Workers’ comp medical costs are not increasing…
Even close followers of the industry would get the opposite impression; pretty much all industry “news”, marketing pitches, industry executive poll results and investor reports talk about rising medical costs or the fear thereof.
The best data out there indicates medical costs have been flat for at least five years – as in, no increase, inflation, or rise. According to NASI’s annual report on workers’ comp, total medical costs actually dropped – albeit marginally – from 2012 to 2017 (the most recent year available). (disclosure – I am a member of NASI, but am not involved in any of their research)
I’ll be the first to admit I was under the impression costs were going up every year – that’s what NCCI and others report, and based on their data and methodologies, that was generally accurate.
Here’s the issue with those metrics – most look at cost per lost time claim, or use actuarial projections to estimate fully-developed claim costs by accident year.
The cost per lost time claim is helpful, and according to most credible research costs are up slightly – on a per-claim basis.
Actuarial projections are much less so; over the last few years NCCI has consistently projected future costs would be higher than they turned out to be. That’s no slight on NCCI; actuarial methodologies and assumptions are based on historical results, and the impact of opioids is the proverbial black swan (one hopes).
This is a reminder that questioning one’s long-held beliefs on a regular basis is healthy, useful, and, yes, often humbling.
And that’s not to say costs aren’t increasing in places – facility costs in Florida and California and physical medicine are among the problem spots.
What does this mean for you?
We’ll dive into implications tomorrow. For now, check your business plan’s assumptions…