Although the firm Market Scout contends that the workers compensation market is not softening, critics question their data, objectivity, timing, and conclusions. Market Scout provides quotes for property and casualty lines, including workers comp, to agents and brokers. For those not immersed in the arcane world of insurance, a “softening market” is one where prices are dropping and coverage expanding as carriers seek to build market share, often at the expense of sound underwriting (risk selection) principles.
Evidently, one of the carriers that they use most often is the primary source of their data. At the least, this calls into question Market Scout’s conclusions; one carrier does not a market make.
There are two other potential concerns with Market Scout’s information and conclusions.
1. their data tends to lag the industry, and there are some indications that rates have begun to soften significantly since June 1.
2. other market watchers are seeing a definite, and larger, drop in WC rates than Market Scout indicates.
My sense is the market is indeed softening more rapidly than Market Scout indicates.
What does this mean for you?
If you are in the WC industry, you can either follow the numbers-challenged off the cliff or tell senior management pricing is about to cross the “stupid line”. If you choose the latter, document document document.
If you work in or provide services to a WC payer, be prepared for them to request price cuts, reductions in work force, and other means to reduce admin expense. When prices are dropping, most payers just look to cut internal expenses instead of focusing on lowering claims expense.

An article in CFO.com analyzes the complex web of transactions, relationships, and incentives that exist in the employer-TPA-managed care firm web. David Katz notes:
“risk managers, by some accounts, often hand over the management of claims and medical costs to third-party administrators (TPAs) without a clear idea of their relationships with medical and claims-services providers.
In some cases, such wholesale delegation can result in “the complete outsourcing of the risk manager’s fiduciary responsibility to the organization and its shareholders by allowing these service providers to control what should be viewed as a line of credit,” according to one senior sales executive for a managed care organization specializing in workers’ compensation. Potentially, a self-insured corporation’s lax management of its workers’ comp outlays could represent “a huge hole in internal controls,” said the executive, who asked not to be identified.”
Katz goes on to discuss some of the legal investigations now in process that may be related to these issues.
What does this mean for you?
With Mr. Spitzer et al hot on the trail of unseemly transactions in the property and casualty industry, participants would be well-served to monitor their TPA relationships closely.

Two Aon execs have published a piece on workers compensation managed care in Risk Management that is uninformed, self-serving, and reflects a lack of appreciation for the true cost drivers in comp. I try not to comment on other consultants’ work, but this article demands a response .
Briefly, the article by Charles D. Reuter, senior vice president and Heidi Mader, assistant vice president with Aon Consulting, Inc in New York office calls for workers comp insurers to either “follow the herd as the industry has become accustomed or

Texas Governor Rick Perry signed a Workers Comp reform bill into law yesterday, authorizing the use of networks for treatment of injured workers.
To quote the Dallas Star Telegram;
“The revised law will create physician networks like those in commercial health plans and provide a small boost in benefits paid to injured workers. Texas has the country’s third-highest workers compensation costs and the highest rate of injured employees not returning to work. The law replaces the Workers’ Compensation Commission with a single, appointed commissioner housed in the Texas Department of Insurance and creates an Office of Injured Employee Counsel as an advocate for workers.”
What does this mean for you?
At long last, perhaps meaningful reform of the one of the nation’s worst workers comp environments. I’ll be taking a much closer look at this legislation and potential impacts of same in the near future.

Jon Coppelman at Workers’ Comp Insider has an intriguing post about the problems at the Ohio Bureau of Workers Comp. Kudos to Jon as he appears to have scooped the New York Times, who published their article a couple days later. To quote Jon;
“The workers compensation bureau has invested $50 million in rare coins, working through Tom Noe, a man prominent in Republican fund raising circles. Indeed, Mr. Noe has been recognized by the Bush-Cheney campaign as a “Pioneer,” as he raised over $100,000 for the President’s re-election campaign.
Realm of the Coin
At this point, it appears that some of the coins purchased by the state fund are missing. Two of the most valuable, totaling a quarter of a million dollars, were “lost in the mail” according to Noe. An additional 119 coins were “misappropriated by an employee.” The coins “went missing” back in 2003, but Noe neglected to tell anyone. The initial estimate for the missing coins was $400,000. Now, according to Noe’s own attorney, the figure is somewhere between $10 and $12 million.”
Despite the very troubling implications of this debacle, it does make for highly entertaining reading. Following the comedy of errors (being kind) perpetrated (or should I say committed) by elected and appointed officials will being a chuckle and shake of the head to most readers.

Several of the larger workers’ comp payers are strongly considering using group health provider networks for their claimant population. And, some have already inked deals with these entities (Hartford-Aetna; Hartford-Horizon NJ). This marks a shift in strategy, and the reasoning behind the moves is telling.
Workers comp networks such as First Health, CorVel, and Focus have several challenges.
First, they apply a generic, one-size-fits-all model across all markets and types of providers. While a PPO predicated on getting the best possible discounts from as many providers as possible sounds good, it breaks down when one remembers that unit price is but one-third of the medical cost equation; the other two being utilization (volume of services per claim) and frequency (number of claims with that type of service). Physical medicine and pharmacy are but two examples of types of care where total costs are minimally impacted by unit price.
Second, with the (possible) exception of First Health, the WC networks rely on their WC business to leverage discounts with providers. The problem with that is very few providers have much WC business; out of the nation’s $1.4 trillion health care bill, $30 billion is WC. Another way of looking at this is that one large HMO in Florida pays more for inpatient hospital care alone than the entire WC medical spend for all payers in that state. So, WC-only networks have little buying power.
Third, the level of customer service delivered by most of these WC-only networks has ranged from mediocre to abysmal. For some of these self-styled WC networks, there have been significant and on-going issues with data quality, provider recruitment, systems changes, state certification, and basic responsiveness, coupled with a level of arrogance that is, on occasion, breath-taking.
Added to those issues is the inability of WC networks to deliver results, defined as control of medical expenses, and it is not surprising that payers are looking elsewhere.
What does this mean for you?
If you are a WC generalist network, get your act together. If you are a WC payer, your frustration is understandable, but I have little confidence that group health companies will remain committed to this business over the long-term. UnitedHealthcare, HealthNet, Aetna, and Blue Cross of Florida are just a few examples of the group health companies that have entered, exited, and in some cases re-entered the WC network business.