It’s time to polish up the HSA crystal ball and prognosticate on what the next year will bring for workers’ comp.

Today we’ll keep it at a high level, examining 5 key drivers that will affect insurers, employers, regulators.

Tomorrow we’ll predict how those high level drivers will affect different stakeholders.

Here goes…

1. Premiums will rise as employment and wages continue to grow.
   GDP is growing strongly, (predictions are for growth above 3.2% for the last half of this year) employment and wages are up, consumer spending and housing prices are increasing. As long as as the new administration doesn’t start a trade war, things are looking good for employment and payroll, which are key drivers of work comp premiums.
   Note – this is NOT to say work comp insurance rates will rise, but rather there will be more payroll and more people working, so the impact of flat or lower rates will be overcome by higher employment.
2. Medical costs will remain flat or close to it.
   The first “official” indicator will come when NCCI Chief Actuary and all-around really smart person Kathy Antonello reports preliminary data on WC medical inflation at the Annual Issues Symposium in May. My bet is we’ll see inflation in the very low single digits – or even less.
3. Frequency will continue to decline.
   Because it always does.
4. Insurers will double down on efforts to reduce administrative expenses.
   With frequency down, investment returns decreasing, and medical costs flat, premium rates are headed down as well. Many work comp insurers seem to think the only thing they can really control is admin expense.
   So, we will see increased efforts to cut Unallocated Loss Adjustment Expense – cost categories such as general office expense, staffing, IT. And, payers will look to assign admin expense to individual claims whenever and wherever they can (more on this in a later post).
   That’s not to say they won’t be working on reducing Allocated Loss Adjustment expense (costs that are allocated, or assigned, to specific claims).  They will.
5. More payers will move their claims adjusters to home offices.
   Okay, one not-macro-level prediction.
   A good friend and colleague reminded me of this trend; I’ve been seeing it for some time, but didn’t realize how widespread the trend is until he made that observation. There are many reasons for this trend; lower administrative expense, easier to hire and retain good staff, dramatic improvements in technology and communications,

What does this mean for you?

Methinks this is the calm before the storm. The new administration may well be highly disruptive, however we won’t see any real impact until 2018 at the earliest.

Fortune favors the prepared. (quoting Dr Louis Pasteur)

Way back in February I finally got around to making my annual “here’s how I make a fool of myself publicly predicting what I think will happen this year” post.

It’s that time of year – when I have to own up to reality.  So, here’s how I did.

1. The comp market will soften pretty much everywhere*.
   Rate this a Yes, altho it was a gimme.
2. *Except in California, where rates are up – and will stay there.
   Nope.  Effective rates are down this year – welcome news indeed.
3. Liberty Mutual will continue to de-emphasize workers’ comp.
   Looks that way.  Mother Liberty dropped to number 7 on the list of largest workers’ comp insurers in 2015. The move away from WC and towards personal lines has helped Liberty’s financial status, with rating agencies improving the company’s status.
4. Private equity’s role in the vendor market will decrease – a lot
   Yup. A couple PE firms have been looking hard but these are relatively new entrants to the space.  While there are a bunch of small (<$2 million in earnings) companies doing well, they aren’t big enough to hit the radar of private equity investors.  Yet.
   And, there’s been so much consolidation that the big companies are too big for any but the largest investment firms.
   And OneCall’s struggles have made PE firms leery of the space.
5. A half-dozen – or more – states will adopt drug formularies
   Wrong.  This is taking far longer than I anticipated.  While a few have moved forward, many others are moving pretty slowly. Tennessee adopted a formulary, California is working on theirs, while things have stalled in Louisiana, North Carolina, Nebraska, and other states. Arizona implemented their chronic pain guidelines in October, which cover all the meds dealing with that condition.
6. Opt-Out will not gain much traction
   True.  Yeah, I know a bill was introduced in Florida, but that’s the only new news in opt-out this year besides the demise of the Oklahoma experiment.
7. We will see a couple/several bundled payment pilots
   Rising Medical has initiated one program in a handful of states, UCLA is working on a bundled treatment plan for opioid addiction, Wisconsin state employees are accessing programs (this started last year). So, this is a Yes – albeit not a loud one.
8. PBMs and payers will make even more progress reducing the use of opioids
   Yes.  Kudos to all for making significant gains in the fight against overuse of opioids.  This has been especially notable in the reduction of opioid scripts for new claims.  We’ve still a loooooong way to go in addressing legacy claims.
9. A couple of large, vertically integrated delivery systems will make significant moves into occupational medicine
   While there have been a couple reports of joint ventures and expansions, I haven’t seen evidence of much movement here. So, count this as a No.
10. There will be big changes at OneCall
    Yes.  New senior management; a reduction in sales staff; automation, offshoring and outsourcing of key functions have kept folks in Jacksonville hopping all year.

