Jan
10

Predictions for workers comp in 2022, part 2

Last week the first five predictions about what happens in workers’ comp this year went up…today’s the second five.

6. With one or two exceptions, don’t expect much in the way of private equity investments.

There may be one or two large transactions, and a couple small ones, but outside of that, the bloom on the workers’ comp rose appears to be fading.

7. OneCall will be sold and/or split up. 

The BlackRock and KKR entities that are the current owners are not operators; they are debt owners. CEO Tom Warsop has squeezed out all the squeezable costs – and then some. Growth – defined as new business from new customers – is not happening. Add the overall drag on work comp services from the still-real drop-off in claims and claims services, and the reasons to hold on and hope are few indeed.

Plus, if interest rates increase – which is a distinct possibility – and if private equity interest in workers’ comp continues to diminish from it’s current modest level – also a distinct possibility – OCCM’s owners may well decide to sell soon rather than watch values decline.

8. COVID’s impact on costs and rates will prove to be minimal.

COVID claims are cheap, few are anywhere close to catastrophic cost levels, the effect of presumption laws and regulations is not much of an effect at all, and many employers – especially health systems – are forcing employees to use PTO rather than file for WC when they test positive/have symptoms.

Most research organizations and actuaries would do well to reflect how their early predictions were so…bad.

Helpful hint – two places to start; a) the tendency for WC “experts” to catastrophize and b) the almost-complete lack of understanding of healthcare drivers, costs, cost structures, reimbursement, and epidemiology.

9. There will be no big issues in workers’ comp. “Big” defined as important, needle-moving, disruptive, revolutionary.

No, medical marijuana is NOT a big issue – neither is COVID, or presumption, or the mid-term elections (there is ZERO interest in workers’ comp on the federal level) or remote work (does anyone seriously believe office workers tripping over toys will amount to any real dollars?)

Oh, and with rates at all time lows, frequency continuing to drop, and medical costs (with the exception of physical therapy and facilities) flat, coupled with ongoing supply chain and labor market issues, execs at big employers are (justifiably) completely uninterested in workers’ comp.

If the big girls and boys don’t see any issues, there aren’t any.

10. Here’s the kicker – the biggest long-term concern for workers’ comp is global warming...yet this is getting zero attention.

There’s going to be an inevitable increase in issues related to heat, flooding, fires, drought, tornados and hurricanes. This is getting more real every day yet remains all-but-ignored by pundits, policy-makers  and rate-makers.  We can expect more heat-related claims. Hurricanes, fires, and tornados will increase in number and severity; affecting logistics, labor, construction, and claims. The research is clear.

What does this mean for you?

As always, success favors the insightful, and failure plagues the ignorant.


Jan
6

2022 Predictions for workers’ comp

Once more I head out on a limb to prognosticate on the events and trends that will shape 2022.

  1. The soft market will continue.
    Carriers are still over-reserved, rates are still too high (see the opioid hangover), capital is still flowing into workers comp (gotta love that looooong tail), and employment growth may continue to be modest (low wage workers have discovered that working at crappy jobs isn’t always a have-to, especially when child care is unavailable and unaffordable).
    On the other side, wage growth will likely continue (thus partially mitigating the above drivers) as more employers finally figure out that people aren’t interested in crappy jobs for crappy wages.
    Caveat – towards the end of 2022 we may well see a bit of tightening as construction, infrastructure, green energy and other initiatives start up and get operational.
  2. TPAs will add more business, mostly from carriers.
    As work comp continues to shrink, insurers will ramp up efforts to shed assets and expenses to reduce their cost structure. By outsourcing claims, carriers are trading the high fixed costs of a claims infrastructure for the variable cost of a per-claim admin fee.
    The smarter carriers will negotiate hard so they don’t get screwed by medical management and other non-fixed fees…but many carriers aren’t that smart.
  3. Insurers will reduce staff, particularly in claims.
    Well, of course. see #2 above. However, TPAs will look to add claims staff, so experienced, well-trained claims folks will be highly sought-after.
  4. IF total medical costs go up – and I doubt they will  – the increase will be marginal.
    Yeah, I know there’s lots of press and punditry about work comp medical costs aka “severity” increasing – and most of it is flat out wrong.

