Disability – it’s not a “medical” condition

A while back I had the pleasure of interviewing Glenn Pransky MD, M.Occ.H., the director of Liberty Mutual’s Center for Disability Research.  As I noted in a post a few months ago;

Glenn is the Director of Liberty Mutual’s Center for Disability Research; he is an occ med physician and has his Master’s in Occupational Health as well and has authored over a hundred articles, research papers, and book chapters.  That’s all quite impressive; what really struck me is how approachable, genuine, and open Glenn is. [my use of his first name is intentional, Glenn is completely without pretension or ego.]

Here’s the first installment of the interview (note I captured this as accurately as possible however any errors are mine) :

MCM: How has the “condition of disability” evolved over the last 20 years?

GP:  [There’s been an] Increase in the amount of health care treatment where it isn’t so clear that it makes people a lot better, along with growth in Social Security disability. More and more people seem to see themselves as permanently disabled.

Workers are staying in jobs longer because they have no resources to retire.

There are more employees with chronic conditions or who are in poor health; [there’s a] wave of baby boomers who are really unhealthy…less routine exercise in our working population. The Return to Work context of 20 years ago has changed, major shift in chronic musculoskeletal conditions is more prevalent today than it was 20 years ago – we are shifting from acute to more chronic disease state.

[Most recently there has been a] Shift from traditional jobs to non-standard work arrangements, contractors, out of house, gig economy etc. Non-traditional work situations are limited in terms of resources for RTW.  The Upside is there is more focused problem-solving on RTW these days than before

MCM: What “causes” disability?
GP: A lot of factors. It starts with a health condition that limits [the person’s] ability to work. Whether it becomes a work loss is due to other factors; whether there are accommodations available, the treating physician’s focus on disability prevention, and whether there is reassurance that the injured worker’s RTW will be safe and supported.

For everyone who’s disabled according to Social Security there’s someone working full time that means there is more [to the disability] than the health condition. Work is better for people, as prolonged disability is bad for your health. Research indicates that even when controlling for the patient’s medical condition, when working age people are out of work, they become sedentary, depressed, detached, and mortality increases.

There are significant opportunities [to mitigate disability]; early positive contact w the injured worker makes a difference; work accommodations offered for temporary alternate duty reduces TTD days by 30%, supervisor response “how can I help”, how can we accommodate” can make a difference of 20% reduction in TTD…Also having a formal policy and consistent approach to it makes a difference.

For insurers- early contact and problem solving research in Australia shows this reduces TTD days.

MCM: What is the role of medical treatment and treaters in disability; causation, prevention, and mitigation?
GP: Providers that are focused on RTW are better for patients and deliver the best outcomes when they practice EBM and communicate w patients on this; there is good evidence that this improves RTW. There are a series of studies from Bernacki in JOEM – more recent ones from WA COHE program…when patients get medical care that does not have a strong evidence base, disability is prolonged. Opioids are a great example.

More to come from Dr Pransky – my quick takeaway is this:

Disability is NOT a medical condition.  

Work comp pharmacy – early results of 2016 Survey

I’m up to my eyeballs in the 13th (!!) Annual Survey of Prescription Drug Management in Workers’ Compensation; the response from payers willing to devote time to the project has been gratifying indeed.

Previous Survey reports are available here; note these are the Public versions; respondents get a much more detailed and comprehensive version.

A bit of background first.  I conduct these surveys telephonically, speaking to the individual at the insurer/self-insured employer/state fund/TPA/trust who is directly responsible for the pharmacy program. In addition to asking their opinions and views, we get data on a variety of key metrics including:

  • drug spend for 2015 and 2014
  • opioid spend for 2015
  • compound drug volume
  • generic fill and efficiency rates
  • mail order usage

A few early findings.

