Insight, analysis & opinion from Joe Paduda

Dec
8

Facts for this weekend’s chats!

Whether you’re chatting around the grill, conversing at a swim meet or hockey game, or between quarters of a football game, here’s the real scoop on the economy, with immediate responses to show you’re the one with the real story.

hint…the “everything sucks” narrative is flat out wrong.

  1. No one wants to work these days! 

Surprise…

Net is the percentage of everyone 16 and older working today is within a half point of pre-COVID participation rates.

No, there is NOT some huge number of Gen Zs, millennials, or whatever that’s said “screw it, we’re outta here, and I’m gonna live with/off my parents forever!”

 

And…for the core group – folks 25-54 – labor force participation is near an all-time high at 83.5%!

 

2. Well…there just aren’t that many people working!

Hmmm…There are more people employed now than ever, and employment has been increasingly steadily for the last three years.

credit FRED.

3. Okayyyyy…but inflation’s higher than wages, so we’re falling behind!!

Well, no – since way back in March – 9 months ago – earnings are growing faster and more than inflation, so you can buy MORE with your weekly paycheck today than you could a few months ago.

source Statista

What does this mean for you?

You are gonna be soooo smart.


Dec
7

Work comp services – another deal is done

Private equity firms Lee Equity Partners and Elements Health Investors completed a recap of Carisk Partners last week, marking one of the very few deals to be done over the last many months.

While this may be an indication that things may be moving, there are several reasons we aren’t likely to see a return to the halcyon days of a decade ago.

First, over the last two years Carisk is one of the very few companies to actually get a deal done. Several others tried and failed, mostly because:

a) sellers’ expectations were out of whack with what buyers would pay;

b) due diligence revealed softness in numbers &/or growth plans &/or management depth;

c) current debt service costs made a deal too costly; and/or

d) the property is/was too large (more at the mercy of industry trends than smaller entities, very hard to grow share when you are already huge)

Carisk has very experienced and quite effective management, terrific marketing, some of the best sales people in the industry, a strong culture and a coherent strategy for growth and expansion.

Second the structural issues inherent in workers’ comp, namely it is a highly mature, consolidating/consolidated industry with very low to negative growth make it less attractive than, say, generative AI.

Third, debt – which makes up most of the purchase price of pretty much every sale – is still expensive compared to rates over the last decade or so. Investors will eventually get over mid-to-high single digit interest rates, but haven’t yet.

Lastly, reality is work comp is just not that interesting: many execs are highly risk-averse if not downright lazy; innovation is frowned upon if not actively avoided; and complacency is rampant as is chronic under-investment in IT and human capital.

The few transactions that have closed – HomeCare Connect and now Carisk most prominent- are really solid companies with great management teams, solid track records and a clear path to substantial growth. The ones that didn’t close were…not.

That’s not to say some companies won’t test the waters, but don’t get caught up in rumors about this or that company getting sold or preparing for a sale or going to market or talking to investment bankers.

Bankers are ALWAYS talking up potential deals…it is how they gin up business – and the work comp rumor mill loves to help ’em out.

What does this mean for you?

A great company will always be valuable. 

disclosure – I have a (very small) financial interest in Carisk.


Dec
5

Profit shifting aka work comp is funding the P&C industry’s losses.

Or, it is a GREAT time to be a monoline carrier.

The property & casualty insurance business is a tale of two extremes, with work comp profits offsetting losses across all other lines.

That’s one reason multi-line insurers are dragging their feet on cutting work comp and continuing to hoard billions of dollars in excess reserves.

Work comp is hugely profitable, with insurers raking in hundreds of millions in profits…with $10+ billion more in excess reserves, aka unrealized gains.

chart extract from S&P

Other insurance lines are the yang to WC’s yin.

S&P predicts all other lines will lose money on an underwriting basis again this year…

Here’s the money quote (pun intended):

➤ Dismal first-quarter 2023 direct incurred loss ratios in the homeowners and private auto business suggests a repeat of 2022, when highly favorable underwriting results in the commercial lines, aided in part by favorable prior-year workers’ compensation reserve development, were more than offset by the personal lines losses. [emphasis added]

and implications thereof:

The [2022] workers’ compensation combined ratio of 83.9% represented a decline of nearly 3.3 percentage points from the 2021 result. It ranks as the second-lowest such result in the last 25 years, owing to relatively benign trends in the current accident year and a fifth straight calendar year of favorable prior-year reserve development in excess of $5 billion. [emphasis added].

What does this mean for you?

Those who pay comp premiums are subsidizing insurers’ losses in personal and commercial lines – especially personal auto.


