Author: Joe Paduda

May
8

Bob Hartwig – drinking from the firehose

Posted by Joe Paduda on Thursday, May 8th, 2014 | Comments

The always-entertaining and enlightening Bob Hartwig of the Insurance Information Institute was next on the podium – he violates a bunch of “presenting rules” (chiefly talking really fast) and is thereby proof that you can be a very good and very effective presenter by doing what works for you.

His view is historical trends indicate we are a few years away from a return to the bottom side of the insurance cycle.  I hope that’s true, but I’m less sanguine.

On the overall economy, he’s predicting growth of around 3% in GDP over the next few years along with a drop in the unemployment rate to below 6 percent (possibly) before the end of the year.  That would be good news – for work comp – indeed especially as it comes on top of the addition of over 9 million jobs since April 2010 (even more in the private sector).

Other good news:

  • hours worked per week are up to almost pre-recession levels
  • average hour day continues to slowly increase, it’s up 14.4 percent since the beginning of the recession.

Growth is going to come in high-frequency industries; construction manufacturing and energy will be big drivers. Construction employment alone is up 565k since January of 2011; we’re still over 1.6 million jobs down from the height just before the crash, altho that was a bubble-driven number.

Manufacturing employment is up 640,000, and those workers are making more stuff than just before the recession, even though there are fewer of them.  That means productivity is higher.

Of course, health care employment is up dramatically as well, and will grow faster than any other sector – adding 3 million new jobs over the next 8 years.  Energy exploration, production and transport will be another big driver.  Employment in this sector is higher than any time in the last 28 years and is going to increase even more.

The net?  Lots more employment in high wage sectors are ‘unambiguous positives for the workers comp sector.”

May
8

The 2013 workers’ comp State of the Line

Posted by Joe Paduda on Thursday, May 8th, 2014 | Comments

With long-time top actuary Dennis Mealy’s retirement, NCCI tabbed Kathy Antonello to fill his very big shoes.

On a personal and professional note, it is GREAT to see a woman in a historically-male profession in such a prominent role (says the father of two professional women).

The public introduction of Ms Antonello to the work comp industry is happening now with her presentation on the State of the Line, perhaps the most-anticipated report in the industry.  Here are a few of the highlights:

  • Total P&C premiums for 2013 were up 4.6 percent.
  • The P&C 2013 combined ratio was 96%, a decline of 12 points from 2011 and 10 from the 1985 – 2012 average.
  • Work Comp premium was up 5.4% – $2.3 billion over 2012 and over $8 billion (almost a third) from the low point in 2010.
  • Work comp’s operating gain shot up to 14 percent, a huge jump from last year’s 5.6% and far above 5.3 percent – the average over the last 23 years.

Ms Antonello got into a lot of detail about various components, ALAE, ULAE, various margin calculations, and premium drivers, and did so with humor and polish.  Among the key drivers employment is perhaps the most important.  I’ll leave the rest of the details to those who want to download the full presentation. (available at no charge, registration is free as well)

She also provided a view into some cool new data visualization tools NCCI has developed, tools that help explain trends over time and the impact of various factors.

So here’s the $64 billion question – is a soft market nearing?  Will some see these strong results as a reason to double-down on work comp, write as much business as possible in as many states as possible, and thereby start a decline in effective premium rates?

States such as California, Arizona, Colorado, New Jersey, Florida, and Connecticut – where premiums grew by double digits – may be especially attractive to new entrants and some current writers.  

Add to those factors the news that premium rates approved for 2014 increased less than a point, and a report from Goldman Sachs that work comp premium increases are moderating, and the likelihood of a softer market looks a little higher.

What does this mean for you?

The work comp industry has never been unable to enjoy success for very long.  Just as we are starting to see daylight, there are some potentially-troubling indications that the market may soften.

May
8

The work comp outlook is…balanced

Posted by Joe Paduda on Thursday, May 8th, 2014 | Comments

That’s the one-word synopsis of the state of the line from this year’s NCCI conference.