    I’ve read far too many investment banker slide decks, “research” reports and surveys of work comp executives that talk about rising medical costs –  almost all are not based on data or solid research.
  5. That said, facility and therapy costs will go up.
    Mostly because a) medicare is increasing reimbursement for therapy which trickles down to work comp fee schedules, and b) some healthcare systems and for-profit entities (looking at you, HCA, especially in Florida) have figured out how to bust open the work comp piggy bank.

Monday – 5 more predictions.

What does this mean for you?

Work comp will just muddle along…


Jan
5

2021 Predictions – How’d I do, part 2

Yesterday we went through the first 5 of my predictions for 2021, today we’ll wrap up the second batch before I attempt to predict what 2022 brings.

6.  The workers’ comp insurance market will stay soft.

Here’s a few reasons why.

  • There’s hundreds of billions of capital floating around out there, looking for a home. Workers’ comp insurance has been a) quite profitable and b) is a great place to park dollars.
  • Claim counts continue to decline – while COVID is accelerating the decline, the structural drop is embedded in the business and is here for the long term. Next year there will be fewer claims, and the following year even fewer.
  • Medical inflation remains pretty low (while there are troubling indicators that costs will bump up, overall trend remains low historically)
  • There are lots of insurers fighting for a shrinking market, and it only takes a couple cutting prices to force others to join in.Verdict – True. Although this is really directly related to another prediction about rates, so if one was true, the other almost certainly had to be. Then again, if one was false, I’d be 0 for 2…

7. More layoffs and staff reductions will hit insurers and TPAs
See #6 above.  Fewer premium dollars = fewer administrative dollars; fewer claims = less need for staff. Layoffs hit several insurers last year and we can expect more to come.

Verdict – False. There are anecdotal stories about a few reductions here and there, but nothing big except…Reports indicated AIG “transferred” employees  – apparently primarily claims staff – to Gallagher Bassett as part of its move to offload fixed costs.

Where I really went wrong was predicting TPAs would have layoffs…Since TPAs’ biggest growth is coming from carriers offloading work to them, and if carriers are laying off staff, then the work has to go somewhere – and that “somewhere” is to TPAs. So, that was an unforced error.

8. Other than presumption and tele-services, there will be very few significant moves in WC regulation or legislation.

Between drastic reductions in state revenues due to sales and other tax receipts affecting staffing and state legislatures and governors all-consumed by COVID responses and budgetary issues there’s little oxygen left to fuel any material changes to work comp regs. While it would be great to see Florida’s legislature stop facilities raiding workers comp to make up revenue shortfalls, that’s highly unlikely.

Verdict – True. And there wasn’t much in the way of presumption or tele-services changes…no, a few states addressing medical marijuana is NOT significant.

9. OneCall will be sold and/or broken up

While the current debt load is a LOT less than it was under the previous owners and the current CEO is an improvement, the decline in claims hit One Call hard in 2020.   The first half of 2021 won’t be any better with employment numbers and claims counts likely reduced due to the pandemic.  On the plus side, there’s still lots of investor money looking for deals.

Net – I expect the company to change hands this year. Whether it is sold as one entity or broken up is TBD.

Verdict – False. That said, it’s just a matter of time…the bleeding has mostly stopped, but growth is anemic at best, service levels remain suspect, and financials have gotten better in large part due to lots of expensive staff exiting the company

10. Opioids and other dangerous drugs will get a lot more attention.

With COVID dominating everyone’s calendar, workload, thinking and energy, we all dropped the ball on managing opioids. That will change.

chart below is from The Economist.

With prescription volumes, MEDs, and duration likely up during 2020, expect payers to re-engage with prescribers, PBMs, and employers to get things moving in the right direction.

Verdict – False.  NIOSH published a timely report on opioid issues among construction workers but other than that – very little material action.

