May

New risks in workers comp – the rise of mining

Posted by Joe Paduda on Friday, May 25th, 2012 | Comments

While construction is still in the dumps, there’s been a remarkable recovery in what was once thought to be a gone-forever industry – mining. While the mineral mines in Michigan, oil shale projects in North Dakota, copper mining in the southwest and oil and gas in near-shore and Arctic areas have yet to hit their full stride, the growth in employment in extractive industries has been significant – up almost sixty percent over the last ten years, with an increase of 12 percent since the beginning of 2011.
The BLS projects employment to grow by almost 25% from 2010 to 2020, and current hiring levels make that projection appear to be conservative.
Wages are also high at over $28 an hour, and the average work week is well over full-time. This is balanced by a decline in frequency for OSHA reportable injuries/illnesses, but the underlying trend is clear – the mining and extractive industries are experiencing a rebirth, one that will dramatically affect workers comp albeit in selected states.
This has already hit North Dakota, where the state’s monopolistic fund, already under fire for what can fairly be termed gross incompetence and possibly intentional negligence, is hard pressed to deal with the huge growth in oil and gas in the western part of the state. Tough to focus on business when you’re consumed with circling the wagons to hold off legal inquiries into denying injured workers benefits.
The implications for comp are obvious.
Injury rates in extractive industries are higher than average, and the types of injuries tend to be more severe.
There are fewer opportunities for transitional duty to help recovering workers get back on the (a) job.
Job sites are often located far from cities and comprehensive medical care services.
New employees may not receive adequate training in safety and loss prevention.
What does this mean for you?
Work comp executives, regulators, and service providers would be well-served to closely monitor employment projections; while these shifts will only affect certain states, the impact they will have on those states is likely to be significant.

May

Freedom v responsibility – another view

Posted by Joe Paduda on Thursday, May 24th, 2012 | Comments

As our country confronts rising health care costs, it is incumbent on all of us to take responsibility for our actions and not rely on others to pay for our “freedoms”. One small way to address this is for motorcyclists who ride without helmets to buy health insurance to cover the costs of injuries.
In response to my post on that subject yesterday, I heard from Pete terHorst of the American Motorcycle Association (AMA) who took issue with my recommendation. Pete was courteous, responsive and is likely an excellent debater. He made a couple of points that I do not agree with – here’s the summary.
My central point was this: Those who seek personal freedom should bear the cost of that freedom. Simple, basic idea, right?
– medical costs for helmetless cyclists involved in crashes are substantially higher than for those riding with helmets;
– many don’t have health insurance and thus uncompensated providers, taxpayers and private insureds cover their costs;
– if states want to repeal helmet laws, then require those riding without helmets to buy medical insurance to cover all potential costs.
Not so simple, according to the AMA.
Pete’s initial comment cited some old research re the cost of motorcyclist trauma care relative to auto injury care and the percentage of riders covered v drivers. This was, in my view, not germane to my central point – so I asked Pete “do you think helmetless riders should not be required to have insurance coverage?. After some back and forthing and Pete’s diversion into discussion of helmet mandates v accident prevention, I tried to steer the conversation back to the central issue, to wit:
“It is appropriate behavior for those individuals to assume the responsibility that goes with their freedom to ride without a helmet.”
Here, are a couple of Pete’s responses:
What the AMA and its members expect is fairness. When the insurance
industry singles out and seeks additional revenue from motorcyclists
for behaviors it considers risky, the logical extension of that
mindset is that the insurance industry would do the same for other
so-called risky behavior. [I’d note that nowhere did I suggest the insurance industry single anyone out, but rather legislators pass a bill mandating medical insurance for helmetless riders] But it does not, because singling what is
risky and what is not is a very slippery slope to tread, and involves
taking on mainstream segments of society that currently represent a
significant revenue stream for insurance industry. [again, I didn’t say anything about insurance companies supporting, backing or conceiving of any such plan] Conversely,
motorcycling is not an activity that most Americans participate in,
and it is a visible and easy target for those who do not understand
its appeal. Bottom line: The AMA does not expect special treatment for
motorcyclists, it expects — and advocates for — fair treatment… The AMA doesn’t favor requiring unhelmeted motorcyclists carry additional medical insurance that is not required of other road users.
If I follow the logic, as long as others are allowed to be “free riders”, the AMA wants motorcyclists to be free riders as well.
Somehow that doesn’t seem right. Here’s a group who wants the freedom to ride without helmets but doesn’t want to pay the cost for that – unless every other participant in risky behavior is also forced to do so. That strikes me as selfish and irresponsible; “just because he gets away with it I want to get away with it too.”
Pete also argued that requiring helmetless riders to get medical coverage would somehow be unfair, and it would head us down a slippery slope – I don’t see this at all; my recommendation would be handled under traffic/motor vehicle laws, and it is abundantly clear (check the sources in the post yesterday) that riders without helmets in accidents are much more expensive to care for than helmeted riders.
What does this mean for you?
Watch our for free riders…

