My post earlier this week re three major trends that will affect work comp in 2012 generated a few comments from friends and readers. One of the more pointed was from a claims exec, who noted he’s seen “a major shift in the employer’s appetite over
the past 3 years or so to return people back to work during their period
of recovery. The new post recession attitude – why bother, I have 50
people waiting in the wings for jobs that I can back fill!” Especially
true for lower end, less-skilled positions…So now as a payer, I have an injured worker with no job to go back to – wow, that’s a recipe for higher severity rates…”
Unsaid was a related issue – employers have lots of applicants from which to choose, making it difficult to place a recovering worker.
We are well into what feels like a somewhat halting, not-terribly-robust economic recovery. Although the employment picture is brighter than it was a year ago, the glow is still pretty dim. Payers seeking to re-employ injured workers, especially those from jobs in construction and manufacturing, are having little success. This inevitably leads to longer claims duration as claimants seek to maintain their cash flow by remaining on workers comp.
In turn, this can lead to more medical expense as claimants seek physical therapy, drugs, and other services to keep the medical treatment flowing.
The system-wide implications are clear – higher claims severity due to longer duration.
This won’t get better until employers’ demand for workers increases considerably, something that may not happen for another year, or perhaps two.
Another colleague had a rather different take, one that reminds us of the perils of unintended consequences. This exec noted that while they’ve run into employers like the one above (and by the way, they won’t be insured by his company, a mid-tier insurer, very long) the majority were handcuffed by the economy and couldn’t accommodate due to financial reasons. The incidents of financial hardship were much more significant
than the availability of abundant labor.
That said, yesterday he had a very interesting meeting with a very large trucking firm in who can’t hire drivers fast enough. Their biggest issue (supported by their consultant/broker who represents a large number of trucking firms with the same issue) has been with the government’s extension of unemployment benefits. They have a spreadsheet with names of potential drivers and when their unemployment will run out. These potential employees have been very open about their intention to enjoy the extended unemployment benefits. In the meantime, this insured can’t stay up with the significant spike in demand over the last 6-8 months.
Obviously this is not work comp related, but one has to wonder if drivers who are on workers comp are also choosing to stay at home rather than get back out on the road. This may well be – in some instances – the case, but I’d note that this is the age-old problem with work comp, and isn’t directly related to economic cycles.
There’s another factor complicating claim closure – MSAs. We’ll dip into those waters next.

I did a talk last week at the National Association of Mutual Insurance Companies on the impact of reform and other factors on workers comp. It got me thinking about something a bit more specific – what’s on the horizon that’s going to affect work comp next year.
Here’s my take on three leading drivers.
Rise in the number of uninsured
We’ll see a rapid decrease in the uninsured population in 2014, but don’t expect the problem to improve until then. Employers have been reluctant to staff up, concerned that their business’ improvement may be temporary. If and when they do hire, they’re going to be reluctant to add the cost of health insurance, which is about fifteen grand per family and seven grand for individual coverage. With health plans increasing rates for groups large and small all around the country, health insurance is becoming even more unaffordable (and no, it’s not due to the health reform bill).
Couple that with the expiration of COBRA benefits that’s hitting more people every day, and the increase in the number of people with high deductible plans, many of whom have very few dollars in their HSA accounts and therefore are essentially uninsured for anything but catastrophic events, and you’ve got big problems for providers. Many of these uninsureds will still need care, which will lead to more cost shifting to soft targets – like workers comp.
Employees who have health insurance thru their employer tend to file claims more often than those who do not, but this appears to be a statistical relationship and not a causal one. However, if and when they do file, those without insurance are going to be more expensive to treat because their work comp payer has to cover all the care necessary to get them back to work, even if that care is not – strictly speaking – for the occupational injury or illness. Sure, the payer can refuse to pay for drugs to lower the claimants blood pressure enough to make it safe to do the shoulder surgery, but that would be pretty dumb.
Net is the more workers that have health insurance, the better for workers comp payers.
Running out of time this morning, so we’ll handle the other two tomorrow. They are:
The economy, and more specifically employment
As economic activity continues to trend upwards and hiring picks up, so will claims frequency.
The impact of MSAs
Pharmacy costs – and CMS’ treatment of same – are causing many payers to delay or reconsider settling claims.

The good folks at NCCI just released a study that, among other things, compares medical cost drivers from the nineties to those earlier in the ‘oughts. [opens pdf]
The study, authored by Tonya Restrepo and Harry Shuford, indicates that the increase in utilization of medical services dropped from the nineties to the oughts, and discusses the impact of that ‘decrease in the rate of increase’. I’ll be reviewing the study in detail later today, and will flesh out the post later.
The study actually focuses on the impact of medical on indemnity severity, a comparison well worth consideration and one many managed care providers, business units, and vendors have long struggled with.
For now, here are the highlights.
The increase in severity was partially due to changes in the mix of diagnoses, which shifted somewhat over the periods studied. In fact, the diagnosis-influenced change in severity was significant, but far outweighed by the change in underlying medical and indemnity inflation.
My interpretation – albeit one based on a quick read of the report, is this.
Underlying factors – those not work-comp-specific – are very much the driving force in work comp claim cost inflation.

Last year we completed the first annual Survey of Workers Comp Claims Systems; the report was published last fall, and Sandy Blunt’s interview with PropertyCasualty360 on the survey is now up and available.
Here are three of the highlights from Sandy’s talk with PC360 with Editor Eric Gilkey:
“One of the most significant findings was a large disconnect between the front-line staff and the executives on whether or not their current system was fully integrated with their bill review and utilization review system,” he said. “While 80 percent of front-line users were clear that there was no full integration between claims and bill/utilization review, 60 percent of executives said they were integrated.”
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“Both front-line staff and executives were very clear: They want a better full integration — not pieces and parts– but a full integration and no more smoke and mirrors.”
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“When we asked respondents, in their view, who was the leading claims system vendor, the number one answer was, ‘I do not know.'”