NCCI’s Bill Donnell on the future of workers’ comp

NCCI CEO Bill Donnell was kind enough to grant me an interview a few days before his talk at this year’s AIS…I was unable to attend due to another commitment (the great folks at the Workers’ Compensation Association of New Mexico invited me to their annual meeting)

Here’s my interview with Bill.

MCMWhat is the major focus of NCCI’s Annual Issues Symposium this year?

Donnell – Eighteen months into this role, I’ve been getting feedback from industry stakeholders and thinking about the industry. Our approach is the line of business has been around 100 years, and survived that long because we’ve adapted.  If we adapt, will probably survive into the future, if we don’t we’ll become irrelevant.

MCM – Is WC relevant today?

Donnell – We have a financially stable, healthy system, covering north of 90% of the workforce.  The industry and system has a pretty good history of getting injured workers back to work and our focus is on that, and workplaces are safer than they were a long time ago…[we have] a lot to be proud of.

Another component is the whole issue of technological disruption.  [The economy has] shifted from agriculture to manufacturing to service and now service is vulnerable.  This provides perspective as it is kind of scary, but look what’s happened over time; 70 years ago we would have been saying the same thing. The issues are always the same, but things will come faster than they have before…change will happen but this time it will be faster.

MCM – with the rise of automation, autonomous vehicles, the gig economy, increased robotics and artificial intelligence, what could we see in the future?  What we need to do to be relevant in years ahead?

Donnell -Workers’ comp could be a high risk business only with repetitive injuries [from decline in employment in industries with that risk] gone, it would focus on high hazard risks, there would be a smaller but higher risk pool and smaller overall business.

With the whole issue of industry evolution, we have to evolve, we need to move the ball forward. [We need to] talk about the industry’s past success and show where we’ve adapted to change…[the] good news is that we’ve done this before.  We’ll talk about examples of how the industry has evolved…

Thanks to NCCI’s communications chief Dean Dimke for setting this up.

 

 

Express Scripts buys myMatrixx – a smart move for both

This isn’t surprising; workers’ comp is a very mature industry which demands consolidation.  As the market shrinks, winners will be those with size, scale, and buying power.

myMatrixx has a very strong brand, excellent customer implementation and service, strong clinical capabilities and a solid portal. What it doesn’t have is buying power, and the biggest payers shied away from myMatrixx as it is one of the smaller PBMs with a dearth of hundred-million-dollar accounts.

Express Scripts’ work comp division has scale, a core group of really good professionals, and a few marquee customers.  What it doesn’t have is a strong brand image and the resources demanded by payers increasingly relying on their PBMs for all-things-pharmacy; opioid management, data reporting, patient enrollment and monitoring, physician profiling, high-risk-claim flagging.

Artemis Emslie will assume overall leadership.  I’ve known Artemis for 25 years; she has a very good reputation in the industry and knows work comp pharmacy deeply. As she takes over what is now a very large work comp PBM, I’d encourage her and her new bosses to consider a couple things.

Keep the myMatrixx brand.  Brand is all powerful, and the market message that will be heard is things are changing, ESI is investing in and providing resources for work comp. That is critical.

Keep doing the smart marketing mM has done for years – rides from airports to conferences, the Phil Walls webinars, the overwhelming focus on pleasing customers.

Get out to all customers today, and listen listen listen.  Don’t inundate them with corporate speak and blather, rather ask questions, dig deep, and document everything. This is a great opportunity to hear directly from customers – a very valuable opportunity.

Staff at both companies are excited about the merger; I’ve spoken with several who are pretty pumped.  This itself is unusual and speaks to their inherent grasp of each company’s challenges.

While terms weren’t disclosed (they likely will be at some point as ESI is a public company) my sources indicate the price was in the $300 – $350 million range, a hefty valuation indeed.

What does this mean for you?

The whole is rarely greater than the sum of the parts.  In this case, it will be – if the new entity has adequate resources and sticks with what made mM successful. A stronger PBM with more capabilities is good news for all payers.

 

 

More and stronger evidence that ACA is reducing workers’ comp costs

Is the Affordable Care Act lowering workers’ comp medical costs?

