Surprise medical bills happen when you think you’re going to an in-network medical provider, only to learn some of your care was delivered by a non-contracted provider who can bill you whatever they want.

In work comp, this happens when your employee suffers a serious injury on the job, and you send her to the nearest emergency room – which happens to be at a hospital in your work comp PPO network. You then get a bill for $30,000 because the ER is operated under contract by TeamHealth or Envision, private-equity owned companies that aren’t in your network.

While state fee schedules may help, rest assured the hospital revenue maximization industry knows exactly how providers need to bill you to guarantee collection.

While this has made headlines in the private insurance world, it has yet to get much attention from work comp insurers. That may be because comp payers are pretty unsophisticated about facility billing, despite claims from bill review departments/vendors to the contrary. (there’s legislation in Texas that deals with a very narrow slice of the issue; it will have almost no impact on the problem save for patients treated at a federal medical facility)

Congress has been blathering about “solving” the surprise medical bill problem all year – making as much progress as usual, that being none. That’s largely because the PE-owned medical service companies are spending tens of millions fighting legislation intended to stop surprise billing.

What’s clear is while the PE firms may win this battle, they will certainly lose the war. The surprise bill fiasco will generate huge returns over the short run, but lead to major reform as voters get madder and madder about this legal theft. The PE firms fully understand this. They are fighting to preserve their right to rip off patients as long as they can, and will keep doing so until voters rebel.

So, to Blackstone, KKR, Welsh Carson et al, enjoy it while you can. This is yet another example of hugely profitable investors’ short-term fixation on short-term profits.  While it will lead to massive short-term profits, it is creating a massive backlash, one that will inevitably lead to laws and regulations that will crush their business model.

In the meantime, employers and taxpayers will pay the price – especially because work comp hasn’t woken up to the issue.

What does this mean for you?

Analyze your facility spend to find out.

Yesterday I briefly summarized today’s work comp market, which in a word is

While this has been very profitable for work comp insurers (that are enjoying double digit returns for the first time ever) and has saved employers and taxpayers hundreds of millions of dollars, it’s been causing agita amongst service providers – with several notable exceptions. (by “service providers” I am referring to TPAs, medical and disability management entities, networks and other parties)

TPAs are flourishing.  As insurers look to reduce their overhead costs, they are finding fewer dollars available to invest in systems, IT projects, training and recruitment. They are also facing the reality that claim frequency declines mean there will be fewer claims to handle next year than this.

The net effect – why spend dollars to get better at handling a shrinking business, when you can outsource claims to a third party?

That’s driving growth at ESIS, Broadspire, Sedgwick, GB et al; most TPAs have seen significant increases in carrier business over the last few years.  That growth will continue.

Medical management entities are in a different situation – but it’s not a simple one.

With fewer claims to handle, there’s less demand for case managers. With medical costs flat, the volume of bills to handle, visits to schedule, and services to provide is static. Of course, while that’s true for the industry as a whole, there’s wide variation amongst the individual companies in the space. Some are growing quite nicely, while others are losing share and revenues.

Of course that’s due primarily to service providers’ abilities, competency, customer service, and how easy they are to do business with.

Many are cutting prices and giving up margin as they try to stay competitive, hold onto current customers, and have any shot at adding new business.  In general this makes sense, but you have to wonder at the long-term viability of the strategy.

A somewhat different approach is worth contemplating.

What’s working for some providers is their ability and commitment to take work off their customers’ desks and do it for them quickly, easily, and with minimal disruption.  These days this tactic isn’t just a nicety, it allows insurers to reduce their internal workloads by offloading tasks to vendors.

Some are doing this intentionally, others may not even be aware they are solving their customers’ strategic needs as well.

There’s a wildcard out there as well – or rather two.

First, most payers require at least two service providers for most services (excluding pharmacy and bill review).

Second, should one of the big service providers stumble or hit financial difficulty, there will be significant opportunity for competitors able to jump in and help out.

What does this mean for you?

Even in a very tough market, there are opportunities for those who think strategically.

Work comp rates continue to drift ever lower, with new declines announced pretty much every week. While this is great for employers and taxpayers, the impact on insurers, TPAs, and the work comp ecosystem is rather less than “great.”

It’s going to end…someday…right?

It always does, but this time around feels different.

Here’s where we are today – and why.

Rates and payroll drive premiums; as we’re at or darn near full employment with pretty static average weekly wages, premiums are likely holding steady or up just a hair.

Graph shows changes in average weekly wages adjusted for inflation from the Bureau of Labor Statistics

Florida’s rates will likely drop for a third straight year, New Hampshire employers are even happier as rates have declined for 8 straight years – this time by almost 10%. California – by far the biggest work comp state in terms of premiums, gets another decrease in 2020. Same story in Missouri, Wisconsin, and Virginia.

Rates follow declines in claim costs, so insurers are making tons of money. Historically high profits result from low combined ratios (defined as the ratio of total losses plus admin expense to premiums earned). As long as claim costs continue to drop, profits will remain strong.

Result – insurers are really happy. So are employers.

