Insight, analysis & opinion from Joe Paduda


The most important thing you aren’t paying attention to

Is the ACA case in Texas.

Briefly, Republican Attorneys General have sued to overturn the ACA.  The AGs’ claim the entire law must be thrown out because the individual mandate — a penalty imposed on people who chose to remain uninsured – was killed by Congress in 2017.

You may recall that, in addition to the mandate, the ACA:

  • expanded Medicaid to more low-income families and individuals
  • reduced seniors’ drug costs by closing the “Donut Hole” in Part D plans
  • reduced insurance costs for older Americans
  • increased funding to fight healthcare fraud
  • increased funding for rural healthcare
  • increased tax credits for small businesses providing health insurance
  • provided insurance subsidies for families making less than $88,000
  • required insurers to offer complete insurance coverage to all without discriminating by medical condition, age, or sex

If the Republican Attorneys General prevail, the ACA will be overturned, and health insurers will be allowed to:

  • stop covering pre-existing conditions; 
  • stop covering your adult kids;
  • limit your maximum dollar benefit;
  • exclude different types of medical care
  • medically underwrite small groups; and 
  • subsidies for folks buying health insurance go away.

Meanwhile, there is NO alternative plan if the judge rules in favor of the AGs. While HHS Secretary Seema Verna says there will be a replacement plan, there are no details about this “plan“, and no information whatsoever from the President or Congress.

photo credit Leslie Boorhem-Stephenson for the Texas Tribute,

I don’t understand how the entire law can be overturned because one part of it is no longer in effect – but I’m no attorney and will leave that to those readers who are.

From a political perspective, this doesn’t seem too smart on the part of Republicans.  People hate losing things they already have – much more than they don’t like not getting things they wish they had. And if the ACA is overturned, millions of voters – including millions of seniors – will be really mad.

What does this mean for you?

If you’re a Medicare recipient, parent, make less than $88,000 a year, are a small business owner, have pre-existing condition, and/or need comprehensive insurance coverage…

nothing good.


Opioids and work comp premiums

Two seemingly-unrelated papers hit the inbox yesterday; CWCI’s just-completed analysis of opioid usage in the Golden State, and NCCI’s report on 2019 workers’ comp financials.

The key takeaways from NCCI’s report include:

  • Premiums are expected to drop 10 percent in 2019, driven by rate/loss cost filings. In other words, losses are declining which leads to lower insurance costs.
  • This marks the sixth consecutive year of decreased premium levels.
  • Not coincidentally, 2019 is the sixth consecutive year of underwriting profitability.

So, even though premiums are dropping like a rock, insurer profits are better than they’ve ever been.


Well, declines in frequency are certainly a big contributor. Reduced worker benefits are likely a factor as well – and a big problem we’ll address in a later post.

If anything, investment profits are a drag on profitability (NCCI reports 2018 investment gains averaged 9.2%.

Which brings us to CWCI’s report “The Impact of Declining Opioid Use on Lost-Time Claim Development & Outcomes in California Workers’ Compensation” [emphasis added; disclosure – I provided input as a peer reviewer for the final report]

Key takeaways:

  • “from 2008 to 2017, chronic opioid use…declined from 13% to 3% of all lost-time claims (a relative decline of 77%)”
  • the strength of the opioids dispensed within the first 12 months of treatment, measured in cumulative morphine milligram equivalents, declined 59% for chronic opioid use claims

Tomorrow – the connection between opioid reductions and premium levels – and what it means for the industry and you.



Haven Healthcare’s next step

Is partnering with two big insurance companies to offer creative plans to two of its owners’ employees.

30,000 JPMorgan workers in Ohio and Arizona covered by Cigna and Aetna will be offered a plan that has no deductibles, with copays ranging from $15 to $110 depending on the service; facility copays will likely be higher.

Amazon’s also offering a Haven Healthcare plan in a handful of states. The giant seller-of-everything also just bought Health Navigator for an undisclosed sum.