This is REALLY disappointing. I get that COVID was a lot to handle, but the opioid crisis got even worse last year with a record number of opioid-associated deaths. That, and the fact that long-term usage of opioids is likely the most significant contributor to claim duration and long-term claim cost should have insurers, employers, and TPAs focused on addressing chronic opioid usage.

The net – overall 5 True, 4 False, and 1 pending.

Gotta do better than that.


Jan
4

2021 predictions – How’d I do?

It’s time once again to see how I did on my 2021 predictions for workers’ comp.

Today we’ll dive into the first 5 and finish up with the last 5 tomorrow.

  1.  Total premiums will stay low.
    As employment, payroll, and injury rates all remain under pressure, total premiums will remain significantly lower than we’d expect in a non-COVID, non-recession environment. We are also on the tail end of the opioid cost bubble, with actuarial projections still over-compensating for what was rampant overuse of opioids.
    Unemployment will persist at least thru the first half of 2021 – and likely the first three-quarters – helping to keep premiums lower. There are some predictions that employment will ramp up towards the end of the year; let’s hope so.
    Implications abound.

    Verdict – True. Wages did increase significantly (Good news indeed for hospitality, leisure, construction, logistics, healthcare and retail workers!) but premiums and rates mostly dropped. Florida, California, and other states saw decreases, continuing a decade (or so) long decline in rates and premiums.
    Note – Actuary Mark Priven – and I – both believe rates are still too high.

  2. Facility costs will spike.

Hospitals are in dire financial straits, with 2021 bringing no respite from the cash crunch experienced by the entire industry when people avoided facilities, put off elective procedures, or weren’t able to get care due to facility restrictions.
As desperate financial managers look high and low for any and all revenue sources, you can bet your house they’ll be focused on workers’ comp. Payers have:

    • few effective price or utilization controls;
    • an often-lackadaisical approach to cost management;
    • bill review programs and processes hopelessly outclassed by sophisticated revenue maximization technology; and
    • management that doesn’t know that it doesn’t know;

thus payers are going to see facility costs – already the largest part of medical spend – jump.

Verdict – too early to tell. We won’t know until we get 2021 data, which will be sometime in mid-Q2 for most states. I’ll go out on a limb and double-down on my prediction; facility costs – as a percentage of total spend – have increased significantly in 2021

3. Consolidation
Seems I’ve been forecasting increased industry consolidation for years…it’s not a prediction but more acknowledgment of reality. Workers’ comp is a declining industry with shrinking claim counts and flat expenses – and that isn’t going to change.

COVID has accelerated the process dramatically; with claim counts down 15-20%, there are fewer claims to adjust, fewer services to medically manage, fewer bills to pay, fewer dollars to compete for.
Because there will be fewer revenue and premium dollars next year than this, more consolidation is inevitable.
I expect this to be most pronounced among medical management firms and TPAs, and the big to get bigger. Genex/Mitchell/Coventry, Sedgwick, Concentra are all likely consolidators. Not sure about Paradigm.

Verdict – True. Paradigm has bought HomeCareConnect; Enlyte (Mitchell/Genex/Coventry) acquired QualCare (and reports indicate Enlyte is for sale); and Sedgwick is buying up tangential businesses (JND Legal Administration, Temporary Accommodations, Managed Care Advisors, and several other firms).

4.  Drugs will re-emerge as a significant problem
After several years of declines in opioid prescription volumes, it looks like things headed in the wrong direction last year.
Prior Auth requirements were relaxed, refills extended, and states loosened restrictions on prescribing. Add to that patients weren’t able to get to their PT visits and surgeries were postponed. The result – I expect we’ll see drug costs in 2020 flattened out, and opioid usage actually increased (We will know a lot more in mid-late March when I complete my Survey of Drug Management in WC).
That was last year; as COVID is returning with a vengeance, expect to see continued increases in 2021.

Verdict – False. Drug costs continued to drop in 2020 and reports from multiple industry contacts indicate that continued into 2021.

