Here are a few of the events/transactions/deals that may affect the workers’ comp industry, along with my take on that impact.

First – Trump’s steel and aluminum tariffs

Leaving aside the fact that China – Trump’s primary target – supplies just one-twentieth of all foreign imported metals, there are way more American jobs in other industries  that would be lost if the European Union and/or other trading partners impose retaliatory tariffs.  

Agriculture, autos, bourbon, bluejeans, and bikes are on the list of possible targets. Total exports amount to $1.4 trillion…

Our cultural exports – fashion, film, music, sports – may fall out of favor as Asians and Europeans angered with Trump stop buying American.

My take – the Trump Tariff is going to cost jobs, unless it is quickly hollowed out by exemptions.

(an excellent discussion is here)

The Trump tax plan

First, if wages and hiring increase, as promised by the President, premiums will rise.

So far, that isn’t happening. The vast majority of the windfall is being spent on stock buybacks.  While this is inflating stock prices it isn’t going to have any material effect on the

With the added focus on deporting undocumented workers, industries that demand low-skilled workers for high-stress jobs such as meatpacking are often struggling to find enough workers. Jobs are usually filled with first-generation immigrants – as those jobs always have been.

Third, Employment changes.

The automation of both low-skilled and white-collar jobs is accelerating…over time many low-skill jobs are going to disappear – including burger-flipping, while white collar work including healthcare administrative jobs is being automated as well.

credit Daily Mail

The unemployment rate has improved  from 4.7% to 4.1% over the last year, while labor-force participation has remained flat (working-age people who’ve not looked for work).

Wages are up about 2.5% over the last 15 months, slightly more than inflation.

My take – hiring is strong, and wage growth may accelerate somewhat. This would generate more premium dollars over the near term. As Flippy and it’s relatives take over from Mary and Mike, we may well see average wages increase as there are fewer low-paid jobs available.

And Last-but-not-Least, changes in healthcare, specifically how and where healthcare is delivered.

Compare the revolution in retail – moving buying and delivery from stores to the home. That hasn’t happened at all in healthcare – but it will.

Enjoy the weekend.

Insular, self-absorbed, and unaware are three traits far too common in the workers’ comp world.credit Rational Faiths

When combined with lousy marketing and poor brand identity, the outcome is akin to life in the Dark Ages – nasty, brutish, and short.

Here’s a few things I’ve learned after decades in the healthcare and workers’ comp worlds.

• Brand Is Everything.
• Few executives in the work comp world understand this, some healthcare people do.
• Marketing is NOT proposal writing, powerpoint production, or event planning…yet most “marketing departments” spend most of their time and too-small budgets doing just that.
• There’s waaaaay too much “presenting” in sales – and waaaaay too little listening.
• No one cares about your company, your products, your results, your story. Until they believe you understand their problem and have a potential solution.
• There are several companies that charge high prices and deliver crappy results – yet they consistently win business because their brand images are strong.
• Companies don’t buy anything. People do.  Just because your “solution” seems to meet a “business need” does NOT mean the person who has to say Yes will say yes.

So, a few suggestions.

1. Figure out what your brand is.
2. Invest in it.
3. Do marketing – real marketing.
4. Be brutally objective. Don’t blow smoke up your boss’s shirt – or your’s.

You’re going to have a spend a lot more dollars on marketing than you ever have, get your “marketing” people involved much earlier in strategic, product development, and sales, listen to what they say and likely change a lot of what you do.

This is going to make a lot of people really uncomfortable – and that’s good. Business people who are comfortable get complacent, and complacent people lose.

What does this mean for you?

It’s really hard, and most won’t be willing or able to do this.

But the ones that do will win.

USI’s 2018 Insurance Market Outlook indicates workers’ comp medical inflation will hit 6 percent, a significant jump over recent years. A key driver is:

“a continued increase in cost shifting from healthcare plans to workers’ compensation due to the profitability challenges faced by the Affordable Care Act as well as other challenges”

I’m puzzled by the scant attention paid to medical cost in the report, and the superficial, and I’d suggest misleading attribution of cost shifting to ACA’s “profitability challenges”.

What “profitability challenges?”

Health insurers are doing quite well. Pharma and device companies are too. Hospitals are rolling in dough, with profits up 43 percent from 2011 to 2016. Sure, around 20% – 30% of hospitals experienced negative margins – but the average net margin was a very healthy 7.7%.

Medical costs drive a LOT of casualty insurance costs in the auto, fleet, workers’ comp, medical malpractice, and liability lines. The quote above is the only substantive statement in the 38 page report, and the statement itself is questionable.

Granted, I’m biased. As one who grew up in and remains firmly rooted in the healthcare world, I see things thru that lens.  That said, my take is the lack of focus on medical is due to a lack of understanding of healthcare, which in turn makes conclusions suspect.

NCCI recently changed its measure of overall medical inflation to a metric that more closely tracks what we’re seeing in work comp. The discussion at the link is pretty wonky; suffice it to say that the Personal Healthcare Deflator (PHC) tracks actual workers’ comp medical trends much more closely than the Medical CPI. (James Moore wrote on this some time ago)

(source NCCI) You’ll note that the PHC Deflator predicts a much lower rate of price inflation than the other more commonly used metrics; PHC does factor in a change in the mix of services, which I’m guessing is a key reason. (In group/Medicare/Medicaid there’s been a significant shift in the location of services from hospital to non-hospital providers which has reduced overall costs.)

It’s impossible to say how USI came up with their estimate of 6% medical cost inflation; it is possible they used the CPI or some other metric.  I’ve got a query into USI and will update this if/when I hear back.

In the interim, I’d suggest we would be well-served if the industry showed a bit deeper understanding of the key driver of claims costs.

After 30+ years in this industry, I’m still amazed at the superficial understanding of healthcare exhibited by most in work comp. The continued emphasis on network penetration and per-line and per-bill “savings”, the failure by most buyers to force insurers and TPAs to report real outcomes, and the resulting lack of real improvement in health care quality in work comp is appalling.

What does this mean for you?

We’ll dig into the drivers of medical costs more this week. It’s a bit complicated, as most important things are.