact of prevent-
able diseases. One reason for rising healthcare
costs is related to the expensive treatment for
these conditions. According to the Centers for
Disease Control and Prevention (CDC), chronic
diseases such as asthma, cancer, diabetes and
heart disease account for 75 cents of every dollar
spent on health care in the U.S.15
The Affordable
Care Act seeks to rectify this situation by prevent-
ing diseases through the promotion of healthy
habits.
Workplace health programs encourage healthy
habits and improve awareness of healthy prac-
tices. Evidence suggests a strong link between
these programs and healthier behavior. Research
shows that for employers, the medical costs fall
about $3.27 for every dollar spent on wellness
programs; absentee day costs fall by about $2.73.
(See Figure 6 below).16
cognizant 20-20 insights 6
26%
28%
Healthcare Costs
Sick-Leave
Absenteeism
Costs: Savings
1:6
Benefits of Introducing an Employee Wellness Program
Figure 6

7. The 1996 Health Insurance Portability and
Accountability Act (HIPAA) allowed employers to
claim a discount of 20% on health insurance pre-
miums for employees practicing healthy habits.
With the ACA, the reward increases to 30%. There
is an optional increase in the reward to 50% in
cases of programs designed to prevent or reduce
tobacco use.
In the U.S., 74% of employers who offer health
benefits also offer employee wellness programs.
Roughly 92% of larger employers (those employ-
ing 200 or more) provide wellness programs
along with health benefits.17
For example, in 2014,
Cognizant piloted its own voluntary wellness
program, iCommit2Fit, for 127 of our employees.
From January to June, participants increased
their weekly step counts from an average base-
line of 36,500 across all groups to 75,000 — an
improvement of 105% and more than twice the
American daily step average. This moved 27% of
our participants to new BMI categories. Employee
wellness programs are set to gain even more sup-
port with the Affordable Care Act.
Employee wellness programs can help control
healthcare costs by:
• Improving the health and well-being of the
working population.
• Reducing healthcare costs through premium
discounts.
Given these factors, employers are likely to
aggressively pursue such programs.
The industry could see a reduction in workers’
compensation claims due to a healthier workforce
that avails itself of universal health coverage
and wellness programs. Healthy workers are less
prone to injury; if injured, they recover faster.
In 2011, The Wellness Council of America report-
ed that indirect expenses associated with an
unhealthy workforce are often two to three times
that of direct medical costs.18
And according to
the CDC, one out of every two adults had at least
one chronic illness, such as arthritis, cancer, dia-
betes or heart disease. Employees with five or
more health risks, such as obesity, high blood
pressure or tobacco use, incur an extra $3,321
annually in medical costs above the average
American. These health risks also indirectly cost
businesses through absenteeism, productivity
losses, decreased morale, employee turnover and
presenteeism. Presenteeism refers to a worker
being on the job but not able to fully function
because of illness or other medical conditions.
It is estimated that the indirect costs due to pre-
senteeism are even higher than absenteeism.19
There is no doubt that access to preventive care
will lead to better health for the general popula-
tion. The ACA supports preventive care — with no
out-of-pocket costs to people insured on most
health plans.
cognizant 20-20 insights 7
0
50
100
150
200
6
8
10
12
LostWorkdaysPer100FTEs
ClaimsPer100FTEs
< 18.5 18.5-24.9 25-29.9 30-34.9 35-39.9 40+
Body Mass Index (BMI)
41
14.2
60.2
75.2
117.6
183.6
5.5
5.8
7.1
8.8
10.8
11.7
The Impact of Unhealthy Employees on Workers’ Compensation
Source: Ostbye, T., et al, “Obesity and Workers Compensation,” Archives of Internal Medicine, April 23, 2007.
Figure 7

8. 8cognizant 20-20 insights
As illustrated in Figure 7 (previous page) and 8
above, the alternative to preventive care is not a
pretty picture:20
• The most obese have twice as many claims and
13 times more lost workdays than workers who
maintain a healthy weight.
