This was the message Accident Fund’s Jeff White delivered in a recent presentation on disruption in insurance – and specifically workers’ comp. A few of Jeff’s slides are shared here…

The idea is simple – things you used to have to do via phone or fax or in person or thru the (gasp) snail mail you can do on your smartphone or tablet – instantly, securely, and at no cost.

Hotel reservation?  Hotels Tonite.

Plane? Get a reservation, get flight status pushed to you, change your seat, get an upgrade.

Get dog food? Amazon Prime.

Nearest coffee? Starbucks app – and pay for it too.

Check on your house? Sure – lock status, turn up the heat, watch home security cameras.

Banking? Deposit checks, pay bills, move money around via your phone.

Sports? Get scores, watch highlights, chat with fellow fans, post pictures, buy tickets.

Travel, retail, security, banking, entertainment – all have been disrupted, middlemen eliminated or drastically changed by adoption of smartphones, spread of a very fast internet, growth of artificial intelligence-driven decision making, internet banking.

This is happening with insurance now, driven by those same technologies, processes, capabilities. Think about the implications; here’s one.

Insurance is risk-sharing for potential losses, but it is a very blunt instrument. Risk is estimated using what are really crude tools to assess exposure, potential cost, liability. Technology allows risk takers and risk assumers to narrow down the actual “risk” a lot, lowering cost of risk and more accurately pricing that risk.  Others with similar risks share the burden – but that burden is much lower due to accurate understanding of exposure.

If a loss occurs, tech can pay the claim instantly.

The graphic below is not a “could be”, it’s a “what actually happened in real life.”

Think this won’t happen in workers’ comp?

Ask a former travel agent – there are lots of them.

Most insurance companies will NOT survive the transition.  That’s because they don’t want it to happen as it will reduce revenues, eliminate the need for executives with newly-irrelevant skills and experience, and make existing infrastructure partially obsolete.

New entrants who don’t have lots of infrastructure to support and business models rooted in current technology and buying patterns are the “Ignorant Antagonists”.  Many of them will fail due to “stupid, ignorant” mistakes – but some will survive, thrive, and come to dominate the insurance industry.

What does this mean for you?

Your company tomorrow will be a lot different than it is today.  If it is around tomorrow. 

 

A very long time ago a professor in a business school class said “you have to differentiate between things that are important and things that are urgent”.

That may very well be the most valuable lesson I learned in business school – although it’s one I constantly wrestle with.

I bring this to your attention, dear reader, because there’s been a very important series of blog posts sitting in my “drafts” folder for weeks now. I should have finished and posted them a month ago, but more “urgent” things kept coming up. Mea culpa.

So enough of my time-management problems – here’s what’s so important.

Writing in IAIABC’s Perspectives, Jeff White said:

Jeffrey Austin White is the smartest person I know in work comp.  Jeff also has the unique ability to instantly grasp highly technical issues and, more importantly explain them to the rest of us so that we understand the issue, AND get its implications.

You need to read his article, because it explains precisely what the future – peer-to-peer networks, crowd-funding, blockchain – holds for healthcare and workers’ comp.

This future has huge implications for buyers, regulators, suppliers, and other stakeholders. A few examples:

The evidence is piling up; ACA is strongly associated with lower work comp premiums. Almost a year ago I attributed improvements in work comp’s medical expense trend to ACA; now, the impact is being seen in improving combined ratios particularly in states that fully adopted ACA’s reforms. (here’s a map of Medicaid-expansion states)

That view is now getting traction outside our little world, with the LA Times covering the issue earlier this week.

Premium decreases are now being seen in Medicaid-expansion states; here are a few examples.

• Arkansas – 8.4% decrease
• Michigan – 9.3% decrease in advisory rate
• Montana – 7.8% decrease in loss costs
• Nevada – 10.7% decrease in loss costs
• Oregon – 5.3 % decrease
• Vermont – 7.9% decrease

(I’ve purposely left out California, which has seen significant rate decreases however other factors beyond ACA are also affecting rates)

Of course, other factors are also in play here, including expanding employment and state-specific reforms. However, when you compare “ACA adopting states” with other states, the overall picture is compelling.