Sure looks that way.

Data from NCCI’s 2016 AIS and HSA clients suggested ACA’s impact was positive and sustained.  Flat-to-declining total medical costs over a two-year period that coincided with the full implementation of ACA were a strong indicator of the law’s positive impact on work comp. Later this week, NCCI’s Kathy Antonello will update us with a first look at the 2016 numbers, and we’ll see if that pattern continues.

I summarized the change in the employed population’s healthcare coverage a while back – noting that many more workers in high-frequency jobs are covered under ACA, a positive factor for work comp. (much more on this can be found here)

Wait, there’s more – Fitch’s just-released review of commercial insurance alluded to the impact of ACA on work comp…

Implementation of the Affordable Care Act (ACA) and a corresponding shift of individual medical care delivery away from workers’ compensation to other markets may also be a factor that bears further study.

Other research from Upjohn analyzes the impact of ACA on workers’ comp.  A couple key points:

  • immediately after workers turn 26 (and thus lose access to their parents’ insurance as allowed under the ACA), the amount of medical treatment paid by workers’ comp goes up – implying that lack of health insurance leads to greater use of workers’ comp benefits.
  • the evidence strongly suggests that the ACA will decrease the likelihood that health care is paid for by workers’ compensation, the size of the cost savings to workers’ compensation is difficult to asses [because]
  • the claiming behavior of people with minor medical needs is influenced by having health insurance. This would suggest that the overall savings to workers’ compensation would be modest. Heaton (2012), however, finds evidence that people with greater medical needs respond to health reform, which suggests that the cost savings to workers’ compensation could be large

There’s a lot more to the Upjohn analysis, and I’d encourage you to read it. Potential issues include access to care and the influence of lower Medicare reimbursement. That said, the authors’ overall summary strongly links ACA to lower work comp claims and medical expenses.

What does this mean for you?

Evidence strongly suggests ACA is positively affecting workers’ comp, lowering claims costs and medical expenses.

Liberty Mutual drops the Research Institute – a missed opportunity

A couple weeks ago Liberty Mutual announced it would be closing its Research Institute in June. The news came as a shock to many, including me. Just two months ago I had lauded Liberty for its ongoing support for research into disability.

Before we discuss the Institute’s demise, allow me to reprise that applause for Liberty’s decades-long commitment to the Institute. Just because they are shutting it down today does in no way diminish the great work it did for years, the commitment by Liberty and its policyholder owners to the greater good. We are all better off for that commitment.

On one level I understand why Liberty did this – it’s the dollars. While no one at Liberty has said so, it looks like a financial move, pure and simple. The Institute’s staff is well-paid, the research itself is likely expensive, and in these times of tight focus on unallocated expense management, cutting the Institute’s non-revenue-generating millions in expenses is a quick way to increase earnings.

But I’d suggest this is a mistake, for two reasons.

First, the financial benefit pre-supposes the Institute is “non-revenue-generating”. That’s true, but it could and should have been used much more effectively to advance Liberty’s brand. Yes, that’s not “revenue-generating” in the strictest sense of the term, but there’s NOTHING more important than a brand.

I asked Liberty’s Communications folks two questions; they kindly responded in a timely manner.

Here’s the first.

MCM – My take is Liberty didn’t aggressively promote the Institute or effectively utilize it in marketing and branding efforts. Yes there was the occasional press release or website mention, but it was rarely front-and-center. Why?
LM – We communicate to our customers and business partners in numerous ways on issues that are most important to help them best manage and mitigate risk. Our Research, Risk Control and Claims expertise all play important roles in helping employers and their employees manage current and emerging risks…
We are also keeping our Hopkinton facility open while discontinuing our peer-reviewed research efforts. Our Hopkinton facility will continue to house our Industrial Hygiene Laboratory and Driver Training program, as well as a personal insurance claims training center.
What is evolving is the way that people live and work, and the dynamics of today’s workplace reflect these changes. Liberty remains committed to helping people live safer more secure lives. We are revisiting our approach to accessing research while at the same time continuing to provide our Risk Control and Claims expertise to help commercial insurance policyholders improve both safety and return to work.

