States Can Benefit By Looking to Workers’ Comp EDI Standards

Despite recent advances in electronic data interchange (EDI) technology and its wide acceptance, many states continue to use paper-driven systems for workers’ compensation claim processes. Others maintain electronic submission requirements that are not standardized. These scenarios make it difficult to accurately collect and evaluate claims and medical bill information in a cost-effective manner. State workers’ compensation commissions can move their data programs forward by relying on recognized, national EDI standards and experienced technology partners.

For example, the Virginia Workers’ Compensation Commission (VWC) recently determined that its “antiquated paper-driven business processes and outdated information technology infrastructure [were] inhibiting its ability to proactively meet the critical aspects of the Commission’s mission.”¹ To remedy this situation, the VWC launched a technology alignment program (TAP) to streamline the work the VWC performs and to enhance its customer service operations.²

The foundation for Virginia’s TAP was a plan to transition the state’s intake of claims data to an EDI platform. In general, EDI facilitates the direct electronic exchange of data in a standard format; the goal for EDI in the workers’ comp environment is “the seamless processing of information from its initial reporting source, whether that is the employer, insurance company, claims administrator, claimant or medical provider, to a jurisdiction."³

The VWC was drawn to EDI because it allows reporters to batch their transmissions and submit them in a standard format while still permitting transaction editing and data cleaning. To launch the program, the VWC decided to outsource the development of an EDI platform that reflected the latest standards and could be implemented in a timely and flexible manner.

“It’s more challenging to achieve a successful outcome when you are doing something that is outside your core capabilities,” said Matthew Bryant, director of the VWC’s program management office. “Software development is not our mission, so we chose to work with outside entities that had specialized expertise.”

IAIABC standards ease transition

When considering EDI adoption, the VWC had specific goals in mind. “We knew that any changes we made had to be aligned with what the industry was doing. In addition, we wanted to take advantage of structured data to run our claims management system as well as other operating and technical systems, and we wanted a devoted product management resource to govern these activities,” Bryant explained.

The VWC’s needs for alignment with industry practices and data standardization led the state to look to the International Association of Industrial Accident Boards and Commissions (IAIABC), a nonprofit trade association representing government agencies charged with the administration of workers' compensation systems throughout the United States, Canada, and other nations and territories.

The IAIABC has been instrumental in developing EDI standards that cover the transmission of claims, proof of coverage, and medical bill payment information through electronic reporting. These standards are maintained through a consensus process that brings together representatives from jurisdictions, claim administrators, vendors and other interested parties.⁴

Releases 1 and 2 of the IAIABC standards are the most prevalent, but Release 3, which Virginia has adopted, currently is being utilized for electronic claims reporting by an increasing number of states. Six are currently in production with Release 3, with four more on the immediate horizon. Although some jurisdictions have chosen to make compliance with the standards voluntary, the VWC is phasing in the mandatory implementation of the standards for first and subsequent reports of injury. The largest trading partners are already in production.

“We felt it was important to make every effort to get advice from the industry through the IAIABC,” Bryant said. “These standards offered us stability and a strong basis to facilitate efficient data sharing. To do that we knew we would have to accommodate a number of different players involved in the workers’ compensation community.”

Bryant believes that following the IAIABC standards is productive, cooperative and beneficial for both the government and the industry. “Discussing issues within the IAIABC community makes your initiative more transparent and credible,” he said.

Outsourcing EDI is a prudent approach

When implementing the TAP, the VWC “decided to outsource data ingestion and trading partner account management so we could push those burdens to someone who has done this all before,” Bryant noted. “When our constituents have technical or transmission issues, those are the vendor’s problems, not ours. We didn’t have to hire or train additional staff to manage them.”

The VWC sought out potential technology partners that had EDI expertise, experience in the field and a sound model aligned with industry best practices, he explained, adding that simply going through the competitive bidding process was a helpful exercise. “When you bid out a contract, it sharpens up your whole operation. Instead of getting one perspective, you get lots of different advice and you can choose the approach that suits your situation.”

Bryant commented that outsourcing also allows the VWC to manage audits more easily and to assign cost to value received more effectively. “It is harder to gauge return on investment when using internal resources,” he said. “Outsourcing provides an incentive to understand exactly what you need up front, because you are paying for those services directly.”

Ingenix has developed a product to capture front-end EDI data using State WorkComp.NET, which was developed and is maintained by an active member of the IAIABC. The service is easy to customize, simple to use and cost-efficient to implement. State WorkComp.NET provides state jurisdictions with an Internet-based application service solution, combined with design and consulting services that eliminate the need to develop and maintain a complex EDI software system, according to Catherine Dominguez, director of operations, Ingenix E-Commerce Solutions.

State WorkComp.NET allows EDI data to be processed, edited, stored and acknowledged while warehousing the information for data analytics. EDI information can be used to monitor outcomes, report back to legislatures and run complex queries to evaluate data. A state can customize State WorkComp.NET to meet particular needs, Dominguez said.

“Helping to develop appropriate and efficient EDI approaches is something we have been doing on behalf of our clients for years, and now we are doing it on a larger scale,” she explained. “The state of Virginia is implementing EDI in a very intelligent fashion, because they are looking at it as a collaborative effort with their trading partners,” she continued.

“The VWC has sought out ways to be flexible, which makes the transition quicker, easier and more palatable for all parties.”

Advice for moving forward

The success of the VWC’s TAP and EDI implementation has piqued other states’ interest in making similar changes, Bryant indicated. Based on Virginia’s experience, he would offer the following advice:

Dominguez and Bryant agreed that states can benefit from outsourcing the technology piece. “There is no reason for states to go it alone. We helped to get Virginia’s new approach up and running quickly by giving them the benefit of our experience, providing them with a sounding board and steering them in the direction that would lead to the least amount of pushback from their constituents,” Dominguez remarked.

When a state works in partnership with its community, with industry representatives like the IAIABC and with skilled technology experts, implementation and adoption of new programs will go smoothly, she said. “Any time a state can make compliance with standards a win-win situation – good for the state and good for the industry, it’s a positive thing,” she concluded.

¹ Id.
² Virginia Workers’ Compensation Commission Web site, “Technology Alignment Program” (Oct. 14, 2008).
³ International Association of Industrial Accident Boards and Commissions (IAIABC) Web site, “Electronic Data Interchange” (Oct. 14, 2008).
⁴ IAIABC Web site.

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