With work comp medical costs static [see detailed report from NASI, free to download] and claim counts stable-to-lower, there’s little if any growth in the number of claimants, the number of medical bills, and the volume of medical services. This means payers have fewer dollars to upgrade systems, pay staff, invest in improvements and training. As premiums drop, overhead costs get squeezed too.

Think of it this way – a California insurer collects $1 million in premiums this year. If it keeps all its current business and doesn’t gain any new customers, that same customer base = $900,000 in revenue next year. The 10% decrease means 10% fewer dollars to spend on IT, marketing, staff training, process improvement.

The impact on service companies isn’t quite as straight forward – for reasons we’ll dive into tomorrow.

What does this mean for you?

Fewer dollars is good news for some, but is likely preventing many insurers from much-needed investment and upgrades.

It’s not “if”, it’s when the next will recession hit.  Things were looking iffy a couple months ago, and – if anything – the outlook has worsened since then

And when it does, workers’ comp will be affected – like everything else.

Here’s how recessions affect workers’ comp; tomorrow we’ll discuss why the next recession may well be long, deep, and painful. 

At the early stage of a recession, employees who get hurt are less likely to file a workers’ comp claim. While we don’t know why that happens, research suggests it’s because workers are concerned their bosses will eliminate their job while they are out on disability, and they’ll have no job to return to.

As the recession deepens, frequency tends to bump up as employees realize their jobs are in real jeopardy.  Claims increase as a result, and it is tougher to find re-employment opportunities for workers ready to resume some level of work. This extends to part-time or other limited duty work that is essential to recovery and return to full duty. So, duration increases too.

In the final stages, as the economy recovers frequency appears to accelerate. Employers put older, less-safe equipment back on line, require workers to put in big overtime hours, hire temps who have minimal training on safety, and the pace of work picks up speed. The result – more injuries.

So, that’s what we can expect. The question is, when will the recession arrive, how long will it last and how bad will it be?

That’s for tomorrow.

What does this mean for you?

Fortune favors the prepared.

Hope your week was excellent, and the weekend is full of family and fun.

Here’s a few takeaways from this week…

Congratulations to Ken Martino; he’s been named president of MedRisk, a post formerly held by Mike Ryan. Mike remains CEO. Ken’s been an instrumental part of MedRisk’s recent growth, and the promotion is well-deserved. I’ve known Ken for thirty years or so; he’s a consummate professional. (MedRisk is a n HSA consulting client)

Word is CorVel’s recovery from the Ryuk ransomware attack is not yet complete. Reports indicate as of yesterday some handwritten UR reports were still being faxed. Heard confirmation that at least one customer has switched from CorVel to another service provider. Adjuster.com’s Jorge Alexandria summarized the attack in a post last week.

BTW Adjuster.com is a pretty interesting site; if you are looking to better understand what makes the front-line folks tick, put it on your reading list.

Congratulations to One Call; reports indicate the company made it thru the second quarter without breaching a key financial covenant. However, customer losses including Great American, Broadspire, and Nationwide didn’t hit the financials in Q2. Unless One Call wins a big piece of the Liberty Mutual ancillary services RFP it will be nigh on impossible to make up the lost revenue.

Will keep you posted.

MSA Administrator Ametros has released an app its customers can use to access their settlement funds and track expenditures.  The Massachusetts-based company pretty much owns the MSA Administration business; this is one sector I’m quite surprised there isn’t a lot more activity.

Family is coming in from California and Jackson Hole today – it’s going to be a terrific weekend!

Update on yesterday’s post.

Spoken with several CorVel customers today and late yesterday; all spoke well of CorVel’s response and communications about the systems issue.

Still haven’t’ seen a public statement.

I’ve been told by multiple sources that CorVel’s systems problems appear to be due to the Ryuk ransomware worm; workers in at least two CorVel offices were recently informed of the worm. This worm is linked to attacks on several cities as well, including Stuart FL.

According to CrowdStrike, the worm has been attributed to:

GRIM SPIDER, a sophisticated eCrime group that has been using the Ryuk ransomware since August 2018, targeting large organizations for a high-ransom return. This methodology known as “big game hunting” signals a shift in operations for WIZARD SPIDER, a criminal enterprise of which GRIM SPIDER appears to be a cell. The WIZARD SPIDER threat group, known as the Russia-based operator of the TrickBot banking malware, had focused primarily on wire fraud in the past.

CorVel has been telling customers it hopes to be back up and running Monday (three days from today); on average other Ryuk victims have taken 9 days to recover fully. The company has told customers it discovered the issue early, and this may help reduce the time lag.

In addition to CrowdStrike, companies including Coveware and Malwarebytes advertise services that ostensibly protect systems from Ryuk and other ransomware attacks.

CrowdStrike indicates the worm has been associated with about $3.7 million in ransom payments in recent months; the graph below was developed by Coveware. Please note that there is no indication CorVel has paid or intends to pay the ransom.

Research indicates even those entities that paid the ransomware may have had difficulty restoring files and operations; from Coveware:

Ryuk Ransomware has a low data recovery-success rate after a ransom payment is made. Relative to other types of ransomware, the decryptor tool is very labor intensive and prone to failure.

The worm’s name comes from a character in a Japanese manga novel; he’s not exactly a picture of your kindly uncle…