Workers comp in 2012 – the economy’s impact

My post earlier this week re three major trends that will affect work comp in 2012 generated a few comments from friends and readers. One of the more pointed was from a claims exec, who noted he’s seen “a major shift in the employer’s appetite over
the past 3 years or so to return people back to work during their period
of recovery. The new post recession attitude – why bother, I have 50
people waiting in the wings for jobs that I can back fill!” Especially
true for lower end, less-skilled positions…So now as a payer, I have an injured worker with no job to go back to – wow, that’s a recipe for higher severity rates…”
Unsaid was a related issue – employers have lots of applicants from which to choose, making it difficult to place a recovering worker.
We are well into what feels like a somewhat halting, not-terribly-robust economic recovery. Although the employment picture is brighter than it was a year ago, the glow is still pretty dim. Payers seeking to re-employ injured workers, especially those from jobs in construction and manufacturing, are having little success. This inevitably leads to longer claims duration as claimants seek to maintain their cash flow by remaining on workers comp.
In turn, this can lead to more medical expense as claimants seek physical therapy, drugs, and other services to keep the medical treatment flowing.
The system-wide implications are clear – higher claims severity due to longer duration.
This won’t get better until employers’ demand for workers increases considerably, something that may not happen for another year, or perhaps two.
Another colleague had a rather different take, one that reminds us of the perils of unintended consequences. This exec noted that while they’ve run into employers like the one above (and by the way, they won’t be insured by his company, a mid-tier insurer, very long) the majority were handcuffed by the economy and couldn’t accommodate due to financial reasons. The incidents of financial hardship were much more significant
than the availability of abundant labor.
That said, yesterday he had a very interesting meeting with a very large trucking firm in who can’t hire drivers fast enough. Their biggest issue (supported by their consultant/broker who represents a large number of trucking firms with the same issue) has been with the government’s extension of unemployment benefits. They have a spreadsheet with names of potential drivers and when their unemployment will run out. These potential employees have been very open about their intention to enjoy the extended unemployment benefits. In the meantime, this insured can’t stay up with the significant spike in demand over the last 6-8 months.
Obviously this is not work comp related, but one has to wonder if drivers who are on workers comp are also choosing to stay at home rather than get back out on the road. This may well be – in some instances – the case, but I’d note that this is the age-old problem with work comp, and isn’t directly related to economic cycles.
There’s another factor complicating claim closure – MSAs. We’ll dip into those waters next.