Category Archives: Workers Compensation

Conference Shows How Workers Comp Wheels Are Turning

March brings my annual trip to the Workers Compensation Research Institute (WCRI) conference in Boston, writes Insurance Information Institute chief actuary James Lynch:

Workers comp is an intricate dance among regulators, lawyers, employers, insurers and the medical community. WCRI’s annual conference is one of the better places to catch up on the direction the many gears are turning on the workers comp machine.

Agenda items I’m looking forward to:

  • Alternatives to opioids: The opioid epidemic, until recently, was the silent mass killer in America. I first heard about this particular scourge at the 2014 WCRI conference. That year almost 19,000 people died from opioid overdoses, yet I had never heard the term opioid. After the conference, I wrote about how the workers’ comp world grappled with the epidemic for Contingencies magazine.
    This year the conference has an update on those efforts. It also has a session on emerging alternatives like mindfulness and other cognitive approaches. Included in that session is a look at medical marijuana, an issue most insurers are approaching with grave caution.
  • Appraising the Grand Bargain in 2017: Comp, of course, is the result of the Grand Bargain. Injured workers give up the right to sue and employers agree to indemnify the injured, regardless of fault. Most insurers will tell you that bargain holds up well more than a century after it was struck. But some challenge that idea. I attended a conference last year baldly titled, “The Demise of the Grand Bargain.” And a 2016 Department of Labor (DOL) study alleged states were engaged in a “race to the bottom,” scuttling benefits to keep employers happy.
    A new president may send DOL priorities in other directions, of course, but there’s still a discussion to be had. WCRI’s conference will end with a debate among experts representing government, insurers and the legal community.

The conference is, March 2 and 3 at the Westin Copley Place, Boston. Details and registration here.

 

D.C. Luminaries Headline Boston Workers Comp Conference

Insurance Information Institute vice president of Media Relations, Michael Barry, previews the upcoming Workers Compensation Research Institute (WCRI) annual conference:

Seldom have the political waters roiled as they have during the first weeks of the Trump presidency. A pair of political veterans will look at what that means for workers compensation insurance at a conference next month in Boston.

Former U.S. Senator Tom Coburn and former U.S. Representative Henry Waxman are appearing jointly in Boston on Thursday, March 2, to kick off the WCRI Annual Issues & Research Conference.

U.S. Senator Coburn, a Republican from Oklahoma, and U.S. Representative Waxman, a Democrat from California, will discuss the ‘Impact of the 2016 Election’ for health care, labor, and workers compensation at the Westin Copley Place Hotel in Boston, MA. Their session begins at 9:15 a.m. and will conclude at 10:30 a.m.

The two distinguished former federal legislators bring impressive credentials to these issues. Before his election to the U.S. Senate (2005-2015), Dr. Coburn, a medical doctor, was a U.S. representative (1995-2000) from Oklahoma.  Former Rep. Waxman served for four decades in the U.S. House of Representatives (1975-2015) and was chairman of the House Energy and Commerce Committee.

The theme of this year’s WCRI conference is Persistent Challenges and New Opportunities: Using Research to Accelerate the Dialogue.” The two-day program highlights WCRI’s latest research while also drawing upon the diverse perspectives of nationally respected workers compensation experts and policymakers.

The Insurance Information Institute will also be represented. Chief Actuary James Lynch will be blogging here at Terms + Conditions from the conference.

The WCRI conference is a leading workers compensation forum for policymakers, employers, labor advocates, insurance executives, health care organizations, claims managers, researchers and other interested parties.

For additional information about the conference, or to register, log onto http://www.wcrinet.org/conference.html

Most Serious Workplace Injuries Cost More Than You Think

$60 billion is a lot of money. Think about it.

For example, insured losses from global disaster events were around $49 billion in 2016, according to Swiss Re.

That’s a large number too, but not as large as the $59.9 billion cost to U.S. employers of the most serious workplace injuries and accidents in 2014, per the just-released 2017 Liberty Mutual Insurance Workplace Safety Index.

By the way, the most serious ones are injuries that cause employees to miss six or more days of work.

The nearly $60 billion in direct workers compensation costs to U.S. businesses translates into more than $1 billion a week that companies spend on these injuries, the index suggests.

As big as it sounds, the total cost actually fell from $61.9 billion in 2016, according to Liberty Mutual.

The 10 leading causes of the most disabling work-related injuries account for $49.9 billion, or 83.4 percent of the total cost of $59.9 billion.

The top three causes of the most disabling work-related injuries are:

–Overexertion ($13.8 billion, 23 percent)

–Falls on same level ($10.6 billion, 17.7 percent)

–Falls to lower level ($5.5 billion, 9.2 percent)

Collectively, these three causes represent almost half the cost of the leading accidents. Check out the chart:

Screen Shot 2017-01-25 at 2.19.16 PM

Developed annually by the Liberty Mutual Research Institute for Safety, the index is based on information from Liberty Mutual Insurance, the U.S. Bureau of Labor Statistics (BLS) and the National Academy of Social Insurance.

The index helps employers, risk managers and safety practitioners make workplaces safer by identifying critical risk areas so that businesses can better allocate safety resources.

Here are some useful additional facts and statistics on workers compensation from the Insurance Information Institute.