May

Motorcycle helmets, freedom and responsibility

Posted by Joe Paduda on Wednesday, May 23rd, 2012 | Comments

While death rates from auto accidents have been steadily decreasing, that’s not the case for motorcycles. There were 1.7% fewer motor vehicle fatalities last year, but motorcyclist deaths didn’t drop at all.
What’s going on? Well, after states laws mandating helmet usage were repealed, death rates climbed dramatically, up 21% in Arkansas, 81% in Florida, 58% in Kentucky, 108% in Louisiana, and 31% in Texas.

So why should you care?
Well, when these freedom-loving riders smack their heads into the pavement, dying or even worse incurring a traumatic brain injury, who pays for the heroic – and very expensive – efforts to save their lives?
Turns out less than half had health insurance coverage.
If they don’t have private insurance, that would be you and me. Research indicates taxpayers pick up about 40% of the medical costs from helmetless riders; cost-shifting to private insurers is certainly high as well.
Here’s a simple solution that should be added to any bill repealing a state’s helmet law.
Those who want to ride without a helmet have to buy insurance that reflects that decision. That insurance must provide comprehensive coverage for medical care for accidents associated with the covered individual, including long term custodial care, with a really high limit – say $10 million, that is indexed to the medical CPI to account for inflation.
Upon showing proof of coverage, they get a special license plate. Insurance companies take the risk, society does not get harmed due to the adverse consequence of a personal decision, and those who want to ride with their hair blowing in the wind are free to do so.
Oh, and they should be required to be organ donors as well.

May

Inflation in Medicare, private insurance, and work comp

Posted by Joe Paduda on Tuesday, May 22nd, 2012 | Comments

Credible research indicates health cost inflation rates will remain fairly low during this decade, driven by “greater cost-sharing in private insurance, new Medicare payment policies, slower growth in prescription drug spending, and an upcoming tax on high-cost insurance premiums.”
Note two of the primary drivers are reduced payments to providers by Medicare and Medicaid and more spending by individuals. These ‘cost-moderators’ are countered (somewhat) by the growth in Medicare eligibles.
The result is overall inflation rates will be about the same for private payers and Medicare at 5.7%. However, on a per-enrollee basis, Medicare’s trend is substantially lower (more than two points) than private insurance. Again, cuts in Medicare’s reimbursement to providers is the primary driver.
It is important to understand the difference between overall program and per-enrollee
cost inflation; it’s also important to think thru the implications for other payers – work comp and auto specifically.
With significant growth in Medicare and Medicaid enrollment coupled with low growth in the number of privately insureds, providers will see flat to declining compensation from a large chunk of their patient population. The latest figures indicate physician compensation rates have been relatively stable; given low overall inflation this is likely “acceptable”. Notably, some specialities saw increases while others dealt with reduced compensation.
However, as patient mix changes, the decline in compensation is inevitable, and will have far-reaching consequences.
What does this mean for you?
Expect utilization to increase, along with charges for services billed to all payers. Those payers without strong fee schedule or contractual controls on price will likely see significant price inflation as well.

May

Cost shifting to work comp – sure, go ahead!

Posted by Joe Paduda on Thursday, May 17th, 2012 | Comments

An article in Physicians News yesterday suggested providers look to workers comp to make up revenue losses from Medicare and commercial payers’ declining reimbursement. That wasn’t stated explicitly, but you don’t have to be a code-breaker to get author Franklin Rooks’ message.
Rooks’ main point appeared to be for physicians to think carefully before agreeing to work comp PPO contracts. Can’t disagree with that, but I do take exception to the several statements which are the basis for his arguments.
As Rooks cited me in his piece, I posted a comment, which is excerpted below.
1. The article stated “Employer direction of medical care tends to erode workers compensation reimbursement to levels below the state fee schedule.” without providing any data or backup whatsoever to support this assertion. Physician News’ editors should have caught this.
In fact there is ample evidence from multiple sources that there are many factors impacting reimbursement, with market concentration of providers and the relative level of workers comp fee schedules [compared to other payers’ reimbursement amounts] chief among them.
2. The article cited the recent effort by Florida’s legislature to ban egregious over-charging for physician dispensed medications. As readers know all too well, in Florida, physician dispensing of medications to workers comp patients has increased employers’ costs by over $60 million with no benefit to injured workers. Data from several sources indicate physician dispensing adds over a billion dollars to the national workers comp tab, again with no discernible, demonstrated benefit to patients. There is, in fact, a critical issue of patient safety in the practice of physician dispensing, as work comp physicians often do not know precisely what medications the patient is taking, and therefore cannot be sure there are not potentially hazardous drug-drug interactions.
I’d also note that workers comp is NOT intended to be the payer used by physicians and other providers seeking to make up for lost revenue from other sources. Mr Rooks’ unstated but clearly intended message is for providers to seek the most reimbursement possible from comp to compensate for declines in other sources.
That is inappropriate and unethical.
Thanks to Sandy S for the head’s up.