  1. Pharmacy continues to be seen as more important than other medical ost areas, primarily due to the “downstream” effects of opioids on claim duration, return to work, and related pharmacy spend.
  2. Most respondents are seeing a decline in drug spend.  This is a bit of a surprise, as national research suggests drug costs are going up.  A possible explanation is that (most of) these payers are pretty sophisticated, have been working diligently on pharmacy issues for years, and most (but certainly not all) have employed a variety of programs to reduce unnecessary use of potentially dangerous drugs.
  3. The percentage of spend that goes to opioids varies greatly, from around 21% to over 50%.  Some of this is due to regional or state differences, but much is not. Much more to dig into here.
  4. Mail order continues to be woefully under-used, with most respondents reporting penetration rates in the low single digits.  Argh.
  5. Compound drugs are seen as highly problematic and payers have a wide variety of programs/efforts/mechanisms in place to address compounds.

Much more to come; when the Survey Report is done I’ll post a link.

Enjoy the weekend!


Monday catch-up

Summer’s arrived in upstate New York – and boy do we appreciate it. While I was watching all the trees turn green, I missed reporting on a bunch of stuff last week.

So better late than never, here it is.

P&C industry outlook

Let’s start with the macro stuff.  A couple weeks back, Fitch published a piece wherein they opined the P&C industry is in for a tough time this year. After several years of stellar performance, Fitch expects prices to decrease as competitors battle for market share. Here’s how they put it:

Renewal rates are flat or declining for most commercial market segments following a hardened market from 2011-2014. The price competition comes from underwriting success and market capacity expansion from earnings accumulation. As price competition intensifies however, this will likely be a drag on premium growth, according to Fitch. Commercial lines written premium volume grew by only 1.8 percent in 2015.

For work comp, Fitch identified prescription drug costs and continued low interest rates as problematic; the first increases costs while the second reduces investment income.


The number of opioid scripts in the US actually declined last year. And that was the third year in a row. That’s the best news we’ve heard in quite a while. Since 2012 – the peak year for opioid script volume – the number of scripts has dropped by 12% – 18% (depending on the data source).  

In case you’re interested, prescription opioids accounted for about $10 billion in total spend in 2015. Workers comp accounted for around 14% of that, a rather striking figure when you consider total work comp medical spend accounts for 1.4% of overall US medical spend.

Yup, work comp uses about ten times more opioids than other payers.

And how the bad news; the drop in scripts hasn’t been accompanied by a decrease in the death count, which stands at 28,000 for 2014.

California Workers’ Comp

Well, at least it hasn’t gotten any worse.  That’s my take on the just-released CWCI study on the UR/IMR process for Q1 2016.

  • IMR volume is about the same as last year at 160,000 determination letters per year;
  • the overall IMR uphold rate is the same as last year at 89%;
  • Rx drug requests still account for nearly half of all disputed medical service requests submitted for IMR (and 40% of the Rx drug IMRs are requests for opioids or compound meds);
  • and a small number of docs still account for the majority of the disputed  service request that undergo IMR (the top 10% of medical providers accounted for more than ¾ of the IMR service requests).  

My take – the IMR process is preventing people who don’t need opioids from getting scripts for opioids.  That’s a very, very good thing.  Yet the same docs keep prescribing this crap to patients knowing full well these requests will be rejected.

I’m very much looking forward to hearing all those “injured worker advocates” heaping praise upon the system for protecting their clients’ health and wellbeing, and that of their kids as well.

I’ll personally nominate each of them for a Comp Laude Award.

Opioids and Workers’ Comp – a quick update

The rest of the world is beginning to catch up to the progress workers’ comp has made fighting the opioid scourge.  Kudos to PBMs, payers, regulators, researchers and some physicians for recognizing the incredibly negative effects of opioids years ago, and taking action to mitigate some of these effects.

That is NOT to say we’re anywhere close to getting this solved – far from it.

But we have seen some evidence of decreases in the number of new claims getting opioids in some areas and an overall decline in opioid scripts and morphine equivalents (MEDs).  We’ll have more information in a couple of months when CompPharma (a consortium of work comp pharmacy benefit managers) releases its 13th Annual Survey of Prescription Drug Management in Workers’ Compensation. (note I’m president of the organization and am conducting the research, past reports are available free for download here.)

