Insight, analysis & opinion from Joe Paduda


YAY! More COVID claims data!

During yesterday’s webinar on COVID19’s impact on workers’ compensation, Mark Priven and I asked the 260+ attendees to share any data they have on COVID and comp.

[As soon as we have a link to a recording of the webinar, I’ll post it.]

William Rabb of WorkCompCentral provided a summary of the presentation [subscription required] this morning, and added helpful commentary from NCCI’s Jeff Eddinger. (NCCI just updated their guide to COVID presumption laws and regulations – get it here.)

Jeff Kadison of Practical Actuarial Solutions forwarded a detailed study put out by New York’s Insurance Rating Board. Lots of detail on costs, counts, and a discussion of potential impact.  A few key takeaways:

Using the CDC’s models, NYCIRB came up with the following estimates:

  • note 97.8% of infected workers will not require hospitalization (this is an estimate)
  • for those that do need hospital care:
    • estimated COVID19 non-ICU hospitalization cost range of $20,129 to $29,948
    • depending on clinical severity, estimated COVID19 ICU costs with ventilator support range from $47,458 to $192,250
    • for claims that may have long-term health issues, the NYCIRB estimated the average incurred medical to be approximately $200,000. (note this is just an estimate)

Brandon Miller, CEO of MWCIA was kind enough to send an excellent report prepared by Minnesota’s Department of Labor and Industry’s Brian Zaidman.

Unlike California and Florida, Minnesota’s claim counts didn’t drop much over the first half of 2020, although a third of MN claims are COVID19-related. The implication is fewer non-COVID19 claims have been filed in Minnesota than one would have expected.

Similar to the Golden State, Minnesota is a “presumption state” which may well be leading to more COVID claims filed. (California’s is by regulation, Minnesota by law.)


COVID-specific claims

Peter Strauss, Executive Director of the Montana Self Insurers’ Association also helped out, sending a presentation delivered 10 days ago by the state’s Department of Labor & Industry.

Unlike Minnesota, Montana’s data is remarkably consistent with what we’ve seen from Florida and California. Overall claim counts’ are down sharply, while COVID claims are relatively rare. Of course, Montana is built for social distancing; the state has a very low population density.


What does this mean for you?

Based on the very limited research we have, it certainly appears COVID19 cases aren’t going to be that expensive.

And please forward any credible research on the claim counts, claim costs, and COVID claims in the comment field below.


COVID treatment costs

We are getting more data on what insurers pay for COVID treatment, data that will help business folks better plan for the future.

AHIP’s June analysis provides a range of estimates based on different infection rates; the chart below reflects an assumed infection rate of 20%. (the methodology and database are robust and pretty complete, see appendices for details)

Note the “cost per utilizer” data which indicate average commercial insurance costs of:

  • $25,000 per non-ICU hospital admission
  • $81,000 per ICU hospital admission
  • $1,500 per outpatient hospital admission
  • $750 for all other medical treatment costs

Patient cost-sharing could add another 8% or so to total costs, however as most insurers have waived cost-sharing requirements,  in most cases that 8% would be added to insurers’ costs.

There are other sources for cost estimations including FAIR Health and the Kaiser Family Foundation. An extensive discussion of their methodologies is here, KFF uses pneumonia with significant complications as a proxy for COVID19, while FAIR Health’s numbers are based on actual COVID19 treatment costs. (I discussed FAIR Health’s findings in depth back in July.)

Other research is here.

For those interested in the percentage of those infected who are hospitalized, a chart from the above link is below.

Costs for treatment of workers’ comp patients may well be higher, however this will vary greatly depending on the state, fee schedule limits (if there is a fee schedule) and network arrangements.

What does this mean for you?

All available data indicates medical treatment for COVID is not that costly. Yes there are some cases that require long-term, extensive ICU care with ventilator assistance, but they are relatively few.


California agriculture, COVID19, and workers comp claims

Here’s what’s puzzling me about agricultural workers, COVID infections, and workers’ comp.

  • Few agricultural workers have filed WC claims for COVID.
  • COVID infections are much more prevalent among Latinx than any other ethnic group.
  • News reports indicate workers infected with COVID have spread the virus to family and co-workers
  • Infection rates in the ag heartland in the Central Valley are much higher than in population-dense urban centers.