I’d be a bit more positive; especially because the combined ratio is down 7 points to 101.

Premiums up for the third year running, and claim frequency continues a long-term decline with another 2 point drop in 2013.  

NCCI indicates medical costs have grown at a rate of 3 percent.

Even investment income is still robust at 14 percent. The result – operating margins are improved as well.

With the latest news indicating employment growth is accelerating after a long winter, the issues identified by NCCI as problematic, namely lagging employment, the potential non-renewal of TRIA, and the potential impact of the PPACA look like pretty small potatoes compared to all the good news.

In his kick-off presentation, NCCI CEO Steve Klingel took pains to note the statistics are national, and individual carrier experience varies quite a bit due to their reserving practices, the states they write work comp, mix of business and other factors.

Klingel noted RAND’s just-released report on TRIA makes a strong case for renewal of the Terrorism Risk Insurance Act; he also opined that state-specific judicial determinations can and will have significant impact on work comp.

Mr Klingel also delved into issues surrounding Big Data, data security, and the impact thereof.

If you aren’t here, you’re one of the few.  The place is packed.

May
7

Insurance saves lives and costs money – and we’re surprised?

Posted by Joe Paduda on Wednesday, May 7th, 2014 | Comments

That’s the finding of a massive study of the impact of health reform on mortality rates in Massachusetts.  The death rate declined by 3 percent after universal coverage went into effect in 2006, and the carefully-constructed study found that the decline was mostly among the poor.

By any measure, that’s a huge win.

For the green-eyeshade folks, a decline in death rates means more productive years for more people leading to more economic production, altho they’d balance that against the costs of caring for those folks. For those of us who are a bit more “human”, it is even better – longer lives for more people means more time with our loved ones.

Juxtaposed against that finding is the increasing evidence that health care costs are going up.  That’s no surprise; a lot more people have coverage and they are using health care services.  The early indicator comes from pharmacy utilization; giant PBM Express Scripts reports there are more scripts going out these days and some of this MAY be due to more coverage, altho this is expected coming out of a recession as well. There appear to be more hospital admissions as well (again not surprising; people who didn’t have insurance couldn’t get knee/hip replacements and now that they have insurance they’re lining up to get those things fixed).

Notably, utilization, not prices, is by far the biggest inflation driver.

In total the VERY EARLY data suggests consumer purchases of health services was up almost 10 percent in Q1 2014.

That said, it would be hard to find anyone  – at least anyone who gets math – who didn’t think health care costs would go up as more folks are covered.  In fact, projections way back in 2009 called for just such a bump.

So there you have it.  People who get insurance who didn’t have it use a lot of health care services.  Longer lives are associated with higher health care costs.

At least for now.

I’d hazard a guess that health plans are working their collective fannies off to hold down costs and thereby remain competitive in the battle for members.  A safe guess, as all the news I’ve seen indicates this is precisely what’s happening.

What does this mean for you?

The free market – a well- and intelligently-regulated one – will deliver better outcomes at lower cost.  And that’s exactly what PPACA is supposed to do.

 

 

May
6

Xerox’ acquisition of Stratacare and Bunch; done deal

Posted by Joe Paduda on Tuesday, May 6th, 2014 | Comments

Minutes ago, Xerox officially announced it is acquiring ISG Holdings, parent of Stratacare and Bunch, for $225 million.

In its announcement, Xerox claimed that the company is now the “leading provider” of work comp bill review services; that looks like a reasonable claim as the combined entity processes around 23 million bills via outsourced bill review and SaaS (where the payer does the actual processing using Xerox’ application).  There’s no question adding Stratacare to the company’s current CompIQ platform makes it a much more formidable competitor.

It also further consolidates a business in dire need of consolidation.  There are now four significant players; mcmc, Medata, Mitchell, and Xerox.  (what’s with all the “M” names??)

(I don’t include Coventry in the mix as their BR 4.0 application is rapidly approaching obsolescence.)

