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Workers comp is A) doing great, or B) a big problem

Where you sit determines what you see; this adage applies to the work comp industry.

For payers, employers, and taxpayers, all is great.  Rates are low and dropping, insurers are enjoying record profits, frequency continues to trend down, medical costs are flat.

The very things that make payers happy have the opposite effect on service companies. For most entities involved in medical management, pharmacy management, investigations, technology, claims systems, Medicare Set-Asides, and litigation defense the drop in frequency and flat medical costs are unwelcome news.

The trickle-down effects of this dichotomy are many and varied.

  • There is little-to-no pressure to revise state workers’ comp laws and regulations.
  • Insurers are looking to increase their work comp business as it is a big profit maker.
  • Claims execs are trying to balance hiring and training new claims adjusters while planning for long-term decreases in claim volume.
  • Execs are also extremely careful about investments in new IT projects, as the long-term payoff is also challenged by structural declines in claims.
  • The consolidation of service companies continues unabated; IMEs, bill review, specialty networks, PBMs, investigations, case management, cat case management services are all subject to this consolidation.
  • Selling services to payers is getting increasingly difficult.  Payers aren’t seeking solutions to major problems; they are reluctant to switch vendors unless there are serious service problems.
  • Work comp conferences are struggling due to the structural issues above; the lack of big problems driving intense interest in solutions and an arguably-over-saturated conference market is hurting attendance.

So, what to do?

If you are a service entity, you’ve got to differentiate. You must also deeply understand what individual buyers want, why they want that, what their decision process is, and who else is involved.

Unfortunately many service entities are cutting marketing budgets and pressuring sales staff to deliver deals. While sales targets are important indeed, they must also be realistic.

If you are a payer, I’d echo the last sentence above. Many payers are planning to write more workers’ comp, an obvious impossibility.


One thought on “Workers comp is A) doing great, or B) a big problem”

  1. While profits increase and the market restricts there is an opportunity for excellence and service to emerge as an opportunity for Payors to increase market share. I am old enough to remember carriers competing in California with claim service and risk management services not price. What would it look like if injured workers got the help they needed navigating the medical labyrinth? Or if an employer received a risk management assessment that was actionable to increase safety . Don’t worry Joe given time some one will mess it up with unintended consequence trying to solve obscure problems and the market will turn and we can all justify showing up at conferences to solve the worlds problems.

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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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