A few factoids to give some perspective:

From CWCI’s most recent research:

  • Opioids declined to 27.2% of all scripts dispensed to California work comp patients in 2014, down from a peak of 31.8% in 2008.
  • Average number of morphine equivalents per script declined from 550 in accident year (AY) 2007 to 422 in 2012.
  • The % of work comp patients receiving opioids within 24 months of injury increased from 22.4% in 2005 to 27.9% in AY 2012
  • Express Scripts reported overall spend for opioids declined 4.9% in 2015, the fifth consecutive decrease.
  • Helios reported:
    • the percentage of work comp patients getting opioids declined by 1.6% from 2013 to 2014.
    • opioid utilization dropped 2.9% over the same period

What we have NOT seen is any significant progress dealing with the knottiest and most important problem – long term opioid users.

I can’t count the number of erstwhile start-ups, business ventures, and eager entrepreneurs I’ve spoken with who contend they’ve figured it out.

By definition, anyone who claims to have a universal solution most certainly doesn’t understand the problem.  Unlike reducing initial and secondary scripts, addressing patients who’ve been taking opioids for months is very much an

  • individual,
  • patient-by-patient approach
  • requiring flexibility,
  • a deep understanding of the disease state and chronic pain and addiction,
  • a willingness to experiment and fail, and
  • a very long term commitment to a business model that almost certainly will not be hugely profitable.

That’s not to say there isn’t opportunity – there most certainly is.

What does this mean for you?

We’re at the end of the beginning of the work to address opioids.  This will take focus, years, diligence, and unrelenting focus.

Workers’ comp – for hospitals, it’s where the money is

Two recent articles in Health Affairs highlight a growing issue for employers and taxpayers; some hospitals are increasingly looking to work comp as a profit maker.

Depending on the state, facility costs can account for anywhere from around 32 – 40% of total work comp medical expenses (different states classify locations-of-service differently).

Ge Bai and Gerard Anderson examined the fifty US hospitals with the highest charge-to-cost ratios and found their markups over Medicare-allowable costs were three times higher than the average hospital.

This is critical in work comp because state work comp regulations often base facility reimbursement on charges – despite NO evidence or requirement that those charges have any basis in reality.

Fully 20 of the fifty hospitals are in one state – Florida – that uses a percent-of-charges reimbursement methodology for hospital outpatient services (manual is here).

Bai and Anderson’s latest work provides a deeper dive into hospital profitability.  A few key quotes:

  • Hospitals with for-profit status, higher markups, system affiliation, or regional power, as well as those located in states with price regulation, tended to be more profitable than other hospitals.
  • Hospitals that treated a higher proportion of Medicare patients, had higher expenditures per adjusted discharge, were located in counties with a high proportion of uninsured patients, or were located in states with a dominant insurer or greater health maintenance organization (HMO) penetration had lower profitability than hospitals that did not have these characteristics.

The methodology used by Bai and Anderson is somewhat different from that used by other researchers in that it excluded income from non-patient care services. I infer that they did this to focus specifically on the actual care delivery cost and not factor in other revenues from services such as parking, gift shops, investment income, etc.

So, what are the implications?

  • Work comp is a soft target for facilities in many states
  • The percentage-of-charges methodology is a license to…profit
  • More profitable facilities have likely already figured out how to make the most revenue possible from every source – including workers comp
  • Less profitable hospitals are going to learn from their more profitable competitors

Who’s running your company.

Is it the execs or the IT department?

The workers’ comp, and, for that matter, the entire property and casualty insurance industry, is chronically systems-poor.  While other industries view IT as a strategic asset, continually investing billions in IT, WC/P&C considers IT an expense category to be mined for pennies to add to earnings per share.

We all know how much execs HATE unallocated loss adjustment expenses

Execs at payers are hamstrung by IT departments that can’t/won’t/aren’t able to implement systems changes. In fairness, IT departments are hamstrung by a lack of strategic vision in many C-suites, which in turn is motivated by financial markets or executive comp plans at mutuals.  Suffice it to say there is plenty of blame to go around – but the result is insurers’ strategy is often greatly limited by IT.

For example, underwriting and distribution. Yes, Google’s initial foray into insurance was short-lived, but that wasn’t because they weren’t selling insurance. In fact profits were good – but “good” by insurance standards, not by tech standards.  Google just couldn’t make the profit levels they are used to.

