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Workers’ comp – predictions for 2016

Just realized I’ve yet to post my annual Top Ten Predictions for Workers’ Comp – my apologies!

Here we go…

  1. The comp market will soften pretty much everywhere*.
    As rates continue to come in flat or a few points down, the equity markets flounder about, and interest rates stay low, there’s going to be more capital than places to put it. So, expect work comp insurers and insurance funders to keep looking to expand market share – which will keep rates low.
  2. *Except in California, where rates are up – and will stay there.
    The uncertain regulatory and judicial environment – at many levels and dealing with many aspects of comp – has made just about everyone nervous indeed about the financial future of the industry. Until there’s some clear direction and these ridiculous court cases are put to bed, the market is going to push prices up and availability down.
  3. Liberty Mutual will continue to de-emphasize workers’ comp.
    Which, given the company’s improved financial performance of late driven by personal lines’ profitability coupled with off-loading a huge chunk of legacy claims liability to Berkshire Hathaway, is a smart move.  However, this does open up opportunities for other insurers and those looking to deploy capital.
  4. Private equity’s role in the vendor market will decrease – a lot
    After years of intense interest, private equity investors’ interest in workers’ comp is waning rapidly.  There are several reasons for this, including the most obvious – the market has been over-heated for far too long.  In addition:

    1. Upheaval in the credit markets makes debt financing a lot harder to come by – and somewhat more expensive.
    2. The past consolidation means there are fewer decent-sized assets (>$10 million in EBITDA) to buy
    3. Strategic buyers are winning more of the deals because they can generate more earnings thru consolidation – United Healthcare buying Catamaran (owner of Healthcare Solutions) and Helios, EXAM buying various small companies, Xerox acquiring Stratacare, York buying MCMC are all examples.
    4. Partially due to strategics, prices have been historically high for a very long time. Double-digit multiples are likely unsustainable for much longer – and certainly not in a PE-driven marketplace.
    5. Some recent deals have not worked out so well.
  5. A half-dozen – or more – states will adopt drug formularies
    Here’s hoping they integrate formularies with utilization review and a very solid and efficient review process.
  6. Opt-Out will not gain much traction
    The bad behavior of bad actors will significantly hamper efforts to advance opt-out legislation.  That, and the lack of any real problems in most states’ workers’ comp systems.
  7. We will see a couple/several bundled payment pilots
    Gaining traction rapidly in Medicare and the group/individual health businesses, we can expect bundled payments for orthopedic care to take place in several locations. Initial reports indicate Illinois (!) and – of course – California may be on the leading edge.
  8. PBMs and payers will make even more progress reducing the use of opioids
    The work comp world has a lot to be proud of here.  After years of enabling opioid use, we – all of us – are doing a much better job stopping initial scripts, working to wean long-term users off opioids, and thereby really helping people and companies. Expect opioid use to drop again in 2016, especially for new claims.
  9. A couple of large, vertically integrated delivery systems will make significant moves into occupational medicine
    Work comp pays well (in most states), is a feeder for orthopedics, gets insured people into the health system, and diversifies revenue sources.  Delivery systems are looking for diversification, and their large infrastructure lends itself well to work comp.
  10. There will be big changes at OneCall
    With debt trading in the low eighties, pressure from debt holders on owners and management to deliver the numbers, management shuffles and continued challenges with customer service, I expect OCCM will go thru some significant changes this year.

That’s it – and I’ll check back in this summer to see how I’m doing.

What are your predictions?

6 thoughts on “Workers’ comp – predictions for 2016”

  1. I predict – with confidence – that your blog will continue to be the most astute, candid and uncompromising blog on all things comp and managed care. Bravo!

  2. You hit the nail on the head with your #10 prediction. OneCall just announced on Monday that they were doing a mass lay off of to our staff. They also announced that our Canonsburg PA office ( home for the true Universal Smart Comp Associates) will be closed by the end of September as OneCall Care Managent has made the decision to outsource multiple departments to Elsalvador. I predict that while saving money by outsourcing; customer service and quality will go down hill fast. Good luck to our clients… Hope you can understand people who can’t speak English.

    1. The company OCCM uses in ElSalvador has been used for years. The agents sometimes speak better English than their American counterparts. Outsourcing always adds a unique struggle to customer service. This isn’t the first time we’ve closed an entire office and we recovered just fine. Is it sad? Yes. It is, however, the nature of the business and if you thought that a company of this size wasn’t going to outsource everything they possibly could then you should have removed those rose-colored glasses years ago.

      I’ve been with OCCM almost a decade. Someday they’ll call my number again and I’ll either have to move…or get off the proverbial pot.

  3. Curious about the Liberty – Berkshire Hathaway connection — do you predict BH will be writing WC paper in the near future (or already are!) or just liberating Liberty’s existing WC portfolio?

    1. Finkle
      Thanks for the note. BH is already writing work comp thru several subs including BH Homestate.

  4. As previous employee of OCCM having worked closely with El Salvador, I can pretty much assure that this will not go well.

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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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