• Indemnity costs are 11 times higher and medical
costs are seven times higher for the most
obese workers than for their colleagues who
are not overweight.
• For employees who smoke, businesses pay an
average of $2,189 in workers’ compensation
costs compared with $176 for nonsmokers.
Participatory wellness programs: Available without regard to an individual’s health status.
For example:
• Programs that reimburse for the cost of membership in a fitness center.
• No-cost health-education seminars.
• Reward employees who complete a health-risk assessment without requiring them
to take further action.
Health-contingent wellness programs: Require
individuals to meet a specific standard related to
their health to obtain a reward.
For example:
• Programs that reward those who do not use or
who decrease their use of tobacco.
• Programs that reward those who achieve a
specified cholesterol level or body weight.
Quick Take
Dissecting Wellness Programs
10,000
20,000
30,000
40,000
50,000
$60,000
< 18.5 18.5-24.9 25-29.9 30-34.9 35-39.9 40+
Body Mass Index (BMI)
Medical Claim Costs
Indemnity Claim Costs
Costs of Unhealthy Workers
Source: Ostbye, T., et al, “Obesity and Workers Compensation,” Archives of Internal Medicine, April 23, 2007.
Figure 8

9. Premium Impact
Workers’ compensation premiums are directly
dependent on employee payroll, industry class
rate and claim experience (mod factor). Any
changes in payroll will affect workers’ compensa-
tion premiums. The ACA can impact payroll by:
• Changing the definition of part-time and
full-time employees.
• Providing a cash allowance to buy insurance on
a public or private exchange.
• Offering premium rebates due to medical loss
ratio (MLR).
As previously noted, one of the key changes due
to the ACA is the reclassification of full-time work-
ers, which will affect payroll. Any employee who
works more than 30 hours a week will be consid-
ered a full-time employee and eligible for benefits
commensurate with that position. According to
The Bureau of Labor Statistics, 30% of part-
time employees work between 30 and 34 hours a
week. This could potentially cause an increase in
the overall payroll used to calculate the workers’
compensation premium.21
Cash Allowance to Buy Insurance on
A Public or Private Exchange
As a result of the ACA, health insurance exchang-
es are expected to gain traction, and become a
favored approach in the health insurance market
by providing greater access to affordable individ-
ual health-insurance plans. (See Figure 9 below).
Employers have the option to swap employ-
ee health benefits for cash allowances, which
employees can use to buy health insurance from
private exchanges set up by the employer. These
exchanges are very similar to existing public
exchanges. According to Aon Hewitt, roughly
44% of employers believe a private exchange
model will be the preferred way to offer employ-
ees healthcare benefits;22
current penetration is
4%. Big organizations such as Sears, PetCo and
Walgreens have already started utilizing private
healthcare exchanges.23
For employers, healthcare costs are predictable;
if the premium for any employee exceeds the
cash allowance, the employee has to pay out of
pocket. If the cash allowance covers the premi-
um cost, the remaining allowance can be used
for deductible payments. The cash allowances for
buying health care exchanges are tax-exempt for
employees, as long as the allowance is used to
buy ERISA/HIPAA-approved health plans from a
private healthcare exchange.
Employers must fully understand the potential
increase in workers’ compensation premiums if
they opt to provide health-care allowances rather
than employer-sponsored health plans.
Premium Rebates Due to Medical Loss
Ratio (MLR)
The medical loss ratio provision prompted by the
ACA is aimed at regulating health insurers to pro-
vide value to consumers. According to the ACA,
insurers should spend a portion of premium dol-
lars on medical care or quality improvements. The
medical loss ratio is set at 85% for large group
insurers and 80% for small group insurers. If the
actual loss ratio is below the target, insurers must
pay premium rebates to the employers. Health
insurers paid $332 million in rebates in 2013, with
over 6.8 million employees/individuals receiving
rebates.24
The universal health coverage and wellness ini-
tiatives set in place by the ACA are expected to
reduce medical care expenses of health insur-
ers, which could lead to lower premiums and
more premium rebates. When employers pay the
cognizant 20-20 insights 9
Source: https://www.ncci.com/nccimain/IndustryInformation/UnderwritingInformation/Pages/PatientProtection-
AffordableCareAct-WC-Prem.aspx.