From Motley Fool:

it will fold [Health Navigator] into Amazon Care, its new employee healthcare benefit that gives users access to virtual doctors and nurses…Amazon Care users (currently limited to employees in the Seattle area) can fill prescriptions through the e-commerce giant and choose between having them delivered or picked up at a participating pharmacy. By providing healthcare services to its employee base Amazon gets to test the waters and make fixes before the program is offered to a wider market.

Evidently Health Navigator uses an AI-based health bot which helps members diagnose illnesses, determine the right course of care, and then routes the member as appropriate.

While JPMorgan and Berkshire are likely funding Haven to help reduce their healthcare costs, Amazon’s got bigger plans.

With annual revenues around $340 billion, the giant company needs a really, really big market to keep growing. Healthcare is $3.4 trillion, massively screwed up, and just the kind of target Bezos et al need to keep the good times rolling.

What does this mean for you?

If you think Haven won’t succeed, did you ever think you’d be getting your groceries, tools, video, toiletries, prescriptions, car parts, medical devices, batteries, dog food, shoes, and music from an on-line bookseller?


What’s up?

The inbox has been stuffed with important new research and news; here’s what most interested me.

Work Comp

Perhaps the best annual summary of the state of the workers’ comp world is just off the press.  The National Academy of Social Insurance’s report is here. Free to download, NASI’s latest finds:

  • Employers’ costs have fallen from just over $1.50 per $100 of covered wages in 1997 to $1.25 in 2017.
  • Worker benefits decreased even more, from $1.17 twenty years ago to $0.80 per $100 of covered wages in 2017.

My takeaway – workers are getting less in benefits than they have in the past – and that’s a bad thing.  It is great that employers’ costs are declining, but that shouldn’t be at the expense of injured workers and their families.

The fine folk at CWCI published their latest research on UR in the Golden State. Despite what some on the applicant attorney side argue;

Results show that 94.1 percent of services performed or requested from January 1, 2018 to October 31, 2018 were either approved (92.5 percent) or approved with modifications (1.6 percent)…

Yup, 17 out of 18 services were approved. 

WCRI’s annual conference returns to Boston – register herenow.  Or risk missing out, as the event fills up every year. Don’t be one of these people!

[I don’t think the guy on the right is Andrew Kenneally…]

Check out WCRI’s upcoming webinar on medical prices paid and work comp fee schedules – lots of great information on facility costs – the biggest problem (outside of opioids) in work comp today.


From Alan Fein at DrugChannels, a most excellent video by John Oliver on everything you should know about compounding pharmacies. You gotta watch this… [can you believe Oliver actually knows about stuff we work comp pharmacy nerds think about???]

The video is both hysterically funny and terrifying. Watch it.

From the funny to the deadly serious; if you haven’t read Gary Anderberg’s most recent GB Journal, you likely don’t know this:

research showed that “57% of those who died from opioid-related deaths had at least one prior workplace MSD. [musculoskeletal disorders]

I’ve long opined the opioid industry has done horrendous damage to the work comp industry, injured workers, taxpayers and employers. Gary’s reporting shows it is even worse than we thought.

When are you going to hold the opioid industry accountable for their criminal actions?

That’s it for now…for those attending the NWCDC next week in Vegas – make sure to say thanks and farewell to Peter Rousmaniere and Roberto Ceniceros.  These gentlemen are both retiring, and our industry will be much the worse for it.

I’ve known them both for decades, learned much from them, and deeply respect their contributions to our industry. They’ve certainly earned a respite…here’s hoping Peter and Roberto weigh in from time to time. Their wisdom and experience are irreplaceable.

I won’t be there – family vacation in Zion Utah…with three grown kids, we have to work around their schedules, proving once again that I am completely not in control of anything.



What’s next for One Call.

One Call’s got a cash injection and reduced its debt burden (so the company doesn’t spend most/all its earnings on interest payments).

Congratulations to the debt holders for coming up with a very creative solution – and for doing a masterful job of cat herding.  KKR, GSO, and their advisers somehow convinced all the debt holders to agree to losing millions of their investment – and got some debt holders to dump hundreds of millions more into One Call in return for ownership stakes.

Darn impressive work.

So, what’s next?