As I noted last week, “While Xerox will now own two platforms, I’m thinking we will see current CompIQ customers converted to Stratacare.  CompIQ has not been having all that much success of late, so this may well rejuvenate what was becoming an also-ran in the bill review space.” I’d add that it makes no sense for X to continue to support two applications, however they will have to do so until their contractual obligations expire, and perhaps a bit longer if customers demands are firm enough.

Xerox is reaching out to customers today, and my educated guess is they are discussing:

  • if and when customers can expect to be converted to one or the other platforms;
  • other benefits that X can bring to the party, such as document management and off-shore processing;
  • staffing and account service plans, although it is likely too early to say anything definitive, so expect something along the lines of “business as usual”.

What I find interesting about this is Xerox’ decision to not only stay in the work comp service business, but to invest a couple hundred million now, and likely millions more in transition costs.  It makes sense; comp is an industry crying out for automation and streamlining of business processes, which is precisely what Xerox does.  There’s a lot of opportunity, especially when comparing work comp to other health-related businesses such as insurance, Medicaid, and Medicare.

Xerox can take much of what it learned there and use it to strip cost and inefficiencies out of work comp – and we all know there’s a LOT of both.  We’ll see how this develops, and if  they really make a push in this sector or are content to just muddle along.  I’d bet they make the push…

I’d be remiss if I didn’t touch on Bunch.  What used to be a leading light in the managed care space has dimmed appreciably.  The purchase by ISG some years back was puzzling, and the rationale didn’t get any clearer as time went on.  Bunch has lost business in its target market and failed to replace those lost customers with new ones.  I just don’t get why they bought Bunch; there may well have been some sound strategic reason, but the follow-thru was noticeably absent.

What does this mean for you?

Wait and see.  The next couple of months will tell the tale; as always actions are credible, words are (much) less so.

May
5

Understanding the implications of ACA enrollment – separating the political from the practical

Posted by Joe Paduda on Monday, May 5th, 2014 | Comments

When it comes to understanding how the ACA will affect your business, you have to separate the politics from the practical.

In this case, remember that “Politics are national; health care is local.”

The pundits (and I’d have to include myself in this category at times, altho I’m an amateur at best) use the national enrollment numbers to declare victory or defeat. That’s fine for a parlor exercise, but practically, the national data matters not one whit for health plans, providers, and work comp payers.

No, for business folks, what matters is what’s happened/happening in their state, and more precisely their operating area. In some states (Vermont – 280% of projections, California, Michigan, North Carolina – 155%), enrollment is robust.  In others (Ohio, Arkansas, West Virginia) enrollment is well under projections.

Medicaid expansion, state-based exchange success or failure, and the political environment greatly affected enrollment; politicians in some states actively discouraged/tried to prevent ACA enrollment while in others the exchange was a mess (e.g. Oregon).

Regardless, the higher the enrollment, the more likely you will see ACA impact;

  • the health care provider community,
  • adoption of different care delivery and reimbursement models,
  • more or less incentive to cost shift to work comp,
  • and access to key specialists.

Current state-specific enrollment data is here.

What does this mean for you?

Depends on where you do business…

May
2

Friday’s catch up

Posted by Joe Paduda on Friday, May 2nd, 2014 | Comments

I’m beginning to think this is a misnomer, as there’s so much going on these days it is impossible to “catch up”.

We’ll try.

I did not attend RIMS this year (or the last few).  While the must-go for brokers and P&C consultants, it has become less important for the work comp crowd as the content tends to be basic while the time commitment is high. That, and a surfeit of client work, made the decision an easy one.  From what I hear there was a lot of buzz about deals pending and rumored.  In addition to the Stratacare-Xerox transaction, the sale of MedAllocators is said to be close while Healthcare Solutions is off the market.

I do regret missing the MedRisk soiree; evidently it was the event of the conference; there were 800+ there listening to a terrific violin quartet amongst other entertainment innovations.  That, and the billboard greeting attendees…

IAIABC’s upcoming webinar on compound drugs is scheduled for May 29; you can register here.