The net – 7 out of 10 predictions were correct.

Later, I’ll do my prognostications for 2017 – a year that is shaping up to be increasingly hard to predict.

After the blur that was the NWCDC in New Orleans last week, here are a few impressions.

Tough week

There were fewer insurance types this year, and a couple TPA execs noted they brought fewer people and most of their people only got Expo passes. The timing – after Thanksgiving – seemed to be a bit of an issue.  End-of-year stuff including closing whatever deals they could to make this year’s revenue budget and finalization of budgets and 2017 plans kept some at their offices, while the all-too-common “let’s stop traveling to control expenses” played a part as well.

Next year the show returns to Las Vegas, and it’s another week later.  We’ll see if that helps or hurts attendance.

Notably, overall attendance was reported as flat – after a couple years of record high numbers, that’s good news for conference owner LRP.

Presenters

Folks, please please please don’t be so damn dull. Workers comp is boring enough without we presenters making it even worse.  If you aren’t used to presenting, get coaching. If your slides just include a bunch of bullet points, get your design folks to translate words into pictures. DO NOT READ YOUR PRESENTATION. Do not read your slides. Engage, entertain, focus. Make damn sure you tell them why what you’re talking about is important TO THEM. 

No matter how important your points are, if your audience is asleep or playing words with friends you might as well be singing in the shower.

There are many, many people with different approaches and styles who are really effective. Friend and colleague Alex Swedlow, President of CWCI, uses a lot of charts and graphs – and a sardonic style and dry wit – to make complex issues understandable.

Bob Hartwig PhD has way too many slides, talks way too fast, presents way too much information – and is a terrific presenter.  Why? Because he’s found a style that works for him.

Some need a lot of practice, others shouldn’t as it makes their talk seem wooden and stilted. Some can ad lib, others can’t.  Find what WORKS well for you, and stick with it.

And always ask what you can do better.  People will always blow smoke up your shirt about how great you were – ignore that.  Sure, take away the things you did well, but seek out what you can do better. We can always improve.

Execution

There are few new ideas in the industry, few real innovations – but lots of talk about innovation. What there is – is a very real and very strong focus on execution by some vendors, TPAs, brokers, and service providers.  The people and companies that impressed me were mostly the ones that were “innovating around execution”. What can they do to make their customers’ jobs, lives, operations, functions easier/smoother/less stressful? How can that be measured? And who are their customers – what do they do every day? How are those individuals measured and rewarded? What do they need, want, and have to have? What makes their job harder? Where’s the nuance, the small difference, the unseen need that can be exploited to differentiate?

Figuring out the “execution opportunity” is a big part of success, but it’s a total waste of time if it isn’t translated into different workflows, services, business practices.  This can be tedious and frustrating and appear to be marginally rewarding at best.

But the whole is greater than the sum of the parts. Customers – buyers, front-line staff, employer supervisors, work comp patients – notice and appreciate the effort. More business comes your way. And competitors find it hard to get a foot in the door.

In several deep dive conversations with a wide variety of folks, I kept noting the ones that are doing well are relentlessly probing, asking questions, wondering why?. This isn’t flashy or in many cases really obvious – but it sure is working.

Industry Isolationism

The conference is useful in many ways; one can get lots of meetings done in a brief period; new, intriguing approaches/vendors/programs are on display; and reconnecting with colleagues is always rewarding.

What stuck out for me this year was something that is both troubling and encouraging: the insularity of the work comp industry is receding.  Perhaps it’s the election, a vastly improved economy, or just more awareness; for whatever reasons, many of the people I spoke with are more attuned to and aware of external factors that may well impact work comp.  A few examples:

• Inflation rates will affect investment income, which in turn moves reserve adequacy
• Automation decreases risk for industrial workers, while reducing re-employment opportunities
• Changes to health insurance status may increase or decrease claiming patterns, cost shifting, case shifting

This is good news indeed.  However, there’s a lot of misinterpretation due to misunderstanding or just plain ignorance (not saying that pejoratively, but rather noting the fact that a lot of folks just aren’t very aware) about some of these issues.  I’d suggest it’s always best to try to understand what’s really going on before jumping to conclusions about what “that” means.

A lesson I try to keep in mind myself…