Category: Workers Comp

Apr
4

Facility costs…more bad news

Posted by Joe Paduda on Monday, April 4th, 2022 | Comments

Here’s two things which will likely increase facility costs.

Becker’s reported last week that so far this year hospital and health system margins (with some very notable exceptions) are pretty crappy – down almost 12 percent month over month in February, and a whopping 42% below February 2020 (jsut before COVID).

My bet is significantly higher staffing costs are a major contributor; the giant Henry Ford system said labor costs were up 8% in February over the same month in 2021; Providence’s increase was even higher at 10%.

Couple that with a steep drop-off in health insurance coverage as COVID-related medicaid coverage ends, and you can expect facility costs to jump.

That’s because we’re going to see a lot more uninsureds seeking care at hospitals.

Medicaid is likely the single largest payer today, with about one out of every four of us covered by Medicaid.

The problem will be especially acute in states that have not expanded Medicaid – if your members/insureds/injured workers are in the orange states, you’ve already been paying a hidden tax to help pay for uninsured care delivered by hospitals.

Since states can pretty much determine who gets Medicaid, the problem is even worse in places like Mississippi that have long restricted Medicaid coverage to a very thin slice of the poor.

If you make more than 27% of the federal poverty level, you’re too rich to get Medicaid in Mississippi – which is both the poorest and sickest state in the nation.  (kudos to Louise Norris for her intel on the issue)

What does this mean for you?

Success favors the prepared. If you think you’ve got an answer to this you’re likely wrong. 

Apr
1

Work comp payers and COVID legislation funding…

Posted by Joe Paduda on Friday, April 1st, 2022 | Comments

You may have noticed President Biden’s request for $15 billion in additional funds to cover vaccines, anti-virals and other COVID-related needs failed.

Fortunately, it’s back on the table.

Unfortunately, part of the funding may come from work comp payers.

The latest news out of Capitol Hill is a there appears to be agreement on a $10 billion COVID care funding bill. While that’s a lot less than the $2 billion the Feds are spending each moth for vaccines, treatment, and related expenses, it’s a whole shipload better than nothing.

The workers’ comp angle appears to be a response to Republican concerns over where to find the funds; while some (amount to be determined) dollars will come from unspent stimulus funds, there’s an unknown gap – and Republicans will not approve the new bill unless funding is a) guaranteed and b) is not “new” spending.

Enter over-reserved and super-profitable workers’ comp…the industry’s stellar underwriting margins during the COVID era make it one of the select few sectors that thrived during COVID. That and the sense among some that the inconsistent way states dealt with presumption reduced the comp insurance industry’s costs make comp an attractive target.

From Yahoo news:

“My view is that it ought to be entirely paid for out of money that’s already in the pipeline by reprogramming it for whatever amount they can justify to get the job done,” Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday.

Except…it looks like COVID funding will be fully utilized:

There’s this from The Hill:

“I don’t think the Dems would agree to offsets that would allow them to cover that. So it’s dropped down to the size that they were willing to pay for,” Thune told The Hill.

“That $5 billion piece could be easily part of the package, but they are just reluctant to repurpose funds, and there’s a whole pile of them sitting out there,” he added.

Side note – A LOT of people are about to lose health coverage as the COVID-era Medicaid funding supplement is about to expire, leaving those people uninsured (continuing Medicaid funding could have helped make up any shortfall).

The Dems a) want to keep the global vaccine program funded, while b) Republicans don’t want to spend. From The Hill:

Romney and Schumer have been swapping offers on a list of potential ways to pay for a deal throughout the week, with Republicans arguing there is more than enough to cover a bill for the full $15.6 billion.

How work comp got into the conversation is anyone’s guess; here’s my speculation:

  • Initial research indicated work comp-might have to spend billions on COVID care; that turned out to be wildly over-stated (of course researchers had very little information to go on)
  • Congress’ budget folks likely a) saw the reports and b) know the industry spent a small fraction of the “potential” costs
  • Work comp is outside federal funding or federal responsibility…politically it’s easy to spend dollars from someone else’s wallet
  • The massive profits earned by work comp payers, plus the industry’s $14 billion in “excess” reserves make this a very attractive target. 