5. COVID claims aren’t going to be costly.

Despite all the caterwauling we heard back in 2020, COVID costs have been minimal. That will not change. Yes there will be long-haulers, but those will be very few indeed. Yes there will be more claims, but most will cost just a few thousand dollars.

Verdict – True. All credible research and reporting indicates COVID claim costs have been pretty low. Not surprising to those who actually have a grasp of healthcare cost drivers and treatment expenses.
More on costs here, here, and here.

The Net – 3 True, 1 False, and 1 pending.

What does this mean for me?
I’ve got to relook at my thinking re drugs and drug costs. I know as much about drugs in workers comp as anyone, and I clearly got this one wrong.  


Dec
9

A promising new tool for physical therapy

I’m approached by lots of companies looking for advice on how to get their products/services into the workers’ comp and/or group health space…most are:

  • not exactly ready for prime time &/or
  • don’t have enough solid research behind them &/or
  • have glaring deficiencies &/or
  • just don’t feel right.

But when Bill Zachry called me about Plethy, I paid attention (disclosure – Bill is a long-time friend and colleague, has huge experience in workers’ comp, and is one of the finest people I know).

While Plethy’s Recupe is technically in the digital musculoskeletal space, Recupe is unlike other approaches in that the technology is not the focus, rather a key component of a comprehensive approach that supports physical therapists’ work with patients. Yes there’s a smartphone-based app, yes there’s a sensor that is used to help the therapist monitor exercises and recovery, yes the data can be seamlessly shared with other members of the patient care team.

In my experience devices of this kind are either driven by technologists or clinicians – both have challenges. Technologist-driven approaches often have significant clinical gaps, while clinicians’ efforts are usually clunky and hard to use.

Plethy has involved orthos, DPTs, and other clinicians in the entire development process, which has been managed/done by highly experienced tech experts with deep background in tech product development.

Tech should NEVER displace the involvement of clinical experts. Rather tech should support those experts, provide actionable information and do so with minimal hassle factor.

So far, Recupe checks those boxes.

What does this mean for you?

We are getting there…

note – I am an advisor to Plethy.


Dec
3

Don’t miss out

on WCRI’s 38th Annual Issues & Research Conference, March 16-17, 2022. Mid-March is a great time to be in Boston!  Then again, pretty much anytime is.

Register here.

on NCCI’s latest update on claim frequency and severity – spoiler alert, frequency is still declining, although it’s hard to unpack the influence of COVID from structural drivers. Hat tip to Carolyn Wise and Kevin Fernes for their helpful research and cogent explanation of the data.

More surprisingly, severity – which is workcomp-ese for costliness – declined last year – for non-COVID claims.

Also notable – and consistent with what I predicted last year COVID claims are way less costly – as in two-thirds less costly – than non-COVID claims (this isn’t about chest-pounding, rather pointing out that this was predictable – but few in the WC world have the health care/medical system insights to do so)

Also worthy of your attention, Chris Brigham MD is hosting a discussion of Post-Acute COVID via Webinar – registration is here and is complimentary.

Finally, in yet another example of the consequences of stupid, a physician who testified before Congress that Ivermectin would prevent COVID…wait for it…got COVID. As concerning, there have been 2021 1,810 cases of ivermectin poisoning in the U.S. in the first 10 months of this year, compared with 499 for the same period in 2019.

What does this mean for you?
Understanding healthcare would be really helpful for workers’ comp execs.

Nov
18

COVID conversations, curiosities and cures

Three-quarters of a million of our friends, family, neighbors and coworkers have died of COVID.

That is a mind-blowing number, made personal because all of us know of someone who died of the disease or has a family member that did.

Remember 9/11 killed about 3,000 of us.

Of course, the unvaccinated are dying at a far higher rate than the vaccinated, and the vaccine divide is becoming more partisan by the day. Unvaccinated English people were 47 times more likely to die of COVID than those who had been fully vaxxed for more than three weeks. 

KFF’s survey reports the race/ethnicity vaccination gap has shrunk significantly, while the partisan divide has grown over time.

Today, the most significant factor determining vaccination status is political affiliation. 

