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Work Comp Predictions for 2014

Proving once again that I’m not smart enough to leave well enough alone, it’s time for my annual predictions for the coming year. I’m putting on my Carnac costume, examining tea leaves, and stopped by the butcher to get ready for some haruspicating – that’s analyzing sheep entrails (and yep, that’s a legitimate future forecasting technique)…

liver map

So here’s what’s going to happen in 2014. I hope.

1. Overall, the work comp insurance market will be steady.  Employment is slowly picking up, manufacturing and construction are doing ok, and premium rates are level to a bit higher.  This will mean more business for TPAs, slightly higher premiums for employers (and insurance companies), and more focus on loss prevention and risk management.

2.  More consolidation in the TPA market is on the horizon.  Expect some of the mid-tier TPAs to grow via acquisition, and there may be a deal involving one of the larger ones as well.

3.  Medical trend – on a paid, not incurred basis – will increase by at least a couple of points.  The ongoing problem of facility costs, coupled with cost-shifting and a lack of focus on (real) medical management on the part of most payers will be the drivers.

4.  Deal activity for mid-sized to large transactions in the work comp services sector will taper off.  There’s one more big transaction in process, but after that gets done there just aren’t that many big companies left to sell.  Expect to see a couple transactions but nothing like we’ve seen in 2013.

5.  At least one – and likely more – insurers will discover the real impact of opioids on their claims costs, and the impact will affect their reserves, rating, and/or financial stability.  As of now, few carriers have split out the cost of claims with and without opioids, and when they do, they are in for a (financial) shock.

More tomorrow!

3 thoughts on “Work Comp Predictions for 2014”

  1. Still being new to the industry (going on year five) so I’m learning every day. You state that few insurers have split out the costs of claims with/without opioids and are in for a financial shock when they do.

    Can you elaborate?

  2. Further supporting any prediction on increased costs of opioids are the following (may differ by payor):
    Morhine Sulfate: a 53% price increase from Jan 2011 to Sept 2013
    Oxycodone HCL: a 40% increase from April, 2009 to Oct 2013
    and that’s without the Physician Dispensing add-on!
    Plays havoc with long-tail reserves

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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