Bill Wilt of Assured Research kindly offered the following observations (more information is available here):

Assured Comment: American Health Care Act (AHCA) Likely Bad for WC Insurers

New 2016 data shows states maximally affected by ObamaCare outperformed WC industry

Newswires are on fire with analysis of the AHCA and its impact on the nation’s medically insured. Advocates point to the CBO’s estimate that it could reduce federal deficits by $337 billion over the ten years 2017-2026. Detractors, and there are many, focus on the CBO’s estimate that some 14 million Americans could lose healthcare coverage by 2021; climbing to 24 million by 2026.

New, 2016 industry data shows that the workers’ compensation loss ratio in states maximally affected by the rollout of the ACA (aka ObamaCare) have begun to outperform states minimally impacted by the ACA (see nearby figure). Our delineation stems from a recent New England Journal study which found that states expanding Medicaid and those introducing state-based exchanges saw the largest increase in the medically insured. In 2016, the WC loss ratios in those 18 states outperformed the 15 minimally impacted states by 440 basis points. The maximally-affected states also outperformed nationwide averages in 2016.

This new data comports with intuition and, increasingly, the anecdotes we pick up from industry sources. The ACA has likely been a contributing factor to the favorable trend in WC loss ratios. The evidence is significant: steadily declining WC loss ratios during the ACA-years, historically low medical inflation and favorable WC loss-reserve development. Most industry experts believe the expansion of the medically insured has resulted in less case shifting and less cost shifting (e.g., fewer fraudulent claims and comorbidities treated under WC).

The AHCA, in its current form, should have the opposite affect; it seems likely to lead to more WC claims and cost shifting – rising loss ratios. The nearly complete unwinding of the expansion in medically insured could accelerate cost-shifting, in turn putting pressure on WC loss trends and reserve margins. The initial wave of newly uninsured (14 million by 2018 according to the CBO) would result from the repeal of the individual mandate. We don’t have an estimate of the working population in that cohort but presume it’s meaningful. The second wave of newly uninsured (another 10 million) would result from changes in Medicaid enrollment. According to WC experts (link here to one prominent blog) some 81% of Medicaid families have at least one member of their family working. That presents plenty of cost-shifting opportunities.

We’d expect the negative impacts of the AHCA, if rolled out in its current form, would first appear in the states benefitting the most from the Affordable Care Act. Large states including California and New York are among the 18 included in our figure above – contact us for a complete listing.

WC rates across the nation have begun to decline – evidence that WC insurers discount favorable trends into their ratemaking. Regulators will probably have little tolerance for preemptive rate increases based on this evidence, but it will be interesting to see if the pace of rate decreases slow. If not, WC loss ratios will have almost surely found their bottom in 2016.

What does this mean for you?

Repealing ACA will be bad news for work comp premium payers, good news for service entities.

One last post on last week’s excellent WCRI conference; Alex Swedlow CEO of CWCI provided a brief but information-rich profile of California – an Altered State.

The good news…

• Medical trend has flattened
• Fewer spine surgeries
• Fewer Opioid scripts
• $1.3 billion in system wide savings

One problem that seems almost specific to California – cumulative trauma claims. These claims are particularly problematic in the LA county area – and are outliers in terms of disability duration, cost, indemnity payments.  Moreover, cumulative injury cost are driven by LA county AND attorney involvement.

Medical treatment costs have been essentially flat for five years – due in large part to adoption of an RBRVS-based fee schedule.

The FBI’s involvement in tracking down miscreants in the spinal surgery industry may have been helpful in reducing overutilization of that much-criticized procedure.

Opioid spend has declined for the 5th consecutive year – kudos to the work comp PBM and payers who’ve done this. There’s also been a 26% decrease in cumulative MED over the first two years of the average claim.

This is very good news.

But, as Alex noted, we’ve only moved from the disastrous to the miserable, as opioid use is still far too high.

Overall, while a reduction of 8 percent in medical trend is welcome news, this happened before in the previous attempt to reform California work comp.  After an initial similar reduction, costs zoomed up, necessitating more reform.  So, while Alex is hopeful that trends are positive, he is wary indeed.