Dec
3

Good news…Monday. Rising wages + Lower inflation = Higher portfolios

About to head home after two weeks in Southeast Asia…off the grid for much of it.

Here’s the good stuff that happened whilst I was floating down the Mekong River.

Wages are up…

and have been rising steadily for the last 3 years…outpacing inflation.

And will keep going up…

From The Economist – “A blue-collar bonanza is under way…three forces that shape labour markets—demand, demography and digitisation—have each shifted in ways that benefit workers.”

If you’ve had to hire a plumber, carpenter, or electrician recently, you know what they’re talking about.

Implication – higher wages = higher premiums.

While inflation continues to drop…

One economist got this right, while many just endlessly caterwauled about the imminent rise in unemployment and drop in wages necessary to tame inflation.

Gotta love economists…or not.

Fuel prices continue to drop…leaving more dollars in our pockets

All this good economic news – consumers have more money to spend, employment remains very strong, and prices are moderating means there will be…

More dollars in your investment portfolio

You’ll likely see your investment portfolio rise in value…BofA, RBC, and Deutsche Bank are among the firms predicting record returns in 2024.

What does this mean for you?

As you start your week, don’t buy into the “economy is awful” nonsense. 

Finally – -one of the keenest observers of trends in business and the body politic is Scott Galloway of NYU. I highly recommend his weekly newsletter.


Nov
22

Getting smarter about PT.

Why do some patients need more PT than others?

Why does a therapist’s treatment duration vary for patients with the same diagnosis?

What conditions have the most impact on patient recovery?

Thanks to WCRI’s Vennela Thumula PharmD; Randall Lea MD; and Te-Chun Liu there are answers.

WCRI’s latest research based on FOTO data digs into just how big an impact mental and physical health co-morbidities – and other factors – have on improvements in functional status.

The methodology is robust indeed, the data solid as it gets, and the insights provided by the researchers quite valuable.

Using FOTO’s 100 point scale, their research indicates patients with both physical health and mental health comorbidities see about 20% less improvement in functional status than patients with no comorbidities.

courtesy WCRI

Co-morbidities – aka health conditions a patient has in addition to the one you’re focused on – may be physical – think obesity, hypertension, arthritis – or mental – depression, anxiety/panic attacks, sleep dysfunction.

Quick takeaways…

About two-thirds of patients have a physical or mental health comorbidity, and these comorbidities definitely affect the patient’s ability to recover.

The more comorbidities a patient has, the greater the impact on recovery.

More troubling still, the more likely these patient would have “very limited” function at the end of therapy.

The researchers also looked at the same metrics for non-work comp patients…and found comorbidities had similar if not more impact on recovery.

And…it isn’t just comorbidities.

Quicker access to PT had an even greater impact on recovery than physical or mental health complications. The details are on page 43 of the study. If you’re not a WCRI member, become one to get access to all their great work at no charge.

Non members will have to pony up a few bucks to learn more.

What does this mean for you?

Great research is really useful…use this to help injured workers get better faster. 

 

 


Nov
21

Customer service, bean counters, and Too Big to Care

During another holiday week a few years back I penned a terrific post on customer service. If I do say so myself, and I do.

Customer service comes to mind as I sit on a transcontinental flight from NYC to Singapore to attend our son’s wedding.

For once I did the smart thing…my lovely bride and I are on Singapore Air, consistently the top-rated airline for customer service. Oh my what a difference between this airline and any other I’ve flown in the past several decades. And I’ve flown a LOT.

Singapore Airlines is…fabulously wonderfully totally about its customers.

One incredibly tiny example…I got up to use the restroom, and an impeccably polite steward very diplomatically noted that cabin service had been halted due to turbulence and perhaps I should stay in my seat unless my sojourn was of utmost importance. I aborted the trip and returned to my seat.

Five minutes later anther flight attendant came by to inform me that things were back to normal and I could safely walk about the cabin. A tiny thing, totally insignificant and yet a blindingly clear demonstration of how serious these people take customer service.

Management clearly gets it. And I will fly Singapore whenever I possibly can. Because any time a flight attendant is that focused on customer service, it is because the entire enterprise is – most importantly top management.

Allow me to reprise the post from 2018, as it is even more topical today.

To that point, here’s an example of a huge business that completely misses the point.

This summer (back in 2018) American Airlines allowed flight attendants to give little things to passengers upset about delays or other problems. Frequent flyer miles, drink coupons, seat upgrades, stuff that didn’t cost AA anything but made angry passengers feel that AA cared about the problems the airline caused.

Then, some genius at HQ decided this was a bad idea.