At some point another tech innovator will figure this out and/or decide a lower profit level is just fine, and then woe betide insurers.

Another example – the medical management world is changing dramatically, and work comp insurers are very hard pressed to adapt. Bundled payments, narrow networks, electronic medical records and vertically integrated delivery systems are here today, and will grow dramatically in importance tomorrow. Flexibility, adaptability, and the ability to move quickly are essential – and equally impossible.  Changing vendors requires IT to design, implement, test and monitor new data feeds to multiple systems and stakeholders.

Conversely, some payers have tied themselves to external vendors who act as consolidators or pipes, thereby greatly reducing the carrier’s IT burden.  In exchange, a LOT of power is transferred to the pipe vendor.  That’s fine if:

  1. incentives are aligned over the long term, and
  2. the vendor is able and willing to make changes to providers, processes, and feeds as necessary, and
  3. there’s transparency.

However, expediency and underinvestment comes at a cost.


CEO T Rex: “Hey, when is that B2B platform scheduled for testing?”

CIO Triceratops: “18 months after I get the money to hire the staff you cut to reduce ULAE…”

The B2B and healthcare delivery market is evolving at a pace akin to that the dinosaurs saw after the meteor hit.  So, here’s a couple of questions you may want to ask yourself.

  1. Does your strategy drive your IT, or does your IT drive your strategy?
  2. What’s your plan to adapt to the revolutionary changes hitting distribution and medical management?
  3. Does your IT department, management, vendors, and infrastructure support that plan?
  4. What happens when – not if, but when – a carrier or new entrant builds the infrastructure and capability you can’t or won’t?

Friday catch-up

Got to love May!  Everything is greening up, baseball season is in full swing, college graduations, flowers are blooming.

While I was out smelling the new blossoms, a bunch of stuff happened.

Implementing health reform

There’s been a lot of press about UnitedHealthcare’s decision to leave the Exchanges, with opponents citing the move as more proof of the impending demise of wrongly-named “Obamacare” and others noting it’s much ado about not much.

A brief and compelling post by David Williams is in the latter camp; David notes:

[United] specializes in selling high-priced plans to corporate accounts. In the price-sensitive world of the exchanges that’s a losing proposition. No surprise — United wasn’t getting traction.

As a former UHC employee (albeit from two decades ago), I have to agree.  UHC never focused on the individuals or employers or demographic groups that seem to be signing up for insurance via the Exchanges.  There are several distinct attributes of health plans winning in the Exchanges; Health plans that have expertise in Medicaid, understand local markets and have very strong local brands, and/or are vertically integrated delivery systems are succeeding.

Bernie Sanders’ campaign appears to have “inspired” Hillary Clinton to talk more about offering a public option in the Exchanges, namely allowing a to-be-defined group to buy-in to Medicare. Notably, Sec. Clinton first broached the public option back in February, so this isn’t really new news. However, it does mark the first time she’s mentioned the Medicare buy-in. (a more detailed review of Clinton’s health policy platform is coming up next week)

From JAMA, the news that employer coverage of health insurance has not changed over the last few years.  This is a key reason the Exchanges have not enrolled more higher-income folks; they are getting their insurance thru their workplace.

Finally, before you get too wrapped up in the media nonsense about prices, enrollment, and the failure/success of ACA, read Larry Levitt’s piece in Vox on Obamacare 2017.

Workers’ comp

WCRI in partnership with the good folks at IAIABC published a must-have guide to State Workers’ Compensation Laws.  Order your copy at the link; investors, analysts, compliance departments and regulators all need this on the virtual bookshelf.

Friend and colleague Peter Rousmaniere’s Working Immigrants blog has been especially active of late; Peter’s been documenting the reality behind immigration trends, and his charts and graphs will speed your understanding of what’s ACTUALLY happening.

(spoiler alert – there is no big influx of Mexicans these days…)

Finally, a terrific post by a woman – a neuroscientist – who finally decided to treat her anxiety with medication.  It is an excellent piece addressing the balance between over-medication and the positive impact drugs can have – when they are the right choice.

Bob Hartwig’s prognostications

Back to NCCI…didn’t want to overload your inbox last week.

