In the esoteric world of workers’ comp, California’s “med-legal” issues rank near the top of issues bound to frustrate/infuriate.

Med-legal (analogous to physician review or independent medical exam) may have even moved up a notch or two, as expenses have zoomed after a change in the med-legal fee schedule that went into effect in April of 2021.

The change was intended to:

• simplify the payment structure by replacing several variations with one flat-fee
• increase the number of QMEs – Qualified Medical Examiners
• and increase the number of oncologists and toxicologists,
• reduce overuse of “supplemental” reports
• do this all without more than a 25% increase in aggregate med-legal fees.

CWCI’s research indicated that results appear to be far less than intended…

• the number of QMEs increased slightly – up 134 – with most ortho surgeons – NOT oncologists and toxicologists
• there was no decrease in supplemental report services (e.g. billing for more pages reviewed)
• and the average paid per month for comprehensive evaluations went up more than 50%.

Thanks to CWCI for sharing the details…need more details?

Sign up for CWCI’s webinar on Wednesday, July 27 at 10 a.m. (Pacific). Senior Research Associate Stacy Jones, who authored the study, and CWCI General Counsel Sara Widener-Brightwell, will review those changes and discuss the results of the study.  The program will be followed by a live Q&A session.

What does this mean for you?

As if we needed it, another entry in the Hall of Unintended Consequences tells us – YET AGAIN – regs have to be carefully thought through, responses anticipated and planned for, profiteer strategies gamed out, and then – AND ONLY THEN – finalized.

The impact of global warming on climate change is happening faster than anyone thought.

And that will lead to more occupational injuries and illnesses.

Today’s early heat wave is smothering much of the country in brutally hot and oppressively humid conditions; as the heat and humidity shifts west and north, the southwest is getting a bit of a reprieve while the eastern US is blanketed with heat warnings.

It’s not just the heat – it is the unexpected/unprecedented storms, droughts, high winds, and resultant floods and fires that are becoming all too common.

credit CNN

Yellowstone is closed, and some roads are impassable  – and will remain impassable for some time due to flood damage. The Yellowstone River reached an all-time high Monday – more than 2 feet higher than the previous record. This in an area that’s been parched in a drought.

flood damage in Gardiner Montana, credit CNN

Hundreds of thousands of Ohioans and West Virginians are without power.

Winds gusting north of 80 mph hit Chicago yesterday – exceeded by a 98 mph guest in Fort Wayne Indiana.

Six months ago I wrote this:

the biggest long-term concern for workers’ comp is global warming...yet this is getting zero attention.

There’s going to be an inevitable increase in issues related to heat, flooding, fires, drought, tornados and hurricanes. This is getting more real every day yet remains all-but-ignored by pundits, policy-makers  and rate-makers.  We can expect more heat-related claims. Hurricanes, fires, and tornados will increase in number and severity; affecting logistics, labor, construction, and claims. The research is clear.

It didn’t have to be this way, but thanks to big oil and its ability to manipulate people and pay off politicians, we failed to take action.

And let’s not forget people were willing to be manipulated.

Now, we are paying the piper. More specifically, workers in public safety, manufacturing, healthcare, construction, logistics, agriculture, forestry, mining, transportation and other sectors will be the ones suffering from the lack of foresight and inability/unwillingness to believe science exhibited by far too many of us.

As of last summer, only three states had adopted standards for workplace heat exposure – kudos to California, Minnesota and Washington. The Feds have yet to set federal requirements.

Jeff Rush of California Joint Powers Insurance Authority and I will be discussing the impact of global warming on workers’ comp at National Comp 2022; thanks to Michelle Kerr and her colleagues for inviting us to speak.

What does this mean for you?

1. Denying the reality of human-caused climate change will have devastating effects on all of us – with worse consequences for our kids and grandkids.
2. States and the Feds will enact heat/humidity exposure standards, which will drive big changes in risk management.

More details from NCCI Chief Actuary Donna Glenn’s presentation yesterday…

Claim costs are driven by employment, frequency (what percentage of workers gets hurt), the cost to provide medical care to those injured workers and the cost of paying their income benefits while off work.

While claim frequency bumped up in 2021, the increase just offset an almost-identical decrease in 2020. When you pull out the COVID stuff, the average annual decline in work comp claim frequency has been 3.8% over the last 20 + years.

This means – in three years there will be 11.4% fewer claims than there are today – that’s one out of ten claims.

Indemnity “severity” didn’t change last year compared to 2020, leveling off after a pretty consistent increase from 2016 to 2020.