Here’s the data.

Latinx people are much more likely to contract COVID19 than any other ethnic group – more than twice as likely as White people.

Agriculture employs a lot of Latinx folks; average monthly employment was 422,000 in 2019 (downloadable files).

About 45% of ag workers nationally are Latinx. [if you have data specific to California please share]

So far this year, only 0.2% of California’s agricultural workers have filed a work comp claim for COVID19.

While news reports allege some employers are failing to implement adequate COVID19 safety protections, there’s another side to this, one that requires serious consideration.

This from a colleague (edited to preserve confidentiality):

I can attest to the Latino population being hit extra hard.  The reasons are fairly simple.

Number 1 reason:   The work ethic demonstrated by our workforce is hurting them and their co-workers.  The Mexican culture has long had excellent work ethic.  Their mantra is always, “I have to work.  I have to work.  I HAVE to work.”  They often do not safeguard their own health as a result.  Many when told they are positive respond with, “Well yeah.  I knew.  I haven’t felt good for a week.”  Which means that they’ve been spreading the virus daily.

Another factor for Ag workers is the common practice of transporting workers by vans or small buses.  Probably the worst thing they can do.

We found out most of them refused to comply with wearing a mask.  They’d have them on in front of the supervisor, but as soon as the vehicle left the yard, most all of them would take the masks off.

The third problem is the comorbidity factor of diabetes.  Their diets frequently lead to diabetes.  Every one of our fatalities had instant blood sugar levels of 700+.  Each of the deaths were investigated, and without exception, we found that there had been a diabetes dx years before but they had failed to comply.  Most of the diabetes dx’s were for men who refused to ignore or rethink the macho feelings of being able to drink beer and eat as many carbs as they want along with refusing to take meds.

Of course this does not apply to the entire Latinx population.  But it is sadly true of more than half and probably true of at least 75%.

What does this mean for you?

  1. Don’t be surprised if we see a significant increase in workers’ comp claims from agricultural workers.
  2. Cultural norms and biases MUST be considered, factored into, and made part of any and all prevention solutions.
  3. There are NO simple answers, and all of us are part of the problem – and can be part of the solution.

REMINDER – sign up for Pandemic, Premiums, and Profit: Is it the Sky That’s Falling…or the Floor? a free webinar on COVID19’s impact on workers’ compensation here. Mark Priven of Bickmore Actuarial and I will be weighing in this Thursday at 1 pm Eastern, 10 am Pacific.


COVID’s costs; 3 P&C insurers report

We are starting to see the impact of COVID on P&C insurers’ financials; so far its not all gloom and doom.

AIG’s COVID costs totaled $458 million for the first half of 2020; Chubb announced $1.16 billion in COVID related costs for Q2, while Travelers‘ “pre-tax insurance losses directly related to the pandemic amounted to $114 million.” for Q2. (note AIG’s numbers are for six months, Chubb and Travelers for 3 months)

Travelers’s results are especially notable as it is the largest writer of workers’ comp insurance. Several quotes from the Q2 conference call merit attention:

  • beyond the healthcare sector, data from some of the state workers’ comp systems suggest that the COVID related claim rate is low relative to the infection rate.
  • That’s likely partly attributable to the fact that the population most seriously affected by COVID-19 skews older and is not the workforce.
  • [there were] fewer traditional workers’ comp claims as more people work from home.

It doesn’t look like workers’ comp is the biggest contributor, as COVID’s costs arose from travel insurance, personal auto refunds, reduced premiums, and lower renewals.

One example – AIG’s travel insurance business got crushed in the second quarter as “you had not only no new sales. You had cancellations…”

According to CEO Evan Greenberg, the $1.16 billion loss “is an estimate of our ultimate loss from the pandemic.”  Chubb’s net premiums written fell by $191 million, mainly from workers’ compensation and commercial casualty payments, including refunds on auto policies.’