For anyone who has heard Bob Hartwig PhD speak, he violates all the common rules about presentations and presetting – and is excellent nonetheless.  Methinks it is because Bob is both deeply knowledgeable and enthusiastic beyond measure.

On to the content.

In the overall P&C market, we’ve just had three consecutive years of underwriting profits, an occurrence previously experienced 45 years ago. Back in the days before 1970, underwriting profits were common, primarily due to the  low investment returns available in those days.

One of the key drivers has been continued reserve releases as insurers and employers take down reserves, adding to gains.

Bob noted there’s been wide disparity among and between states in terms of premium increases, linked quite closely to each state’s underlying economy, but overall premium growth has been pretty modest.  With organic growth somewhat stalled, insurance M&A activity ramped u significantly in 2015 – not just in the US but in Asia and across North America.

Hartwig talked about the Trump v Clinton positions on matters of import to P&C insurers; see his presentation for the relevant slide.

Non-farm payroll is increasing at about a 4.5% annual clip since the great depression – due to higher employment, higher pay rates, and more hours.  This is GOOD NEWS INDEED.  There are also early indications that labor force participation has improved “modestly” since the beginning of 2016, and the number of “discouraged workers’ has also dropped significantly of late.

Manufacturing is a major issue in workers comp – while there’s been solid growth since 2009, it is contracting in the energy sector along with the entire non-durable sector.

The on-demand aka Gig economy – there are a plethora of regulatory issues which, in turn, have implications for insurance.  Independent contractor v employee, private passenger auto vs commercial auto, liability, etc are all of major concern. Notably, young, minority urban males are the most likely to offer gig services – this demographic group is also more likely to incur an occupational injury.  And, gig workers WANT more regulation – they seem to think of themselves as employees.

The sharing economy is going to have hugely disruptive effects on insurance; no longer does one entity own the asset that delivers the service or product, distributes it, services it, and employs those who do the work. This will require a rethinking of how and what is insured, and how “claims” are assessed/attributed/reported/paid.

Very glad there’s lots of smart millennials that can figure this out because it sure makes my head hurt.

41% of occupational deaths were due to transportation incidents – almost 2000 in 2014, 60% of those caused by roadway incidents.  Of course, that’s not the good news, what is the good news is increasingly-automated driving will likely reduce the death rate dramatically.  The “single greatest area where we can see a decrease in frequency of deaths due to improved automation.” (paraphrase, it’s impossible to type as fast as Bob talks)

Hartwig concluded with a discussion of the growing involvement of private equity and venture capital in the insurance industry.  Google Compare came to the US from the UK; after a brief run it closed up shop in February this year due to low profit margins.  When you have a hurdle rate (desired return on investment) of 18%, insurance is probably not a terribly promising industry.

Nonetheless, there are a plethora of insurance-related companies getting $10 million or more in funding to do something disruptive in P&C insurance.  Distribution, analytics, data warehousing, insurance technology are all areas of focus.

And that’s it!

Innovation in Insurance – we are soooo far behind

ACORD’s Bill Hartnett gave a compelling, entertaining, and pointed presentation on innovation, technology, and the impact of same on insurance (my title, not his).

You will be sorely tempted to ignore this and move on to the next email or project update; Do NOT do this.

His money quote – Insurance is the DNA of Capitalism.  Buildings and homes don’t get built or repaired…”

This set the stage for a discussion of the future that fortunately began with a back-to-basics primer on what insurance is for – risk assessment and management. One lightbulb went off for me – does big data give us great predictability, which obviates the “risk” issue inherent in the concept of insurance?

We will be able to predict weather events, identify medical conditions, greatly reduce “accidents”, deliver medical care designed specifically for that individual patient.

A few factoids – every minute, there are:

  • 4 million Facebook likes,
  • a million Vine users play videos,
  • 110,000 Skype calls,
  • 700 Uber rides scheduled, and,
  • 450,000 tweets

That’s a LOT of data.

And data mining uses this incredibly rich data trove to learn a LOT about you, about health issues, drug issues, crime, you name it.  Just by accessing, analyzing, and monitoring publicly available data.

