Insight, analysis & opinion from Joe Paduda

May
14

NCCI – quick hits, a deeper dive, and a critique

Apologies for not getting this out sooner; wanted to wait until I heard back from NCCI on a couple items.

Quick hits

  • Insurers are enjoying record profits.
  • Frequency is down again – continuing a 30+ year downward trend.
  • Medical costs grew  – just barely.
  • Premiums dropped.

A deeper dive

The meeting planners did excellent work, the production was quite good and NCCI’s actuaries and statisticians bravely took on the role of media communicators. CEO and Chair Bill Donnell led things off, noting that the COVID19 pandemic requires agility – a talent not often associated with insurance in general or workers comp in specific (my words not his).

Bill is confident that workers’ comp is in good financial condition to deal with COVID19 – a confidence that is well founded.

For six years the industry has been quite lucrative. Investment gains and underwriting margins have driven record profits – and the profit train kept rolling in 2019.

Steady declines in frequency and relatively stable claim costs over the last five years that continued in 2019 are a big driver of record profits. (I’ve also argued that rates are way too high.)

Chief Actuary Donna Glenn reported private insurers’ reserves grew by $5 billion last year; there’s now a $10 billion reserve redundancy, so the industry has $10 billion more than it projects it needs to cover all current claims liabilities. Coming on top of billions in reserve releases in 2019 it is clear workers’ comp rates are still far too high (my words not Ms Glenn’s).

In 2019 claim frequency dropped again – by 4% – paralleling the long-term trend of 3.8% over the last three decades. According to an NCCI video, key drivers include:

  • better risk management,
  • workplace safety,
  • better training,
  • wellness,
  • automation,
  • a continued shift away from heavy manufacturing and towards a service-based economy.

Intuitively it makes sense that these factors have helped lower claims frequency. However, the video didn’t provide any data or identify any specific research supporting these assertions. I would have expected NCCI  – at its core a research organization – would include references to studies that supported the video’s claims.

I asked NCCI for the research that supported these assertions – as usual Cristine Pike and her colleagues were very responsive; additional research is here and here. However the citations provided didn’t conclusively demonstrate these factors were the cause of frequency declines – and didn’t mention most of the drivers cited in the video.

Donna Glenn, NCCI’s new chief actuary, provided an update on the State of the Line. Lots of good news…

On a per-claim basis, for private carriers, medical severity ticked up 3 points for lost time claims, a very modest change. Combining the 4% decrease in frequency with the 3% increase in severity likely yields no appreciable change in overall workers’ comp medical spend (my assumption, not NCCI’s).

NCCI projects claims incurred in 2019 will ultimately result in a 99% combined ratio reflecting continued underwriting profitability for private carrier business.

Thus it’s not surprising that premiums for state funds and private carriers dropped by $1.6 billion to $47 billion [a 2.6% drop] in 2019 as rates trended down.

Bob Hartwig did provide some context, citing Willis Towers Watson ‘s May 2020 analysis as the basis for projections on changes in workers’ comp premiums motor vehicle accidents and the like

My complaint.

NCCI has extensive access to workers’ compensation data. Given that the world has dramatically changed from 2019 to today and all of us are desperate for information, a discussion of changes in claim counts and types of claims would have been extremely helpful. I get that data is scant and spotty, but generalities and qualitative statements aren’t nearly as helpful as data. I asked NCCI about this; here’s the response:

NCCI has spoken to a number of carriers about their COVID-19 claim experience.  However, I would be very careful about making assumptions based on these conversations.  Until more time has passed and we can get information from a significant portion of the market, we would not be sharing any observations on COVID-19 claim activity.

Here’s where I’m perplexed. The discussion of frequency drivers attributed declines to a host of factors without citing specific research, data, or studies. That’s an assumption.

NCCI could have – and in my view should have – provided data on Q1 2020 claim counts by claim type (cause). That would not have been an assumption, but rather initial reporting of concrete data.

Given potential moves by governors and legislators to make COVID19 illness a covered condition and the lack of certainty about where this is headed, I can understand why NCCI – and other research organizations – don’t want to provide any data that might encourage politicians to look to workers’ comp to cover the costs of COVID19.

What does this mean for you?

The more we know and the sooner we know it, the better.


May
12

Now, about those drug rebates…

Drug rebate dollars account for a big chunk of brand drug costs – more than 40% in some cases. While list prices for brand drugs have been rising rapidly, net prices – the prices actually paid to the manufacturer – have not.

That’s mostly because manufacturers have been paying rebates to employers, insurers, and others in the drug distribution system.

