Pretty terrific.

Put another, more awkward way, COVID’s been very, very good to work comp insurance.

Yesterday kicked off the NCCI Annual Issues Symposium with CEO Bill Donnell’s introduction. Bill set the right tone – we’ve all been humbled, learned not to take anything for granted, and adapted.

The State of the Line address was again led by Chief Actuary Donna Glenn. Donna and her colleagues spoke extensively about the impact of COVID – fewer total claims and a big drop in premiums especially for main-street businesses, hospitality, retail and personal transport (my label, not her’s).

Financial highlights

Net written premiums were down 10% for state funds and private carriers.

Early numbers indicate a calendar year combined ratio of 87% with $14 billion in excess reserves – and only $260 million in COVID losses.

But this financial heyday wasn’t just due to COVID. Last year was the 8th year in a row for rate decreases – many of them in the double-digit range; rates continue to drop, with the vast majority of states seeing significant Year over Year decreases.

Despite plummeting rates, the combined ratio (claims plus all admin costs) has been under 90 for four consecutive years…so rates are STILL too high. While Donna characterized the underwriting gain as a measure of “financial strength”, I’d suggest one could also call it “over-pricing”.

Unpacking the combined ratio we find loss ratios have been under 50% for three years in a row. Investments gained 11% last year. The result – a 2020 pretax operating gain of 24%.

That, esteemed reader, is a very hefty profit margin.

Even heftier when one adds in the $14 billion in excess reserves.

COVID

The average COVID claim cost $6000, and about 75% are lost time claims. COVID claims represented 7% of LT claims.

“Indemnity only” claims are those that had no medical costs – and are pretty much unique to COVID claims. Makes sense when you think about how most of us are affected – a couple weeks of misery at home, followed by a steady recovery, with no external medical care..

Even COVID claims with both indemnity and medical costs ran up $18k in costs – about half the cost of the average WC LT claim.

95% of claims were less than $10,000, 1% of claims accounted for 60% of losses – these tended to be inpatient claims, often with ICU utilization.

My takeaways.

First, work comp is VERY profitable.

Second, insurance rates are still much too high. (Even if claim counts rise, there’s a LOT of excess reserves sitting in insurers’ coffers.)

Third, all the caterwauling about how awful COVID’s impact on work comp was flat out wrong. More to the point, much of it was avoidable if those predicting awfulness had thought about how COVID is treated.

Mark Priven and I – and I’m sure others – figured this out last summer; this isn’t to blow our horn but rather to show all the indicators were there – if one just knew to look for them.

I believe this is because most people in workers’ comp don’t know or understand health care, medical care, health insurance, provider business practices – pretty much anything about the biggest driver of workers’ comp costs.

And that’s why they got COVID predictions so wrong.

 

 

The worst provisions of HB1465, aka the “any willing provider whether or not they can spell “workers’ comp” can join an MPN” bill have been removed from the text.

Now, we get to deal with an almost-as-bad bill, which henceforth shall be known as the HB335 – the “Make Adjusters Jump to Inappropriate Conclusions Act”.

Among other things, the MAJIC Act:

• forces employers to decide if a filed claim is or isn’t compensable in 45 days instead of today’s 90; and
• forces employers to pay up to $17,000 for medical care while the claim is being investigated.

The MAJIC Act creates problems in an attempt to solve others that don’t exist. 

About one of every eight claims ultimately judged compensable takes 45 – 90 days to investigate.  So, the MAJIC Act would force employers to accept or reject a significant chunk of claims without a full investigation.

I can hear the counterargument now…”well adjusters should just work faster!”  Well, “pushing on a rope” isn’t much of a solution…because adjusters don’t control:

• whether and when a doctor sends medical records;
• whether or not a patient responds to calls;
• whether a qualified medical professional can schedule an appointment;
• whether or not an investigation has been completed and all relevant information collected;
• and a lot of other materially-important pieces of the puzzle.

The result will be more provisional denials, leading to more litigation, and higher cost for everyone with no benefit whatsoever for folks injured or sickened on the job.

Then there’s the 70% increase in the employers’ medical liability for claims that have been reported but not accepted. How that number was decided upon is a mystery, because, according to a study just published by CWCI;

• less than 1 out of every 165 claims incurred costs of more than $10,000.
• 1 of every 500 denied claims had costs more than $10,000

SB 335 proposes “fixes” to problems that do not exist; there’s no evidence that injured workers are suffering because they are denied care, nor are they harmed because adjusters are doing thorough investigations – as required by state law.

SB 335 will lead to more litigation, which will increase employers’ and taxpayers’ costs while benefiting no one.

What does this mean for you?

Please encourage California legislators to leave the MAJIC to the magicians.