Hartnett talked about vehicular changes dealing with autonomous vehicles – Ford and Tesla will have fully autonomous cars on the road before 2023. Given vehicular accidents are the single biggest cause of occupational fatalities, this is good news indeed – computers are better drivers than humans.  Yes, even me.

Moreover, frequency and severity will drop significantly within five years – this is going to greatly impact the auto repair business and auto insurance, but perhaps no industry will be more affected than long-haul trucking.

What will today’s drivers do?  How will they be classified for workers’ comp purposes? Will we get a spate of injuries as drivers see tech taking over the wheel?

New news to meGuardhat is a hard hat with technology specifically designed to avoid falls, notify when falls occur, and monitor other movement and risk metrics. Other technologies include wearables that address posture and monitor vital signs via a tattoo on the skin.

But hard hats may not be necessary, as 3-D printed buildings are coming – a 3-D construction printing rig can build a 2500 square foot house in 20 hours and needs 3-4 technicians to move it around.

I’ll stop with this – cognitive cognition – computers that can do pretty much everything we humans can in terms of pattern recognition, intuitive capabilities, and perhaps have emotions – exponentially faster and more consistently than we ever could.

Can you imagine the impact on health care?  Doctors? Diagnostics? Medical information? The health care delivery system will be revolutionized, with the potential to dramatically reduce costs as the role of people may well be greatly reduced.

Of course, I’ll be retired by then…oh, wait, I won’t be.

That’s how fast it’s coming.

Then there’s Distributed Trust

Workers’ comp – 2016 State of the Line

NCCI Chief Actuary Kathy Antonello’s State of the Line presentation – is the hot ticket at AIS. (Her presentation will be available here right after her presentation ends; the password is Transforming .)

Antonello’s use of new imaging and automation to present data was compelling and highly informative, really helping this non-actuary understand the import of the data and findings, and potential impact going forward.

Key intro points – Medical severity changes remain moderate, but drug costs are increasing at a troubling rate.  Definitions of “employee” are evolving as is the “workplace.

Key data points

  • Work comp net written premium for private carriers up 2.9% to almost $40 billion in 2015. State funds accounted for $5.8 billion in premiums, for a total of $45.5 billion – up from 44.2.
  • WC combined ratio improved to 94, a six-point drop from 2014 and the second best combined ratio since 1990
  • Most recent P&C industry cycle was a seven-year one, shorter than previous cycles
  • Unsurprisingly, net investment income decreased slightly across all P&C lines.

Private carrier details

  • direct written premium decreased in 9 states, with the biggest drop in OK due to reforms.
  • CA and NY had larger than average increases with CO DC and OH jumping by double digits.

Work Comp Drivers

  • Payroll is up 23% since 2010 – a pretty nice increase.
  • Construction employment has led the way, up 17%
  • Frequency continues its long term structural decline, down another 3 points – just below the long-term average of 3.6%
  • Medical is 58% of total benefits
  • Medical cost per LT claim DROPPED 1% in 2015 – more on this later…
  • Indemnity expense up 1 point from 2015 on a per-claim basis.
  • Loss ratio drop of 6 points is by far the most important contributor to the improved combined.
  • Loss adjustment expense (LAE) ratio increased somewhat, due to the improvement in losses.
  • Five-year investment gains dropped to 13 percent, down below the long-term average of 14.1 percent.
  • Reserve deficiency down to $7 billion

The operating gain jumped to 18 percent, a historic high – and far above the long-term industry average of 5.8%

Not surprisingly, all this good financial data is leading to premium price reductions.  Rates are decreasing, with 57% of agents seeing a decrease in rates at renewal in Q4 2015.

Most surprising is the data on medical severity – it is actually tracking BELOW medical CPI increases, a major change from prior years.

This despite a 6 point increase in drug costs, a finding that – argh! – will be discussed in detail in the research discussion which is scheduled at the same time as my panel on regulatory issues…

More – lots more – to come on the medical cost finding.  Spoiler alert – it looks like the reforms in California are working to cut unnecessary medical expenses…with Cali accounting for about a fifth of total work comp premium, that’s a big driver.