From Politico:

“I just cannot support another round of Covid funding that just completely eviscerates our ability to be, as Joe Biden put it, the arsenal of vaccines for the world,” Rep. Tom Malinowski (D-N.J.) said. “We have to get it right.”

So, we have:

  • politicians looking to have something positive to say when they head home for the Easter break;
  • another COVID wave may be on the way;
  • a major funding gap, and
  • a super-profitable, wildly over-reserved insurance sector with little-to-no sway on Capitol Hill.

How this works out – or if it does – is also anyone’s guess.

What does this mean for you?

As the old lobbyist says: “If you aren’t at the table, you’re on the menu.”

Mar
30

Doing the right thing

Posted by Joe Paduda on Wednesday, March 30th, 2022 | Comments

Kids’ Chance has become an industry-wide phenomenon, a charity supported by insurers, employers, service companies and individuals throughout the workers’ comp world. For those not familiar with Kids’ Chance, it provides children of workers injured on the jobs with financial support for their ongoing education.

Good friend Ken Martino is President of Kids’ Chance; Ken and I connected a couple months back and he updated me on the good work they are doing. Ken noted that since its founding back in 1988, Kids’ Chance has funded over $30 million in scholarships to over 8,700 students. Ken and Kids’ Chance are always looking to do more; If you know an injured worker with a child/children that could benefit from financial support for education, here’s the link to submit their information.

More recently, over a two-year period, Kids’ Chance provided over 700 students with scholarships averaging over $4,200 each. In total, over $3 million was provided –  in just 2 years out of the organization’s 33 years of existence.

I caught up with Liberty Mutual’s Sue Mellody at WCRI; Sue is very actively involved in Kids’ Chance of Massachusetts, one of the 49 state chapters of the national organization. In addition to her day job as VP Managed Care and Tech Solutions, Sue serves on the Board and chairs the Scholarship Committee.

Sue noted that when “someone is hurt on the job, the family is impacted just as well”…an occupational injury can affect the worker’s entire family. If the worker is out for an extended time, finances can suffer. This can impact kids in a number of ways – one of the most concerning is their educational future may be in jeopardy with potentially far-reaching consequences over the rest of their lives.

The Massachusetts chapter has made a lot of progress of late, with 10 applications for scholarships already this year after a total of 4 last year. Kudos to  Sue and her committee members for making a difference…

What does this mean for you?

If you know an injured worker with children that could benefit from financial support for education, here’s the link to submit their information.

To join in and help out, here’s how you find your state chapter. 

 

Mar
25

WCRI #4 – Provider consolidation’s impact on workers’ comp

Posted by Joe Paduda on Friday, March 25th, 2022 | Comments

Is Not Good.

that’s the primary takeaway from Bogdan Savych PhD’s presentation at WCRI’s annual conference– and a lot of other work I’ve done on the topic.

Consolidation eliminates competition – although I’d posit there’s little true competition in health care services. [I’ve written a LOT about  consolidation and the impact thereof]

There’s solid evidence that consolidation actually leads to increased prices and some research indicating it leads to decreased quality.

So how has healthcare evolved – well, primary care docs shifted from mostly solo practice to employment by health systems or group practices. Note this data is from 2018; consolidation has accelerated since then.

Of course, like everything else in healthcare, it’s local…orthopedic practices in Wisconsin are much more likely to be owned by health systems than those in Delaware.

Dr Savych’s research hit on a critical issue – exactly how many workers’ comp patients do primary care docs see? – the answer is most see almost none – with just one out of every ten physicians seeing more than 10 WC patients per year. Of course orthos see more – but still not many; only about a third see more than 10 claimants per year.

There are a whole host of issues with this which we’ll get into in a future post. For now, the net is researchers have to identify the specific physician responsible for the care of and outcomes for specific patients – which is fiendishly difficult especially when that physician moves from a group practice to employment by a health system. Provider identification is the main challenge – but by no means the only one.

Case mix adjusting – the art of comparing patients with similar diagnoses (often primary, secondary, and tertiary) over time – is as or almost as hard to get consistently right.

All that said, Dr Savych noted that cost increases are due more to a shift in the volume and type of procedures than higher prices for individual services.

The initial takeaway (there’s a LOT more research and analysis to do) is vertical integration (physician practices absorbed but health systems) leads to docs providing more expensive services.

