What work comp has done right

The workers comp world has certainly had its problems over 2008, and often these problems have overshadowed the successes, and victories both big and small that were achieved this year. Here without further preamble are a few of the more significant ‘wins’ for work comp in 2008.
1. Frequency declines continued this year, building on a fifteen-year downward trend that has cut the US comp injury rate in half. By any measure, that’s great news. I’d also note that somehow the rate keeps declining, despite various experts (myself included) opining that it has to stop somehow.
2. Pharmacy costs have leveled off, due in no small part to efforts on the part of payers to mine their data, identify trends, and put in place programs to attack over-utilization. Good work to all; your efforts led to the fifth straight year of a decrease in the rate of pharmacy inflation in comp.
3. Predictive modeling continues to progress, albeit in fits and starts. Mistakes are being made, false leads chased, and assumptions proven wrong, but that’s actually good news. This is a new, complex, and weird business tool that will require a lot of trial and error. Mistakes are necessary and vital as the industry learns.
4. More and more payers are actually building new networks and adopting new strategies, either on their own or with new market entrants. These strategies are based on smaller, highly select networks of work comp expert docs, the kind of physician who can drive better outcomes at lower costs. After too many years of relying on the promises of the big networks, these payers are taking matters into their own hands, driving innovation and progress. it may not be as fast or as extensive as some would like to see (me being one of the some), but progress it is.
5. Disclosure of financial relationships among and between managed care firms and TPAs has significantly expanded, with companies including Gallagher Bassett, SRS, and Broadspire leading the charge (in fairness these firms were doing this long before 2008).
6. Specialty managed care has exploded, with carve-out vendors doing an exemplary job managing costs and delivering results in physical medicine, DME/home health, facility bill review, and cat claims. The more they do, the better they get.
7. Regulators in several states are working hard to do the right thing. New York’s willingness to change the pharma fee schedule and increase in benefits, California’s pursuit of lower costs, better medical care, and better benefits, and Texas’ (somewhat clumsy) attempts to fix their system all have been welcome signs of progress. We aren’t there yet, and all have their warts, but the needle is pointing in the right direction.
8. Solvency – unlike other insurance lines, the core solvency of the work comp insurance industry has not been in doubt this year. While parent companies, other insurers, and blue-chip, white-shoe Wall Street firms were imploding on a weekly basis, we in the work comp world have chugged along, hitting a few bumps on the way, but nothing like the rest of the financial world.
We have a long way to go, but in many areas, we’re heading in the right direction.
Good work.

3 thoughts on “What work comp has done right

  1. As a former Board Member/Commissioner of the NY State Comp Board, I disagree with your analysis.
    (1)In NY, comp claims increase in time of economic recession. Some Boards tend to treat comp awards as a safety net since it is not a ‘tax’ but a ‘benefit’.
    (2) There has been the discovery that a number of firms underfunded their premium needs by $110 million dollars and have all folded.
    (3)The Chairman of the Board just issued a report trumpeting the reforms but my website explains why these reforms may cost more money than in the past.
    But you do raise some valid points.

  2. Insider – what data do you have to support your assertion that during recessions comp claims increase? I haven’t found any published studies that indicate that occurs.
    Paduda