Well, I tried to find out from One Call…I sent One Call several questions early yesterday; Jessica Taft, OneCall’s VP of Marketing and Branding,  was kind enough to send a statement earlier today.  I’d note the response was not very “responsive” as it didn’t fully address my questions; I’ve pasted the communication in at the end of this post verbatim so you can judge for yourself.


In response to my question about management changes, Taft said there are “no planned changes to the management team.” Ms Taft may not have full visibility into the new owners’ plans – and I don’t either. Now that Apax is no longer involved, the new owners will undoubtedly install their own Board; I expect major changes to, if not wholesale replacement of ,the Board of Directors.

It would be surprising if the new Board didn’t install new folks in the C-Suite.  (As I mentioned in an earlier post, execs were dealt a pretty poor hand to start with, so it’s unfair to blame the entire mess on them.)

Business lines

I asked:

What business lines will OCCM focus on going forward, and which lines will be de-emphasized? For example, there have been recent efforts to sell the hearing business; will those efforts continue or be halted?

OCCM responded:

One Call will continue to focus on delivering products and services to enable our customers to get injured workers the care they need when they need it…Finally, there are no plans to sell our hearing business…

I don’t expect One Call to sell any of its businesses at this juncture, although the new owners may look to do so after things settle down. It may be that the parts are greater than the entire operation; time will tell.

Provider reimbursement

I asked;

Management acknowledged extending payments to some providers out an additional 15 days in a recent call. When will OCCM reduce days outstanding for provider payables, or is that not being contemplated at this point?

OCCM responded:

Our provider network is one of our most valuable assets, and we intend to continue to enhance the value we deliver to our provider partners and continue to pay them timely.

I would expect One Call to work on strengthening relationships with providers, but don’t know what to make of Taft’s response.


I asked a question about future investments in Polaris; the response was marketing-speak.

My view

With somewhere north of $300 million in the bank (if the entire equity payment went to the company’s coffers, and not to any other entities) and the annual debt load reduced from around $150 million to $60 million, One Call is in waaaaaay better shape than it was before the infusion.  

That’s good news indeed for the company’s workers and customers – and for the industry at large.  More competition for payer business is better than less.

The next steps are critical.  The industry wants to see a highly credible exec installed, one with deep experience in workers’ comp and a very strong brand. The company would also benefit greatly from more IT strength; it’s reliance on Polaris(r) for much of the customer-facing functions makes that platform essential to One Call’s future.

Happier and more connected workers would also be a big plus; sharing equity or otherwise rewarding workers who’ve stuck by the company during a very tough time is relatively inexpensive and would get more folks to buy in to the future.




OneCall’s Halloween is going to be all treats!

Thanks to a massive restructuring, OneCall lives to fight another day. This is excellent news for the folks who work there; not so much for the original investors.

Briefly, absent a new injection of equity and major reduction of debt, OCCM was headed to bankruptcy – on Halloween. That’s when the grace period on a $15 million debt payment expired. Late Friday a deal was reached that keeps the company operating.

Look, it’s cash!

Here’s how it happened.

As I’ve reported in the past, when OCCM was put together it was highly leveraged – in English, that means it had a ton of debt. That debt, which was restructured several times over the last few years, was a big drag on the company. The $150 million a year (or so) in interest payments soaked up cash that could have been used to pay workers and invest in systems.

The use of debt by Apax, the private equity firm behind OCCM, is commonplace in this type of deal. By using debt to help buy the pieces that made up OCCM, Apax hoped to double or triple the equity it originally invested in OCCM. That works great if a business is growing and consistently profitable; the PE firm’s investors make a ton of money when an “equity event” occurs.

But that high debt load can be a real problem if the company doesn’t grow. Late Friday OneCall announced the company is going thru a complete financial restructuring. In essence, debtholders traded a big chunk of their debt for equity, which a) injected much-needed cash into the business and b) reduced the company’s debt burden, freeing up cash for ongoing operations.

Apax – the private equity firm that owned OCCM – lost control of the company, and its entire $750 million +/- investment when OCCM’s finances deteriorated to the point that it was days from bankruptcy.

At that point, control shifted to the debtholders.