What does this mean for you?

Consolidation raises work comp medical costs.

The best way to think about this is on a state-specific basis; understand where there’s more consolidation and watch the type of services delivered to your patients like a hawk.

Mar
24

Optum vs the Massachusetts Attorney General

Posted by Joe Paduda on Thursday, March 24th, 2022 | Comments

Several weeks ago Massachusetts’ Attorney General’s office put out a press release noting work comp PBM Optum had settled a civil case by paying $5.8 million and agreeing to “implement additional procedures to prevent overcharges in the future under the workers’ compensation insurance system. Optum Rx has also agreed to cooperate with the AG’s Office regarding monitoring of future regulatory compliance.”

Several clients contacted me to get my take, and as I’m involved in audits of multiple pharmacy programs any insights into the issue might be helpful.

The net – Massachusetts’ work comp RX fee schedules’ regulations are ridiculously difficult/impossible to implement, and Optum was treated unfairly by the AG’s office.

[note I’ve spent way too much time digging into this, and it is entirely possible I don’t have the full story – largely because the AG’s office chose to be unhelpful.]

I reached out to the AG’s contact multiple times in an effort to better understand the issue; when I finally got a return call, it was, well, less than useful. The attorney told me he couldn’t say anything beyond the press release due to the involvement of a confidential informant. [that’s a pretty universal excuse for not engaging and one I found less than helpful; I wasn’t asking how the AG learned about this, but rather specifically what Optum allegedly did wrong]

here’s the key section of the AG’s press release:

The settlement, filed in Suffolk Superior Court, resolves allegations that Optum Rx, in some circumstances, failed to apply various regulatory benchmarks – like the Federal Upper Limit for Medicare and the Massachusetts Maximum Allowable Cost – to its pricing determinations for certain workers’ compensation insurance prescription drug charges.[emphasis added]

After some back and forth, in which I explained the release wasn’t clear, he informed me [paraphrasing here] that “anyone who knows the Mass work comp pharmacy fee schedule understands the significance of the ACA FUL and Mass MAC…”

I got a bit huffy with his borderline rude retort, and informed the gentleman that in fact:

  • A) I did “know” the Mass WC Rx fee schedule;
  • B) I have a pretty solid understanding of pharmacy fee schedules and reimbursement in general; and
  • C) if I couldn’t understand it, then I’m pretty sure most work comp payers and other stakeholders couldn’t either.

So, I called contacts at Optum to get their side of the story.

The net is, according to Optum – and other PBMs I’ve spoken with – the fee schedule wording is unclear, subject to interpretation, neigh on impossible to implement and therefore highly problematic.

From Optum:

  • Defining and Implementing the Commonwealth’s “Usual & Customary” definition – The provision as written is unclear and guidance on interpretation/implementation was not supplied in a manner that allowed all stakeholders to be successful.
    • 101 CMR 331.02  – “Usual and Customary Charge. The lowest price that a provider charges or accepts from any payer for the same quantity of a drug on the same date of service, in Massachusetts, including but not limited to the shelf price, sale price, or advertised price for any drug including an over-the-counter drug. If an insurer and the provider have a contract that specifies that the insurer will pay an average or similarly computed fixed amount for multiple therapeutic categories of drugs with different acquisition costs, the fixed amount will not be the provider’s usual and customary charge.”

      My take       – this is nonsensical and impossible to manage – for a whole host of reasons.
      Taking this literally, a PBM would have to A) know the amount accepted for reimbursement for B) each and every drug at C) each and every retail pharmacy. Note that the Commonwealth’s definition of U&C specifies the “lowest price that a provider…accepts from any payer…” As PBMs and other payers don’t instantly adjudicate claims and don’t know what amount a retail pharmacy ultimately “accepts” for a particular script, there is no way to comply with this requirement. [retail pharmacy bills are rarely paid on the day the script is dispensed, but paid in accordance with each PBM contract – it could be weekly, biweekly, monthly, or at another time.]Example – an Optum patient goes to Walgreens on Tuesday, gets her script for 30 tabs of 800mg ibuprofen. Did Walgreens know and transmit to Optum the lowest price it accepted for that drug on that day at that pharmacy?
      Of course not.