This from Forbes:

Every time some bright young marketing executive tried to make American (or some other airline) more responsive, and more quickly responsive to passengers’ dissatisfaction by empowering front-line workers to offer some form of compensation, the bean counters back at headquarters quickly noticed that the cost of such empowerment escalated rapidly. The result, alas, always has been the dramatic reduction or elimination of front-line workers’ authority to solve customer service issues at the point of contact.

Instead of fixing the problem, the corporate knuckleheads tried to deal with the fallout – but stopped when it cost too much. 

update – American is currently rated #82 out of the world’s best airlines. Well behind RyanAir (!!!), Air Mauritius and Azerbaijan Airlines, This isn’t due to American’s front line workers, rather management decided service is about #82 on their list of important things.

This is exactly what killed US manufacturing, autos, and many other businesses. At the end of their assembly lines, GM, Ford, and Chrysler diverted many just-built cars with manufacturing defects to another mini-factory.

Auto worker using hammers to straighten a hood on a just-built car…

There, very skilled and very expensive workers diagnosed and fixed cars that had just been built. These guys are yesterday’s American Airlines flight attendants, tasked with fixing problems caused by management.

Clearly senior management didn’t understand that if they spent the time and energy and dollars to do it right the first time, they wouldn’t have to a) fix problems with cars they just built, and b) deal with pissed-off customers.

Yes, it takes that time and energy and dollars. But the results are measured in customers kept, service problems eliminated, and extra costs avoided.

Or, you can just wait for your businesses’ version of Honda to come in and eat your lunch.

What does this mean for you?

Find out what your customers want, and do it right the first time. They will love you and reward you for it.


Nov
20

Forbes’ “rating” of workers comp insurers is…

A farce.

Ok folks, I’m gonna get snarky here.

First, there’s the title. I think they meant “insurers” not “insurance”… the latter is quite consistent across all insurers

A while back PropertyCasualty360’s reported on a “rating” of workers’ comp insurers by Forbes Advisor, an entity which doesn’t appear to take its ratings very seriously.

Everyone loves lists – done right they can reward the best and force others to up their game while helping consumers pick the best offerings. Done poorly they mislead, provide zero value, and result in buyers making decisions based on useless/misleading/wrong criteria.

In this instance, Forbes’ understanding of what makes for a “good” insurer is about as deep as my understanding of quantum mechanics.

In fact, the article looks like it was created by a beta version of ChatGPT with zero editing by anyone who passed a high school English course. (I did try to contact the author but there’s no link or contact info other than a name on Forbes’ website, and I’m not going to waste even more of my time trying to track this guy down)

okay, the details.

From PropertyCasualty360 (who really ought to know better):

Forbes Advisor based 90% of the scores [sic] the level of upheld complaints made to state insurance departments and collected by the National Association of Insurance Commissioners. The remaining 10% of the scores were based on the financial strength assigned to the company by AM Best.

Well. I’ll spare you, dear reader, my minor criticisms and focus on the major ones.

  1. What??? 90% of the “rating” is based on complaints which have little to nothing to do with how good a business partner a carrier is.
  2. What about cost, dividends, time to first report of injury, claim closure rate, claim frequency, sustained return to work…Jesus there’s about a million criteria more important than complaints to regulators.
  3. That said, a major driver of complaints would be certainly driven by claim volume…so the bigger the insurer, the more likely they would a) have complaints and b) the more complaints there would be. No discussion of this in the “survey.”
  4. Sometimes people complain because they don’t want to go back to work, don’t like having to go to specific providers, want brand drugs instead of generics, and on and on. Sure some of these complaints would likely be dismissed by regulators, but others would likely not be “dismissed.”
  5. Financial strength – well, given many carriers are A, A – or A+ rated, how useful is this? Might as well say “hey, only buy WC insurance from an A rated carrier!”
  6. What about:
    1. customer satisfaction?
    2. injured worker satisfaction?
    3. broker rating (be careful, but a whole lot more useful than “complaints”)
    4. claim closure rate?
    5. medical provider satisfaction?
    6. Net promoter score?
    7. employee rating of their employer e.g. Glassdoor?
    8. best places to work ratings?

The result is a wholly useless exercise which may encourage clueless buyers to make bad decisions based on a “survey” which looks like nothing more than clickbait.

I’ve seen better/more useful/more credible ratings for the top home margarita blender kits, highest rated shoelaces and best pencil erasers.

What does this mean for you?

Another sign of the impending apocalypse. 

 


Nov
17

Good news Friday, inflation is deflating

In what can only be described as excellent news, inflation is down to 3.2%.

Further good news – ahead of the heavy Thanksgiving travel week fuel prices are continuing to drop… in 11 states average prices are below $3 a gallon.

