I was fortunate indeed to attend Louisiana Workers’ Compensation Corporation’s annual provider meeting last week. Well attended, learned a lot, really enjoyed the people and the weather was really nice too.

I was blown away by their office building.

It was gorgeous…open, airy, beautifully appointed, welcoming, spacious, high ceilings and a terrific learning center and gym…it can only be wonderful to work in and it was a delight to experience.

But what really impresses me about LWCC is their people and culture – open and constantly learning, humble and very focused on doing the right thing. Unlike many other workers comp carriers, LWCC is about as far from arrogantly self-satisfied as it could be. I’ve seen way too many payers suffer from the “if it wasn’t invented here it didn’t need to be invented” syndrome, secure in the incontrovertible truth that they alone are the BEST.

They of course won’t listen or read this…why waste the time when you’re entirely sure you can’t learn anything from anyone? Especially not a single state carrier in a not-big state solely focused on a single line…

They might learn…if their customers take them down a notch or several, challenge them to compare their processes and outcomes using objective criteria, call them out on their arrogance.

It is clear that senior management really cares about LWCC’s people and are totally committed to doing the right thing. They listen hard and carefully, and respond to what they hear. And it shows; the passion and commitment to doing the right thing by every injured worker and every policyholder was front-and-center, evident in every LWCC person there.

They invest in marketing – which is really, really good. A cogent, really well-designed branding strategy designed to link LWCC to its home state, fresh and engaging graphics, a commitment to telling their stories, a leader who really understands marketing – which is NOT proposal writing, powerpoint editing, or letter writing. It is branding, content, design, strategy, pricing, research, community relations and more.

I don’t know of any other workers’ comp entity that does it as well.

What does this mean for you?

Most of the biggest payers in workers comp can learn a LOT from LWCC. 

Yesterday we dug into my prescience – or lack thereof – as laid out in my first 5 predictions about workers’ comp in 2022.

Today, it’s the second 5.

6. With one or two exceptions, don’t expect much in the way of private equity investments.

There may be one or two large transactions, and a couple small ones, but outside of that, the bloom on the workers’ comp rose appears to be fading.

Verdict – True.

Enlyte’s sale didn’t happen; sources indicate the price offered didn’t hit the level its owners needed for the big bonuses to kick in. Not good for the employees with options…

Other efforts – MTI America and Medata among them – also didn’t result in sales, while TRISTAR bought Risico and Carisk acquired Advanced Claim Review Specialists – both deals make a lot of sense strategically. There were a few other, smaller transactions, but nothing like what we saw 5+years back.

Oh, and the deals that did happen were NOT PE firm acquisitions, rather strategic investments by other companies in the space.

Adding to that is the reduction in the number of firms interested in workers’ comp services…unlike the halcyon days a few years ago, there are far fewer PE firms focusing on work comp.

7. OneCall will be sold and/or split up. 

The BlackRock and KKR entities that are the current owners are not operators; they are debt owners. CEO Tom Warsop has squeezed out all the squeezable costs – and then some. Growth – defined as new business from new customers – is not happening. Add the overall drag on work comp services from the still-real drop-off in claims and claims services, and the reasons to hold on and hope are few indeed.

Plus, if interest rates increase – which is a distinct possibility – and if private equity interest in workers’ comp continues to diminish from it’s current modest level – also a distinct possibility – OCCM’s owners may well decide to sell soon rather than watch values decline.

Verdict – Nope. OCCM continues to soldier on, although Sedgwick’s move to internalize those services and the continued structural decline in claims frequency make the future uncertain at best.

8. COVID’s impact on costs and rates will prove to be minimal.

COVID claims are cheap, few are anywhere close to catastrophic cost levels, the effect of presumption laws and regulations is not much of an effect at all, and many employers – especially health systems – are forcing employees to use PTO rather than file for WC when they test positive/have symptoms.

Most research organizations and actuaries would do well to reflect how their early predictions were so…bad.

Helpful hint – two places to start; a) the tendency for WC “experts” to catastrophize and b) the almost-complete lack of understanding of healthcare drivers, costs, cost structures, reimbursement, and epidemiology.

Verdict – True.