       

  • Understanding of contracts between the traditional triad of pharmacy/PBM/comp payor – The Commonwealth’s interpretation of how payment agreements (within the specific context of MGL c. 152, Section 13) should run between those entities is, frankly, unique in relation to how other jurisdictions operate.
    In English, what Optum is saying is the Commonwealth thinks contracts should be three-way – PBM, pharmacy, and payer/PBM customer.
    That is patently impossible; there are tens of thousands of employers and other entities contracted with PBMs, which in turn contract with thousands of pharmacies.

From the AG press release:

“Our workers’ compensation insurance system has specific processes in place to help ensure drug pricing is handled fairly, maintains transparency, and keeps costs down,” AG Healey said.

My view – well, no.

If I read this interpretation right, Massachusetts wants something no other state does to solve a problem that no other state seems to think exists.

I suspect the AG’s office is also pursuing similar litigation against other PBMs – and more’s the pity, because from what I have been able to learn, the AG did NOT handle this “fairly”.

If that’s a misinterpretation, it’s due to a lack of responsiveness and clarity from the gentleman from the AG’s office who chose to NOT be “transparent”.

What does this mean for you?

If you’re a PBM, make sure you’re on top of this.

[note – Optum is not a client, and we’ve actually crossed swords several times of late. Regardless, from what I can tell Optum did NOT attempt to drive “up costs and…unlawfully profit.”]

note 2 – happy to re-engage with the AG’s office at any time.

Mar
21

Future of the Workplace post COVID – WCRI #3

Posted by Joe Paduda on Monday, March 21st, 2022 | Comments

My posting service sends out posts at 10 am eastern, so I decided to hold off on flooding your inbox with reportage from WCRI’s annual confab and spread things out.

Today we’re reporting on a panel discussion re the future of the workplace post-COVID (let’s HOPE we are “post” COVID)…[Ed note – these are paraphrases; corrections welcomed and apologies for errors]

Denise Algire, director of risk initiatives and national medical director for Albertsons Companies (and a good friend); Dr. Craig Ross, regional medical director for Liberty Mutual; and Dan Allen, executive director for the Construction Industry Service Corporation, a non-profit labor management association were the panelists.

Dan Allen – The vaccine requirements have been very well received by workers in construction – strong educational outreach, not a “hammer”, rather focused on getting the word out – safety is the imperative – healthcare demands all workers are vaccinated, so workforce depends on being being safe and being vaccinated to work in healthcare and many academic projects.

Construction workers are essential workers and are often right next to each other, so separating by 6′ is tough – collaboration is the key.

Denise Algire – Albertson’s relied on education and empowerment – did not have a vaccine requirement unless required by the state.

Long Covid –

Dr Ross – post acute symptom covid is considered a disability, so think carefully about how you approach this. There are 200 different symptoms in 20 different body systems…no consensus regarding diagnostic criteria or treatment for for Post COVID conditions (PCC). A recent study published in Nature compared post covid patients to a control group – one key finding was an increased risk for CV (cardiac) complications – most significant was myocarditis – 5x greater incidence in covid patients. [I think this is the link.]

Dan Allen – be ready to work with employees struggling with long COVID, there’s a very long list of potential symptoms/conditions…the key question is how do you address those? Employers must work with occ medicine specialists to better understand these symptoms and potential impact thereof.  mental health resources-  take frequent breaks – listen to understand where the patients are coming from – not as straightforward as our tupical WC claim.

Dan – there’s no WFH (work from home) in construction which leads to more risk of getting exposed on the job – to address this, construction sites have implemented scattered job site times; come early, come late hand washing stations, and mask regulations increased that safety.

Denise – grocery workers were essential workers as well – Albertsons’ put together a clinical team, realized no one size fits all – key is listen to employees and balance that with collaboration – looking at teaming and ensuring folks working on stuff together are at the office at the same time – going forward work  will be a hybrid approach –

Also – we need to keep re-assessing as COVID persists as the situaiton changes  – and may likely continue to change

Craig Ross DO – business needs to continue to invest in safety and safe workers

Dan – safety and health care critical – union training on these issues is paid for out of each worker’s hourly pay – “right to work” states kill apprentice and other training programs which strongly advocate for safety…Construction results in over 20% of workplace deaths in the US in an industry with <6% of workers.

