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Work comp is fading, and that’s a big loss.

Hold on, because this isn’t going to end up where you think it is.

The comp insurance business is shrinking. Insurers are increasingly outsourcing claims function to TPAs, and TPAs are looking to move more claim-related activities in-house to capture more of a shrinking pie.

Sure, carriers including AmTrust and the Berkshire companies are growing by leaps and bounds, but most others are moving in the opposite direction. And yes, our friends in California have seen earned premiums increase – and as the largest state by far we can’t ignore that. However, insurer profits have remained solid while rates while the last two years have seen frequency drop – the first time this has happened since the Bush Recession.

Margins are very healthy, markets are competitive, and the business remains solidly profitable.

Over the last 22 years, only one saw a material increase in claim frequency.

After 2 years of essentially flat trend rates, 2016 saw a 5 percent jump in claim severity.

Work comp premiums have been flat since 2015 as decreasing claims costs and insurer discounts have balanced out higher payrolls. Overall, it looks like more employers have seen their premium rates decrease than increase.

Those aren’t just a jumble of unrelated facts and figures, rather a combination of causes and effects, all leading to an inescapable conclusion – industrial accidents and illnesses are less common than they used to be, and more common then they are going to be.

Implications abound.

Here’s a major one.  More insurers appear to be looking to outsource claims, generating growth and jobs in the TPA industry which is one of the few sectors that’s seeing this.

The service sector has consolidated rapidly with two huge PBMs dominating the pharmacy space; physical medicine owned by two other firms (one of which, MedRisk, is a client); Genex increasing it’s position as the largest case management provider, imaging already the domain of OneCall, and three bill review tech firms where once there were six. Other examples abound, all driven by the inevitabilities of a mature industry.

Yes, smaller companies, innovators, and new entrants can and are doing well, but these are by far the exception rather than the rule. Fact is, external factors and technology are rapidly shrinking workers’ comp.

I’m more than a bit frustrated by this.

I see work comp as one answer to the mess that is health care. We actually care about, and work to restore, functionality, an “outcome” that few in the group health, Medicaid, or Medicare world grasp.

What we do – when we do it right, which is all too uncommon – is what they should do – deliver care that gets the patient healthy again – defined as able to do what they did before, if not do it better.

Those pinheads in DC are arguing over insurance – which is NOT the problem.

They should be talking about why our nation’s healthcare is so crappy, and why healthcare we all pay for, and get, and that our loved ones get, doesn’t work a hell of a lot better than it does today.


6 thoughts on “Work comp is fading, and that’s a big loss.”

  1. Joe I have often said that if patients had a bill of rights and coverage was not cap group health would change dramatically. With all of its ills workers’ compensation does have its focus correct. Restore functionality which means return to work and contributing to society. You are correct insurance is not the problem it is leaders are not willing to take on the health care industry and hold them accountable for results.

  2. So if this logic holds, network contracting specialists at Align/One Call can\’t really deliver on the promise of MORE patient referrals for a steeper discount? Thanks for your expertise.

  3. You are right. In DC and many state capitols, the debate is ideological – single payer vs, free market – neither of which really addresses the effective delivery of care. Ten years ago I gave a presentation which could have the same title if I gave a similar presentation: What Health Care “System” Are We Talking About? There Is Nothing Systematic About US Health Care.
    Yet I still hear politicians discussing how to “reform the system” or the “system is broken” or “the system is not broken” or “Obamacare changed the system for the worse” or “Obamacare changed the system for the better” – meanwhile we continue to spend more money for inferior outcomes.

  4. Let’s fix whatever you want to call it, so that everyone gets health care, cradle to grave, like other Western and other countries do, and be done with it and move on. As I wrote on my blog last week, my medical condition has made me personalize this debate, and at this point I don’t give damn about Wall Street’s profit-making from the health care industry, or the health care industry itself. We have too many “programs”, WC, Group Health, Medicare, Medicaid, CHIP, Tricare, etc., What other nation has a segregated health care “system”? Only we stupid Americans. It’s high time we consolidate them all into one global budget and take care of all of our sick and injured citizens. And if your profit depends on a “broken system”, it is you who are the problem.

  5. I’m not an expert, but do understand supply and demand. With the aging population demand for services are increasing. I’m not addressing costs. Just supply of services. I’ve suggested to Paul Ryan and Mitch McConnell they consider legislation to increase the number of physician’s assistants, nurse practicioners and doctors (No response yet. I’m just a voice in the wilderness). Besides the cost of insurance, it seems to me we need more frontline providers. ERs are clogged in MA (24/7). I love pharmacys that have nurses on staff with offices… Attack price/paper work/tort reform, but also shift college students from low employment opportunity fields into healthcare (Veterans and other workers too)… More providers with less paper work, in my opinion, would go a long way in improving the system… Anyone got any political pull?

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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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