Figure 9
NCCI Recommendations for Handling Health Insurance Coverage
If... Then...
Payments/contributions are made by an employ-
er to the employee as part of the employee’s
gross wages, for the employee to obtain/pur-
chase their own health insurance coverage …
Those payments/contributions are included
in payroll for the purpose of determining the
employer’s workers’ compensation premium.
Payments/contributions are made by an employ-
er to a group health insurance plan or employee
benefit plan on behalf of the employee …
Those payments/contributions are excluded
from payroll for the purpose of determining the
employer’s workers’ compensation premium.

10. cognizant 20-20 insights 10
employee premium rebate received from a health
insurer, the rebate amount is considered part
of the payroll. As a result, workers’ compensa-
tion premiums will rise. Please refer to the NCCI
(National Council on Compensation Insurance)
explanation of MLR rebates, Figure 10 above.
Looking Ahead: What Insurers Can Do
While the ACA is expected to have a significant
influence on the workers’ compensation system,
the extent of its impact will only become clear
when all of the act’s provisions are implemented
next year. To mitigate the impact, we suggest the
following measures:
• Educate employers on The Affordable Care Act.
• Learn to handle healthcare premium rebates.
• Improve loss-control efforts.
• Continuously monitor the ACA’s impact.
Educate Employers on The Affordable Care Act
Insurers can act as advisors to employers by help-
ing them understand the ACA’s key provisions,
and how to effectively balance healthcare costs,
workers’ compensation premiums and the imple-
mentation of wellness plans. This starts with:
• Providing education on the pros and cons of
paying penalties or health insurance under the
ACA.
• Revealing the impact on workers’ compensa-
tion premiums based on rebates.
• Disclosing the impact on payroll taxes based
on increased payroll rebates.
Learn to Handle Healthcare Premium Rebates
The ACA provides larger discount and premium
rebates on healthcare premiums tied to employee
wellness programs. Employers can offer them as
refunds to employees or use them to offset future
premiums. The premium refunds can be account-
ed for as payroll, which could lead to an increase
in workers’ compensation premiums, since they
are dependent on the payroll. Insurers may have
to make changes or invoke controls to handle
these refunds.
Improve Loss-Control Efforts
Controlling workers’ compensation claims is
largely dependent on reducing the duration of
workers’ leave time before they report back to
work. The longer a worker is away from their job,
the greater the claim cost due to:
• Higher medical expenses.
• Indemnity payments.
• Attorney and other legal fees.
The availability of universal health coverage under
the ACA will increase the demand for physicians
and specialists. This could have a direct impact on
the time it takes to resolve a workers’ compensa-
tion claim. Insurers can counter this problem by
developing an outcome-based network/account-
able care organization for resolving workers’
compensation claims faster by making providers
more accountable for the cost and quality of care.
The outcome-based network shifts the focus from
discounting services to successfully resolving
Medical Loss Ratio (MLR) Rebates
If... And... Then...
Payments/contributions are
made by an employer to a group
health insurance plan or employ-
ee benefit plan on behalf of the
employee …
The employer receives an MLR
rebate from the health insurance
provider and gives the full rebate
or any portion of the rebate
directly to the employee …
Either the full or a portion of
the rebate amount is included in
payroll for the purpose of deter-
mining the employer’s workers’
compensation premium.
Payments/contributions are
made by an employer to a group
health insurance plan or employ-
ee benefit plan on behalf of the
employee…
The employer receives an MLR
rebate from the health insurance
provider and applies or uses the
full rebate or any portion of the
rebate for future health-insurance
premiums for the employee…
Either the full or a portion of the
rebate amount is excluded from
payroll for the purpose of deter-
mining the employer’s workers’
compensation premium.