The construction work force is aging and unless you train them well you’ll get more injuries. The great resignation started before the pandemic – don’t overwork and overexert the workers you do have.

Craig – going forward we will likely see increased repetitive trauma due to WFH  – calls for increased employee assistance.

Any changes in claim composition?

Dr Ross – claims composition didn’t change except more severe injuries – more severe multiple body part claims…there wasn’t a delay in care, telemedicine ramped up early and seems to be used in specific situations especially mental health. There have been very few vaccination claims to date; and multiple studies suggest it reduces risk of long covid.

Dan – suicide rates in construction are highest of any other industry – 53 workers/100k…why – big macho thing – injured workers don’t report injuries – working on mental health days, collaboration w businesses – have a foreman who talk to workers – let them know you care about them – talk to the workers so they can share issues.

Addressing the use of opiates and finding alternatives has been a big help – sometimes there’s a little bridge from using opiates as treatment to patients using them to address stress. Hope is we’ve learned from COVID and you’ll see safer workers and safer worksites, suicide presentation, calisthenics before work…there’s dollars for training in the infrastructure bill for minorities to help them get introduced to careers in construction.

Misclassification is a huge issue for insurers, workers, and builders – “cheat to compete” – they take advantage of immigrants – put em into jobs, unskilled, untrained, misclassified workers,  cheap untrained unsafe labor means legitimate contractor loses that job  construction is substandard and project has problems.

What does this mean for you?

Behavioral health was my big takeaway...be open, let workers know they are not alone and you’re open to listening, that there is no stigma.

As one who’s dealt with panic attacks for 25 years, I completely agree – yeah I get them, yeah they suck, and yeah you’ll get through this and we are here for you.

Mar
18

How’s the work comp “system” today?

Posted by Joe Paduda on Friday, March 18th, 2022 | Comments

A panel discussion on the State of the Workers’ Comp System featuring Alan Pierce, David Langham, John Ruser and Bruce Wood closed WCRI’s 38th Conference. The discussion was spirited, there were significant disagreements all handled with respect and courtesy – take a lesson, Washington!

There’s no question the “system” is way better than it was fifty years ago when the National Commission’s report was published…the panelists disagreed on how much “better” it is – among other issues.

Unfortunately what was not addressed in any detail was the state of the “system” today, rather the panelists focused mostly on how we got here. That was a miss, although my bet is Dr Ruser just ran out of time.

Alan Pierce JD opined [paraphrasing here] that all cost cutting efforts came at the expense of the injured worker, citing changes in Massachusetts’ reduction of benefits in the 90’s and other events. He also noted that issues related to compensability of injuries incurred by older folks with degenerative conditions are increasing, often to the detriment of the injured worker. Pierce is a passionate worker advocate with deep experience, albeit in one jurisdiction – Massachusetts.

Pierce asserted this has happened in large part due to the decline in organized labor and increased political power of employers. Unfortunately Mr Pierce went way over his allotted time, reducing other panelists’ time and robbing the audience in the process.

After Mr Pierce completed his soliloquy, Bruce Wood weighed in.  Bruce noted many states adopted key recommendations set forth by the national commission, then the work comp market collapsed around 1990, creating an “existential crisis.”

Bruce noted the industry was in such dire financial shape that state regulators adopted measures to address the largest cost driver in comp — permanent partial disability. He also challenged Pierce’s characterization of the industry’s prior acceptance of paying for care for aging-related conditions, citing changes in specific states to address that issue, changes that Bruce stated were necessary to help regain financial stability.

David Langham – a workers’ comp judge in Florida – criticized the production of the National Commission’s report, averring that the report was limited due to time constraints. Langham noted there needs to be a balance and legislators/regulators seem to make changes that are weighted too far towards employers or employees. Langham called for legislators to focus on getting things back in balance, noting few or no injured workers are involved in the legislative process, nor are any smaller  – or midsized employers for that matter. Kudos to Judge Langham for keeping to his allotted time.

Asked about the role of the Federal government, Pierce suggested perhaps there should be a set of minimum standards for worker benefits states should comply with…then noted this might become the de facto universal standard, thereby the “floor” becomes the ceiling.

