There’s a lot happening in the work comp industry: a hardening market; frequency ticking up; consolidation/mergers/acquisitions and buyouts; legislative and regulatory changes; and management moves. And all this against the backdrop of a very big election year.
So here’s what I’m going to be watching for.
1. Health reform will impact workers comp.
I have no idea what the Supremes will do when they rule on the constitutionality of the PPACA, aka health reform bill. Their ruling could kill the law, leave it alone, or eliminate the individual mandate. But no matter what the official decision is, the health financing and delivery industries have changed dramatically over the last two years, and that change will only accelerate over the next two.
The rapid consolidation of health care providers, growth (via acquisition) of delivery systems, and acquisition of providers and provider-based managed care plans by payers is changing the landscape, as is the expansion of Medicaid. Health plans KNOW they have to change their models, get bigger, invest billions in technology and solidify and strengthen relationships with providers, regardless of whether reform survives or not.
All health plans are very tightly focused on those strategic imperatives. As a result workers comp, long a sideline, has been relegated to a position of insignificance, with one exception – Anthem. I’d expect to see the Big Blue continue to expand their work comp presence, but they’ll be the only one to keep pushing. The rest are too busy worrying about the 98% of the business that is group, Medicare and Medicaid.
For comp, network discounts will diminish, That doesn’t mean medical costs will increase, as discounts don’t always, or even most of the time, equal savings. Network options will change, and we’ll see more piecemealing of networks as other payers follow the lead of Broadspire and now ESIS and diversify their network relationships.
2. M&A in comp is going to accelerate.
There was a lot last year, but 2012 is going to be the year of the deal. With the pending changes in capital gains slated to kick in a year from now, several private equity-owned companies getting well past the three year horizon (and a couple past five), some long-time entrepreneurs looking to ride off into the sunset, and what appears to be an uptick in valuations, it’s a no-brainer.
3. Comp rates will go up.
Well, this already started, but it bears repeating. After a way-too-long soft market, it’s about time pricing sanity returned. Higher work comp premium rates will drive business to TPAs, encourage risk managers to, well, actually manage work comp risks, increase vendor business (think UR/case management, PT, bill review, and networks) and generally help all of us in the industry.
Three more tomorrow…
Jan
9
