May
15

Where’s the economy going?

In MCM’s ongoing effort to help you, dear reader, know things that will likely greatly affect your work world, here’s a quick review of economic predictions and implications thereof.

Moody Analytics is pretty optimistic about the future of hiring, employment, wage growth and the economy in general.

However that optimism is somewhat dampened by concerns overseas as key players in Europe and the BRICs are entering or going thru recession.

One key data point is the “quits rate”, which is simply the rate at which people are leaving jobs.  This is tracking higher, indicating people are moving among employers – according to Moody’s Adam Kamins this presages higher wages as employers have to increase compensation to attract and keep good workers.

Housing starts are a very big part of the recovery, and part of the reason things haven’t gotten better faster. There’s a good bit of pent-up demand, driven in part by millennials living with their parents at historically high rates. Obviously, houses can’t be built without construction workers (at least until 3-D printing of buildings gets a lot more prevalent – which it will…). According to Kamins, we are about 40% below the level we should be for housing construction – which equates to perhaps a couple million workers.

Expect this to be most heavily felt in the west and south, where construction permits have moved up nicely over the last few quarters.  Not surprisingly, the west has led in job creation for several years, with the south catching up over the last year.

Internationally, China’s economy is slowing – which isn’t surprising as it has been growing at a breakneck pace for several years.  Interestingly, Kamins said (I’m somewhat paraphrasing here) “Fortunately, the Chinese government has pretty tight control over the economy.”  With other countries’ economies in a bit of trouble, the dollar is strengthening leading to problems with trade – our stuff is really expensive, while their’s is cheap.  In turn this could hurt domestic manufacturing as demand for US goods drops off.

The dollar’s strength hurts tourism too; it’s really cheap to travel abroad for us but the US is a pretty pricey destination for Europeans and Asians these days.


May
15

NCCI outtakes

This morning began with Ted Koppel – not a workers’ comp expert, but a terrific speaker and highly entertaining.  So, while listening to Mr Koppel, a few things worthy of note are coming to mind.

First, while my original thought was this was, while fun and interesting, pretty much a filler, I have to say that was short-sighted.

We workers comp folks spend far too much time navel-gazing, and the chance to engage, really engage, with a very thoughtful, highly experience, and deep thinker was valuable indeed. Topics addressed included India, Pakistan, the energy infrastructure, Edward Snowden, Putin, Nixon at the Great Wall and where to find good sources for information (Mr Koppel’s favorite is John Oliver’s This Week Tonight on HBO – and yes, it is for the news content, not just the terrific delivery).

While Mr Koppel was impressive, what was perhaps more impressive was the depth and interest level of his questioners.

Kudos to each and every one who posed a question – you enriched the experience for all of us.

What does this mean for you?

It’s not about the urgent; it’s about the important.  Look up, read, listen, and not just to those who think just like you.

 

 


May
14

NCCI’s PM sessions – hard core research geeks only

NCCI, with the assistance of payer medical directors (shout out to Employers’ Dwight Robertson MD and David Deitz MD among others) presented on 4 research topic areas late Thursday afternoon.

After a long day of great talks (this NCCI has been the best I’ve been to in a dozen plus years) it was time for the real dense, pithy stuff.  I’ll summarize so you don’t have to write your own notes…There’s some really good stuff here.

Joint injuries

Barry Lipton discussed an analysis of knee surgery across six states; you may be surprised to hear costs, even after correcting for price variations, ranged rather dramatically across the six – by around 60 percent.  What’s a lot more surprising is the variation in diagnoses, particularly among strains.  The percentage of knee injuries that were attributed to strains varied by somewhere around 20 points from highest to lowest state.

Shoulders exhibited differences as well, however there were similarities between the two joints.  Namely, the variation in utilization for both was driven by surgery and physical medicine.  A question from the audience asked why there is such variation when treatment should be uniform…

Therein lies the issue.  According to the handout, “Utilization differences across our selected states are driven more by differences in the treatment for given diagnoses than to the mix of diagnoses.”