Reading between the lines, it doesn’t look like Chubb’s investment income was significantly affected by COVID-related interest rate cuts; the huge insurer’s $112 billion in cash and investments increased by $3.4 billion in Q2 2020. (see CFO Phil Bancroft’s discussion in the transcript)


  1. COVID’s costs aren’t devastating P&C insurers.
  2. While interest rates have dropped, so far this hasn’t had much of an impact on insurers’ investment income.
  3. Insurers with less exposure in the US are doing better; other countries have handled COVID far better than we have.


Are health insurers profiting while providers suffer?

Well, yes – but it’s not intentional.

Most medical practices have seen a sharp drop in patient visits – and revenues – due to patient concern over COVID19 exposure. Hospitals have also suffered, as have ancillary providers, and many are on the brink of financial collapse.

Rural and safety-net providers are especially vulnerable, as many were on very shaky ground before COVID19.

Primary care providers are in the worst shape, as their patients often don’t have serious health needs that need to be addressed immediately. And primary care providers have the lowest pay as well. Research indicates that PCPs will lose about $15 billion this year.

Meanwhile, health insurers’ finances have never been better.

The connection is clear – insured people are not getting care, so insurers don’t have to pay their bills.

For months, healthcare providers have called on insurers to help them out by prepaying for care, paying billed charges, authorizing all treatment requests, providing loans, or otherwise funding providers. Much of this is nonsensical; authorizing all treatment requests would certainly lead to widespread abuse, over-treatment, and poor outcomes. Paying billed charges is nuts; NO ONE pays billed charges, which can be 10-30 times higher than average reimbursement.

What’s clear is COVID has likely created a significant one-time profit bump for healthplans, as a lot of foregone care will not be “made up” as practices gradually return to normal. While insurers should carefully assess their reserves, it is highly likely their “excess profits” won’t all be needed to pay for future COVID19 costs.

So, what to do?

Prepaying care may be a viable option. Healthplans would mine their data to determine what they paid a practice in the recent past, figure out how many members are using that practice, and sign a contract with the practice to ensure the plan’s interests are protected.

That’s just a short-term solution to a problem with roots that far predate the pandemic.

Reality is primary care is still under-valued, fee for service creates huge administrative friction and incentivizes over-treatment, and health care prices are unsustainably high.

What does this mean for you?

COVID will accelerate systemic changes that are desperately needed. There will be lots of pain for some stakeholders – primarily specialists and facilities.


Claim counts, COVID, and (premature) conclusions

We know a LOT about how COVID and the COVID economy are affecting workers’ comp – and that’s what Mark Priven and I will dive into next week as we discuss “Pandemic, Premiums and Profits: Is It the Sky That’s Falling … or the Floor?” .

The free webinar (register here) is happening August 20 at 10 am Pacific, 1 pm Eastern. (attendance is limited, so sign up now to make sure you get a spot).

Mark is Vice President and Principal of Bickmore Actuarial, a highly regarded Actuary, and a very insightful analyst of all things workers’ comp. I’m honored to be on the virtual dais with Mark.

What triggered our decision to work together was a shared concern that there’s been way too much discussion about the potential, theoretical, possible, hypothetical costs of COVID itself – and (with one major exception) no discussion, analysis, projections, or discussion of the huge drop in workers’ comp claims – and the effects of that drop..

Frankly, prognostications about the damage COVID could do to profits just don’t stand up to scrutiny.  How an industry with a combined ratio of 85 and investment income of 11% will go from a 26% profit margin to a loss when COVID claims are not that common and all evidence indicates they aren’t that expensive is…puzzling.

One can – and some do – argue that we don’t have data on claim counts yet – and therefore it’s premature to discuss the impact.

But you can’t have it both ways – we know little about COVID, so making assumptions or statements about how the disease will affect workers’ comp is equally presumptuous.

Fact is we are fast approaching budget season for employers, insurers, TPAs, and service companies – and it is incumbent on those with data and expertise to share that information.

So, sign up, send us your questions, and Mark and I will do our best.

What does this mean for you?

Sign up here.


COVID’s fallout for workers comp – the picture gets clearer

70,000+ small businesses have permanently closed their doors.

The demise of big retailers has accelerated, with JCPenney, Men’s Wearhouse, and Brooks Brothers all entering bankruptcy.

Prom wear companies were also hit hard, with Occasion Brands also a victim.

