Here’s what I see coming.

Quick take – what happens this fall and winter will bump up premiums, injury rates and claims costs.  

Insurers will see rising premiums, claims service entities more work, and some insurers and re-insurers’ bottom lines will be hit hard.

Companies focused on servicing work comp patients in Texas and Florida are going to be very busy.

Hurricanes are the “why”

Harvey, Irma, and as-yet-unnamed storms are likely to make this the worst of all hurricane seasons – and we’re nowhere close to the end of the season.

Harvey alone may cost close to $200 billion. With Irma – now a Category 5 hurricane with winds over 175 miles per hour – storm tracks favoring a Florida landfall, we could be looking at a second blockbuster bill. (note cost projections are all over the map

There are huge implications for the workforce – starting with public safety workers, moving to clean-up crews and workers making emergency repairs. Then comes re-building: residential, public, commercial, and industrial construction, plus repairs to infrastructure.

Remediation will follow and take years. The huge petro-chemical operations around Houston mean waterways and land will be seriously polluted.

And, hopefully, big changes to storm and climate change mitigation planning, which will require major investments as well will mean billions in spending and lots of work for construction workers

Roads, water and sewage systems, rail, power generation and transmission, pipelines, ports and terminals, communications infrastructure all were hammered by Harvey and Irma may be just as brutal.

Implications.

Higher payrolls – Hundreds of thousands of workers will be needed today, next month, and for years to come. They will be working in high-frequency, high-severity jobs, and many may be poorly trained and supervised. And good, experienced workers will be costly due to supply-and-demand.

It’s highly likely tens of thousands will be undocumented; our governmental leaders will have to decide whether they are going to strictly enforce immigration laws or turn a blind eye. 

Labor fraud – I’m betting a large percentage of clean-up and construction workers will be undocumented, which means a likely explosion in labor fraud. Unscrupulous employers will bid on clean-up work, knowing they can screw immigrants out of pay and those workers have no recourse.

Higher injury rates – inexperienced workers putting in massive hours in dangerous places doing dangerous work = lots of bad injuries, plus exposure to nasty chemicals and pollutants.

What does this mean for you?

We’re about to see the most significant change in workers’ comp in decades.

Friend and colleague Peter Rousmaniere penned a terrific piece in workerscompensation.com on how and why Harvey may expose huge holes in the workers’ compensation “system” in Texas.

here it is in its entirety- thanks Peter and WorkersCompensation.com!

Harvey brought 50 inches of rain and a thick dossier of irony to the workers’ compensation system in Texas. This natural disaster, like others have in the past, will challenge an economic safety net like workers’ comp to deliver assured and complete response.

Special factors at play in Texas may trigger a combination of grief, schadenfreude, and uncertainty.

Already hundreds if not thousands of employers in the state are gearing up for a surge of business in cleanup and repair. Can employers and workers depend on workers’ comp? Well, it depends. The catastrophe struck in the state with the greatest contradictions in how the workers’ comp system is supposed to work.

Are the cleanup and repair workers actually eligible for workers’ comp coverage?

In any other state, in any other year, the simple answer is yes. But in Texas, employers do not need to participate in the workers’ comp system. The opt-out program (technically, its non-subscriber program) covers very many small employers. How they respond to work injuries may be anyone’s guess, including themselves, since being outside workers’ comp means the employer is accountable to no one. Though they are supposed to file an intent to opt-out, the state is lax in enforcing that. The employer can drop off an injured worker at a community hospital and not pay a cent for the worker’s medical care. It need not pay a dime for wage replacement.

The employer can, to be sure, be sued for negligence. But what lawyer is going on a fool’s errand to sue for negligence a dry wall contractor with somewhere between 2 and 10 employees depending on the jobs at hand?

Further, the employer can legally threaten to fire the injured worker, or his co-workers, if anyone threatens to file a suit or so much as complain about having to make up his or her own work injury benefits. Intimidation is legal in opt-out.

Typically, in other states, when workers try to cover their work injury medical bills with their health insurance plan, the plan sends a team to the workers’ comp insurer to recover their medical spending. But Texas in this regard is not typical. Opt-out employers don’t have insurers.

And, Texas has the largest percentage of the population of all 50 states that do not have health insurance. (When almost every other state’s uninsured population plummeted due to Obamacare, Texas’ did not.) A lot of the cost is likely paid by the worker or out of hospital free care.

What about the undocumented workforce?

“Where are those undocumented workers now that we need them?” the construction industry may be asking. It has, according to press reports, grumbled months ago about Trump’s immigration enforcement. A 2013 study by the Workers Defense Project estimated that half of the construction workforce in the state is undocumented. These workers concentrate in low skilled assignments — such as hauling destroyed carpets from flooded homes, clearing out debris and carrying in building materials. In other words, the work created by Harvey.

We can disagree on the wisdom of stepped-up immigration enforcement and on the best long term solutions for the country’s eight million undocumented workers. But consider the facts on the ground. As Voltaire was reputed to have quipped, at 5 PM we are all economists.

Here is the problem: If Homeland Security continues to root out undocumented persons, how are the contractors who depend on them going to hire them? And if hired, in today’s climate of enforcement would an undocumented worker of employer covered by workers’ compensation rationally ever want to file a workers’ compensation claim out of fear of being discovered and deported?

Major disasters find a way to exacerbate unresolved stresses that preceded — in land use, economic relations, public policy. This was the case in the Chicago fire of 1871, the Triangle Shirtwaist fire of 1911, Katrina, and now with Harvey. Is the state of work injury benefits in Texas a model or a monster?

You can reach Peter at pfr@rousmaniere.com

We’re all suffering from repeal-and-replace exhaustion, so I’ll keep this light and entertaining.  Or at least try to.

Quick – Is work comp the lion or the gazelle?

With ACA very likely to remain the law of the land, here are the over-arching implications for workers’ comp:

• Growing cost pressure on providers from group health and governmental payers will make those providers increasingly look to work comp to replace “lost income”
• Healthier workers will heal faster and need fewer healthcare services

Revenue maximization is the industry term for getting as much revenue from each patient as possible.  This entails:

• using the hospital “chargemaster” to set prices to drive higher reimbursement;
• using sophisticated software to avoid service denials or rejections;
• finagling codes to get higher reimbursement; and
• focusing on specific niches among many other tools/processes/approaches.

Rest assured work comp is one of the payers in the cross-hairs of “revenue maximizers”.

Next, as those with coverage likely won’t lose it, and we may see even more folks covered if other states adopt Medicaid as we discussed yesterday, the good news is

• more workers have health insurance,
• their health status tends to be higher,
• they are healthier, will tend to heal faster, and
• work comp won’t have to pay for their non-occ medical conditions if/when they do get hurt on the job.

Can we quantify this?  Not yet, but the research clearly indicates health reform has been good for comp.

As providers adopt new revenue maximization approaches, will work comp be able to keep them at bay?

What does this mean for you?

Which gazelle will you be – the one resting in the lion’s jaws, or his slightly faster brother?