This from Adam Fein PhD of Drug Channels:

A drug’s net price equals the actual revenues that a manufacturer earns from a drug. The net price equals the list price minus rebates as well as such other reductions as distribution fees, product returns, chargeback discounts to hospitals, price reductions from the 340B Drug Pricing Program, and other purchase discounts.

AARP is one of those making bank off rebates, along with lots of healthplans and insurers.

Workers’ comp

The picture’s a bit different in workers’ comp, for several reasons. Rebate payments tend to be lower because:

  • fewer brand drugs are dispensed to work comp patients
  • far fewer speciality drugs – the really expensive ones – are dispensed to work comp patients
  • the brand drugs dispensed to work comp patients typically don’t have big rebates.

But – there’s always a but – rebates must be considered when evaluating your drug spend. If you are an insurer or self-insured employer, a few things to consider:

  • ask your PBM how rebate payments affect your current pricing, and how.
  • if you’re pricing a new PBM, ask if you’re going to get the rebates paid directly to you, or if rebates are included in a calculation of your drug price
  • find out if you are getting ALL the rebate payments, or other entities in the supply chain are getting a cut. [that’s not necessarily a bad thing, but you do want to know where your dollars are going – because they are your dollars]
    • the big PBMs have more buying power, so you’re more likely to get more of the rebate dollars if you’re working with one of the big players

What does this mean for you?

These are your dollars. You need to ask the hard questions to be sure you’re getting the right answers. 


May
8

COVID19 catch up

Three key takeaways from this week’s COVID19 news.

Do we KNOW how bad things are, who’s dying, and Remdesivir.

  1.  Do we know how many are infected, the death rate, and the number hospitalized/in the ICU/on ventilators?

No.

We are three plus months into the crisis and if anything, the picture is muddier than it was a month ago. From the highly-credible COVID Tracking Project;

it is impossible to assemble anything resembling the real statistics for hospitalizations, ICU admissions, or ventilator usage across the United States.

Also from the Project:

the CDC does offer a national-level account of “specimens tested,” this data is incomplete and lagging, and it uses a different unit (specimens tested) for total tests than for positive results (which are counted in people). This makes it impossible to accurately match testing totals with positive tests to infer a complete picture of COVID-19 testing, even at the national level…a simple count of identified COVID-19 cases doesn’t show the true location or comparative severity of outbreaks. Simple case counts show where people are being tested, not where people are sick. [emphasis added]

Yep, the greatest country on Earth can’t even capture and accurately report infections, hospitalizations, and deaths…you should be pounding your head against the wall.

Or maybe just scream in frustration…

2. Who’s dying.

In the New York City, it’s mostly older folks.

From Statista…

Alas, our nation’s leaders still do NOT KNOW how many of our loved ones in nursing homes have been killed by COVID19. 

Almost three weeks after CMS Administrator Seema Verna took to the podium to announce HHS would begin publishing the numbers, we’ve seen nothing.

3. Finally, Remdesivir is NOT a cure – far from it.

The results of a study conducted by NIAID on about 1,000 patients found it does shorten the course of COVID19 – by four (4) days – in some patients. Manufacturer Gilead hasn’t said what remdesivir will cost, but indications are about $4,000 per patient.

NIAID’s study found the anti-viral drug:

  • has been shown to be safe in humans,
  • is given intravenously (it is injected into the blood stream),
  • the course of treatment is 5 – 10 days,
  • has to be administered in a hospital, and
  • the vast majority of patients who recover at home will NOT get the drug.

Perhaps the most important impact will be shortening the course of COVID19 (although that didn’t happen in all patients who got the drug). This will free up more bed-days in facilities and allow them to treat more patients.

Note an earlier study in China did not find remdesivir was effective in treating COVID19. From the study: “Remdesivir use was not associated with a difference in time to clinical improvement”

Lastly, who will actually get the drug depends on luck – some hospitals will get it, others will not, with no rhyme or reason.

For my work comp readers, over at Workers’ Comp Insider Tom Lynch has a quick summary of COVID19 and its impact on workers’ comp.

What does this mean for you?

We should expect way more from our elected officials. 


May
7

Watch those facility costs…

As the coronavirus continues its relentless march, hospitals and health systems are getting crushed. With elective procedures banned in many states, the profitable patients hospitals relied on to generate profits have disappeared. Meanwhile, expenses related to preparing for COVID19 patients have gone thru the roof and so no signs of abating.

Florida is especially hard hit:

A new report by the national consulting firm Crowe shows Florida health systems have suffered nearly a 50% drop in patient volume in March and April.

