Workers comp medical costs – the real driver

Today’s NCCI report on the near-term future of workers comp should be required reading for work comp execs.
Here are the soundbites.
– indemnity costs will continue to rise, but very slowly.
– frequency will likely not increase.
– medical cost inflation will trend upwards.
For those interested in more detail, NCCI’s full report is here. [opens pdf]
I’m struck by the double-edged sword that drives workers comp; costs are held down because wages aren’t going up, and permanent, full-time employment isn’t likely to increase significantly till mid-year, keeping frequency low. Yet good-payng jobs with available overtime, and lots more of those jobs, are exactly what the country so desperately needs. I’d also note that the more jobs there are, and the higher paid they are, the more premium is created.
The bulk of the report is a thorough and highly readable discussion of the future labor market in the US, the factors influencing employment growth and a dissection of the impact of structural and cyclical drivers. Overall, a very well done synopsis with much grist for the strategic thinker’s mill.
The real driver has been, and will continue to be, medical costs. With medical price inflation forecast to rise at almost three times the overall inflation rate , the moderating influence of low indemnity costs will be more than outweighed by medical inflation.
I’d note that the above paragraph only speaks to the impact of price on medical costs; as we’ve all come to understand, utilization is the big medical inflation driver.
Simultaneous with the release of the NCCI report comes WCRI’s analysis of medical costs in Wisconsin (hat tip to WorkCompWire for the head’s up.)
While one state does not a national trend make, WCRI’s report that the Badger state’s medical costs per claim grew twelve percent from 10/07 to 10/08 should make anyone sit up and take notice.
That 12% annual medical inflation rate was driven in large part by increasing payments for outpatient hospital services.
There’s lots more evidence of higher medical costs and their impact on workers comp, but alas I’m on vacation this week and promised to limit my blogging to a half hour a day.

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