Meanwhile, B sent me a link to the most blatantly profiteering pitch to docs I’ve ever read. The pitch is for something called terocin, which is nothing more than Capsaicin, Methyl Salicylate and Menthol – to figure out if you are getting billed for this stuff, here are the NDC codes.

and the profits for the docs – and the sales reps – are enormous.  Of course, their profits mean higher costs for employers and taxpayers…

Speaking of scum, I keep getting emails asking for donations to Charlie Crist’s campaign for Governor of Florida.  Crist’s pitch is this:

 What we have today in Tallahassee isn’t working.

Governing for the people has been replaced with cronyism and government on the fringes. Financial bullies and special interests have drowned out the voices of people like you.

What a load of crap.

Much as I abhor Rick Scott, Crist is exactly the kind of sleazeball/hypocrit the Sunshine State doesn’t need.  Recall then-Governor Crist got a huge contribution from drug dispensing “technology” firm AHCS after the then-Governor vetoed a bill that would have killed up-charging for repackaged drugs – a bill that had been passed by unanimous vote in the state House and Senate.

As a result of Crist’s veto, Florida’s employers and taxpayers got stuck with hundreds of millions in higher workers’ comp costs and it took four years to come up with a legislative fix that is no fix at all – in fact it validated the practice of dispensing and will result in hundreds of millions in additional costs.

Crist is everything that is disgusting about politics wrapped up in one nicely-tanned package.

An insightful column from Roberto Ceniceros on the value of UR; good to see Roberto add his voice to the growing chorus calling for more – and better – use of UR in work comp.

Finally, WCRI is out with its annual compendium of work comp laws, which cover all states plus Canada.  Check it out here.

Enjoy the weekend…

May
1

And the winner of the Stratacare auction is…

Posted by Joe Paduda on Thursday, May 1st, 2014 | Comments

Believe it or not, Xerox. Or more precisely, subsidiary CompIQ.

While the deal isn’t official yet, word from multiple sources is it will be finalized early next week; no details on whether Bunchcare will be part of the transaction.

This will greatly strengthen Xerox’ bill review business, combining the number three and five (my guess) application providers.  While Xerox will now own two platforms, I’m thinking we will see current CompIQ customers converted to Stratacare.  CompIQ has not been having all that much success of late, so this may well rejuvenate what was becoming an also-ran in the bill review space.

This yet another example of the rapid consolidation occurring in the work comp services space, and is by no means the last deal we’ll see for a while.  There are several more in process as I write this, and that doesn’t count the ones that I don’t know about.

More on the implications of all this later.

 

 

Apr
29

Abusive practices in drug testing

Posted by Joe Paduda on Tuesday, April 29th, 2014 | Comments

I’m talking about the urine drug testing used to ensure patients are taking the drugs they are being prescribed, and ONLY the drugs they are being prescribed.

The “abuse” is on the part of unscrupulous physicians and drug testing companies, who work together to scam employers and taxpayers.

Here is a quick list of some of the more egregious practices I’ve heard about.

  • sham partnerships, wherein a doc “buys in” to an LLC, along with a bunch of other docs who buy into a couple other LLCs.  When doc A writes a script for drug testing, it goes to one of the three LLCs that he has NOT bought into.  Similarly, when the other docs write scripts, they are sending patients to doc A’s testing company. Neat, huh?
  • a drug testing company leases a machine to a doc’s office, pays the doc a few hundred bucks for each test, and keeps the rest for themselves.
  • leasing space, wherein a testing company rents a couple square feet from the doc, and puts a machine in there.  You may surmise that the rental fee is really high…and you’d be right!
  • sham testing, wherein a doc charges for the “qualitative” test (look at the pee in the cup and the colors of the indicators), a “confirmation” test (pour the pee into a bigger machine that does essentially the same thing); and a “semi-quantative” (turn a switch on the same machine to give numerical scores and not just yes/no indicators.  One machine, one cup, three billing opportunities!

What does this mean for you?

With drug testing costs exploding, make damn sure you are working with the good actors, and monitor everyone.