Hospital owner UHS just withdrew its financial guidance, with management citing concern over the “financial uncertainty caused by the coronavirus disease.” The announcement followed similar moves by  hospital giant HCA, and Maryland’s hospitals are projecting a billion dollar revenue shortfall for the second quarter. Hospitals in Colorado are facing an even larger reduction in revenues and Michigan hospitals are laying off workers, 

“Patient volumes at our acute care hospitals and our behavioral health care facilities were significantly reduced during the second half of March as various COVID-19 policies were implemented by our facilities and federal and state governments. These significant reductions to patient volumes experienced at our facilities have continued into April, 2020.”

The billions sent to hospitals under the CARES Act is no panacea; on average the funds cover less than a week’s revenue.

Implications

More than a dozen rural hospitals  in the South closed last year.  We can expect more in 2020.

Hospitals and healthcare systems are drastically ramping up their “revenue maximization” efforts. Workers’ comp payers, long seen as hugely profitable, now have an even bigger and brighter target on their chests.

What does this mean for you?

Watch those facility costs. 

 


May
4

RIMS, opioids, and awards to drug distributors’ risk managers

Last month RIMS announced its annual awards; one of the recipients is the risk manager for Cardinal Health, another has a similar role at McKesson.

Awarding awards for excellence in risk management to two individuals at companies with huge liabilities for the opioid crisis, and failing to discuss that liability in press releases is pretty shocking.

Both companies are embroiled in ongoing and likely very expensive litigation regarding their responsibility for the opioid crisis. Cardinal just announced a $4.9 billion loss for the first quarter of 2020, attributing the hit entirely to opioid litigation (the company estimated the cost of litigation at $5.6 billion.

West Virginia is one of the states devastated by rampant overuse of opioids; Pulitzer Prize-winning reporter Eric Eyre just published a book detailing his investigation into Cardinal’s role in the opioid crisis.

According to Eyre, Cardinal “saturated the state with hydrocodone and oxycodone — a combined 240 million pills between 2007 and 2012. That amounted to 130 pain pills for every resident.” All told, distributors shipped 780 million pills into West Virginia over that time.

Cardinal, McKesson, and Amerisource Bergen are the largest drug wholesalers in the nation, acting as the middlemen between manufacturers and retail and mail order pharmacies. While all three contend they are just part of the supply chain, they are required to monitor and report shipments of controlled substances – including opioids, a responsibility that is at the center of the litigation.

(This is not to say the three distributors bear all the responsibility for the crisis – far from it. State health officials, the DEA, FDA, prescribing physicians, opioid manufacturers and others all share in that responsibility.)

From the Washington Post:

McKesson, Cardinal Health and AmerisourceBergen, were in and out of court. They paid lots of fines but kept on trucking. In 2018, their chief executives gave sworn testimony before the House of Representatives Committee on Energy and Commerce: All denied contributing to the opioid crisis. Later that year, the committee released the results of an 18-month study. It found that distributors failed to conduct proper oversight of pharmacies by not questioning suspicious activity and not properly monitoring the quantity of painkillers shipped. [emphasis added]

Earlier this year, McKesson agreed to pay investors $175 million to settle claims that “directors failed to maintain adequate internal systems for spotting suspicious opioid shipments…”  According to Bloomberg, U.S. District Judge Claudia Wilken in Oakland, California said the suit raised:

“legitimate questions about whether directors ignored “multiple red flags” about opioid shipments even after agreeing to step up compliance oversight as a result of a deal with the government.

The settlement, produced in part by a series of mediation sessions, calls for McKesson to add two new independent directors to its board, to beef up compliance training for directors and improvements in internal systems designed to red-flag suspicious orders, according to court filings.”

McKesson is the also the subject of a criminal probe launched by Federal prosecutors in Brooklyn, NY. 

So, the world’s leading risk management organization conferred prestigious awards on risk management professionals at two companies that have massive financial liability – and I would argue ethical responsibility – for what can only be described as a massive risk management failure. And one is the subject of a Federal criminal probe.

I contacted RIMS to inquire about the decision criteria used by the individuals to select the award recipients, stating:

I’m curious as to the decision criteria employed by the award committee that resulted in awards to these two executives. While their accomplishments are impressive and their achievements notable, I’d like to understand how the opioid settlement issue factored into the award decision.

RIMS Communications Director Josh Salter was kind enough to provide an initial response:

RIMS awards are reviewed and selected by volunteers. This group of risk professionals is charged with vetting all submissions and then, using their experience in the profession, making a decision based on the applicant’s accomplishments. While the volunteer group changes from year to year, I will share this information with them.

