That’s one of the questions I asked 36 payers and service providers; here’s a snapshot of their responses along with some interpretation…

Service types

Briefly, those services that happen earliest in the claim and/or require face-to-face contact have seen the greatest impact as new claims volumes dropped overnight.

Initial visits to occ med clinics, transportation, imaging, PT and rehab, IMEs, Field Case Management, surgery and management thereof have taken the biggest hit to date. Network revenues are suffering as a result, as is UR.

As the shutdown and peoples’ reluctance to expose themselves to infection continue, there have been significant reductions in bill review and network business volume.

Less  – but still somewhat – affected are sectors that get most of their revenue from longer-duration claims. Think home health care and DME, Pharmacy Benefit Management.

Business models

Cash-rich companies with manageable (or no) debt are in far better position to weather the crisis than highly leveraged firms. This generally benefits founder-owned companies and those with solid cash reserves.

Networks may well weather the crisis as they are generally high-margin businesses with relatively low staffing requirements.

Companies that have kept more of their business functions on-shore are in far better shape than those that outsourced critical functions  such as turning paper into pixels (processing documents), clinical support, provider relations, and call center operations.

There’s a lot of nuance to this; thanks to the 36 respondents for their insightful and sometimes surprising views.

What does this mean for you?

Cash is king. On-shoring is critical. 

Note – A public version of the report will be available in 2 weeks; respondents will receive a detailed version. A third version with additional interpretation will be available for purchase.

COVID’s biggest impact on workers’ comp has not been from the disease, but rather from efforts to control its spread and the resulting impact on the economy.

35 workers’ comp insurers, state funds, TPAs, and service providers and large self-insured/self-administered employers took part in our second Survey of the impact of COVID-19 on Workers’ Comp. Payers have received about 33,000 COVID-19 claims to date and accepted just over 1/5th of all claims filed.

While there are major differences in claim acceptance policies across the respondents, by far the most common reason claims have not been accepted is a lack of a diagnosis, no symptoms, and/or a negative test for COVID19.

The “non-COVID” effects include:

• a drop of 25% to 50% in new injury claims since the outbreak,
• slower return to work due to an inability or unwillingness to access care and/or adjudication processes, and
• respondents’ estimate that 2020 will end with a 20% decrease in the total number of claims.

For payers with large books of small businesses, retail, hospitality, and travel the picture so far is grim, with most expecting major declines in premiums.

The good news is the cost of COVID claims remains pretty low, with most accepted claims resolving with minimal expense. A relative handful have been quite expensive (>$200,000) due to costs associated with ICU and ventilator care.

The big winner is tele-everything. The big service providers all reported massive increases in tele-rehab, tele-triage, and tele-medicine visits with most indicating they expect this to persist after we are through the COVID19 pandemic.

As I work thru the data we’ll be publishing more details; a public version of the report will be available in about 3 weeks.

What does this mean for you?

This will be a very tough six months. The big decline in new claims and drop in premiums will have knock-on effects throughout the industry and every stakeholder.

We are more than halfway thru our second Survey of COVID19’s Impact on Workers’ Compensation (details on the first survey and a link to the abstract is here).

Respondents include:

• TPAs
• Insurers
• State Funds
• Large self-insured/self-administered employers
• Service providers/managed care firms

Top takeaways from the 18 surveys completed to date:

• 83% of respondents rated COVID’s impact on workers’ comp a 4 or 5 (very or extremely significant impact)
• Across all respondents over 10,000 COVID claims have been reported
• To date about 15% have been accepted; many are still under review
• The number of new injury claims has dropped significantly, although this varies greatly by type of employer
• Disability durations are a major concern due to high unemployment and far fewer jobs to return to
• To date, the incurred cost for COVID claims has been relatively modest

Service provider takeaways:

• Field case management took a big hit early on and has yet to recover
• UR volumes plummeted as well
• Transportation got hammered early on…there’s some evidence it is recovering
• Medical bill counts are trending lower (there’s a lag)
• Pharmacy management is among the service lines least affected

I’ll finish the Surveys late tomorrow, then it’s analysis and report prep. Respondents will get a (very) detailed version of the Survey Report; an abstract will be available to the public.

And thanks VERY much to the 30+ payer executives who are sharing their experience; their reward will be knowing a lot more about the impacts of COVID, how other payers are responding, and how others are adapting.

What does this mean for you?

COVID’s impact on workers’ comp will not be COVID claims or costs. 

Hospitals are drowning in red ink. In many states, workers’ comp is the lifeline.

Privately-insured patients are avoiding hospitals while those facilities have spent huge dollars to buy PPE, make modifications, and ensure they are ready for a COVID19 patient influx.

Kaufman Hall provides the graph; the blue curve shows hospital profits pre-COVID, the yellow line reflects COVID. The “0” vertical line is the breakeven point, so the graph indicates the vast majority of hospitals are losing big bucks.

Staff layoffs are all over the news, while research shows the most profitable facilities are getting disproportionally more taxpayer dollars as part of Congress’ aid packages. Rural hospitals are especially hard hit – and this comes after over 150 closed in the last 15 years.

Where are those facilities going to find the $$ they desperately need?

