Insight, analysis & opinion from Joe Paduda


And the state of workers comp is…

Pretty terrific.

Put another, more awkward way, COVID’s been very, very good to work comp insurance.

Yesterday kicked off the NCCI Annual Issues Symposium with CEO Bill Donnell’s introduction. Bill set the right tone – we’ve all been humbled, learned not to take anything for granted, and adapted.

The State of the Line address was again led by Chief Actuary Donna Glenn. Donna and her colleagues spoke extensively about the impact of COVID – fewer total claims and a big drop in premiums especially for main-street businesses, hospitality, retail and personal transport (my label, not her’s).

Financial highlights

Net written premiums were down 10% for state funds and private carriers.

Early numbers indicate a calendar year combined ratio of 87% with $14 billion in excess reserves – and only $260 million in COVID losses.

But this financial heyday wasn’t just due to COVID. Last year was the 8th year in a row for rate decreases – many of them in the double-digit range; rates continue to drop, with the vast majority of states seeing significant Year over Year decreases.

Despite plummeting rates, the combined ratio (claims plus all admin costs) has been under 90 for four consecutive years…so rates are STILL too high. While Donna characterized the underwriting gain as a measure of “financial strength”, I’d suggest one could also call it “over-pricing”.

Unpacking the combined ratio we find loss ratios have been under 50% for three years in a row. Investments gained 11% last year. The result – a 2020 pretax operating gain of 24%.

That, esteemed reader, is a very hefty profit margin.

Even heftier when one adds in the $14 billion in excess reserves.


The average COVID claim cost $6000, and about 75% are lost time claims. COVID claims represented 7% of LT claims.

“Indemnity only” claims are those that had no medical costs – and are pretty much unique to COVID claims. Makes sense when you think about how most of us are affected – a couple weeks of misery at home, followed by a steady recovery, with no external medical care..

Even COVID claims with both indemnity and medical costs ran up $18k in costs – about half the cost of the average WC LT claim.

95% of claims were less than $10,000, 1% of claims accounted for 60% of losses – these tended to be inpatient claims, often with ICU utilization.

My takeaways.

First, work comp is VERY profitable.

Second, insurance rates are still much too high. (Even if claim counts rise, there’s a LOT of excess reserves sitting in insurers’ coffers.)

Third, all the caterwauling about how awful COVID’s impact on work comp was flat out wrong. More to the point, much of it was avoidable if those predicting awfulness had thought about how COVID is treated.

Mark Priven and I – and I’m sure others – figured this out last summer; this isn’t to blow our horn but rather to show all the indicators were there – if one just knew to look for them.

I believe this is because most people in workers’ comp don’t know or understand health care, medical care, health insurance, provider business practices – pretty much anything about the biggest driver of workers’ comp costs.

And that’s why they got COVID predictions so wrong.




Will work comp claims increase?

I’m thinking yes.

Here’s why.

The economy recovery is uneven at best. Auto manufacturing is hamstrung by scarcity of parts and a steel shortage, construction by not enough sawmill and timber workers, and many sectors desperate for parts lamenting the scarcity of shipping containers.

Hotels, restaurants, cruise lines and airlines are still a long way from pre-COVID revenues.

Supply chains will straighten out, demand will drive up wages for workers in key sectors, and that will drive increased employment.

All that may well increase occupational injuries.

from Foresight

As “injury-intensive” industries such as manufacturing, logistics, energy, and construction staff up and accelerate production to meet rising demand, they will:

  • hire inexperienced workers,
  • hire temp workers,
  • increase the speed of work,
  • have less time to train, educate, monitor and protect workers, and
  • increase overtime.

All this will increase the likelihood of injuries.

Add in rising employment, and you get more claims – and likely higher average severity.

That’s bad news for workers, employers, and insurers – but good news for TPAs and service companies.

Expect you’ll hear a lot more from NCCI Chief Actuary Donna Glenn in today’s Annual Issues Symposium.  Will be reporting on the first day of the AIS tomorrow.

What does this mean for you?

Success favors the prepared.


Research Round-up – the Hospital Edition

Lots of good stuff…

Those darn facility costs…

WCRI’s latest survey of outpatient hospital costs, reimbursement, and all manner of related matters is just off the presses. There’s data about specific states’ costs, network penetration, facility cost trends, surgical costs in WC compared to Medicare, and pretty much anything you need to know.

