A couple weeks back NCCI released information about its annual survey of work comp execs.  About 100 participated in the survey; some of the results were a bit surprising.

Execs were asked about their “concerns” re workers’ comp…frankly I found some of their concerns (financial health? rate adequacy? medical inflation?) puzzling at best.

Here’s a couple questions from my discussion with Damian England, Executive Director, Affiliate Services and Raji Chadarevian, Executive Director-Actuarial Research – and thanks tons to NCCI’s Cristine Pike for making this happen.

Where did the responses rank concerns?

Damian England, Executive Director, Affiliate Services – “While some carriers mentioned multiple concerns, roughly 40% of the responses were related to the financial health of the system and rate adequacy. About a quarter reflected the changing workforce, followed by medical inflation and the economy. Climate change and artificial intelligence were cited as emerging concerns.”

MCM – Rate adequacy concerns?

Damian England, Executive Director, Affiliate Services – Rate adequacy concerns are more of a global fear of the future and the unknown, amid a long-term trend of steady declines in loss costs/rates.  Although the industry in aggregate has seen nearly 10 consecutive years of underwriting profitability, not every carrier has same results or books of business; rather, individual carrier performance varies in many ways from the aggregate.  We also hear about changing underwriting cycles and whether we have the data necessary to recognize a turn in trends, as there is a recognition that recent trends will not last forever.

MCM – Why are they worried about medical costs – which are a non issue?

Raji Chadarevian, Executive Director-Actuarial Research (and all around good guy). – Medical cost drivers are not well understood; some are just looking at the overall medical price index, but medical cost drivers go beyond that. Changing medical practices, new medications, new ways to administer treatments and other transformations need to be considered. It is starting to resonate that some are understanding it is more complex…but there is a misconception in the industry that we look at health insurance rates and think that is representative of medical inflation – those rates [health insurance premiums] are going up but that is not medical inflation.

Also, WC is a long tail business, so a small change in the inflation rate one year can mean a lot in terms of overall cost of claims – that is where some of the concern emanates from – what does it mean for a 20-30 year claim?  Furthermore, for LT claims it isn’t general medical inflation largely driven by physician and facility prices, rather, for claims that are beyond the critical treatment period, medical costs have more to do with the price of Rx, home health care, medical equipment. Prices for HHC and DME have gone up significantly in recent years.

Ok, couple things here.  And please, this is not meant to argue with Raji or Damien, rather to point out that work comp execs need to study up on medical issues and worry about REAL issues, not NON-issues.

1. Rate adequacy is NOT AN ISSUE. Over the last decade rates have been too high – evidenced by continuing rates drops in almost all states over that period, accompanied by huge profits AND $14 billion in “excess” reserves.
2. Medical inflation is NOT AN ISSUE. Over the last few years there have been no reports of significant increases in medical trend. None. Zippo, Zilch.
3. Drug costs have been dropping for years – for lost time claims as well as med onlies.
4. Claims with ultimate costs >$1 million account for – at most – 15% of total WC costs  – and a huge chunk of that is not medical, but indemnity expense. So, while I get some execs may be concerned about future costs, this feels more like catastrophizing than rational business thinking.
5. Climate change – hard to believe that this was not one of the top concerns, but completely consistent with the industry’s ignorance of the issue. Talk to insurers, employers, and TPAs in Louisiana and California and they’ll regale you with the horrific and extremely expensive impacts of human-caused climate change.

What does this mean for you?

Execs are working about non-issues and willfully ignoring those that will have real and sustained impact on the industry.

 

Stuff you may have missed…

Spinal cord stimulators...Don’t work.

More specifically, multiple high-quality studies found little evidence of pain reduction, no impact on disability, no impact on opioid use, and a relatively high risk of complications (about one in five patients required device revision or removal)

Just as bad, the SCS industry fought back with highly questionable tactics: this from JAMA reported in MedPageToday:

 “Industry-funded critics of independent studies often do not follow the usual route of scientific discourse…

Rather than respond to the journal where the original study was published, critics frequently publish in journals where they are the editors and can control the discourse (15 of 18 letters criticizing the independent studies cited in this article appeared in journals with industry-affiliated editors)…

The journal can then choose to paywall the subsequent response from the independent authors, giving critics the last word.”

and criticisms are typically narrow (but they didn’t look into the benefits for left handed red heads who speak Swahili!) and/or specious.

The net – science indicates the risks of SCS are high indeed, while the benefits of SCS are sketchy at best.

FDA approves test to assess opioid addiction risk

From the FDA”

“The AvertD test is intended to be used before patients who are being considered for a 4- to 30-day prescription for acute pain (e.g., for a planned surgical procedure) are first exposed to oral opioids. It is not intended for patients being treated for chronic pain.”

Excellent news indeed!

The test is NOT yet available…check here for more info.

Net – get your Medical Director(s) on this post haste to determine coverage policies and reimbursement.

Opioid settlement dollars

are in high demand, with a bunch of companies coming up with very creative ways to stick their heads in the trough. Spiderman-type cord wraps for police, locking pill bottles, safe disposal envelopes are among the pitches governmental entities are getting for their opioid settlement dollars.

Two points – 

1. addiction counseling, behavioral health, and other patient care is what is needed – and where dollars should go.
2. illicit fentanyl is the big problem now – expensive locking pill bottles and disposal envelopes are marginally useful.

Texans may see rolling blackouts this winter, with implications for businesses, public safety employees, utility workers and essential workers.

In October ERCOT – the state’s power regulator, “… issued a request to increase [electricity producers] power capacity ahead of winter’s peak load season in Texas but canceled the request after it only found an additional 11 megawatts out of the 3,000 it was looking for.”

Power producers pointed to ERCOT’s request as too little, too late; University of Houston Energy Fellow Ed Hirs: “Just simply throwing some money out and hoping that people could bring a coal-fired power plant back out to operational capability within a period of weeks was really, ridiculously, ambitious.”

It’s not just Texas…with changing winter weather patterns driven by climate change other states are also at risk of similar blackouts.

 

In which we briefly discuss the power grid, jobs and what it means for you.

The good news is the Inflation Reduction Act (IRA) and bipartisan Infrastructure Investment and Jobs Act invest billions of dollars to upgrade the nation’s electrical grid.

courtesy Carbon Collective

(a connected grid enables operators to send power from places where there is plenty of electricity – say Arizona – to places where demand is super high – say Oklahoma during a deep freeze)

Dollars going to infrastructure are a major reason construction spending has jumped..it’s now more than a third higher than pre-COVID

Paralleling investment, construction employment has dramatically increased and is well above pre-pandemic rates..

source – FRED

What does this mean for you?

More investment = reliable infrastructure + more jobs = higher payrolls = higher premiums.

A very good explanation of the grid, transmission, and electricity production is here.