Langham noted the public doesn’t have much faith in the Federal government, but failed to point out why that is the case – which I would argue is caused by two factors:

  • the vilification of public service by many pundits and politicians.
  • the abject failure of most elected officials to actually work for us, instead whipping up outrage and working only to get re-elected.[Of course the Federal government has problems…every large organization does…you tried to use your health insurance lately? called your cable company? mobile phone company?]

Wood noted that the last time Congress addressed any of the Federal programs was 1984…I would note that this is NOT the fault of those programs, but rather the responsibility of Congress.

Which, frankly, has not done its job.

My view

Change has to be driven by stakeholders.

Well, insurers are making record profits – they don’t see any need to change. Employers’ workers’ comp costs are at a historical low – they don’t see any need to change.

Injured workers may well see a need for change, but their intentions and desires are often co-opted by profiteers cloaking their insatiable thirst for yet more dollars in the guise of “helping workers.” I’m looking at you, mail order pharmacies masquerading as advocates…

Physician dispensing accounts for half of all drug spend in several states – yet delivers zero benefit to injured workers and sucks hundreds of millions out of employers and tax payers.

Many – but not all – hospitals in Florida are absolutely screwing employers and taxpayers, yet legislators and regulators in the pocket of the hospital industry aggressively resist any attempt at reform. Meanwhile, Florida’s doctors get paid less to treat work comp patients than their fellow physicians in pretty much every other state – and those same legislators and regulators do nothing.

I ran into old friend and colleague John Swan on the way out of the hotel (btw I LOVE the Westin Copley Square – great service, terrific gym, wifi works).

John said something we – and I – need to ALWAYS remember – the only people with “standing” to work on policy and interact with legislators are workers and employers.

The rest of us – insurers, TPAs, service providers, brokers, consultants, judges, attorneys, medical providers – are tangential at best.

 

Mar
16

WCRI kicks off…

Posted by Joe Paduda on Wednesday, March 16th, 2022 | Comments

It is SO GREAT to see faces, shake hands, smile and see it returned, reconnect with colleagues and friends after a looooong two years.

Scroll to the bottom for impacts on P&C and work comp…

Gallagher Bassett’s Russ Pass opened the conference – full disclosure I’m a big Russ Pass fan; he’s incredibly thoughtful, measured, and knowledgeable, and WCRI is lucky indeed to have Russ as Chair.

Dr. Bob Hartwig dove into the impacts of COVID on the work comp line….I had several cups of coffee so felt almost ready to keep up with the estimable Dr. Hartwig.

Inflation…

is at a 40 year high, started by supply chain issues, then exacerbated by fiscal/monetary policy, wage increases and now Russia’s war on Ukraine and the impact on energy prices. Inflation is driven by price increases in energy, food, vehicles and “core goods” — NOT from services including medical care.

Oil is going up and down – the China Shenzhen shutdown has cut prices quite a bit as demand falls (that’s my take, not Dr Hartwig’s). We are also a LOT less vulnerable to oil prices now as cars are twice as efficient as they were in 1980.

Hartwig noted that as bad as things are today – they really aren’t that bad.  As one who graduated college into high inflation and high unemployment, I heartily agree.

Dr Hartwig noted there’s a 20-25% chance that we enter a recession within the next year…although others think the chances are higher than that.  that would have a MAJOR impact on workers’ comp, as employment would drop and we might well see attendant claiming-related behavior.

Hartwig also noted that reserve adequacy might suffer if inflation stays high for a some time.  Not sure I see that – WC is WAY over-reserved today so there’s plenty of dollars in the kitty to make up for inflationary pressures.

Part of the driver of the current labor issue is a lot of people have been in and out of the workforce due to illness. That said, about half of businesses are having a tough time filling jobs…as only 82.2% of those in their prime working years in the workforce that’s likely a much bigger driver. Dr Hartwig opined that problems with childcare and fear of contracting COVID along with unemployment benefits are major contributors.

Wages went up over the last year, with average hourly wages up 10.6% from 2/2021 to 2/2022.  That’s a lot, especially compared to recent increases which were mostly in the 2 – 3% range for the last decade or so. (Ed note – I’m really encouraged by this – great to see folks in lower wage industries like hospitality get big boosts in their income – well deserved!)

