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Work comp medical expense is on the rise

I’ve been watching a disturbing trend in workers comp medical costs – they appear to be headed up. New information from California adds fuel to that fire.
The insurance rating board in California has recommended a premium increase of 17.8%, driven mostly by medical inflation – inflation that has caught regulators somewhat by surprise. According to an article in WorkCompCentral (sub req):
“new medical data from 2006 and 2007 convinced the board that an even bigger increase is necessary. The rating bureau says the rate must jump by 10.8% just to cover rising medical costs.
[California Work Comp Insurance Rating Board Communications Director Jack] Hannan said the governing board, in its last two filing recommendations, adjusted pure premium rate recommendations based on an assumption of 1% medical inflation. He said the board believes the inflation trend in medical costs is actually closer to an increase of 5% per year. [emphasis added]
Hannan could not say specifically what area of medicine is spurring the rise in costs, but he said the bureau hopes to have a breakdown by the time the Insurance Department holds hearings on the rate recommendation in September.”
I’ll take an educated guess. Facility costs, with a big push from surgical implants, and a smaller contribution from drug pricing.
After a year of essentially little to no increase in drug pricing, manufacturers raised prices for a relatively small number of brand drugs – few of which are commonly (or ever) used in work comp. But that was a year ago, and manufacturers, stung by flat utilization, are going to have to get top-line growth from somewhere. If they can’t sell more drugs, they’ll have to increase pricing on the pills they do sell.
What does this mean for you?
Nothing good.

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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