If an employee pays all or part of
their health insurance premium…
The employee receives an MLR
premium rebate from the health
insurance provider…
That rebate amount is excluded
from payroll for the purpose of
determining the employer’s work-
ers’ compensation premium.
Source: “The Patient Protection and Affordable Care Act and Workers Compensation Premium Determination.”
National Council on Compensation Insurance (NCCI). https://www.ncci.com/nccimain/IndustryInformation/
UnderwritingInformation/Pages/PatientProtection-AffordableCareAct-WC-Prem.aspx.
Figure 10

11. cognizant 20-20 insights 11
claims, and removes the incentive for over-treat-
ing. Loss-control efforts could also include:
• A nurse referral/triage program to control
claim costs.
• Injured worker self-service.
• Medical bill review program.
Continuously Monitor the Impact of the
Affordable Care Act
The predictions surrounding the ACA’s impact on
workers’ compensation have yet to be fully real-
ized, but potentially could result in new products.
With this in mind, insurers should set up controls
and checks on workers’ compensation policies
and claims data to continuously monitor for
cost-shifting, reductions in questionable claims,
payroll changes through premiums, and premium
refunds due to wellness programs. These insights
will provide the information insurers need to
design viable products and features for workers’
compensation.
Footnotes
1
“Cost of ObamaCare: Obama Care Cost.” http://obamacarefacts.com/costof-obamacare/.
2
Karen Davis, Kristof Stremikis, David Squires and Cathy Schoen. “Mirror, Mirror on the Wall — How the
Performance of the US Healthcare System Compares Internationally.” The Common Wealth Fund. June,
2014. http://www.commonwealthfund.org/~/media/files/publications/fund-report/2014/jun/1755_davis_
mirror_mirror_2014.pdf.
3
Jessica C. Smith and Carla Medalia, Health Insurance in the United States: 2013. U.S. Census Bureau,
September, 2014. http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-250.
pdf.
4
“Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act.”
Congressional Budget Office (CBO), April, 2014. https://www.cbo.gov/sites/default/files/45231-ACA_
Estimates.pdf.
5
United States Chamber of Commerce — Q2 Small Business Outlook Study, Harris Interactive. July 16, 2013.
http://www.uschambersmallbusinessnation.com/uploads/Chamber%20Small%20Business%20Survey
%20Q2%207%2016%2012.pdf.
6
The Budget and Economic Outlook 2014 — 2024. Congressional Budget Office, February 2014. https://www.
cbo.gov/publication/45010.
7
ObamaCare Employer Mandate. http://obamacarefacts.com/obamacare-employer-mandate/.
8
“Wal-Mart Returning To Full-Time Workers-Obamacare Not Such A Job Killer After All?” Forbes.com.
September 25, 2013. http://www.forbes.com/sites/rickungar/2013/09/25/wal-mart-returning-to-full-time-
workers-obamacare-not-such-a-job-killer-after-all/.
9
Center on Policy Initiatives. Construction: Working Without a Healthcare Net. http://www.onlinecpi.org/
construction_working_without_a_healthcare_net.
10
Managing Workers’ Compensation Fraud. Travelers Insurance. https://rccustomers.travelers.com/riskcon-
trol/rcpublicdocs.nsf/0/D04329CBC4970CB985257515007678BA/$FILE/A0174_ManagingWCFraud.pdf.
11
Employee Health Benefits: 2013 Annual Survey, Kaiser Family Foundation & Health Research and
Educational Trust. http://kff.org/report-section/2013-summary-of-findings/.
12
Katherine Grace Carman, Christine Eibner. Changes in Health Reform Since 2013. RAND Corporation, 2014.
http://www.rand.org/pubs/research_reports/RR656.html.
13
Vasanth Sathiyakumar, BA; Daniel J Stinner, MD; William T Obremskey, MD, MPH; A. Alex Jahangir, MD; and
Manish K Sethi, MD. “The Future of Workers’ Compensation Under PPACA.” November, 2012. http://www.
aaos.org/news/aaosnow/nov12/advocacy2.asp.