I asked Mr Salter if he would facilitate a discussion with any members of the committee and offered to keep the names of those members confidential; to date and after multiple requests I have not received a response. [I’m certainly willing to hear from Mr Salter and committee members]

Eyre’s editor, Ned Chilton, coined the term “sustained outrage” to define what he saw as an essential responsibility of news organizations, a demand that media keep the focus on injustices instead of reporting on a calamity and moving on. I’ve been reporting on the opioid crisis since 2005; over the last two years my passion and drive has burned out.

That’s my fault.

I struggle to understand how RIMS could confer prestigious awards for “risk management” on individuals at two huge companies that bear significant responsibility for the opioid crisis – and not even mention the opioid issue in publicity around the awards. This is not to impugn the professionalism, ethics, or abilities of the individuals recognized by RIMS, rather to ask a very uncomfortable question, one RIMS needs to address.

What does this mean for you?

We cannot let crisis fatigue take our focus off opioids.

[PS – kudos to Tristar’s Mary Ann Lubeskie for her ongoing and tireless efforts to keep opioids front and center… you can follow her at @maryannlubeskie on Twitter]

 

 

 


May
1

Friday Funday

Another week in physical isolation – no business trips, lots of zooming, plenty of dog walks.

Suzie’s not stressing…

She’s doing the Vulcan mind-meld with brother Louie…

And the pups let Deb borrow the dog grooming tools to clean me up a bit (yes I still have two ears)

Some folks are seeing the bright side…

And others are making the best of it.

Have a sports-free weekend!


Apr
30

COVID catch-up

In  less than 4 months, COVID19 has killed more of us than died in the Vietnam war’s 11 years. Some have stated this is a “great success story.”

Healthcare providers may not see this as such a great success, as COVID is crushing healthcare financials.

Research suggests almost 13 million workers have lost their health insurance due to the repercussions of COVID19. Multiplying that by 2 approximates the total number of employees plus dependents that lost coverage – 26 million.

Many will seek Medicaid coverage, but eligibility varies widely (and wildly) by state. People who don’t have coverage and contract the disease and need facility care should have their bills covered by the Feds – either at Medicare rates or via Medicaid.  Either way, reimbursement is likely half or less what their private insurer would have paid.

Anthem just informed us they expect the percentage of people covered by governmental healthcare plans to increase. The $100 billion+ health insurer saw its financial results for Q1 improve; my guess is the drop in elective procedures was a big factor.

All of this to say that COVID appears to be accelerating a trend towards a public option for health benefits – or perhaps a much bigger role for governmental programs in health insurance.

Hospital financials are getting hammered as elective procedures are way down, and many folks with all kinds of ailments are staying away for fear of coronavirus exposure. (chart from Kaufman Hall)

With receivables drying up to dust, facilities are going to redouble their efforts to collect every nickel they can from everyone they can.

Workers’ comp payers – you are hereby warned.

Willis Towers Watson has been publishing their perspectives on all things COVID19, from the impact on the LGBTQ community to a helpful discussion of paying premiums when cash is tight.

An early piece focused on employers’ considerations re workers’ comp liability for COVID19 claims. One item in particular stuck out – large employers with excess coverage should read their current communicable disease coverage details very carefully.  Friend and colleague Karen Caterino was kind enough to paraphrase for me:

For large employers purchasing excess, a multi-claimant disease incident carries the possibility of creating catastrophic financial loss.  If the transmission of a covered communicable disease is a series of incidents versus a single accident, the difference in retained loss could be significant.  A majority of work comp deductible agreements include a provision stating that the deductible applies per employee for occupational disease.  Some insurers are likely to suggest the statute requires they follow the assumption that occupational disease, by its very nature, is a series of occurrences for multiple claimant losses.

This is especially important for supermarket chains, who by now should know that paid sick leave may be the most effective risk management tool to prevent employee and patron exposure. There are many stories like this one detailing how quick, thoughtful action kept food coming while drastically reducing employee exposure.

NCCI has a helpful compendium of states‘ COVID19-related legislative and regulatory initiatives along with COVID19 FAQs.

And yes, surgical masks are quite effective at reducing viral transmission; thanks to Glenn Pransky MD for tipping me off to this research.

Finally, this is a terrific summary of what we know and don’t about how COVID19 affects the human body. It’s long, very well-written, and perfect for a lunch-time read. Spoiler alert – a lot of treatment these days is based not on extensive research but on what docs think works based on prior experience and communication with other clinicians.

From the physician author:

In the absence of data from randomized, prospective trials, we search for answers on colleagues’ Twitter accounts, in interviews with Chinese or Italian physicians, and in our patients’ charts.

What does this mean for you?

Wear a mask, and physically isolate, because we can’t take much more of this “success.”


Apr
29

When can we re-open?

