Work comp frequency and severity – Mealy reports on 2012

Part 2 of The NCCI State o’ the Line; aka the Dennis Mealy farewell tour.

There was a good bit of discussion re frequency in his SoL report, with Mealy noting there was a sharp decline in relatively low-cost claims early in 2008/9, but little change in the number of high cost claims. This is consistent with other research indicating employees are reluctant to file claims in a recession for fear of losing their jobs; however those with major injuries really have to file.

Indemnity severity (cost for wage replacement) was up just a point over 2011; not surprising given the continued tough employment situation – wages weren’t up, so wage replacement costs weren’t either.

Medical severity was up 3 percent, overall “not bad” according to Mr Mealy.  Recall workers’ comp is just 2 percent of total national health spend, thus we are more affected by external factors than in control of our own destiny.  There are structural changes working their way thru the medical community, driven in large part by efforts to prepare for PPACA implementation in 2014 that are likely having a significant impact.

Somewhat surprisingly, the medical CPI is actually running a full point higher than lost time medical severity – only the second time in memory this has happened.

There was a bit of discussion about the impact of health reform on workers’ comp; I remain convinced the overall impact will be quite positive; I was puzzled by some comments that ACA might increase cost shifting.  As ACA will ensure somewhere around 20 – 30 million more Americans have health insurance, there’s no question there will be LESS need for providers to cost shift post-ACA than there is today.  

Those uninsured are getting free care today, and that care will be reimbursed tomorrow. Even if that reimbursement is at Medicaid levels, that’s a heckuva lot better than zero reimbursement.

That said, I’d also note access to key specialties – think orthopedics – is going to be very tight this time next year as pent-up demand meets insurance coverage.