And there’s this really wonderful story about a gay professional hockey player’s journey...the response to his coming out announcement has been overwhelmingly positive – especially from other pros.

Gotta love the love.

 


Nov
15

Wildly off-topic…Reasons to support Ukraine, Part One

Some think we should not be helping Ukraine protect itself and its people from Russia and the Russian invasion.

They note it is expensive, the battle is far from our shores, it isn’t any of our business, we have other priorities.

Here’s why it is most definitely in our best interest to help Ukraine.

  1. The world is a dangerous place, and enemies large and small – Iran, North Korea, the Taliban, jihadists, and frenemy China – are always looking for signs of American weakness.

    If we had not provided aid and arms to Ukraine, Russia would have taken Kyiv (the capital of Ukraine) and own Ukraine today…and Iran, North Korea, the Taliban, jihadists and their ilk would be plotting attacks on us. 

    Instead, those enemies are watching a large and once-powerful country – Russia – get its ass kicked by a much smaller country, in no small part because we are supporting Ukraine. That ass kicking is most certainly giving would-be attackers nightmares… thanking whatever entity they worship they didn’t do something as blindingly stupid as taking on an ally of the US. 

  2. War prevention – specifically Taiwan. As very/extremely conservative commentator Marc Thiessen notes:

    how much…would U.S. weakness in Ukraine embolden Chinese dictator Xi Jinping? The risk of war over Taiwan would skyrocket. And, unlike the war in Ukraine, it could very well involve U.S. troops. [emphasis added]

    Think of Xi’s calculation: If the United States won’t stand fast for Ukraine, an internationally recognized sovereign state, how likely is a stalwart defense of Taiwan, which is not? And if the United States is not willing to spend money to defend Ukraine, is it really going to risk American lives to defend Taiwan?

    China’s military is massive, has thousands of missiles, will soon have the largest navy in the world, and is increasingly belligerent.

    Chinese ship attacking Vietnamese coast guard ship

    After pushing around small countries like Vietnam and the Philippines and doing its damndest to illegally expand its territory, many of its leaders are were wildly over-confident. Watching as Russia’s battle-tested, quite experienced, once well-equipped and still very large army gets hammered by a much smaller country allied with the US is undoubtedly forcing Xi and his generals to think a lot harder about screwing with America and our allies.

  3. The elimination of one of our two most dangerous enemies cost exactly no American lives.
    Putin is an extremely dangerous dictator and Russia is our enemy.
    Presiding over a country with very serious financial, demographic, ethnic and economic issues, Putin did what most dictators in that situation do – pick a fight with a supposedly weak neighbor.

    For Putin, the result has been catastrophic, eliminating Russia as a threat to  the US and our European allies. More than half of Russia’s armored vehicles and hundreds of aircraft have been destroyed, stocks of missiles and rockets have dramatically shrunk, hundreds of thousands of soldiers have been killed or grievously wounded, its Navy has lost much of its war-fighting capability.

    Russia’s military infrastructure is in deep trouble…every day there are new reports of factories making munitions, armored vehicles, explosives and missiles mysteriously exploding.

    a “fireworks” factory is now rubble…

As brutal and awful as it is, we are much safer because hundreds of thousands of Ukrainians have died, millions have lost their homes, and hundreds of towns, villages, and cities have been destroyed.

What does this mean for you?

Thanks to the Ukrainians, the world is less dangerous today – which is a good thing indeed.


Nov
13

The worst job ever.

Has to be nursing in a health system or hospital.

There’s bullying of young nurses by “more senior” nurses…

Management dismissing nurses’ complaints about sexual harassment, groping, violence and abuse.

Awful hours,

Having to ask if you can go to the bathroom

Seemingly endless shifts

Forced overtime

Working next to – and training – a travel nurse with half your experience who makes twice what you do.

And lest we forget, dying in droves during the early days of COVID.

Here in the Upper Valley in New Hampshire, I recall signs and posters and cheering for nurses and other staff in the early days of COVID.

This lasted about 2 months…followed by COVID deniers using, screaming at, hitting, and abusing nurses.

From heroes to scapegoats, the fall was catastrophic and all too real. This wasn’t unique to northern New England.

Several family members lived through this hellscape, and it isn’t getting any better.

The net is this – our healthcare system is collapsing and the very people who are desperately trying to keep it – and us – functioning are being served poorly by management.

What does this mean for you?

Thank every nurse you know, see, meet, or encounter. They really, really need and serve it.

And call out those – including management – that don’t acknowledge, protect and respect nurses.

note – this very likely applies to many if not all those who work in healthcare facilities…I limited it to nurses because I have first-hand knowledge of their plight.

 


Joe Paduda is the principal of Health Strategy Associates

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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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