More info…

  • Non-farm payroll is back to where it would have been if COVID never happened – that is remarkable/historic/great,
  • the “quits rate” seems to have leveled off,
  • more of us are retiring – especially the 65 – 74 year olds,
  • and more than half of the 55+ are now retired…(what’s wrong with the rest of us??)
    • that’s the first time this has ever happened – says Dr H.
  • one of the biggest drivers of economic growth is…population growth. As we aren’t making babies like we used to, and for unfathomable reasons are severely limiting immigration – that’s a drag on the economy.

Impacts on P&C

COVID cut premium growth in half – BUT that was still much higher than COVID’s impact on th overall economy.

Work comp saw a 10% decline in premiums in 2020 (not including state funds) – by far the biggest decrease in P&C.

P&C investment yields were 2.6%, the lowest level in 60 years. As interest rates edge up, investment yields will increase.

The overall work comp combined ratio is projected to be 90 in 2021 after an 87 in the previous year. That, dear reader, is super-profitable compared to the line’s historical returns.

Mar
15

CWCI – what’s happening in California – part 1

Posted by Joe Paduda on Tuesday, March 15th, 2022 | Comments

The brainiacs at CWCI presented the results of their latest research last week…video is here.

I’m a big fan of CWCI’s work because:

  • it is super timely – much more so than any other research organization
  • it covers almost all California claims
  • CWCI’s researchers are very insightful and
  • they explain the implications clearly and concisely.

Top takeaways…

COVID is one persistent bugger…the repeated peaks are driven by variants – reminding us that viruses evolve, adapt, and persist.

The major jump in January 2022 was driven by Omicron…January numbers were 13% higher than the previous peak – remember Delta?

That said, and yet another reminder – to date COVID claims have NOT been a major cost driver – far from it, and that’s primarily because COVID claims either A) didn’t incur any payments or B) didn’t incur significant medical spend..

[According to  CWCI’s Rena David, The majority of the “no medical or indemnity claims” may well be mostly those that were reported by the employer when there was a possibility a worker had COVID exposure but either the claim didn’t go forward or there wasn’t a positive test.]

While median costs for LT COVID claims with medical expenses were modest – and a lot lower than non-COVID claim costs, the gap narrowed considerably for claims at or about the 90th percentile for LT claims with medical expense.

BUT COVID claims were still less expensive for non-COVID claims – as if we needed more proof that COVID claims will not break the bank.

What does this mean for you?

As goes California, so goes the rest of us – just a little later.

Mar
14

Are we there yet?

Posted by Joe Paduda on Monday, March 14th, 2022 | Comments

Last week’s CWCI conference was – as usual – stuffed with useful information you can’t find anywhere else.

We’ll start off with this – Mark Schniepp PhD’s discussion of the state of the economy. Interesting takeaways indeed…

First up, consumer sentiment is not great – despite a booming jobs market, rising wages, low consumer debt and strong household finances including a solid savings rate, folks seem concerned about inflation. (note these data don’t account for the Russian war on Ukraine).

Second, jobs. There’s a giant number – as in a record – of job openings. This is pushing wages up – which I’d argue is a good thing, as the middle class’ wage increases have long lagged income increases among the super-rich. The lack of child care is a major factor – Dr Schniepp noted:

“among prime-age workers – those without children have fully returned to the workforce.”

I’m quite sure you, dear reader, know families that are constantly stressed by the lack of child care and the impact that has on work.

As one who graduated college at the height of the inflation back in 1980, when mortgage rates were in the teens and inflation wasn’t much lower, I get the concern about inflation.

That said, jobs were scarce indeed back then. So, compared to the early eighties, people are doing quite well, but IMO people are paying way too much attention to things like gas prices.

Gas accounts for just one out of every fifty dollars of personal spending…demonstrating once again that people are NOT rational.

The Russian War on Ukraine will likely drive some costs higher although we Americans are much less vulnerable than folks in Africa which rely on Ukrainian wheat and other grains.

Dr Schneipp does NOT expect inflation to persist, and noted that most key economic indicators are rising, consumer demand is strong, corporate profits are really high and business investment is surging.

The net…

We are not rational beings. The economy is doing quite well, you are probably doing pretty well (unless you can’t find child care), higher gas prices REALLY don’t affect you, and…you don’t live in Ukraine.

More to come tomorrow…