Flooding and wildfires are causing increased rates of cancer, asthma, and other respiratory ailments among the people exposed. These events are getting larger and more frequent, a reality that will affect the work comp industry.

Notably, we understand a lot more about the long-term health effects of disasters due to tracking the health status of individuals affected by the attack on the World Trade Center. Data indicates higher rates of thyroid and prostate cancer as well as pulmonary fibrosis among those studied.

A well-researched article in the NYTimes this morning shows this is a much bigger issue, citing:

• raised levels of carcinogenic PCBs from flooding in Puerto Rico,
• significantly higher rates of asthma from Californians exposed to smoke from wildfires, and
• sinus problems, skin irritation and respiratory ailments reported by individuals after hurricane Harvey flooded industrial areas around Houston.

Harvey is particularly scary. Research showed benzene, lye, vinyl chloride, butadiene, and dioxin were just a few of the 200+ chemicals and contaminants spread across thousands of acres of residential neighborhoods, parks, playgrounds, schools, and business district by floodwaters.

While the long-term effects are far from certain, what we do know that clean-up crews and construction workers likely face significant exposure risks. I wrote about this a couple years ago; given the growing intensity and frequency of “weather events” driven by climate change, we can expect more in coming years.

What does this mean for you?

Occupational illness/disease claims may well increase significantly over the next few years, an eventuality that most employers, insurers, and actuaries have likely not considered.

Too darn busy last week to get my usual 3-5 posts up…things are calming down this week so expect to see posts in your inbox.

Followup on One Call; after the Debtwire article about OCCM debtholders organizing to prepare for a “potential liquidity event and expected covenant violation…” I was inundated with nonsense from anonymous writers accusing me of bias…this continued last week. [reminder – I reserve the right to know who is commenting]

A couple people told me OCCM owner Apax had offered $50 million to OCCM management, who turned it down.

Sorry, that’s just not credible; let’s walk thru the logic here.

• Private equity firms such as Apax don’t have a pot of money to write checks from. All Apax’ funds are from investors, and Apax has to get investors’ approval before using any of their funds.
• To do this, A) Apax would have to restructure the entire transaction, giving stock to B) investors who think sending money to a company that will likely be owned by creditors is a great idea.
• There’s no way OCCM management would “turn down” a cash infusion. As Debtwire reported, “cash flow has been limited by high capex needs as a result of its effort to migrate users under a single system” (Debtwire is referring to Polaris’ development cost).
• OCCM has a line of credit-type load that, according to Debtwire,

  “had USD 50m drawn at 31 March” out of a total available amount of $56.6 million….so, One Call had only $6.6 million available AND was paying interest on the $50 million it had already borrowed.

  Ergo, if management HAD been offered $50 million in cash, they would’ve been delighted to accept it. For the reasons enumerated above, I very much doubt that offer was made.  If you know otherwise, I’m all ears.

To my critics, reporting facts isn’t “biased”, Debtwire isn’t biased, and neither are financial statements. For non-believers, One Call has to report its second quarter results within 45 days of the end of the quarter. That’s a month from today.

It is possible, if not probable, that the debt investors will see the numbers before mid-August. If the numbers are consistent with Debtwire’s reporting, there may well be a “covenant violation.”

Update – One Call CEO Rone Baldwin provided a financial update this morning; he states:

One Call is in full compliance with all debt covenants for the second quarter of 2019 and expects to be compliant for the remainder of 2019, based on the full-year guidance that it intends to provide to investors in its second quarter conference call.

Will keep you posted.

Want to know how medical prices affect worker outcomes? Then WCRI’s upcoming webinar featuring Bogdan Savych PhD is a must.

Worker mis-classification – the usually-intentional is coming under increasing scrutiny, with the latest moves coming from the Garden State. Gov. Phil Murphy released a report which, according to Business Insurance, indicated “employee misclassification, which has grown 40% over the past decade…in 2018 alone 12,315 workers in New Jersey were misclassified as independent contractors.”

Finally, I heard from several folks about my York-Sedgwick post suggesting that my statement “a highly profitable managed care unit built by former leader Doug Markham” was inaccurate.

Fair point.

In my haste I failed to give credit to the many other people who built that business. Markham led Wellcomp prior to – and after – York’s acquisition of MCMC. The businesses were run separately for a time, then “combined” in a move that resulted in Markham running the new entity entitled CareWorks.

Mike Lindberg and his colleagues at MCMC – acquired by York – built a thriving managed care business that served, and continues to serve, a big list of customers. MCMC was kinda/sorta “combined” with York’s internal managed care entity under Markham when Mike Lindberg departed; I won’t get into the drama that surrounded that move. MCMC was a big chunk, if not the larger piece, of York’s managed care entity.

BJ Dougherty, Lisa Oskoui, Larry Brinton, Steve Junker are some of the professionals whose contributions made MCMC a successful company. (apologies in advance to those folks I failed to name)

Barry Lipton PhD did a quick review of a few ways work comp and group health differ – and how they are sometimes comparable.

The biggest difference is that workers’ comp is very focused on return to work, and more broadly, we care more about functionality.  In group health, not so much.

Differences – other than the obvious e.g. WC=ortho and trauma; group health= everything

• price differences are 12% higher for work comp than group health,
• while utilization is 60% higher for workers’ comp
• so total costs are 77% higher.

