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Redesigning Employee Benefits

Hadler, Nortin M., MD; Carter, Stephen P., JD

Journal of Occupational and Environmental Medicine: September 2018 - Volume 60 - Issue 9 - p e509–e510
doi: 10.1097/JOM.0000000000001405

Department of Medicine, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina

Stephen P. Carter, P.A., Bentonville, Arkansas.

Address correspondence to: Nortin M. Hadler, MD, Department of Medicine, University of North Carolina at Chapel Hill, Chapel Hill, NC 27517-4410 (

The authors report no conflicts of interest.

At the turn of the last century, European politics roiled over the human cost of industrialization. As David Lloyd George said on June 11, 1911, “When you reckon up the national wealth and begin to talk about imports and exports … I have never seen a balance-sheet of that kind up to the present that did not omit the greatest asset of all, and that is the men, the women and the children of the land.”1 After 2 decades of heated debate, a template emerged from the Reichstag that would be adopted with modifications country-by-country across the industrialized world: some form of universal health insurance, compensation for the injured worker, and disability insurance for those afflicted with work incapacity. This template made landfall in the U.S. but found no safe harbor. A national Workers’ Compensation insurance program was deemed unconstitutional under the Commerce Clause; it reverted to state-based legislation. The other components were incorporated into the platform of the Progressive Party and suffered defeat along with Theodore Roosevelt in the presidential election of 1912.

The country contended with wars and economic failure till mid-century when the needs of the needy and social legislation regained center stage. The body politic would not countenance any comprehensive approach to recourse. Rather, each social need was to be approached independently, legislated and regulated separately, and in its own time. Insurance was the obvious mechanism for a population at risk to share the burden of events that were low in frequency but high in value. For homeowner's insurance, as an example, robbery and fire were definitive events for which an insurance company can adjust the premium to provide a calculable response. The response is exacerbated by the “moral hazard” of an insured individual doing the damage.

The insurance moniker applies less readily to “health insurance” where the risk also includes high-frequency events that are less catastrophic, often less definitive. To provide for this circumstance, health insurance was offered as a defined benefit. Under this scheme, the insurer decides what is covered and pays the costs and the insured pays a premium to cover these costs and provide a margin of profit for the insurance company. In this circumstance, the “moral hazard” shifts to the insurer to remain cost-effective.

The American “healthcare system” that resulted by the turn of this century does not lack for critics or for reasons for criticism. It is comprised of several bulging administrative silos that are far more efficient in serving themselves than in serving the needy.2 This system blunders along bolstered by many times the largesse of any other advanced country and with far less benefit to show for it. All this is transparent and well publicized. Multiple attempts at “reform,” now a national echolalia, have been thwarted by counterproductive compromises, false premises, and aggressive finger-pointing. America is saddled with a patchwork that is unconscionable.

We are convinced that no attempt at reform is a match for the entropy of the system. We have spent the past decade designing an alternative health care system and defining a path to its realization. The path takes us through a crack in the legislation for Workers’ Compensation. There is one state, at least, that does not demand a causal relationship between “injury” and task, only that the “injury” occurs while employed. Almost any morbidity suffered by an employee during or after working hours can be labeled an “injury” and qualify for coverage. The challenge is to provide coverage that is ethical, comprehensive, and avoids or circumvents all the pitfalls that bedevil the current system. That requires several new tenets:

This “universal workers’ compensation insurance policy” (UWCP) policy is designed so that employees will receive indemnification in one policy for hazards of illness, injury, disability, and death. The UWCP is not a defined benefits policy; it is a defined contribution policy. Our mathematical models suggest that coverage can be provided to the workforce of a large employer if every employee pays a premium of 2% of wages and the company pays 6% of payroll. Furthermore, our model suggests that this premium should result in a substantial monetary excess that will be returned to the employees to underwrite ancillary health insurance, such as coverage for family members. To serve this goal, the administration of the UWCP is constrained by statute to be modestly profitable on a per capita basis. It calls on each stakeholder to be a fiduciary, as any money spent or saved belongs to the employees. Furthermore, administrative overhead is constrained by statute; the wastrel will fail.

Then, there are the pitfalls of the current system that need to be circumvented. The administration of disability schemes, whether for incapacity consequent to illness or to injury, can be consumed by the need to deny the unworthy. Disability determination is a very expensive and ineffective form of social iatrogenesis.3 It is far more rational and moral to do away with disability determination based upon impairment, functional capacity, or causal criteria such as “work-relatedness” and simply provide time-limited recourse. Furthermore, as the disability payments tap into the funds that are held in common by the workforce, finding a way back to functioning is a common goal.

Then, there is the challenge of providing ethical clinical care in a fiduciary model. We are of the strongly held opinion that medicine is a philosophy informed by science and only valuable to the extent that the patient-physician dialogue is trustworthy.4 We have designed the “health” component of the UWCP to serve this credo. The UWCP generously remunerates a patient-physician dialogue based on duration without coding, billing, or any constraint on the provision of care that is likely to provide a clinically meaningful benefit. Furthermore, the possibility of an annuitized bonus is built into the remuneration. However, if any intervention has been studied in a systematic fashion and no clinically meaningful benefit is demonstrable, the UWCP provider is not bound to more payment than would be required for an efficacious alternative. A committee has been constituted, a Clinical Effectiveness Panel (CEP), to serve the charge of determining if any given clinical intervention need not be covered for this reason. The CEP is comprised of six senior physicians and three senior attorneys of national repute, all free of overtly conflictual relationships and all nearing the end of careers focused on matters relevant to this determination. The CEP is not charged with defining what should be done, only what need not be covered on scientific grounds. Furthermore, the CEP is also serving a fiduciary role; it is not “saving money,” it is sparing the workforce from interventions that cannot be shown to offer enough benefit to justify sharing the expense.

This essay is not describing an exercise in the possible. It is an introduction to an effort of over a decade that is at a tipping point between promise and proof of concept. The legislation that creates the UWCP has been written. Input from scholars, politicians, legislators, and corporate officials has been forthcoming gratis, and much support has been garnered. This essay is but an introduction. Because so much about the UWCP diverts from the current social constructions of health and health care, and therefore is counterintuitive, we have published a more detailed description.5 We are not promoting a new business model or new profit center. We are attempting to monetize altruism.

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1. Grigg J. Lloyd George, the People's Champion, 1902–1911. 1978; London: Eyre Methune, 333.
2. Hadler NM. The Citizen Patient. Reforming Health Care for the Sake of the Patient, Not the System. Chapel Hill: UNC Press; 2013.
3. Hadler NM. The illness of work incapacity. Occup Med 2016; 66:346–348.
4. Hadler NM. By the Bedside of the Patient. Lessons for the Twenty-first-century Physician. Chapel Hill: UNC Press; 2016.
5. Hadler NM, Carter SP. Promoting Worker Health. A New Approach to Employee Benefits in the Twenty-first Century. Chapel Hill: UNC Press; 2018.
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