A few more key data points

Loss Adjustment Expense is just about equal to indemnity payments and is the highest across almost any comparison group.  And, this expense load has increased dramatically over the last couple of years. Medical cost containment expenses are a big part of this; the data presented was preliminary and thus can’t be cited yet but suffice it to say that costs account for a huge portion of overall medical expense.

Drugs

Rx spend accounts for 12.4% of medical spend but average expense for first 24 months after a claim is incurred is just under $2000 – this has decreased over the last few years.

A formulary is in the offing and it looks like the go-live date of July 1 2017 will happen. While the intent is to improve care and reduce cost, there will have to be strict enforcement for the hoped-for results to actually become real. One of the key issues unresolved is the formulary doesn’t address the difference in the price per pill of identical drugs – the variation can be wide indeed. This is an area that regulators have been focused on, yet none of the current solutions – change in fee schedule or adoption of a formulary – has addressed.

IMR and UR

Only 4.3 percent of medical care sought by treating providers was modified or denied, refuting claims made by other media outlets that there was wholesale rejection and denial of needed care thru the IMR process. Fortunately 99.4% of compound drug rejections were upheld – and over 90% of opioid denials.

What does this mean for you?

Things are getting better in California, but some of the “solutions” offered by regulators are misguided and will actually increase frictional costs. I’m going to dive into this in a post next week.

Now on to the real stuff – deep research into issues of interest only to we real work comp geeks.

Dr Bogdan Savych started off this brief and information-stuffed session.

Across 15 states, 14 percent of workers with lost time injuries didn’t have a substantial and persistent return to work (this is PRELIMINARY and subject to change) – why?  what drives this?

Among the biggest drivers – workers who strongly agreed that they were afraid of being fired or laid off had “worse outcomes.”  As over a quarter of workers fell into that category, that’s a big issue. There are both literal interpretations of this – perhaps the worker was justified in fearing a layoff and broad interpretations of this – perhaps the work environment was low trust.  These workers were also more likely to hire an attorney.

Takeaway – the employee’s work environment, and interpretation of that environment, is a major driver of “permanent disability.”  So, think less about medical issues, and much more about these “other” drivers.

Glenn Pransky of Liberty Mutual was next up.  Dr Pransky is one of the industry’s leading researchers on disability issues (kudos to Liberty for continuing to support the Center for Disability Research and similar efforts.

Glenn noted that one driver was the patient’s communications with the payer.  Workers were sometimes thrown off by negative language used by the claims adjuster in the initial encounter or call.  If they feel their needs aren’t being taken into account or they are being treated unfairly they are more likely

The top return to work coordination skill – communications. That’s the result of research conducted in Canada about a decade ago, research that is very likely true today. In fact, Glenn and others conducted a study a few years back that evaluated the impact of improving the initial contact with the case manager, focusing the patient on problem solving and not using words like “claimant, investigation, liability, etc.

What’s interesting here is this is – in large part – old news, yet we still need to hear this.

More importantly, to paraphrase the previous White House, we need to STOP doing stupid stuff.

Clearly we KNOW this language, the style of communication, the employee’s workplace satisfaction are critically important to disability. Yet far too often we still talk to patients not as people but as “claimants”, and treat patients as legal claims, not as people.

Takeaway – treat patients as you would want to be treated.

Boston’s always beautiful in March – some days are even more beautiful than others. No better place for the annual gathering of the work comp geeks – myself included aka the WCRI Annual Issues & Research Conference.

The kickoff session featured two former denizens of Capitol Hill opining on the impact of the election on healthcare, labor, and work comp. Former Rep Henry Waxman (D CA) and former Sen Tom Coburn (R OK) took to the podium for a moderated discussion and audience Q&A.

WCRI CEO John Ruser started off asking about the Executive Orders issued by President Trump, specifically the drop 2 regulations for every one adopted. Waxman spoke briefly about the complexities, but focused on the lack of consensus among Republicans on healthcare reform and noted that, due to this lack of consensus, they are looking to the President for leadership.  But the President is not providing leadership on healthcare, so we’ve got a hot potato situation.

