Workers’ Compensation claims counts are down again, reflecting an overall “macro” trend that has been persisting for over a decade. However, the types of claims that have been eliminated tend to be the smaller, less costly ones; overall they have dropped by 34% since 1999, while the most expensive claims (over $50,000) have only decreased by 7% over the same period. And, there has been an increase in the number of claims with long disability duration.
The data comes from a report by the National Council on Compensation Insurance, one fo the major rate-making and research organizations. NCCI’s research is top-notch, credible, and although it suffers from data limitations (it only has data on states where it is involved in rate setting) it clearly indicates national trends.
The big question is why? During periods of economic expansion and flat growth, rising and level/falling employment, the trend has continued. Declines have been consistent across injury types, jurisdictions, occupations, and employer types. Moreover, the shift in occupational types, driven by macro-factors such as off-shoring and increases in construction activity, appear to have little impact on this welcome trend.
Amidst the good news, there are clear signs of trouble.
Disability duration
NCCI looked at claim frequency by duration of disability, and found that there has been a 6% increase in claims with an indemnity duration of more than 31 days. And, the longer the duration of the disability, the smaller the decline in frequency.
Medical costs
The average annual rate of inflation from 1999 through 2004 was 9.8%. This was driven by higher prices, utilization, and the use of more types of medical procedures on the average claim (this from other sources, including WCRI research).
So, all claim counts are dropping, which is good. But the decrease in frequency has been overmatched by medical inflation. That’s bad.
What does this mean for you?
Manage the medical! Be especially careful to identify and manage lost time claims that may become long-term claims, as these most-costly claims appear to be increasing in frequency.

CorVel and Gallagher Bassett are the subject of a highly critical article in the South Florida Sun-Sentinel, that could be subtitled “When bad claims management and bad managed care meet bad employers, it’s bad news.” In this case, Broward County School District’s internal audit uncovered a raft of problems with the District’s $34 million annual workers compensation program. The article itself looks like it was co-authored by Carl Hiaasen and Dave Barry, two of South Florida’s keenest observers and funniest writers.
Iin addition to the District itself, the two entities receiving the harshest criticism are CorVel, the District’s managed care “partner”, and Gallagher Bassett. GB receives slightly more than $2 million a year to “manage” the program, while CorVel was paid $2.7 million during the 2003-2004 school year. Here are some of the more interesting quotes from the article in the South Florida Sun-Sentinel which reviewed an audit of the workers comp program by District auditors.
“Examples of waste or botched oversight range from using a pediatrician to treat adults to paying a claims investigator for working more than 24 hours a day, three times in one month”
“Auditors are also sharply critical that Itasca, Ill.-based Gallagher Bassett subcontracts medical duties, such as selecting doctors and assigning patients, to another firm, CorVel Inc. of Irvine, Calif., but will not give the district a copy of the agreement to evaluate.”
“In one example cited, the firms (CorVel and Gallagher Bassett) spends (sic) $2 million a year to assign a field case manager to supervise nearly every case no matter how minor, a service that usually includes escorting patients to a doctor’s office. Other workers’ compensation companies usually reserve that level of service for catastrophic cases, said Reilly and Shaw. In one case, the district paid a case manager $2,800 to accompany an asthma patient at the doctor’s office.
“Auditors chose five doctors at random from CorVel’s list. One had four malpractice settlements since 1992. CorVel has only rejected two out of 1,200 doctors it uses, one for questionable service and one for demanding payment up front.
Additionally, referrals for physical therapy for specific patients were based not on a therapist’s track record, location near the patient or expertise. Instead, therapists were chosen alphabetically, based on which firm was next on an approved list, auditors said.”
In perhaps one of the more stellar examples of understatement, the report noted “It appears the district has taken a casual interest in the operations, resulting in higher direct costs including excessive medical, indemnity [lost time], litigation, monetary settlements, permanent impairment ratings and personnel costs associated with replacement or substitution for injured workers,” auditors wrote.
To quote Dave Barry: “and I’m not making this stuff up.”
One wonders if this will lead to an official inquiry, as the relationships between managed care entities, TPAs, and employers have been the recent target of subpoenas and news articles.
Actually, it is likely not a question of “if” but “when”.
What does this mean to you?
Make sure your managed care relationships are clear, explicit, and public, that all transactions are transparent, and you hire the right managed care firm. Unless you want to see your name in print.

Ohio’s workers compensation scandal continues to grow, heading off in ever-more-interesting and bizarre directions every day. The fallout is both political and financial, and has reached the governor’s office.
Here’s the latest information from our friends at “Workers Comp Insider” and other sources. It appears the Bureau of Workers Comp, the entity that oversees the state’s monopolistic workers comp insurer, has lost somewhere around $215 million in funds. These losses were due to investments in rare coins (!); with shady investment manager Alan Brian Bond; and in a hedge fund that was amazingly adept at losing large sums and charging high fees for that ability.
In one of the more entertaining chapters of this growing story, one of the key players suffered an alleged burglary at the home of Michael Storeim that resulted in the loss of significant

The growing scandal in Ohio surrounding the Bureau of Workers’ Compensation‘s wildly inappropriate behavior has officially hit the big time. Initially surfaced by local press, and blogged on several occasions at Workers Comp Insider, the mess has just hit the national press. BWC’s investments in rare coins, affiliation with a politically-connected investment manager, apparent desire to hide losses totaling over $200 million, and perhaps even worse is covered in Paul Krugman’s column in today’s New York Times (free registration required).
Here’s one of Krugman’s more trenchant observations:
“We’re not just talking about campaign contributions, although Mr. Noe’s contributions ranged so widely that five of the state’s seven Supreme Court justices had to recuse themselves from cases associated with the scandal. (He’s also under suspicion of using intermediaries to contribute large sums, illegally, to the Bush campaign.) We’re talking about personal payoffs: bargain vacations for the governor’s chief of staff at Mr. Noe’s Florida home, the fact that MDL Capital employs the daughter of one of the members of the workers’ compensation oversight board, and more.”
One has to admit, this is lots of fun for outsiders. Perhaps now that Michael Jackson has returned to his devoted fans and home/amusement part/daycare center, and Scott Peterson has left the headlines, the press will focus on this mess, bringing notoriety and “human interest” to our little corner of the world. Imagine, workers comp will be the center of the cocktail party or soccer sideline discussion, enabling the cognoscenti (that’s us) to dispense our wisdom and hard-won knowledge to listeners eager to get in on the latest. I can see Peter Rousmaniere on “NightLine”, Tom Lynch on “Larry King Live”, Larry Dorman on Greta van Susteren, Jon Coppelman on “The Daily Show”…