There was quite a bit more to Barry’s presentation; check out NCCI for more.

Next up, Drug Fee Schedules

NCCI looked at differences in the prices paid for drugs in an effort to assess the effect of fee schedules [FS] on prices paid.  Some quick highlights from Natasha Moore’s talk…

  • Just because states have similar fee schedules doesn’t mean the prices paid for drugs will be similar.
  • Prices in high FS states are generally higher than states without fee schedules
  • There’s quite a bit of variation in prices paid even a) after correcting for drug mix and b) among states with similar fee schedule levels.
  • However, lower fee schedules are correlated with lower prices paid.
  • Brand drugs are 22% of scripts, but 56% of cost

Time from injury to treatment – preliminary results

NCCI is workign on a long term study on the impact of the Affordable Care Act; their first effort focuses on time from injury to treatment.  Highlights are from data between 7/1/2010 – 12/31/2012:

  • 85% of trauma cases are treated within 3 days from date of injury
  • there are longer “delays” in seeing some specialists in some states

My view is this is not likely to bear much fruit; looking at time to treatment by specialist as a way to somehow evaluate the impact of ACA is likely to be confounded by multiple issues, including:

  • practice pattern variation
  • supply of various provider specialties
  • expansion of Medicaid – or not
  • state support of ACA enrollment e.g. California vs those antipathetic to ACA e.g. Texas

Perhaps an analysis holding provider populations level and using the uninsured rate would be more illuminating.

Impact of report lag on claim severity

Following on the ground-breaking work by the Hartford’s Glen Pitruzzello fifteen years back, NCCI looked at the impact of claim reporting lag on claim severity.

There’s a wealth of data shared; the net is the longer the delay, the more likely the claim will cost more – HOWEVER, the correlation is by no means linear and varies by type of injury (e.g. the most expensive fractures are those reported on the actual date of injury, next is during the first week).

A long day indeed…


May
14

Listening fast to Bob Hartwig

The estimable Bob Hartwig President of III breaks pretty much every rule re presentations – way too many slides, with way too much information on each,  mixes fonts and graphics and colors and pretty much everything, often on individual slides, talks way too fast…

…yet he’s really good.

A few takeaways I plucked out of the torrent while somehow not spraining any fingers typing…

The P&C industry…

  • P&C profitability is both cyclical and event driven (e.g. hurricanes)
  • for 25 years the industry didn’t turn a profit in any year – yet the last two years we’ve seen profits – totaling $12.3 billion in 2014
  • the last three years have seen premium growth of around 4% each year…
  • as a result, P&C industry is in a very strong financial position with deep reserves
  • is the world’s single largest institutional investor

Work comp specifics…

  • Florida lost 27% of WC premium from 2007 to 2013 due largely to a collapse of the housing industry
  • More so than in other P&C lines, WC returns are driven by investment income, so the longer the Fed keeps interest rates low, the harder it is to generate returns.
  • As WC is heavily invested in interest-rate sensitive instruments, the historically-low-interest rates that have been held down for a historically-long time are dramatically affecting returns.
  • The number of workers not seeking jobs has decreased rather significantly; the forecasted unemployment rate drops below 5% in the next few quarters.
  • 3 million jobs were created last year. New jobs plus slightly higher wages led to increased payroll and thus higher premiums.

Employment

  • Look for big bump in construction due to under-supply of new homes – but it’s still picking up too slowly
  • Manufacturing employment growth has leveled out due to high value of dollar
  • Oil & Gas extraction employment down slightly since peak in September 2014
  • Numer of temporary workers is at an all time high – due in part to the slow recovery, but also driven by the “sharing economy”…

The Sharing economy was the closing part of Bob’s talk – noting Washio, Handy, TaskRabbit, WeddingWire as apps to do pretty much anything via your phone – using task-specific “workers” who are often independent.