Liberty’s response didn’t address my statement about the relationship between the Institute and the company’s branding efforts. “Communicat[ing} to our customers” is talking to people you already do business with. And, communicating without weaving the brand message into that communication constantly and thoroughly minimizes its usefulness.

In my view Liberty didn’t effectively leverage the terrific work done by the Institute, never really connecting the work it does to support Liberty’s overall “lead safer, more secure lives” brand statement.

The lack of effective brand management is by no means unique to Liberty. Rather it is a major problem for the entire workers’ comp and P&C insurance industries. Every player talks about their people, their great claims management and effective underwriting, but few really differentiate. That is why this industry is commoditized; why buyers switch carriers for a few percent, why risk managers follow their consultants’ advice based on a spreadsheet.

Directly and consistently and broadly and cogently tying the Institute’s work to the impact it had on Liberty customers would have been expensive, arduous, in some cases tedious, and totally worthwhile. It would have greatly strengthened the brand by demonstrating Liberty’s depth of commitment to its brand statement.

My second reason is much more debatable.

In these days of awfully insensitive corporate behavior, the Institute stands as a shining example of doing good work without a direct dollar benefit. It is just the right thing to do. While corporations are obliged to support their shareholders, Liberty is a mutual insurer; its owners are its policyholders. One could, and I am, make the argument that the Institute was and remains prima facie evidence of Liberty’s commitment to its “owners”.

What does this mean for you?
Lots of terrific researchers are looking for work. Please reach out to them; here’s one source. 

Trump de-funds Drug Policy Office…WTF!

President Trump’s budget proposal kills the Office of National Drug Control Policy.

I cannot fathom how any responsible public servant could do this.

In the midst of a horrific opioid epidemic, where we need every possible tool to slow down the death train, he de-funds ONDCP? 

30,000 dead people, thousands of devastated communities, huge societal costs, dead moms and kids and drug-addicted newborns, fentanyl and elephant tranquilizers coming in from China and he de-funds ONDCP?!

ONDCP is the lead agency setting NATIONAL DRUG CONTROL POLICY.  This isn’t some obscure, useless federal agency – these people set POLICY – what the feds do, don’t do, how they work together, what they focus on, where they target their efforts.

Without ONDCP, there is no coherent, cohesive policy; we’ll have a bunch of federal, state, and local organizations tripping over each other, duplicating efforts in some areas while completely missing or ignoring others.

And don’t tell me this is just a wish list – this shows where the President’s heart is, where his priorities are and are not.

This is real, folks. I’ve made no secret of my fear of the Trump administration, I just cannot believe even Trump would do this.

Thank goodness this is too awful for some of his fellow Republicans. 

What does this mean for you?

I don’t even want to think about it.

 

What’s your company worth? part 2

A couple weeks ago I shared a post on company valuation – how to figure out what your company is worth to a potential buyer or investor.

We focused on customer value as a key driver.  Sure, There’s a lot more to this than just customer value – some obvious and some not. And it has been done with a lot of success by work comp service providers…one is referenced below.

External factors such as interest rates, industry attractiveness (for some reasons work comp is kind of hot again), success of other investments in the space,  Not much you can do about that – but there is a lot you can do to maximize the value of your customers.

A big part of that calculation is how long customers stick around – and how their “value” increases over time.  Customer longevity – or lifetime customer value – is much more than how many cases you get per month times the price per case times the length of time you keep a customer.

In fact, that’s a very limiting way to view your customers, especially if you show that calculation to potential investors.  Those investors want to see how you are going to manage, grow, improve your business. If you aren’t strategic enough to think about how you can deliver more to those customers so they drive more revenue, that isn’t going to impress smart investors.

Briefly, here’s a better way to think about customers…(thanks to Harvard Business Review)

Our customers become much more valuable when…

  • they give us good ideas
  • they evangelize for us on social media
  • they reduce our costs
  • they collaborate with us
  • they try our new products
  • they introduce us to their customers
  • they share their data with us

Even if you aren’t going to be selling your company anytime soon, you should be thinking about this – a lot.  A far-too-common mistake – and one I make all the time – is not focusing on the important stuff because I’m caught up in the urgent.