Those debt holders agreed to swap much of their debt for stock – and pump more capital into the business in an effort to keep it going. This will reduce OCCM’s debt payments, freeing up cash, hopefully allowing it to a) make needed improvements to Polaris; b) reduce accounts payable and c) reward employees who have stuck with the company through some pretty tough times.

Six weeks ago I opined:

[a] debt for equity swap is also unlikely. If the covenants are breached, the debtholders likely get (some) control over the company. I don’t see why the debtholders would swap debt for equity now, when that may occur in the near future. [emphasis added]

Reports indicate the restructuring was driven by two debtholders – KKR and GSO – who recently snapped up lots of OCCM’s distressed debt. The two firms convinced other debtholders to agree to a deal to:

  • reduce annual debt service costs by $90 million, down from $150 million +/-;
  • inject $375 million in capital into the business; and
  • eliminate short-term debt.

Tomorrow – what the future holds for One Call. (I’ve asked One Call several questions, and will report back if/when the company responds.


Haven and workers’ comp

Yesterday we dove into Haven, the healthcare company formed by Amazon/JPMorgan/Berkshire Hathaway.  Today, we discuss the potential implications for workers’ comp.

Based on what we know so far, there are two ways Haven might impact workers’ comp.

Before Haven can affect WC, it has to become a viable entity of some significant size. Some skeptics don’t see that happening, citing the Byzantine complexity of the US healthcare (non)system, the size and scale of the medical-industrial-financial complex, and the bewildering maze of laws and regulations.

Those are excellent points; I’d suggest critics may be making assumptions that aren’t necessarily appropriate. Haven may well create a “de novo” healthcare delivery and financing system, leveraging the employee population, intellectual capital, technology, financial capabilities, and buying power of its owners.

If Haven becomes the healthcare delivery platform for the hundreds of thousands employed by its three owners, those employers would likely use that platform for occupational injuries and illnesses. That would enable seamless integration of care, reduce the risks inherent in the siloing of care between comp and group health, and likely upgrade non-occ disability management as well.

Efforts to deliver 24 hour care have fizzled as the opportunities inherent in integration couldn’t outweigh the legal, regulatory, cultural and political realities. It’s possible that Haven could eliminate much of these obstacles by starting fresh.

So that’s the big change.

More likely – and much sooner, is the potential for Haven/Amazon to provide drugs, supplies, and DME to work comp patients.  The companies’ push into pharmaceutical manufacturing and distribution, and distribution of medical devices and supplies means it has the supply piece in place; next step is building the distribution channels/pipes into work comp payers.

The total work comp drug/supply business is likely less than $6 billion, a relative pittance compared to the half-trillion plus dollars in revenue the three partners will enjoy this year. And, once those pipes are built, Haven will figure out how to generate more revenue.

If anyone can do this it’s Haven/Amazon.

What does this mean for you?

Service providers need to double down on service and be that indispensable partner. 






Amazon, JP Morgan, Berkshire Hathaway’s Haven – where is it today?

These giant powerhouses are working together to do something big in healthcare.  Haven, the name for the organization set up by the giant retailer, insurer/diversified company, and financial services firm will initially be focused on employees of those three companies. Later, they will “share [its] innovations and solutions to help others.”

Haven was introduced almost two years ago, albeit without that appellation.  Since then, it has been pretty quiet, at least as far as announcements of major innovations. (The company’s COO resigned after a year citing the Philly-to-Boston commute.)

There are plenty of skeptics, most citing the enormous complexity of healthcare, the Gordian knot of regulations, the lack of interconnection, perverse incentives – including for-profit stakeholders, and consumer expectations as all making it more likely that United Healthcare could build a successful commercial bank than JP Morgan will “fix healthcare.”

That’s fair, except Haven hasn’t focused on “fixing healthcare”, but rather fixing healthcare for the folks who work for the three owners.

What we know today – it looks like Haven will initially focus on drugs and virtual health.

Haven will operate on a non-profit basis.

Amazon had just over $41 Billion of cash on hand as of June 30. That hoard plus its distribution capabilities, existing customers and attractive stock make it a very capable acquirer.