May

Missouri’s resident idiot

Posted by Joe Paduda on Wednesday, May 16th, 2012 | Comments

Earlier this month a physician legislator in Missouri blocked a bill setting up a prescription drug monitoring program, making MO one of two remaining states without a PDMP.
Oh, and the Show-Me state’s death rate from drug overdose (most of which is from prescription drug abuse) is higher than the national average…
For the uninitiated, PDMPs help ensure patient safety by identifying potentially harmful drug-drug interactions; enable prescribers and dispensers to see if a patient is filling the same scrip multiple times, and inform doctors and pharmacists when a patient is getting multiple scripts from multiple docs. And they comply with all patient confidentiality requirements.
Republican Sen. Rob Schaaf, henceforth known as Missouri’s resident idiot, spent eight hours filibustering the PDMP bill, ending with this brilliant justification for not protecting patients with a PDMP: “If they overdose and kill themselves, it just removes them from the gene pool.”
And if Schaff prescribes percoset and some other doc is prescribing oxycontin and a third is prescribing a sedative and the patient dies thru no fault of their own, and their kids lose a mom, and a Scout troop loses a den mother and a school loses a teacher, all because Schaaf is an idiot, whose fault is it?
What does this mean for you?
We get the government we deserve, and we deserve it good and hard (apologies to HK Mencken)

May

$20,728 – your family’s 2012 health care cost

Posted by Joe Paduda on Tuesday, May 15th, 2012 | Comments

That’s the figure reported by Milliman earlier today.
Yep, almost twenty-one grand just for health insurance and out-of-pocket costs.
The good news (!) is the annual rate of increase was a paltry 6.9%, the lowest trend in a decade.
The bad news? In six years, the average family of four’s premium and out-of-pocket costs will be $31,000. That’s if the inflation rate stays the same; if it reverts to the norm, we’ll see costs pierce the thirty grand level in 2017.
Here’s hoping someone – anyone – finds a solution. We know that Massachusetts’ premium increases are among, if not the, lowest in the country; we also know Medicare’s rate of increase is lower than commercial plans’. Perhaps there is a role for big government; altho I’m hoping private insurers figure out how to control costs without the threat of price caps.
Then again, we’ve tried that – for about fifty years – with pretty poor results.

May

NCCI research wrap-up; disability duration drivers

Posted by Joe Paduda on Monday, May 14th, 2012 | Comments

Late on Friday the true work comp nerds stuck around for the research workshop, while the smarter NCCI attendees headed home or hit the golf course.
Barry Lipton led off with the latest info on NCCI’s research into temporary total disability. Duration has been increasing significantly over the last 6 years, driven by the recession. Duration increases moderating over the last couple years, likely due to small claims coming back into the system and the improvement in employment.
One of the primary drivers is…SURPRISE our old nemesis, opioids.
The duration of claims with opioids is 50% longer, with some claims seeing disability duration twice as long when case mix adjusted. Opioids were defined as schedule II drugs plus tramadol. Liberty Medical Director David Deitz raised the point that looking at diagnoses and the potential impact of opioids on changes in diagnosis or severity may be helpful in assessing impact.
The next update was on the impact of comorbidities on cost. The work done by NCCI was enlightening. 4% of all claims (MO and LT) between 2000 – 09 had treatments, paid for by workers comp, for comorbidities, with hypertension the most common. These claims cost twice as much as those without comorbidities.
For those hoping health reform is overturned, remember over a quarter of the working age population in Texas and Florida is without health insurance…if reform sticks, many more of these folks will have coverage, and work comp won’t have to pay for these comorbid treatments.
Drug abuse was the second most common diagnosis followed by diabetes and chronic pulmonary issues; about 2/3 of comorbid claimants are male, with a much higher percentage of males diagnosed for drug abuse.
The vast majority of treatment for drug abuse is hospital-bsaed, unlike all other comorbid conditions.
The cost of claims with comorbidities is, not surprisingly higher. When case mix adjusted, comorbid claims cost twice as much as those without comorbid treatments. The audience raise a number of questions and brought up a number of points many of which will be factored into future research by NCCI.
And that wraps it up. Overall, an excellent conference, and no, I wasn’t able to make Peggy Noonan’s talk. Alas.