What’s sad beyond belief is this

That said, 6 out of 10 of those who identify as leaning or Republican have received at least one dose.

Thanks to Broadspire’s Marc Cunningham for hosting me on the Beyond the Claim podcast; Marc and I spoke about the impact of COVID on workers’ comp, the need for deeper understanding of medical drivers, and what the future holds.

Advocate Healthcare Aurora’s Teresa Clarke took the stage in the second episode, and dove deeper into COVID and healthcare. Teresa manages AHA’s work comp program, and has been in the trenches since day one of the pandemic.

Hat tip to Broadspire’s Chris Stephenson for handling all the heavy lifting on the pod.

Two new medications show a lot of promise in treating COVID. And no, neither are Ivermectin.

Pfizer’s Paxlovid is in the Emergency Use Authorization process; the Federal government is expected to contracted to buy 10 million doses of the medication.

When given within three days of symptoms, Pfizer’s antiviral reduced the rate of death and hospitalization by 89 percent for those at high-risk of developing severe illness.

Merck’s drug “reduced the risk of hospitalization and death by nearly half among higher-risk people diagnosed with mild or moderate illness.”

What does this mean for you?

Get vaccinated, because you might die if you don’t.


Nov
17

Infrastructure = jobs = premiums and claims

Three days ago President Biden signed the Infrastructure Investment and Jobs Act, a notable accomplishment coming after bipartisan support in Congress.  Pretty remarkable that this happened at all; past Administrations  – both Democratic and Republican that enjoyed majorities in Congress were unable to pass this desperately needed legislation.

There’s lots of good news in the Act; including: (source Business Facilities)

  • US$47 billion in climate resilience measures to protect buildings from the storms and fires that result from climate change
  • $65 billion to repair and protect the electric grid, build new transmission lines for renewable power and develop nuclear energy and “green hydrogen” and carbon capture technologies
  • $39 billion to continue and expand current public transit programs, including help that allows cities and states to buy zero- or low-emission buses
  • $66 billion to fix Amtrak and build out its service along the Northwest Corridor, in addition to building tens of millions for high-speed rail and other commuter rail
  • $7.5 billion to build electric vehicle charging stations;
  • $25 billion to repair airports to reduce congestion and emissions, encouraging the use of low-carbon flight technology

States are already targeting the funds for much-needed projects; North Carolina is getting $1.5 billion for bridge repairs,  broadband expansion, and transportation upgrades – and more dollars for other projects.

Wyoming’s roads, dams, water systems and bridges will get $2.5 billion in repairs and upgrades.

Arizona’s rapidly expanding population desperately needs new infrastructure – and big improvements to utilities especially water as well as ports of entry along the border. 

The federal Transportation Department “plans to open competition for the first round of port infrastructure grants funded by the bill within 90 days, as part of a broader effort to ease supply chain bottlenecks slowing down the delivery of goods.”

That will impact Long Beach, Savannah, Houston, Los Angeles, Miami, Mobile, Seattle, Norfolk and other critical ports.

The question is – how fast will these dollars translate into employment? I’d say next summer we will see a noticeable impact as plans that are already under development get funding commitments.

The Federal Highway Administration projects each billion dollars in highway funding supports 13,000 jobs.

S&P estimated a:

 $2.1 trillion boost of public infrastructure spending over a 10-year period, to the levels (relative to GDP) of the mid-20th century, could add as much as $5.7 trillion to the U.S. over the next decade, creating 2.3 million jobs by 2024 as the work is being completed.

The Act is about $1.7 trillion in spending, so we’re looking at about 1.9 million jobs. 

Of course, that is an estimate – it could be higher or lower. However, there’s no question workers’ comp will see:

  • higher premiums;
  • more claims; and
  • higher severity.

What does this mean for you?

Prepare for some much-needed growth. 


Nov
12

Medical drives everything

The “claim-centric” approach to handling workers’ comp claims is misguided.

Hear me out.