One surprising data point – network penetration (for outpatient hospital surgeries) has declined in several states over the past 15 years…

HealthAffairs’ latest edition reports on a study showing health system consolidation increases Medicare’s costs.  I’m quite sure your costs increase as well. As health system consolidation continues, so will cost increases.

Another study analyzes the impact of private equity investments in healthcare facilities…

And here’s a state-by-state list of 1-star hospitals – and another for the 5-star ones.

What does this mean for you?

With facilities the fastest growing component of healthcare costs, these resources are valuable indeed.



The worst provisions of HB1465, aka the “any willing provider whether or not they can spell “workers’ comp” can join an MPN” bill have been removed from the text.

Now, we get to deal with an almost-as-bad bill, which henceforth shall be known as the HB335 – the “Make Adjusters Jump to Inappropriate Conclusions Act”.

Among other things, the MAJIC Act:

  • forces employers to decide if a filed claim is or isn’t compensable in 45 days instead of today’s 90; and
  • forces employers to pay up to $17,000 for medical care while the claim is being investigated.

The MAJIC Act creates problems in an attempt to solve others that don’t exist. 

About one of every eight claims ultimately judged compensable takes 45 – 90 days to investigate.  So, the MAJIC Act would force employers to accept or reject a significant chunk of claims without a full investigation.

I can hear the counterargument now…”well adjusters should just work faster!”  Well, “pushing on a rope” isn’t much of a solution…because adjusters don’t control:

  • whether and when a doctor sends medical records;
  • whether or not a patient responds to calls;
  • whether a qualified medical professional can schedule an appointment;
  • whether or not an investigation has been completed and all relevant information collected;
  • and a lot of other materially-important pieces of the puzzle.

The result will be more provisional denials, leading to more litigation, and higher cost for everyone with no benefit whatsoever for folks injured or sickened on the job.

Then there’s the 70% increase in the employers’ medical liability for claims that have been reported but not accepted. How that number was decided upon is a mystery, because, according to a study just published by CWCI;

  • less than 1 out of every 165 claims incurred costs of more than $10,000.
  • 1 of every 500 denied claims had costs more than $10,000

SB 335 proposes “fixes” to problems that do not exist; there’s no evidence that injured workers are suffering because they are denied care, nor are they harmed because adjusters are doing thorough investigations – as required by state law.

SB 335 will lead to more litigation, which will increase employers’ and taxpayers’ costs while benefiting no one.

What does this mean for you?

Please encourage California legislators to leave the MAJIC to the magicians. 


Comp’s culture of catastrophizing

At the height of the COVID crisis last year, some research organizations, brokers/consultants and “thought leaders” were gravely forecasting how awful this was going to be for workers’ comp.

Sure, we didn’t know what was going to happen, although careful and thorough research would have indicated things weren’t headed towards the “awful”.

Instead, we heard:

  • investment returns were going to suffer;
  • profits were in deep peril; and
  • workers’ comp was going to be the “go to” insurer for COVID due to presumption

These could have happened, but the data clearly indicated these outcomes were pretty unlikely.

Then there’s “social inflation”, a term describing some rather nebulous and ill-defined “drivers” which are allegedly increasing the cost of insurance claims. [There are a host of methodological problems with the research cited in the link and with this study as well]

Social inflation is being blamed for all manner of problems – jury awards (many drastically reduced on appeal), ‘increased litigation”, “broader definitions of liability, more plaintiff-friendly legal decisions.”

This from Fitch’s Robert Mazzouli, [emphasis added]

A high-profile litigation example in the U.S. is the so-called opioid crisis – drug companies have been accused of playing a harmful role in the extensive overuse of opioid medications, with the overuse blamed on both medical prescriptions and illegal sources.

Read that again.

“So-called opioid crisis?” What planet is this guy living on?

Not this one. There is overwhelming evidence against Purdue and other members of the opioid industry.

Not sure where these experts get their information, as research indicates the various “problems” attributed to social inflation are overstated or exaggerated.

What’s abundantly clear about these two issues is workers’ comp insurance people have no idea what’s really driving their business. Instead of doing the hard work to figure out how to address over-spending on claims, too many blame outside forces.

COVID and “social inflation”‘s impact on work comp is insignificant compared to opioids and facility costs.

Opioids drove up workers’ comp rates and claims and claim duration. Yet few work comp insurers have figured out how to help long-term patients reduce or eliminate opioids.