(your picture here)

Just in time, the fine folk at WCRI published a detailed review of outpatient hospital costs and related services. [free to members, there is a charge for non-members] I read the report (yes, the entire thing, minus the super-wonky discussion of statistical methodology). The lede was spot-on:

While the full impact of COVID-19 is currently unclear, this study will also be a useful baseline to monitor the effects on hospital payments.

The analysis is thorough, comprehensive, and easy to follow. Rui Yang PhD and Olesya Fomenko PhD have analyzed 36 states; here are a few key takeaways.

• costs in states without fixed-amount fee schedules are at least 50% higher than in those with fixed-amount reimbursement
• in states with fee schedules, percent of charges fee schedules are the worst offenders [my words not the authors’]
• BUT, there are gaping loopholes in other fee schedule types that allow facilities to maximize reimbursement (looking at you, Florida)
• many states don’t even have fee schedules, which in some cases is just as bad.

What’s a payer to do?

First, identify low cost, high quality facilities and direct your patients to them.

Second, do NOT allow physicians to schedule surgeries in high-cost facilities. The Golden Rule applies – she who has the gold rules, and you are that “she”.

Third, “cost” is the actual cost, NOT the PPO discount. Don’t be fooled – discounts tend to be higher at high-cost facilities.

More on this issue here, here, and here.

Apologies for not getting this out sooner; wanted to wait until I heard back from NCCI on a couple items.

Quick hits

• Insurers are enjoying record profits.
• Frequency is down again – continuing a 30+ year downward trend.
• Medical costs grew  – just barely.
• Premiums dropped.

A deeper dive

The meeting planners did excellent work, the production was quite good and NCCI’s actuaries and statisticians bravely took on the role of media communicators. CEO and Chair Bill Donnell led things off, noting that the COVID19 pandemic requires agility – a talent not often associated with insurance in general or workers comp in specific (my words not his).

Bill is confident that workers’ comp is in good financial condition to deal with COVID19 – a confidence that is well founded.

For six years the industry has been quite lucrative. Investment gains and underwriting margins have driven record profits – and the profit train kept rolling in 2019.

Steady declines in frequency and relatively stable claim costs over the last five years that continued in 2019 are a big driver of record profits. (I’ve also argued that rates are way too high.)

Chief Actuary Donna Glenn reported private insurers’ reserves grew by $5 billion last year; there’s now a $10 billion reserve redundancy, so the industry has $10 billion more than it projects it needs to cover all current claims liabilities. Coming on top of billions in reserve releases in 2019 it is clear workers’ comp rates are still far too high (my words not Ms Glenn’s).

In 2019 claim frequency dropped again – by 4% – paralleling the long-term trend of 3.8% over the last three decades. According to an NCCI video, key drivers include:

• better risk management,
• workplace safety,
• better training,
• wellness,
• automation,
• a continued shift away from heavy manufacturing and towards a service-based economy.

Intuitively it makes sense that these factors have helped lower claims frequency. However, the video didn’t provide any data or identify any specific research supporting these assertions. I would have expected NCCI  – at its core a research organization – would include references to studies that supported the video’s claims.

I asked NCCI for the research that supported these assertions – as usual Cristine Pike and her colleagues were very responsive; additional research is here and here. However the citations provided didn’t conclusively demonstrate these factors were the cause of frequency declines – and didn’t mention most of the drivers cited in the video.

Donna Glenn, NCCI’s new chief actuary, provided an update on the State of the Line. Lots of good news…

On a per-claim basis, for private carriers, medical severity ticked up 3 points for lost time claims, a very modest change. Combining the 4% decrease in frequency with the 3% increase in severity likely yields no appreciable change in overall workers’ comp medical spend (my assumption, not NCCI’s).

NCCI projects claims incurred in 2019 will ultimately result in a 99% combined ratio reflecting continued underwriting profitability for private carrier business.

Thus it’s not surprising that premiums for state funds and private carriers dropped by $1.6 billion to $47 billion [a 2.6% drop] in 2019 as rates trended down.

Bob Hartwig did provide some context, citing Willis Towers Watson ‘s May 2020 analysis as the basis for projections on changes in workers’ comp premiums motor vehicle accidents and the like

My complaint.

NCCI has extensive access to workers’ compensation data. Given that the world has dramatically changed from 2019 to today and all of us are desperate for information, a discussion of changes in claim counts and types of claims would have been extremely helpful. I get that data is scant and spotty, but generalities and qualitative statements aren’t nearly as helpful as data. I asked NCCI about this; here’s the response:

NCCI has spoken to a number of carriers about their COVID-19 claim experience.  However, I would be very careful about making assumptions based on these conversations.  Until more time has passed and we can get information from a significant portion of the market, we would not be sharing any observations on COVID-19 claim activity.

Here’s where I’m perplexed. The discussion of frequency drivers attributed declines to a host of factors without citing specific research, data, or studies. That’s an assumption.

NCCI could have – and in my view should have – provided data on Q1 2020 claim counts by claim type (cause). That would not have been an assumption, but rather initial reporting of concrete data.

Given potential moves by governors and legislators to make COVID19 illness a covered condition and the lack of certainty about where this is headed, I can understand why NCCI – and other research organizations – don’t want to provide any data that might encourage politicians to look to workers’ comp to cover the costs of COVID19.

What does this mean for you?

The more we know and the sooner we know it, the better.