Today, about 7% of the US population are “providers” in these areas, with the average making less than $50k.  (there are over 300,000 signed up to be Uber drivers…)

The big question is – how will the sharing economy, with its different “use” of “employees” on demand affect workers comp?

The answer is TBD.

 


May
14

The State of the Workers’ Comp Line – 2015 ed.

Chief Actuary Kathy Antonello gave the state of the line at AIS: here are the top data points on a calendar year basis for work comp, the P&C industry numbers were also presented and should be available later here.

  • private carrier combined ratio of 98%; state funds at 115%
  • private carrier pretax operating gain of 14%, down from 17.7% in 2013 (this is NOT equivalent or even similar to profitability or returns)
  • state fund operating gain of 5%
  • private carriers saw a 4.6% jump in direct written premiums
  • claim frequency is down 2 percent for NCCI states; CA is actually seeing an increase in frequency.

Key claim cost data points

  • Indemnity cost per lost time claim was up 4% in 2014, continuing the trend for claim costs to go up faster than the average weekly wage.
  • medical trend for LT claims was also up 4% in 2014; average cost per LT claim is $29.4K. (medical CPI was up 2.4%)
  • these data points vary widely by state from an average annual 2% decrease over the last 5 years to a 10% increase

Ms Antonello was careful to clearly explain the factors driving financials, what the descriptions mean – and don’t mean, and how today’s results compare to historical averages.  She noted that the big jump in investment gain seen in 2013 was largely driven by a single corporate entity’s capital gain; adjusting for this dropped the return – and the operating gain – dramatically.  In fact, actual investment gain was almost dead even with the 20 year rolling average of 14.2%.

Who cares?

Well, mis-understanding these data points has led others – notably ProPublica – to claim the WC industry is delivering a historic return, and infer that return has been due to reduced benefits for injured workers and a system slanted to favor employers.

More on that in a future post…

Antonello and her colleagues have done yeoman work in an apparent effort to help laypeople better understand the work comp system’s financial performance.  Using videos, data maps and graphics, and clear and concise language, presenters illustrated correlations, noted there is a $10 billion reserve deficiency, and clarified the system-wide decrease in premium levels set by work comp bureaus (down 4.3% for 2015).

Another graphic clearly showed how changes in the economy affected premiums in individual business sectors. The use of these visualization tools indicates NCCI is doing much more to help stakeholders quickly and readily track the industry’s evolution.  Kudos to Antonello and her colleagues for this initiative.

Today, premiums are up, despite a decrease in premium levels.  This is happening because employment has increased, and as wages are up slightly, there’s a multiplicative effect.  Compared to 2005, the payroll index is up 16%.

Simply, work comp total premiums are based on the rate multiplied by wages, so the more people working and the higher their wages are, the higher the premium dollars.

What does this mean for you?

Across the nation, work comp is pretty level, however a few individual states are seeing rather radical changes.  Medical and indemnity expenses continue to outpace overall benchmarks

 


May
14

First up at NCCI – Work comp is looking better…

Workers’ comp net written premiums for funds and insurers were up substantially – 6 percent – over 2013, making for the 4th consecutive year of premium growth.

Meanwhile, the combined ratio for private carriers improved as well – down 4 points to 98, driven by a drop in loss adjustment expense, underwriting expense and loss costs.  State funds saw their combined stay flat at 115.

And yes, the industry returned a pre-tax operating gain  of 14% – NOT to be confused with “profits” or “return” – more on that in a later post.

This was driven in part by a decline in claim frequency – a continuation of a two-decade-plus downward trend in frequency.

This was the introduction to NCCI’s 2015 AIS provided by President and CEO Steve Klingel.  Klingel noted that the industry is rarely able to sustain profitability for very long; factors that may drive changes include the Feds’ moves on interest rates, employment growth, and changes in what defines “employee” and “employer”.

