Although the firm Market Scout contends that the workers compensation market is not softening, critics question their data, objectivity, timing, and conclusions. Market Scout provides quotes for property and casualty lines, including workers comp, to agents and brokers. For those not immersed in the arcane world of insurance, a “softening market” is one where prices are dropping and coverage expanding as carriers seek to build market share, often at the expense of sound underwriting (risk selection) principles.
Evidently, one of the carriers that they use most often is the primary source of their data. At the least, this calls into question Market Scout’s conclusions; one carrier does not a market make.
There are two other potential concerns with Market Scout’s information and conclusions.
1. their data tends to lag the industry, and there are some indications that rates have begun to soften significantly since June 1.
2. other market watchers are seeing a definite, and larger, drop in WC rates than Market Scout indicates.
My sense is the market is indeed softening more rapidly than Market Scout indicates.
What does this mean for you?
If you are in the WC industry, you can either follow the numbers-challenged off the cliff or tell senior management pricing is about to cross the “stupid line”. If you choose the latter, document document document.
If you work in or provide services to a WC payer, be prepared for them to request price cuts, reductions in work force, and other means to reduce admin expense. When prices are dropping, most payers just look to cut internal expenses instead of focusing on lowering claims expense.

An article in CFO.com analyzes the complex web of transactions, relationships, and incentives that exist in the employer-TPA-managed care firm web. David Katz notes:
“risk managers, by some accounts, often hand over the management of claims and medical costs to third-party administrators (TPAs) without a clear idea of their relationships with medical and claims-services providers.
In some cases, such wholesale delegation can result in “the complete outsourcing of the risk manager’s fiduciary responsibility to the organization and its shareholders by allowing these service providers to control what should be viewed as a line of credit,” according to one senior sales executive for a managed care organization specializing in workers’ compensation. Potentially, a self-insured corporation’s lax management of its workers’ comp outlays could represent “a huge hole in internal controls,” said the executive, who asked not to be identified.”
Katz goes on to discuss some of the legal investigations now in process that may be related to these issues.
What does this mean for you?
With Mr. Spitzer et al hot on the trail of unseemly transactions in the property and casualty industry, participants would be well-served to monitor their TPA relationships closely.

Two Aon execs have published a piece on workers compensation managed care in Risk Management that is uninformed, self-serving, and reflects a lack of appreciation for the true cost drivers in comp. I try not to comment on other consultants’ work, but this article demands a response .
Briefly, the article by Charles D. Reuter, senior vice president and Heidi Mader, assistant vice president with Aon Consulting, Inc in New York office calls for workers comp insurers to either “follow the herd as the industry has become accustomed or

Texas Governor Rick Perry signed a Workers Comp reform bill into law yesterday, authorizing the use of networks for treatment of injured workers.
To quote the Dallas Star Telegram;
“The revised law will create physician networks like those in commercial health plans and provide a small boost in benefits paid to injured workers. Texas has the country’s third-highest workers compensation costs and the highest rate of injured employees not returning to work. The law replaces the Workers’ Compensation Commission with a single, appointed commissioner housed in the Texas Department of Insurance and creates an Office of Injured Employee Counsel as an advocate for workers.”
What does this mean for you?
At long last, perhaps meaningful reform of the one of the nation’s worst workers comp environments. I’ll be taking a much closer look at this legislation and potential impacts of same in the near future.