May

NCCI’s second day – state v fed regulation

Posted by Joe Paduda on Friday, May 11th, 2012 | Comments

Current Florida Insurance Commissioner and NAIC Chair Kevin McCarty led off his talk with a description of drug repackaging as a “license to steal.”. I absolutely agree. He expressed optimism when noting the legislative effort will continue next year; on that I am less sanguine.
Most of his talk was about the “incremental encroachment of the federal government into the regulation of insurance.” Noting that insurance has been regulated under McCarran Ferguson for decades, McCarty opined that the current state-based regulation has worked pretty well, if somewhat inefficiently.
McCarty took exception to the new Federal Insurance Office (FIO) created by the Dodd Frank bill. While FIO is explicitly not a regulatory agency, McCarty noted their various functions seem pretty similar to those performed by regulatory agencies. While much of the speech was a pretty dense, acronym-intensive discussion of financial stress tests, bank regulation, McCarty detailed FIO’s various research and reporting functions.
Continuing his advocacy for the state-based regulatory system, McCarty noted that there are very different market needs in different states, which require different regulations, while stating that it is necessary to reduce the frictional costs (his characterization) inherent in the state-by-state regulatory environment .
While McCarty et al may decry the interference of federal authorities in the insurance process, payers may be less negative after considering the additional costs inherent in state-specific regulation. According to a report in Insurance Journal earlier this week,
“Tyler Leverty, a professor of finance in the Tippie College of Business, says that the expenses associated with meeting regulations in every state in which an insurance company does business drive up compliance costs by 26 percent when compared to companies that are regulated by only one state.
“These high regulatory compliance costs reduce the technical efficiency of firms, deter firms from operating in additional states, and increase the price of insurance,” says Leverty.”
Finally, McCarty was asked for his views on the interstate sale of health insurance products, and seemed somewhat uncomfortable with the topic (not surprising as this is one of the main ideas promoted by GOP opponents of health reform)- noting that he wanted some regulatory authority over any out-of-state policy sellers to protect purchasers; McCarty stated a couple times that he did not want to oversell the benefit of interstate insurance sales, but concluded by allowing that they would probably most help with short term policies for college kids etc. There was a caveat; he thought “everything” should be tried, but he was not enthusiastic in that suggestion…

May

Hartwig’s take; the economy and P&C insurance

Posted by Joe Paduda on Thursday, May 10th, 2012 | Comments

We’re drinking from the firehose that is Bob Hartwig’s annual discussion of economic factors affecting the property and casualty industry.
His presentation was – as usual – high energy and entertaining. Example – noting that a Greek default would have little impact on the rest of the world, Hartwig said while “we may see an olive shortage”, a default of an economic entity the size of Alabama will just not matter that much.
It was also very positive.
The quick takeaway is we are close to if not at the bottom of the profitability trough, with profits likely increasing over the next four to six months. Barring natural disasters, of course.
Hartwig sees economic activity ramping up, albeit modestly and unevenly; he also opined there won’t be a double-dip recession. The economy is expanding at about 2.5%, driven by consumer sentiment (responsible for 70% of the economy) despite a very slow recovery in construction. What construction activity is going on is mostly building manufacturing plants and power generation facilities.
The P&C sector’s premium growth will be stronger than AM Best’s projections of 3.8%, but there won’t be a traditional hard market, as there remains a lot of capacity and frequency is favorable. The 28 consecutive months of growth in private sector employment, totaling 4.4 million private sector jobs since January 2010, is also favorable for work comp. However, the depth of the recession was so severe that we’ve still got a ways to go…
The public sector continues to suffer job losses, with a half-million employees shed since January 2010. This adds about a half-point to the unemployment rate, which will likely be below eight percent by the end of this year/beginning of 2013. Fortunately, the impact has been offset from a surprising source; US manufacturing growth has been pretty impressive, with a gain of a half-million jobs since January 2010.
However, there’s a lot of variation in economic performance among and between states, with North Dakota enjoying a three percentage unemployment rate compared to Nevada at 11.3%.
Hartwig talked at length about future opportunities for insurers, mentioning health care, energy and alternative energy, petrochemicals etc all as promising markets.
For some reason he presented a couple slides showing P&C industry performance during Presidential terms; the net is return on equity was highest during the Carter administration. Entertaining if not terribly enlightening…
The presentation will be here when it becomes available.

Author: Joe Paduda