The airline industry is mired in a deep slump, with passenger volumes down to a quarter of pre-COVID levels.

That’s driven by both far fewer flights, and far fewer passengers on each plane.

Air travel reductions affect other businesses…

  • taxi ridership and rideshare services
  • on-airport concessions, food, retail, and services (these account for 2/5ths of airport revenue)
  • hotel and restaurant activity is lower with far fewer business travelers and vacationers
  • airplane maintenance requirements are greatly reduced – along with the need for mechanics, spare parts, and consumables (fuel, lubricants, etc)
  • airplane orders are way down and many have been cancelled, impacting the airplane industry  – and the thousands of suppliers dependent on it.
    • In June, Boeing had a single order for one jet, while losing 183 orders due to cancellations or likely cancellations.

And energy – in a slump to begin the year, got crushed with fallout continuing.

Its not all bad news; in general larger companies are doing better – if they aren’t in retail, energy, air travel or tourism. Of course exceptions abound; WalMart is doing just fine, thank you as are big box home improvement stores.

For workers comp, the implications are significant;

  • lower premiums due to lower payroll
  • tougher to return injured employees to work due to cutbacks
  • fewer claims require fewer services
  • insurers focused on energy, Main Street businesses and retail will be hit hardest




COVID is crushing work comp claim counts.

Thank you, CWCI. Due to it’s diligence and foresight, we now know:

  • through June 30 there were 14,487 COVID claims reported to California’s DWC;
  • this amounts to 6.3% of all confirmed COVID cases (data from JHU);
  • the vast majority of COVID claims reported have been accepted;
  • and perhaps the most important data point…

Total claims (COVID and non-COVID) dropped 28.8% from the first half of 2019 to the first half of 2020. (note this is corrected from my original 36.4%)

Kudos to the fine folk at CWCI; they have produced the first data-based report on all things COVID. It is quite user-friendly, highly credible, and interactive, allowing users to analyze California-specific on COVID and non-COVID claims.  The tool enables comparison by industry, body part, nature and cause of injury, class code and region for claims (both filed claims and accepted claims) with dates of injury from 1/1/2020 to 6/30/2020.

The tool also allows users to compare actual claim counts for the same time period in 2019 to current and projected counts for 2020.

Claim counts, dear readers, is WAAAAAY more important than the rather minor financial impact COVID claims have had on workers’ comp. As I’ve reported previously, work comp COVID claims to date are not expensive; despite the prognostications of others, it is unlikely indeed COVID’s costs will have any material impact on work comp financials.

What WILL have an impact – and a very positive one – is the massive drop in total claim counts we’ve seen so far this year.

grey – 2019; green – 2020

Yeah, I know, this is California-specific, and only for half a year, and not fully developed, and all that stuff. I also know a 36% drop in total claim counts is the biggest thing to hit the workers’ comp industry in…forever. 

What does this mean to you?



Mitchell’s Coventry acquisition – implications abound

The implications of Mitchell’s acquisition of Coventry’s workers’ comp business are broad, from insight into the future of M&A in workers’ comp services to impact on competitors. (press release is here) Today we’ll dive into a few of the top-line implications.


The $850 million price was likely driven largely by the network’s profits and sustained position as the work comp PPO industry leader… the PPO is by far the biggest revenue and margin generator for CWC (Coventry Workers’ Comp). The transaction also represents yet another step in the rapid consolidation in the work comp services industry.

Mitchell now owns the number 2 bill review application (by customer base), the largest medical management entity (Genex + Coventry), the largest case management business (a mixed blessing these days), and the dominant network. If it holds onto both PBMs, it will gain the number three position in that sector.

As I noted yesterday, Mitchell is likely off the major acquisition field for a good while. It has to fix its PBM business, integrate Coventry, develop and implement a customer outreach that ideally will result in more stuff being bought by more customers, ensure Coventry’s distributors (including bill review rivals Medata and Conduent) continue to offer Coventry’s network, all while dealing with COVID19’s impact on work comp and auto claims.

The other big players left in this business are OptumWC (network, PBM, ancillary services), Paradigm (cat case services and management, case management, some network and ancillary businesses), and One Call. The next tier includes bill review/document management company Conduent; physical medicine expert MedRisk and myMatrixx (number 2 PBM, both are HSA consulting clients).