Noting the March OSHA document – essentially an indictment of workers’ comp, legal challenges in FL and OK, and press reports about individuals apparently mis-served by the work comp system (likely referring to the ProPublica/NPR series, much of which has been challenged here and elsewhere), Klingel’s sense is there may well be storm clouds in the near future for work comp.

Next up – the State of the Line…

 


May
12

Work comp in North Carolina – lessons learned

WCRI has done it again.

Carol Telles‘ just-published report on the North Carolina work comp system should be required reading for anyone looking to understand why and how costs and care change in response to regulations.

A couple of items make the point…

  • Hospital costs were “among the highest of the states we studied” – despite fee schedule and other changes in 2009 and 2013. There was an 11% drop in 2013 in outpatient surgery payments however whether that’s sustainable is questionable (my interpretation, not Ms Telles’.)
  • NC’s work comp claimants receive the highest income benefit payments among all 17 CompScope states – because settlements are higher and disability durations are longer. (there were reforms in 2011, but we don’t know the impact yet)
  • From 2009/10 to 2013/14, total costs/claim didn’t change much at all – in contrast to 8% annual increases seed in the prior 6 years.
  • There has been substantial reform over the fast six years…

There’s a lot more detail in the report, including the finding that the main reason medical costs haven’t moved much since ’09 is a reduction in utilization – primarily for outpatient hospital services per claim.

One other notable finding; there was a dramatic increase – 21% – in reimbursement for evaluation and management services in 2013.  My take is paying docs to actually talk with and “evaluate” patients may help hold down medical costs, and help reduce the longer-than-average disability duration seen in the Tar Heel State as well.

What does this mean for you?

Reform can effectively mitigate cost drivers IF that reform targets specific factors influencing costs.  


May
12

Off to NCCI…

The annual NCCI Annual Issues Symposium starts later this week in Orlando, where we will learn:

  • how the industry performed last year, thanks to Chief Actuary Kathy Antonello ;
  • what will drive workers’ comp in the coming years from several guest speakers;
  • how many slides the estimable Bob Hartwig can cram into an hour, yet remain both entertaining and informative;
  • whether ProPublica and NPR will attend to find out what is really happening in workers’ comp
  • what works – and what doesn’t – in containing costs from Rick Victor and Alex Swedlow

Along with NWCDC, CWCI, and WCRI’s annual events, the AIS is one of the four-fecta of must-go-tos for those looking to find out what’s really happening in workers’ comp.

I – and others – will be live-blogging from AIS, so get ready for a flood of feeds.

There will also be a good bit of live tweeting and probably myriad other social media feeds emanating from Orlando – but it just isn’t the same as being there on-site.


May
7

Medicaid and Workers’ Comp

21 states have not (yet) chosen to expand Medicaid; one can (and I have) argued that this is nonsensical at best, as

  • the Feds are paying for ALL of the additional cost for another two plus years, and
  • the vast majority of the cost (90% +) thereafter; and
  • the savings to the states for uncompensated care would be anywhere from $4 to $9 billion;
  • health care providers in non-expansion states are in dire straits due in large part to the “non-expansion.”

My sense is the non-expansion states will eventually decide to accept the Medicaid deal as the financial cost to hospitals and health systems will force them to. And, the Feds will work with the states to create different models that will be ideologically palatable, providing cover to those politicians obsessed with such things.

But until – and unless – Texas, Florida, Virginia, Wisconsin and the rest expand Medicaid, there’s a raft of problems created by their principled if (in my view) wrong-headed position.

Mostly, these problems are due to two things.  Over the short term, the cost pressure placed on facilities and health systems and the fallout therefrom will lead to increased pressure to cost shift – and yep, work comp is a pretty soft target.

And long term, the 6.4 million adults who remain uninsured will be less healthy, have more incentive to get care under workers’ comp, and heal more slowly with more complications if they do get injured on the job.

What does this mean for you?

For work comp payers, nothing good.