Medical “severity” for loss time claims didn’t increase from 2020 from 2021 – it was dead flat – and has been pretty much flat since 2016.

Ed. note – while widely used in the work comp industry, the use of “severity” to describe what is nothing more than “cost” isn’t helpful. Medical severity should be a clinical measure, not a financial one. I would argue that the use of “severity” further distances the industry from increasing its understanding of the role of medical care in workers’ comp.

Glenn attributed the lack of movement in part to a shift to delivering care in outpatient facilities…more details to come in the final presentation today.

What does this mean for you?

Work comp medical costs are NOT increasing – my guess is the major progress most payers have made in reducing drug costs- and more specifically opioid over-use – has been a major help.

Work comp is still way over-priced, incredibly profitable, and the industry – defined as total revenues – is a lot smaller than it appears.

Those are my key takeaways from NCCI Chief Actuary Donna Glenn’s presentation just completed in Orlando (ed note – this was supposed to be distributed yesterday, but I missed the 10 am cutoff time)

I’m not at NCCI due to other client needs, but the fine folk at NCCI have provided a media feed – thanks Cristine Pike and Dean Dimke…

(Note NCCI has included data from most but not all states and payers; thus I suggest you pay more attention to overall trends rather than specific figures)

Premiums for private carriers were up just a bit last year – less than 2 percent.  Not a surprise as COVID was still rampant although shutdowns weren’t as prevalent…and employment was way up in 2021 compared to 2020.Rates are down in pretty much every state except Hawaii (betting its those damn physician dispensers in Hawaii…)

Overall, premium rates dropped significantly last year – continuing what has become a 9 year trend. The drop was driven by a decrease of one-third in losses, almost all of which was offset by a 28% increase in payroll. Interestingly “rate loss cost departures” i.e. discounts – have grown significantly over the last few years. See the para below for my reasoning as to why this has happened…

Combined ratio was 87 – again a hugely impactful continuation of 8 years of underwriting gains. WC – which used to be marginally profitable – continues to be a huge profit producer – which is why those “loss cost departures” i.e discounts – are growing. Insurers know how profitable work comp is, and know they can make bank even if they drop their rates.

Even better, NCCI projects accident year combined ratios will improve over time for 2020 and 2021… in contrast to reporting carriers’ initial forecasts, NCCI believes ultimate losses will be much lower. (the blue shaded areas above reflect NCCI’s predicted final loss ratios; the grey reflect carrier’s initial predictions and current predictions.)  One can see that carriers’ predictions have consistently been much higher than their final loss ratios – and there’s still more room to decline.

2021’s 25 percent operating gain (!!!) is just the latest in a 9-year string of operating gains. 

Not surprisingly carriers released a shipload of reserves last year – this reflects the disparity between what they initially report compared to what losses ultimately totaled. NCCI predicts there is more favorable development to come – as in a LOT MORE.

That said, NCCI indicated reserves are still $16 billion too high.

Donna Glenn, NCCI’s Chief Actuary, kept referring to these results as evidence of work comp’s “strong financial position”.

I’d suggest that Ms Glenn’s terminology while directionally accurate, is burying the lede.

Which is this:

• work comp rates are still way too high,
• carriers are making way too much profit, and
• the actual industry size is significantly smaller than today’s premium levels suggest.

What does this mean for you?

More consolidation, more rate cutting, more growth for TPAs.

WorkCompWire arrived yesterday with the news that new employees get injured much more often than their more-experienced colleagues.

The Travelers provided the research, which confirmed  – and added more detail – to what we already (sort of) knew – about a third of injuries happen to workers with a year or less on the job.

This makes sense; newer workers are less experienced, have had less training, are likely younger and don’t know what they don’t know.

Not surprisingly the incidence rate varies by industry…again from the umbrella people…

Couple additional observations.

• Construction is a higher-severity industry, making newer workers even more susceptible to longer-term claims.
• Hospitality, construction, and transportation are higher-turnover industries, making it more likely the entire workforce is less experienced – and more of the workers are in their first year than in other sectors.

And here are related issues that deserve your attention:

• there’s a lot more turnover in employment than “normal” these days – which means more workers will be in that dangerous first year.
• construction is ramping up with billions in spending on governmental and private projects.
• logistics/transportation is under severe stress due to the ongoing supply chain problems

What does this mean for you?

All these factors suggest injuries may bump up later in 2022 and into 2023.

Kudos to the Travelers for the work; this is helpful indeed.