I don’t see any of these entities scrambling to react to the deal; they’ve known about it for months, and outside of Optum and Conduent any impact is tangential.


Coventry’s PPO is the industry leader – and has been for decades. It has the most market share, is rated highest by customers, and its policy of demanding top billing in any state (primary network status) remains secure. Expect Genex to invest heavily in the PPO. This will secure its leadership position and hold off competition from newer entrants – primarily Optum.

Bill review

The market’s perception of Coventry’s bill review function indicates room for improvement. The chart below shows how BR buyers rated the top bill review entities’ customer service in a survey I conducted two years ago; service is THE key metric. [shoot me a comment if you want a copy of the survey, the comment won’t be published]

As I noted yesterday Conduent handles much of Coventry’s bill review; How Mitchell will address this is an interesting question.

If you’ve got additional questions, leave them in the comments section and I’ll do my best to get answers posted.

What does this mean for you?

Smart acquisition at a very good price makes Mitchell the leading entity in workers’ comp services. I wouldn’t worry too much about Mitchell gaining too much market power.


It’s done; Mitchell owns Coventry work comp

After almost 5 months of negotiations and COVID19-related delays, Mitchell International owns Coventry Workers’ Comp.

The price was around $875 million, with most of the value based on Coventry’s work comp PPO. The network is a cash machine, has been the industry leader since it started the work comp PPO business, and so far is holding off a new competitor – Optum – without too much difficulty. Press release is here.

Sources indicate Coventry will report up thru Genex, with current president and CEO Art Lynch staying on in that role.

Long time readers will recall Aetna tried to sell Coventry six years ago, an effort that failed due to what can only be described as ignorance on the part of Aetna; whoever was responsible for the deal didn’t understand that network contracts were the linchpin.

What’s next?

Way back in March I dug into this in detail, here’s an edited excerpt:

Now that Coventry will be owned by a workers’ comp entity run by people who know workers’ comp, I’d expect a pretty significant investment into the core asset – the PPO.

That will undoubtedly include building and staffing a network contracting and management capability – from scratch. In the interim, one can assume M/G will use Aetna’s technology and perhaps contracting/credentialing resources until it has completed building a network management capability. M/G will do everything possible to build that network management capability quickly and well.

Quick takes

Mitchell is likely out of the acquisition game for some time. Digesting Coventry while battling thru a no-end-in-sight COVID crisis is going to consume management’s time and focus.

If anything, the company might sell it’s PBM business, a move that would free up management time that’s been focused on a business that has been rather challenged – and generate cash to pay down older and quite expensive debt.

I know, combining Coventry’s PBM – First Script – with Mitchell Pharmacy Solutions would create a third significant player to compete with Optum and myMatrixx. But…

  • First Script has suffered from chronic under-investment,
  • Express Scripts (myMatrixx’ parent company) provides First Script’s pharmacy network,
  • the work comp PBM business is brutally competitive,
  • selling the PBM businesses would free up cash to help lower debt, and
  • management time is needed to
    • integrate the rest of Coventry’s assets,
    • strengthen the network,
    • figure out what to do about Coventry’s bill review operation (most is handled by Mitchell competitor Conduent) (myMatrixx is an HSA consulting client), and
    • manage thru COVID.

It is possible Mitchell will hold onto the PBM, but there isn’t a compelling business case. And no, the “bill review and PBM synergy” argument isn’t it.

Bill review

Coventry’s bill review function runs mostly on Conduent’s platform. This will (very) likely change – the question is when.

Mitchell will want to cut costs and increase cash flow by switching customers over to a Mitchell platform. That is no simple task; systems connections and data feeds are business-critical; state reporting; integration with UR, claims, and financial systems as well as external vendors and other entities are notoriously complex and will take quite a while to build out.


  • in an industry that chronically under-invests in IT, and
  • at a time when insurers and TPAs are staring a in the face of a 20% reduction in claims volume and accompanying drop in premiums.

What does this mean for you?

Consolidation continues, Coventry’s network should get better.

Tomorrow – a deeper dive into implications.

Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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