Amazon is already selling prescriptions in Japan and distributing medical supplies in the US.

The company is building new product lines, and buying expertise, experience, and already-successful businesses. From FoxBusiness:

> Amazon [is launching] an exclusive line of 60 over-the-counter healthcare products, called Basic Care

> Amazon buys online pharmacy PillPack for $1 billion placing the online giant squarely against drugstore chains, drug distributors and pharmacy benefit managers.

> Amazon files for a patent for Alexa, its virtual assistant, which would detect when a user is sick and recommend and sell medications.

Aurohealth, a maker of generic pharmaceuticals, teams up with Amazon for an exclusive over-the-counter pharmaceuticals brand called Primary Health.

The common thread is medications – manufacture the drugs, encourage adherence, enable distribution.

Last month, Amazon’s Seattle-based employees were introduce to Amazon Care, which boils down to a pretty sophisticated virtual/tele-health platform using a local medical provider group. That ensures employee health records stay with their healthcare provider, and aren’t “owned” or handled by the employer.

Don’t expect that to last…from Huron:

Amazon recently established a stealth lab, called 1492, that focuses on healthcare technology. While little is known about the products being created, speculation is that the retailer is developing tools to mine data from electronic health records, new telemedicine technologies and healthcare applications for its existing products.

I would expect Amazon to do much of its building thru buying; there are a lot of great companies out there innovating different parts of healthcare and buying gets a footprint, talent, and experience that would take too long and cost too much to build.

What does this mean for you?

Nothing yet.  That will change. 

Homorrow, Haven and workers’ comp.


Switching workers’ comp TPAs – have a plan and stick to it

United Airlines’ Joan Vincenz spoke on changing TPAs at the California Self Insurers’ Association’s Employer Summit meeting, one of those rare events that has focused, highly useful presentations narrowly targeted to the attendees.

Joan’s career is pretty diverse, with experience as a flight attendant, in marketing, working on safety. She’s a stickler for details, for customer service, for metrics, for doing things the right way and living up to your commitments.

UAL changed TPAs a couple years ago in a process that has created opportunities for ‘step change’ improvements.   United had experienced progress with the previous TPA, e.g., over 6 years the number of open claims dropped by more than 40% – while employee head count increased.  However, to take the program to a new performance level, United decided to change TPA partners.

United had been with one TPA for 19 years; in 2015 the workers’ comp and procurement teams collaborated on a full RFP for TPA services.  The process was both quick and intense, taking only 6 months from beginning of the RFP process to selecting a new TPA. [editorial comment – other procurers could learn a lot from this] Moving the business would be tough, as all the closed and open legacy claims would be moved to any new vendor – if one was selected.  Vincenz was not going to “leave those claims behind.”

At the end of the RFP, Vincenz and the other decision makers decided to stick with the current TPA and not move. Later, after more diligence and a determined and focused effort to improve some areas and be more collaborative, she decided to move the business to the top candidate from the RFP.

Staying with a current vendor is an easy ‘default’ since moving ‘run in’ claims is expensive and there is considerable risk in making sure all the financial and claim data is moved on time, accurately and without any negative impact on injured employees.  Moving the ‘run in’ claims cost UAL several million dollars, plus took lots of management time and staff resources to change. Vincenz was sure to get everyone on board (especially the Chief Financial Officer and the company’s external actuary)  as to why this is necessary.

A big part of Vincenz’s business case to senior management was the move would pay for itself within three years, with process improvements in claims handling and other key program parameters wins.

Lessons learned

Vincenz strongly emphasized the importance of making sure you’re moving your program for the right reasons and not just because of a few mistakes or because you think there are greener pastures elsewhere.  It’s key to document the pluses and minuses of moving, make sure you are clear on the goals you will achieve by moving, commit to those improvements and measure them post-move.

If you’re going to move, give it enough time to get it done right, but don’t leave claims with prior TPA any longer than necessary.  United moved their entire program in 3 ½ months.