Facility costs are the fastest-growing part of medical spend, driven by:

  • the failure of some states to expand Medicaid;
  • (mostly for-profit) health systems’s amazing ability to over-charge workers’ comp payers and get away with it;
  • changes in reimbursement by Medicare;
  • reliance on PPOs to address facility costs; and
  • grossly inadequate medical bill review

What does this mean for you?

Instead of blaming external issues, work comp execs should focus on understanding medical drivers and how healthcare impacts workers comp.


Recklessness and Responsibility

The Greatest Country on Earth will not conquer COVID.

Misinformation by “thought leaders” and their followers is the primary reason.

The CDC ‘s experts no longer believe herd immunity is possible. Instead COVID will become woven into the fabric of everyday life, with new variants popping up from time to time, killing the most vulnerable and sickening thousands of us. Lest one think that’s not a big deal, recall the most common version of COVID now circulating in the US came from Britain – and this version is 60% more transmissible than the “original” version. More concerning still, future variants may well be more lethal.

While there are many factors contributing to the herd immunity problem, the biggest driver is vaccine uptake (which contributes to the variant problem).

from US Dept of Health & Human Services via NYTimes

Of course, this doesn’t help.

Sturgis ND during Bike Week

Which leads to the key question – why?

Why don’t people get vaccinated? Why don’t they mask up and physically distance?

Mostly because they listen to “thought leaders”, influencers and friends who spread misinformation.

The key takeaway.

Those of us who have followings, however modest, have a moral and ethical responsibility to use that influence for good. Re-posting and re-tweeting inflammatory, wrong, and just plain stupid “information” is reckless and irresponsible.

It can also be deadly.

Do your research before publishing anything – and don’t just check “sources” that always support your thinking.

When you make a mistake, own it. Correct it publicly and apologize.

I’ve made my share of mistakes, so I’m certainly not immune; a few examples are here, here, here, here, and here.


Work comp pharmacy and claim outcomes

myMatrixx’ Drug Trends Report is out  – here are my key takeaways.

Behavioral Health

Kudos to the authors for the comprehensively addressing behavioral health (BH) issues. Among the takeaways are:

  • Not addressing the mental health of injured workers can delay return-to-work, increase the risk of opioid addiction or both.
  • Although mental health conditions rarely can be proven as work-related on their own, they often arise as a result of work-related injuries. (italics added)
  • The older the claim, the more likely psychotropic medications were prescribed.

What this means

Claim closure and settlement are driven by the recovery of the patient. You are not going to get those claims closed or settled unless and until BH issues are resolved.

Opioids and benzos drive claim outcomes

The Report referenced a 2014 JOEM study noting the more dangerous drugs a patient is prescribed, the higher the claim cost – and the longer the claim is open.

While there’s certainly a severity issue at play here, the central takeaway is minimizing the inappropriate use of short- and long-acting opioids and benzodiazepines is key to patient recovery.

What this means

If your PBM and clinical staff aren’t on top of opioids and benzos – as in instantly aware of scripts and able to deploy clinical support expertise – those patients are far less likely to recover – and you’re going to pay dearly.  

Both of these issues – behavioral health and dangerous drugs – are critically important to patient recovery and claim closure.

As I noted yesterday, far too often WC payers choose vendors/partners based on the wrong criteria.

Nowhere is this more common than for pharmacy management. Price is important, and service is key – but both are secondary to the impact of pharmacy on claim outcomes.

What this means for you.

More than any other service, PBMs drive claim outcomes – for better or worse.  

note – myMatrixx is an HSA consulting client. I’m honored to work with them.




The right way to think about buying WC Services

Here’s how to think about price and service. Hint – getting it right requires taking the time to dig deep…

Commodities vs specialized services

All “services” are NOT created equal. Some are commodities – drugs, facilities, PPO networks, and some other types of medical services/treatments. These are usually – but not always – best bought from a big company with big buying power.

Pharma is a great example. Buying power is king – generally speaking, the bigger the PBM’s non-WC business, the better the price. Workers’ comp represents a tiny fraction of total drug spend – as in less than 1 percent. PBMs that aren’t owned by a PBM with a lot of group health, Medicare Part D and Medicaid business have to buy drugs through a third party, adding cost and complexity to each transaction and complicating communications.

In contrast, specialized services aren’t uniform; think clinically-oriented services, those delivered to high-need patients e.g. powered wheelchairs, medical bill review. These aren’t “vendor size dependent.”  That is, what matters is NOT the buying power of the supplier, but it’s customer-centricity, depth of knowledge, flexibility, and adaptability.