That depends on when we:
a) can reliably tell people if they’ve been infected, and
b) know that those who have been infected are immune.
Let’s take these in order.
How do you know you’ve been infected with coronavirus?
Outside of the obvious – a positive test that shows the actual presence of the coronavirus, there has been much talk of “antibody” or “serology” tests. You may have seen articles like this one reporting that many more of us have been infected with the virus than we thought.

Not so fast…that assumes the tests used to verify exposure are accurate, ergo, the core issue is “are these antibody tests accurate?

First, there are over 120 antibody tests on the market – few if any vetted by the FDA to determine if the tests are accurate. And some have been shown to be pretty inaccurate, including $20 million worth of tests the UK bought from a Chinese supplier.

Credible research indicates some tests are accurate – and some aren’t.  A study conducted by UC-San Francisco and Cal Berkeley on a dozen of the tests indicates there are an alarming number of false positives – tests that show patients DO have antibodies, when in fact the patients don’t.  That means the tests indicated the patients were infected – when they may well not have been.

Here’s the key statement from the cite below: “a large proportion of those testing positive on an antibody test may not actually have had COVID-19 [emphasis added]” – and thus could be infected – and infect others – in the future.

The good news is the FDA has decided it will begin to “test the tests”; yet another example of the FDA’s new operating principle “Better late than never.

Second, there is no consensus as to the immunity of individuals previously infected with coronavirus to a re-infection. 

This from the actual study report cited above:

Importantly, we still do not know the extent to which positive results by serology reflect a protective immune response. Future functional studies are critical to determine whether specific antibody responses predict virus neutralization and protection against re-infection. Until this is established, conventional antibody assays should not be used as predictors of future infection risk [emphasis added]

What does this mean for you?

Until we know who’s been infected and if they are immune, “opening up” will be a crap shoot.

Scientific rigor is critical, and you MUST read critically. 


Apr
27

We don’t know &^%$*(

Research published in HealthAffairs a study estimating COVID19 will cost somewhere between $164 billion and $654 billion.

Insurance industry trade group AHIP’s financial analysts calculate private insurers will pay between $56 to $556 billion for COVID19-related costs.

Kaiser Permanente in northern California – a plan with 11% market share – had a grand total of 377 hospital admissions for COVID19 in March.

According to the WCIRB, COVID will cost California’s work comp system between $2.2 billion and $33.6 billion.

Private conversations with work comp executives show something much different; COVID19 costs for a major insurer with significant exposure in the healthcare sector total about $1 million incurred to date.  A major state fund has seen less then a couple dozen cases. Multiple insurers have less than 40 cases that have incurred any costs to date.

What’s going on here?  

In a nutshell, researchers are either being forced (in WCIRB’s case) or otherwise decided to come up with analyses based on really skimpy, incomplete, and not-very-helpful data. For example, we

a) don’t know the real infection rate as we aren’t testing anywhere near enough people;

b) we don’t know the real death rate for a bunch of reasons;

c) different areas have been affected very differently. This has been a disaster in Albany GA and NYC…and not even close in most of California, or Alaska. Louisiana has been hit very hard, but neighboring Arkansas hasn’t.

d) different areas have responded very differently; California and Washington shut down early and broadly; New York did not.

e) different areas are different; NYC is very crowded, even California’s most populous cities are a lot more spread out.

f) but even in smaller cities that are more spread out, one infected person can expose a lot of people, resulting in a rapid increase in cases (Albany FGA).

I bring this to your attention just to point out that estimates are pretty useless, that COVID19’s impact is going to be massive in some places and a minor inconvenience in others,

So, look for data that’s specifically relevant to your geographic area and covered population. Figure out if that area is testing enough folks, is complying with common-sense prevention techniques (social distancing, for example), and is reporting data accurately.

And then don’t be surprised if you are really surprised. Because there are so many confounding factors and different things that can affect the numbers, as of now anyone who is projecting is doing this…

What does this mean for you?

Making decisions based on current data is as dangerous as standing near a guy throwing darts blindfolded. 


Apr
24

Funday Friday

This drug may work, then it won’t…testing is ramping up, then it isn’t…we’re going to open up!…then we’re not.

I’m as frustrated and tired of this mess as you are. So, time to bring some joy into the world…

You think you have it rough?

This is Suzie, one of our two Newfoundlands, exhausted after a tough morning cleaning dishes.

And here she is trying to wake my wonderful bride…Deb’s not having it.

Finally, for my friends and colleagues in Florida, California, and other points south – rejoice – you aren’t  here in New York’s Finger Lakes…this was yesterday.

But don’t lose hope…there’s this…


Joe Paduda is the principal of Health Strategy Associates

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