Watch out for problems with recent claims that go into a ‘shell’ status, which is the time period (~3 weeks) immediately after the move when the new TPA doesn’t have access to history on some of the claims.  United set up a ‘war room’ for the month after the move and the staff kept access to the prior TPA’s claims system so that they could help the new examiners with information.

Technology issues are also key to manage – there are multiple feeds and connections that all have to be programmed, tested, verified, and secure.

Other key recommendations included:

  • Pick a hard date, plan for it, and commit to it.
  • Have a comprehensive communications plan using corporate communications, involve the TPA, and be prepared to handle questions via a hotline to make it as seamless as possible for active claimants.
  • Make very sure the indemnity payments are on time – UAL prepaid all TTD payments for the month post-move date to make sure employees wouldn’t be affected negatively.
  • Stay close to the current TPA during transition to make sure things are handled appropriately.
  • Train the new TPA’s staff to handle YOUR standards and processes, not the new TPA’s best practices.
  • Performance guarantees should be managed by actuarial data, e.g., United’s performance guarantee required that all financial data had to be complete and accurate as validated by United’s external actuary.
  • Celebrate success – UAL had a party to thank all the folks involved internally from all areas.

Lessons learned:

  • Keep your intent to move confidential until you tell the current TPA.  Leave with grace by acknowledging all the positive things they handled for your company over the years.  Demonstrate your appreciation for what they did for your employees
  • Keep your focus on your injured employees and make sure there is no interruption in their medical treatment or pay
  • Clear and consistent leadership is key; the new TPA’s leadership responded and took responsibility for problems and worked to fix them
  • Build partnerships – these are essential to solving unforeseeable problems

One question I asked Joan was around TPA differentiation; during the process did the competing TPAs stand out from one another? The response was there wasn’t much differentiation in responses to the RFP, but there was in the onsite meetings – particularly around technology,  and the questions the TPAs asked Joan and her team.

What does this mean for you?

Learn your prospect inside and out, ask them lots of questions, and make very sure your solution is specific to the prospect. And spend more time preparing for the onsite than in doing the RFP response.


What I missed, and fashion statements for safety professionals

Back from a week’s holiday with my wonderful wife in France; Paris, Mont St Michel and Normandy.  A few not-surprising impressions…

  • it’s awfully hard to find a bad meal in France
  • public transit is really, really good
  • what is “old” here in the States…isn’t in Europe
  • you can find a bar to watch the Eagles game
  • a day touring Normandy makes me even more grateful there wasn’t a war for my mini-generation
  • France’s fashion industry must be targeting you risk managers and safety professionals!

OK, here’s what I missed while marveling at all things French.

WCRI’s annual conference is back in Boston March 5 and 6. It sells out every year, so sign up here.

More less-well-off folks in states that haven’t expanded Medicaid are going to die. Patricia Powers is a minister living in non-expansion Missouri across the river from Illinois, which did expand Medicaid. If she’d lived a few miles further east, her breast cancer would likely have been diagnosed much earlier.

NCCI opined on the impact of a recession on workers’ comp. Key takeaways –

  • frequency drops off sharply at the beginning of a recession, then bounces up as things start to improve
  • as there are fewer people working in manufacturing or construction these days, actual injury counts likely won’t decline as much as they did in past recessions.

(I wrote on this a couple weeks ago, noting past recessions have had a couple other characteristics not discussed in NCCI’s piece.)

In DC, a bill to reduce drug spending is progressing thru the House. Among other measures, it would require the Feds negotiate prices on 35+ drugs with manufacturers. (I would encourage readers to focus on the actual components of the bill and not get caught up in critics/supporters’ use of inflammatory language.)

Key takeaway – it would reduce Medicare costs by $345 billion over the next six years (that sound you hear is taxpayers clapping…)

Other key takeaway – the public is really focused on drug prices.

Non-medical use of opioids will cost our economy about $200 billion this year.

The finding came from the Society of Actuaries’ report (available here). Almost half of the costs are from health care expenses and lost productivity, issues that are key concerns for workers’ comp.

Have any work comp insurers sued the opioid industry?

What does this mean for you?

Drug pricing and opioid litigation should have a major impact on workers’ comp. Note emphasis on “should”.

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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