14
Paul Heaton. The Impact of Health Care Reform on Workers’ Compensation Medical Care (Evidence from
Massachusetts). RAND Corporation, 2012. http://www.rand.org/pubs/technical_reports/TR1216.html.

12. About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in
Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry
and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 100
development and delivery centers worldwide and approximately 217,700 employees as of March 31, 2015, Cognizant
is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among
the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on
Twitter: Cognizant.
World Headquarters
500 Frank W. Burr Blvd.
Teaneck, NJ 07666 USA
Phone: +1 201 801 0233
Fax: +1 201 801 0243
Toll Free: +1 888 937 3277
Email: inquiry@cognizant.com
European Headquarters
1 Kingdom Street
Paddington Central
London W2 6BD
Phone: +44 (0) 20 7297 7600
Fax: +44 (0) 20 7121 0102
Email: infouk@cognizant.com
India Operations Headquarters
#5/535, Old Mahabalipuram Road
Okkiyam Pettai, Thoraipakkam
Chennai, 600 096 India
Phone: +91 (0) 44 4209 6000
Fax: +91 (0) 44 4209 6060
Email: inquiryindia@cognizant.com
­­© Copyright 2015, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any
means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is
subject to change without notice. All other trademarks mentioned herein are the property of their respective owners. TL Codex 1329
15
“Preventing Chronic Disease.” Center for Disease Control & Prevention. April, 2009. http://www.cdc.gov/
pcd/issues/2009/apr/08_0236.htm.
16
Katherine Baicker, David Cutler, Zirui Song. Workplace Wellness Programs Can Generate Savings. February,
2010. http://www.kpcom.com/newsletters/documents/Workplace%20Wellness%20Programs%20can%
20generate%20savings.pdf.
17
Employer Health Benefits: 2010 Annual Survey. Kaiser Family Foundation & Health Research and
Educational Trust, 2010. https://kaiserfamilyfoundation.files.wordpress.com/2013/04/8085.pdf.
18
Making the Case for Workplace Wellness Programs. Wellness Council of America, 2011. http://ww1.
prweb.com/prfiles/2011/07/22/8664822/TheWellnessCouncilOfAmericaMakingTheCaseFor
WorkplaceWellnessPrograms2011.pdf.
19
Paul Hemp, “Presenteeism: At Work — But Out of It,” Harvard Business Review, October 2004. https://hbr.
org/2004/10/presenteeism-at-work-but-out-of-it.
20
Insurance Information Institute, iii.org Workers’ Compensation Study. http://www.iii.org/issue-update/
workers-compensation.
21
Labor Force Characteristics. Bureau of Labor Statistics. http://www.bls.gov/cps/lfcharacteristics.htm.
22
“The Time is Now: Rethinking Health Care Coverage.” Aon Hewitt, 2012. http://www.aon.com/attach-
ments/human-capital-consulting/Corporate_Exchange_Survey_Report_Final_2.pdf.
23
Beth Pinsker, “Petco, Applebee’s Employees Join Growing List on Private Exchanges.” October 15, 2013.
http://www.reuters.com/article/2013/10/15/usa-healthcare-mercer-idUSL1N0I516R20131015.
24
“2013 MLR Refunds by State.” Center for Medicare and Medicaid Services. http://www.cms.gov/CCIIO/
Resources/Data-Resources/Downloads/2013_MLR_Refunds_by_State.pdf.
About the Authors
Vikas Jain is a Senior Manager with Cognizant Business Consulting’s Insurance Practice. He has 15 years
of management consulting experience in the insurance industry, where he advises senior executives on
strategy, operations and transformation issues across underwriting, claims and distribution functions.
Vikas can be reached at Vikas.Jain@cognizant.com.
Sivaram Mohan is a Senior Consultant with Cognizant Business Consulting’s Insurance Practice. He has
seven years of business consulting experience and project management expertise across the insurance
industry. Sivaram specializes in P&C insurance, and can be reached at Sivaram.m@cognizant.com.