The power wheel chair has to be the right weight carrying capacity, have the right functionality, fit thru the right width and height, and meet the user’s functional restrictions and limitations. These are one-offs, customized (or manufactured in very small quantities, then customized) for each individual.

Okay, that’s one part of the equation…but just one. There’s more to this than just theoretical buying power.

Ownership – Investor vs Strategic

This can have a major impact on the level of service – but it may not be what you think.

Some of the vendors owned by investors have a smart long-term plan, are well-managed, and not overly burdened with debt (which can suck up cash flow needed for staffing, training, IT, product development…).

Unfortunately others have none of the above…and I’m sure you know who I’m talking about.

Then there’s those WC services companies that are owned by another company (generally called a “strategic” buyer as opposed to an investor or “financial” buyer). In most instances, the WC services company is a small part of a much-bigger organization. If the WC company is lucky indeed it may get the attention and commitment of the parent’s senior execs. The execs help by leveraging the parent’s assets, skills, and buying power to help the WC subsidiary succeed.

More often, the WC subsidiary is treated like just another asset, albeit a very small one. Senior execs are focused on their main business, and the WC sub is a distraction, gaining attention only when quarterly earnings reports are due. WC is a line item of interest only as a source of cash. The result is chronic under-investment, declining service and loss of key staff, tremendous pressure to maintain pricing and an inability to innovate and improve.

The industry is littered with now-gone-but-once-good companies that were bought by huge group health entities or big investors that proceeded to screw them up until they all but disappeared.

Netting it out

Huge companies have the ability to delivery the lowest price for commodities, driving value for their WC subsidiaries.

Some WC subsidiaries pass those prices on and some don’t. It’s not the type of owner that matters, rather does the investor or strategic owner have a plan, is it focused on the customers’ needs, and how well does it execute that plan.

Similarly, some big companies can and do deliver great service, and many smaller ones do as well.

Others, not so much.

What does this mean for you?

Assumptions are always dangerous – especially when they drive major buying decisions. 


Friday catch-up

Good to be back in the habit of regular posting…lots going on deserving of your attention.


From myMatrixx, a very useful post from Phil Walls, everyone’s favorite pharmacist. Phil highlights three drugs in the pipeline that may well find a place in work comp.

Nalmefene was developed as the naloxone for fentanyl. While naloxone has saved countless people on the verge of dying from opioid overdose, a single dose isn’t strong enough to save someone on fentanyl. Read Phil’s post for details.

Two other meds – Molnupiravir and Ofev may help patients battling COVID. The former is an anti-viral, easily administered and offering the potential to reduce the length of infection.  Ofev is more narrowly focused on combating a very serious lung disorder associated with COVID.


As if Florida, Mississippi, and other states needed yet another reason to expand Medicaid...individuals with Opioid Use Disorder referred by criminal justice agencies were more likely to receive  medications for OUD in states that expanded Medicaid compared with those in states that did not.

Considering overdose deaths dramatically increased after the pandemic started, legislators in non-expansion states need to get off their collective butts and do the right thing. Stop with the bullshit arguments and do something that actually helps people.

And the Biden Administration should do the same – fast track authorization for medical providers to prescribe buprenorphine. We’ve been waiting over three months, Mr President…

Hospital profits

Hospital and facility owner HCA reported profits more than doubled in the first quarter of 2021 over 2020. The really scary part is

“Same facility revenue per equivalent admission increased 16.6 percent in the first quarter of 2021, compared to the first quarter of 2020, due to increases in acuity of patients treated and favorable payer mix.”

In English – employers and taxpayers’ facility costs shot up. Here’s looking at you, workers’ comp…

Workers comp

Despite the rampant profiteering off workers’ comp by HCA and others, workers’ comp remains a very profitable line of business. That’s mostly because rates are still too high, frequency continues to decline, and medical trend remains flat.

National Underwriter reported WC was the fourth most profitable P&C line in 2019, at with a “relative net worth” of 12.2%. I’m not entirely sure what “relative net worth” is…perhaps the best way to compare margins across not-for-profit, mutual, and stock companies?


Finally – be Skeptical!

Did 4% of Americans gargle with bleach last year?

You may have read the news reports on a “study” that found a bunch of us were gargling with bleach. Bunch of morons…typical (insert demographic group here),

But, the answer is likely no.  In fact, the “study” had fatal flaws, flaws which came to the surface when a well-designed study followed up.