Coburn attributed problems to a lazy Congress passing large numbers of bills written by departmental Secretaries; elected officials aren’t developing the legislation but rather using language handed to them. He also believes Congress has abdicated and/or lost much of its rightful place as an equal player among the three branches of government.

ACA

Ruser led off with a hypothetical question about what parts of ACA should be kept if the law is repealed and replaced.  This was the wrong question, as it deals with a – in my view – highly unlikely hypothetical. Instead, the question should have been “what’s going to happen with ACA? Will it be repealed? What will pass if anything?”

Waxman doesn’t believe ACA will be repealed.  In contrast, Coburn thinks that all we have to do is publish prices for health services and outcomes and people will go to those providers with the best prices and outcomes.  I don’t know what planet he lives on, but parents with sick kids, individuals with mental health issues, or children of ailing and incompetent parents are never going to be able to make appropriate “Market based” decisions.  Oh, and insurers are never going to insure people with pre-existing conditions – and they’ll look to cancel policies for those who have the temerity to get sick.

This isn’t an economic decision folks, it’s your daughter or son.

Coburn promoted a bill that is under consideration – Burr Hatch Upton.  He believes this bill will be similar to what comes out of Congress.  Details on this here.

He also said there was no attempt by Democrats to involve the GOP in ACA – a statement that is patently false.

Cost shifting

Waxman responded to Ruser’s question about the potential for healthcare changes on case or cost shifting to work comp.  He talked about Medicaid changes that may well reduce enrollment in Medicaid – didn’t speak to workers comp.  Not surprising as he isn’t a work comp guy.

Coburn is a practicing physician, he discussed unfunded liabilities, asserting $105 trillion in future unfunded liability for medicare medicaid etc, noting that we are hurting Millennials as they will have to pay for this.  This is somewhat interesting as he voted against requiring the feds to negotiate pricing for drugs for Medicare.

Unfortunately these two gentlemen weren’t really equipped to address the question – no fault of their own as this is an esoteric topic.

Federal oversight of work comp

Waxman doesn’t see the new Administration moving to increase federal oversight of workers comp, as there’s been no indication from the nominee or administration about this.  that and there are too many other issues re far more important.  Coburn agreed with Waxman and cited lack of Constitutional support for federal involvement in workers comp.

Coburn discussed the expansion of the definition of disability under SSDI, and the subsequent increase in beneficiaries.  He sees SSDI as a social safety net.  All the data supports his case that SSDI enrollment has increased and there are now 25 million Americans are on ssdi – a number that isn’t right.  The actual figure is 4.8% of the population – or 15 million people.

An audience member asked if the Grand Bargain is being dismantled.  Coburn noted that there’s no requirement that SSDI factor in the cause of the disability; SSDI is responsible for disability regardless of the cause.  He said the real question is should work comp cover the entire cost of the disability?  

That’s an excellent question – I believe the answer has been, and still is, yes.

 

 

 

Could hypertension be an occupational disease?

That’s the question addressed in an excellent article in HealthAffairs.

The short answer is there are many factors that contribute to or mitigate risk for hypertension, however the physical and psychological hazards associated with the worksite do correlate with hypertension risk.

Specifically, psychological demands such as how often one is required to work fast  and without errors are correlated with blood pressure while more freedom for workers to make independent decisions is associated with lower blood pressure.

The research looked at about 14,000 Alcoa blue-collar workers over a 16-year period and included surveys as well as medical billing data.  While other external factors are indeed important, the researchers concluded:

workplace environmental exposures may as a whole contribute substantially to hypertension among US blue-collar workers. We found evidence for this across multiple exposures in the categories of psychological hazards and the plant social environment.

Note that this study resulted from a partnership between a very large employer and researchers.  I’d hazard a guess that a study involving less paternalistic employers would show stronger correlations with greater impact.

What does this mean for you?

Employers have long known the worksite is a factor in employee health and productivity; this research clearly indicates hypertension could be characterized as an occupational disease specifically associated with employment.

Note – HealthAffairs has been doing really good work of late on workplace health and exposures.  Put their site on your reading list.