Final comment – the “old” One Call Imaging was very good at this.  OCI got their customers to share data with the company so it could figure out where “leakage” was going, and then worked to identify why and where and who was involved.  From there, OCI and their payer customers worked together to close gaps and plug the holes. This led to OCI dominating the workers comp imaging space for quite a while.  It also maximized the company’s value when it was sold to Odyssey, and later when Apax bought the next gen OCCM.

What does this mean for you?

I don’t know ANYTHING more important than thinking about your customers – what do they want, why, how do they want to get it, what makes them successful, how you can help them be successful – all will help you determine where you need to go.

What’s in the House version of AHCA?

Here’s the quick summary of the Republican bill. Lots of details here.

Net is the bill attempts to give states much more leeway in establishing and regulating health insurance policies and programs – sort of returning to the world we had pre-ACA.

While the bill was passed without a CBO evaluation/score, it is similar enough to the original bill. My guess is we could expect at least 15 million people will lose insurance coverage under this bill…but remember it’s not going to pass the Senate.

  • It replaces income-based subsidies (basing financial subsidies on a person’s income) with age-adjusted tax credits of fixed amounts.
    This means – wealthy and near-poor people of the same age get the same $ amount
  • Eliminates the individual and employer mandate
    This means – no requirement that people have health insurance.
  • Increases premiums for older people and reduces them for younger folks who get their insurance from small employers or in the individual market
    This means – more young people may sign up, more older folks will find insurance unaffordable
  • Ends funding for Medicaid expansion and caps future federal Medicaid payments
    This means – fewer low-income people will have coverage, states will have to come up with more money.
  • Penalizes individuals and families that don’t maintain continuous insurance coverage
  • Allows states to let insurers drop coverage for different types of medical care
    This means – consumers may not be able to get coverage for their condition or the type of care they need (e.g. drugs, behavioral health, maternity)
  • Eliminates taxes and tax increases from ACA
    This means – Medicare will run out of money in a couple of years instead of 10+

This is just what’s in the actual bill – which is already under fire by Senate Republicans; Portman, Heller, Graham, Scott, and Snowe have all voiced objections.

Instead of adopting or modifying the House Bill, expect an entirely new bill from the Senate. If the Senate bill is passed (which may – or may not – require 60 votes), then the House and Senate will have to figure out how to move forward and which bill is the vehicle.

 

 

ACA Deathwatch: No, AHCA is not going to pass Congress

AHCA is not going to become law.

IF it passes the House, there’s no way it gets enough votes in the Senate.  Two reasons.

  1. Senate Republicans are opposed to the bill.
  2. Enacting AHCA without massive changes would alienate core Trump voters.

Passing AHCA – without drastic changes – would be political suicide for politicians who voted for passage. And while pre-existing condition coverage is a big issue, the big issue is loss aversionmillions of Trump voters would lose coverage under AHCA.

The biggest winners – young, healthy people – don’t vote.

Oh, and AHCA keeps current ACA subsidies and protections for Congress and Congressional staff while chopping both for regular Americans

This from Nate Silver:

Republicans whose families make less than $30,000 a year were nearly three times more likely than those in families making at least $75,000 to say it was the government’s responsibility ensure Americans had health care coverage.

And from Jonathan Cohn – voters who stand to lose the most in insurance subsidies under AHCA are – by a wide margin – Trump voters…

Subsidy amounts lost by voters in 2016 election

AHCA drastically cuts assistance to older, lower-income Americans in rural areas, a demographic that overwhelmingly supported Trump. And, most of these voters earn too much to qualify for Medicaid, so they’ll be left:

  • with far lower subsidies
  • without coverage for pre-existing conditions
  • facing insurance premiums that are much higher than today’s because AHCA allows insurers to charge older folks much higher premiums.

Some may cynically hope AHCA passes as it will doom the GOP in the 2018 elections. But the cost of that political calculation is far too high; the millions will lose coverage are those most in need of healthcare coverage.

Of course, Congress won’t suffer – they keep subsidies, pre-ex coverage, and all the other goodies.