Takeaway – beware of clickbait, ESPECIALLY when it supports your own opinions and biases. Here’s looking…in the mirror.

Lastly, a request.

Smile at someone you don’t know today. Things are getting better by the day, and you can spread the joy.


What’s up with OneCall?

It has been a while since we checked in on OneCall.  The investment community’s level of interest seems to be rising as I’ve had several calls from investment firms of late, all seeking information on what’s happening and what the future holds.

Here’s a quick summary of what’s happened since OneCall was “recapitalized” late in 2019, a last-minute move by a few investors that may well have saved it from bankruptcy.  You may recall that the company had a huge debt burden that was hoovering up cash flow at a frightening rate; as a result the equity investor agreed to “sell” OCCM to ADD here.

Revenues and customer gains/losses

Like most workers’ comp service companies, OCCM took a major hit last year, with revenues reportedly down 15% from 2019. Earnings suffered as well, although with all the accounting gymnastics I’m not sure there’s a way to compare 2020 (post recap) to 2019.

Also like most workers’ comp service companies, things have gotten better as the economy has improved. Revenues are reportedly up, which is a good thing.  Several sources indicated OCCM is claiming it is gaining “new business”. I contacted OCCM to ask about new business; this was the response:

As a matter of policy, we do not discuss customer agreements externally.

Okay, I’m a bit confused as a company exec reportedly told “external” folks about new business. Perhaps there are different types of external discussions.

S&P reported “the company ended 2020 with new net wins of $35 million, compared with net new losses of $54 million the prior year, which will translate into incremental revenue in 2021.”

So, I asked several contacts in the service sector about recent client moves to OCCM; one indicated OneCall picked up about $3 million in additional revenue from the Travelers through the HealthESystems pipe.

If that is in fact the case, it is certainly a credit to the organization. Any company that can lay off some sales personnel, reduce salaries and titles for others, and add new business is darned impressive.

However…one has to balance new business against business losses. On that front, things are not so good. Sources indicate OCCM lost somewhere around $40 million of business to competitors last year.

Takeaway – According to S&P,

  • One Call added $35 million of revenue after accounting for lost business in 2020.
  • S&P also reported the company’s revenues dropped 14% from the previous year.

So, revenue actually dropped by $175 million +/-, while One Call “added” $35 million in net new revenue…which one might reasonably assume means new business from new customers, or perhaps new product/service lines added to existing customers, revenue that may materialize in 2021. Or…something…

Again, outside of the reports re Travelers’ $3 million of PT volume taken from MedRisk, I haven’t heard of any other entities losing business to One Call.

I have heard of One Call losing business, specifically reports indicate Mitchell took CNA ancillary business from One Call and MedRisk captured Acuity’s PT business; MedRisk is an HSA consulting client.

If you know of other transactions, shoot me a comment; all are screened before publication.


Debt remains a problem.  OneCall appears to be involved in yet another debt restructure process, one that Moody’s states:

will improve One Call’s liquidity profile [cash flow] as it will extend the debt maturity profile while materially reducing the annual cash interest expense.

In discussing OneCall’s current credit rating a month ago, Moody’s (free registration required) said:

One Call’s B3 [Corporate Family Rating] CFR is constrained by its high financial leverage and historical challenges to grow revenue and profitability.

[B3 is defined as “speculative and a high credit risk”; A CFR is a defined as a credit rating assigned by a Credit Rating Agency, to reflect its opinion of the ability of a corporate group to honor all of its financial obligations, as if there was a single class of debt; in other words, the overall rating of a corporation.]

S&P was slightly more positive, (free registration required) upgrading One Call’s ratings somewhat from “negative” to “stable”;

Again, Moody’s…

The affirmation of the B3 CFR reflects a continued improvement in One Call’s operating performance following a decline in revenue in Q2 2020 due to the impact of the coronavirus pandemic on referrals. Since then, a combination of new business wins [??], strict cost discipline, and productivity improvements have helped One Call limit the pressure on earnings and cash flow. Going forward, Moody’s expects further earnings and cash flow growth in 2021.

As noted above, I’m not aware of any material new business wins, One Call would not discuss them, and outside of S&P’s statement, credible reports indicate significant losses of existing business.

[a detailed discussion of the credit ratings and related matters is here.]

What does this mean for you?

I’ll let you figure that one out.

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.



© Joe Paduda 2021. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

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