This differs by state, with Alabama, Missouri, and Virginia showing the biggest cost difference compared to national averages, and Colorado and South Dakota with the lowest cost compared to that average.

It also differs by type of service – not surprisingly physical medicine is used much more in workers’ comp, driven almost entirely by more utilization.

That’s not surprising, as comp conditions are predominantly musculoskeletal injuries and focused on return to functionality, while group health deals with many more conditions and RTW is irrelevant.

There’s also a big difference in the cost of MRIs…

You can see that Medicare pays way less than work comp (WC is blue, Medicare is green-ish). You can also see the impact of Medicare’s change in reimbursement in 2013; it started to really impact workers comp in the years after 2014 as regulators adopted/factored in/used Medicare’s rate for reimbursement in their state.

What does this mean for you?

Price + Utilization = Cost. But one has to factor in RTW in comp, a focus that is nonexistent in group health.

NCCI Chief Actuary Kathy Antonello’s presentation on the state of the industry has just too much information for a single post – so here’s three key details.

Reserves

Private carriers are over-reserved. That means there’s several billion dollars of excess cash on carrier books. I’d note that this ASSUMES the projections are accurate, and that losses for already-incurred claims don’t get worse (or, in insurance-speak, develop upward).

Frequency

Lost time claim frequency declined by 1 percent last year – significantly less than we’ve seen over the decade. My take is this is related to several factors.

• Employers aren’t focusing on work comp issues – e.g. safety and loss prevention – as premiums are so low that they aren’t a problem.
• Hiring standards have been relaxed as we’re at full employment
• More overtime is being worked, leading to higher injuries due to tired workers

Severity

Medical costs went up a mere 1 percent in 2018, continuing a trend of relatively low increases that’s persisted since 2008 (the jump of 4.1% in 2017 looks like an aberration).

What does this mean for you?

Workers’ comp is not a problem for employers – which means it will get little attention from legislators.

When buyers aren’t experiencing pain, they have little reason to buy.

This year’s Annual Issues Symposium was the best I’ve attended – and I’ve been to 20 or so.

The hotel and conference center were excellent – great service, everything was right on site, food was very good, all around best conference site experience in memory.

The opening day’s content was rich and mostly very well done. Kathy Antonello’s discussion of results continues to improve. I would have liked a bit deeper dive into cost drivers, but that’s a very minor quibble; you can’t cover everything in an hour. Graphic presentation was helpful, and Kathy is clearly comfortable on stage and enjoys presenting.

For me, after Kathy’s State of the Line the highlight was the discussion of AI and human decision making. Jim Guszcza of Deloitte was brilliant, laying out a compelling case for the joint use of both AI and humans in decision making.

A discussion of TRIA renewal was – I’m sure – of keen interest to many, but the speaker’s impact suffered a bit as he read his talk.  David Priebe of Guy Carpenter is clearly expert in all things TRIA and knows his stuff.

Moments into David Deitz’ physician panel, the hotel lost power and all went dark.  Staff responded quickly, using social media to keep all of us informed – they handled the unexpected with aplomb.

The physician panel is up there somewhere…

When things got started, I had the sense the blackout was a metaphor for payers’ views of treating providers – there’s little visibility into what docs have to deal with when serving work comp patients.

In fact, the physicians had pointed comments about the problems docs face trying to do the right thing, many of which are caused by well-intentioned but ultimately dumb “requirements”. Takeaway – if we want good care, we need to make sure the people delivering it like to work with us. We have a long way to go to make the occ docs who care for our patients true partners.

Barry Lipton quickly ran thru three research foci, I particularly liked Barry’s insights into ways work comp and group health are different.

Alas I won’t be attending the second day; the boy’s annual mountain bike trip conflicted.  It’s off to Moab, Utah, for four days of back-to-boyhood.

What does this mean for you?

This is a must go. Sign up early so you don’t get locked out of 2020.

What passes for predictive modeling today is like Google maps, except the app tells you when to turn a half-hour after you’ve passed the intersection.

Adjuster finding out a claimant had spinal surgery 6 weeks ago…

By the time adjusters figure out a claim has gone off the tracks, it’s often too late to do anything but increase reserves. That’s because there’s no real-time monitoring, no way to clearly and definitively identify when – exactly – that happens.

A promising approach is in the works at Gallagher Bassett.

Building off research conducted by Johns Hopkins, GB has developed a tool that enables real-time monitoring of medical services delivered to its claimants. Using a proprietary platform, alerts are sent when patients’ quality of care is headed in the wrong direction.

The trigger is inappropriate medical treatments. GB matches medical bill data with evidence-based treatment guidelines, with each service, procedure, or medication individually assessed. As the number of inappropriate treatments increases, alarm bells ring.

Of course, that doesn’t mean all treatment that is non-compliant is inappropriate. However, much is, and there’s a clear – and quite strong – correlation between bad medical care and lousy claim outcomes.

Those are clinical words and hide the real import of GB’s approach. Getting claims back on track means patients get better faster, AND the risk of bad outcomes from inappropriate surgeries, injections, drugs, and tests decreases.

What does this mean for you?

There’s lots of data out there – and far too little smart use of data. This is promising indeed.