You’re a parent of a sick child. Her pediatrician wants her to get ear tubes and an antibiotic. The insurance company’s claims rep denies the request, instead requesting an X-Ray and Tylenol, telling you to call back in a few days if that doesn’t work.

Of course, the claim rep thinks she’s doing the right thing and has decades of experience – but no medical training, no RN or any other designation.  You appeal to your daughter’s case manager, who agrees with the pediatrician.

And the claims rep rejects the case manager’s recommendation.

24 hours later, your baby daughter has a fever and is hoarse from screaming and you are at the local ER, about to lose your mind.

This is how almost every workers’ comp payer “manages” medical treatment.

Claims reps/adjusters/examiners with zero formal medical training decide what medical care your claimants get.

They approve opioids and spinal cord stimulators because they don’t want to hear from an attorney.

They deny surgeries because, well, because they don’t think they are necessary.

They refuse to pay for behavioral health because they don’t want to “own the psych.”

They “certify” 24 visits of PT because, well, because…

Medical drives claim outcomes. Medical drives claim costs.  Medical drives recovery and return to work. Medical drives litigation. Medical drives everything.

What does this mean for you?

Would you let a claims rep determine the care your baby or grandbaby gets?

Then why do you have claims reps determining the care your claimants receive?

(shout out to an anonymous good friend who got me thinking more about this)


Nov
5

Big doings! and natural immunity vs vaccination

Well. that was welcome indeed.

Looks like the Dems in Congress have reached a deal on controlling (some) drug prices. As with all legislation, it is far from perfect, no one is particularly ecstatic, but then again, politics is the art of the possible, and the deal WILL help control drug price increases. Especially for older Americans who now get out-of-pocket spending on drugs capped at $2,000 a year and diabetics who will get a cap on insulin at $35.

Will this effect workers’ comp? Unlikely. WC drug fee schedules are based on AWP except in Cali, where it is based on Medicaid.

The Labor Department’s jobs report this morning showed over half a million people were hired last month, a major jump over prior months. Over 5 million (!) have been hired since January.

This means – higher payrolls = more people insured, more payroll, more consumption.

I expect employment will be a topic of conversation at WCRI’s annual meeting, slated for March 16 – 17 in Boston. Save that date and make sure you are on their mailing list as this always sells out.

All things COVID

Two drug manufacturers reported positive results for their new COVID treatment medications.  Just-released data from a clinical trial indicated Pfizer’s Paxlovid cut the risk of hospitalization or death a whopping 89 percent when administered within three days after the start of symptoms. Paxlovid won’t be widely available for several months, and then will likely be prescribed mostly to high-risk people.  Treatment will cost about $700 per patient.

Merck’s  molnupiravir will cost about the same; it has been approved for use in the UK and the manufacturer has applied for an Emergency Use Authorization (EUA) here in the US.  As reported in the Economist, research

“found the interim results of a trial found that patients with a risk factor for covid-19 were 50% less likely to be hospitalised or die if the oral antibiotic was taken in the first five days after symptoms.”

While neither is available just yet, expect both to get EUA approval shortly.  BTW, remember the vaccines were also administered under EUA.

We are learning more each day about long COVID, and much of what we are learning isn’t good (note that’s not surprising, as first we need to understand the problem and only then can we work on solutions). Significant GI problems are one issue, and the more severely affected patients also present with anxiety and sadness. That’s not surprising either, as nothing makes you more miserable than a severe GI problem.

BUT… one of the report’s authors noted “We do not know whether the psychiatric symptoms are a cause or a result of the GI symptoms, but we suspect it is likely to be both,”

About 20 million of us have experienced symptoms such as difficulty breathing, pain, hypertension and fatigue that are consistent with long COVID. Get the latest on November 17 at noon eastern when the National Institute for Health Care Management hosts a time of a webinar on the “Implications of Long COVID for patients and the health care system.” Register here.

Alert for some readers advocating “natural”immunity… A new study found “unvaccinated US adults who previously had COVID-19 contracted the disease at more than five times the rate of those who were fully vaccinated.”

What does this mean for you?

Get the shot.