All the credible research indicates COVID hasn’t been expensive – if anything claims are less costly than non-COVID claims.

9. There will be no big issues in workers’ comp. “Big” defined as important, needle-moving, disruptive, revolutionary.

No, medical marijuana is NOT a big issue – neither is COVID, or presumption, or the mid-term elections (there is ZERO interest in workers’ comp on the federal level) or remote work (does anyone seriously believe office workers tripping over toys will amount to any real dollars?)

Oh, and with rates at all time lows, frequency continuing to drop, and medical costs (with the exception of physical therapy and facilities) flat, coupled with ongoing supply chain and labor market issues, execs at big employers are (justifiably) completely uninterested in workers’ comp.

If the big girls and boys don’t see any issues, there aren’t any.

Verdict – True.

While some pundits/erstwhile “experts” would have you think medical marijuana, COVID, employment, or other issues even more tangential are going to be big issues, reality is there are no big issues in workers comp – save the decades-long drop in claims frequency.

10. Here’s the kicker – 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.

Verdict – True.

Yep this is going to be a controversial finding, especially among the human-driven climate change deniers (and other flat-earthers).

Storms are getting more severe, heat-associated “injuries” increasing, and other major weather events (tornadoes, massive blizzards, deep cold snaps) are happening more often and with more intensity.

The verdict.

I got 8 correct, one flat-out wrong, and one is TBD.  

Proving I never learn, we return to score how I did on my 2022 predictions for workers’ comp…

a sneak peek inside Health Strategy Associates’ intergalactic HQ as the analytical team finalizes its prediction algorithm

today we’ll look at the first 5.

1. Prediction – The soft market will continue.
   Carriers are still over-reserved, rates are still too high (see the opioid hangover), capital is still flowing into workers comp (gotta love that looooong tail), and employment growth may continue to be modest (low wage workers have discovered that working at crappy jobs isn’t always a have-to, especially when child care is unavailable and unaffordable).
   On the other side, wage growth will likely continue (thus partially mitigating the above drivers) as more employers finally figure out that people aren’t interested in crappy jobs for crappy wages.
   Caveat – towards the end of 2022 we may well see a bit of tightening as construction, infrastructure, green energy and other initiatives start up and get operational.
   Verdict – True. The most recent reporting from NCCI has the combined ratio at 87.2% – a clear indication that rates remain too high, and it’s a sure bet reserves are as well. The same report says “NCCI expects premium to decrease in 2022 by 7.5%, on average…”
   That, dear reader, is proof positive the soft market continued…
2. TPAs will add more business, mostly from carriers.
   As work comp continues to shrink, insurers will ramp up efforts to shed assets and expenses to reduce their cost structure. By outsourcing claims, carriers are trading the high fixed costs of a claims infrastructure for the variable cost of a per-claim admin fee.
   The smarter carriers will negotiate hard so they don’t get screwed by medical management and other non-fixed fees…but many carriers aren’t that smart.
   Verdict – True.  Gallagher Bassett is now handling the vast majority if not all of AIG’s WC claims. Other TPAs – Tristar, Broadspire and Sedgwick among them – added carrier business as well.
3. Insurers will reduce staff, particularly in claims.
   Well, of course. see #2 above. However, TPAs will look to add claims staff, so experienced, well-trained claims folks will be highly sought-after.
   Verdict – True. AGI slashed staff – but GB hired many.
4. IF total medical costs go up – and I doubt they will  – the increase will be marginal.
   Yeah, I know there’s lots of press and punditry about work comp medical costs aka “severity” increasing – and most of it is flat out wrong.
   Verdict – no conclusive data available yet.  It’s too early to tell.
5. That said, facility and therapy costs will go up.
   Mostly because a) Medicare is increasing reimbursement for therapy which trickles down to work comp fee schedules, and b) some healthcare systems and for-profit entities (looking at you, HCA, especially in Florida) have figured out how to bust open the work comp piggy bank.
   Verdict – True – anecdotal reports of higher facility costs abound, as does news of higher costs for physical medicine (PT, OT, and chiro). I will come back to this after NCCI’s annual meeting in May to finalize the verdict.

Tomorrow – the other half.