Workplace Safety Imperative for Truck Drivers

Transportation-related incidents were the leading cause of workplace fatalities in 2015—and by a long way—according to data just-released by the Bureau of Labor Statistics (BLS).

Of the total 4,836 workplace fatalities recorded in 2015, transportation-related incidents accounted for 2,054, or 42 percent.

The next closest major cause of workplace fatalities was falls, slips, and trips at 800, or 17 percent.

A key takeaway from the BLS figures: some 745 drivers of heavy and tractor-trailer trucks died because of injuries at work last year, more than any other major civilian occupation. The majority of these fatalities (84 percent) were caused by transportation incidents.

What are some of the factors in large truck crashes?

Truck braking capability for one. The Insurance Institute for Highway Safety (IIHS) reports that loaded tractor-trailers take 20-40 percent farther than cars to stop, and the discrepancy is greater on wet and slippery roads or with poorly maintained brakes.

Truck driver fatigue is another known crash risk. Federal regulations allow drivers of large trucks to drive up to 11 hours at a stretch, and up to 77 hours over a seven-day period.

Still surveys suggest many drivers violate the regulations and work longer hours than permitted.

Distracted driving is another key factor impacting the number of accidents.

As for insurers, a recent report by ratings agency A.M. Best noted that commercial auto insurance results continue to underperform the results of the overall property/casualty commercial lines market, due to escalating claim frequency and severity.

With more vehicles on the road, cumulative miles driven increasing, and gas prices at reduced levels, making a profit writing commercial auto insurance is a challenge few insurers have been able to meet, A.M. Best said.

It pointed to the considerable perils associated with larger vehicles, including trucks and buses, noting:

“The increased number of miles traveled over the last three or four years also factors into the rise in the fatalities associated with accidents involving larger vehicles that often produce losses exceeding $100,000 in total claim cost.”

Despite the myriad challenges, leading writers of commercial auto insurance have a track record of profitable operations, according to A.M. Best.

Still, more effective risk management and underwriting techniques focused on both covered drivers and vehicles are needed, the ratings agency said.

The Compliance, Safety, and Accountability (CSA) program implemented in 2010 by the Federal Motor Carrier Safety Administration, together with state partners and the trucking industry expanded safety reporting and enforcement measures for large trucks and buses.

Check out the Insurance Information Institute facts and statistics on workplace safety.

WCRI Insight Into How Well Workers Comp Process Works

Insurance Information Institute chief actuary James Lynch brings us another highlight from the Workers Compensation Research Institute conference:

A preliminary WCRI study showed little difference across states in how well workers recover from injuries but showed some significant differences in how satisfied injured workers were with the treatment they received.

WCRI researcher Bogdan Savych presented the results of a 15-state survey of 6,000 injured workers. The workers were interviewed three years after their injury. The goal was to learn how well workers recovered and to gain insight into how well the workers compensation process works, at least from the injured person’s point of view.

The health of workers was assessed on a 100-point scale in which the typical American’s health is at 50. Before they were injured, Savych said, workers were assessed at a 56. That score fell to 26 immediately after injury. Three years later, the median injured worker was 46, mostly recovered but not entirely.

Not all workers recover fully, Savych said. Depending on the state, between 9 percent and 19 percent of workers reported they had not fully returned to work. The 15-state median was 14 percent.

WCRI undertook the survey in part to determine how states differ in both recovery rates and patient satisfaction. The organization found that the severity of injuries was comparable across states, as was the level of recovery.

But worker satisfaction varied considerably. In the typical state, 17 percent of workers reported “big problems” getting the medical services they wanted. Wisconsin workers reported the best experience–only 11% reported big problems–while 21 percent of Florida workers said they had big problems getting the services they wanted.

Similarly, in the typical state, 14 percent reported “big problems” getting the medical provider they wanted, with Wisconsin the lowest and Florida the highest.

And 10 percent of Wisconsin workers said they were “very dissatisfied” with their overall care. Nineteen percent of Florida workers made the same assessment. In the typical state, 14 percent were very dissatisfied.

Savych noted that costs per claim were higher in Wisconsin than in the typical state, but the survey provides evidence that claimants from that state may be getting better outcomes for the cost.

WCRI Conference Highlights

Insurance Information Institute chief actuary Jim Lynch attended the Workers Compensation Research Institute (WCRI) conference last week in Boston. Here are some highlights:

Preliminary research from WCRI indicates that New York City residents sometimes get surgery done across the river, in New Jersey, where surgical costs can triple.

WCRI researcher Bogdan Savych outlined how the research organization uncovered this fact. It was akin to unraveling a mystery.

Researchers noticed a 37 percent increase in the average payment for knee arthroscopies at ambulatory surgical centers from 2011 to 2012. Shoulder arthroscopies rose a similar amount.

This was a surprise because New York workers comp claims follow a fee schedule. Normally researchers expect to see claim sizes spike when fee schedules change, but not in other years. Yet New York’s schedule hadn’t changed in years.

Then they noticed that all of the expensive surgeries were done in New Jersey.

It turns out a quirk in New York law exempts out-of-state providers from being paid according to the fee schedule. Instead they receive the usual customary and reasonable charge.

For knee arthroscopies, that means the NJ surgeries paid 266 percent more, an additional $4,954 on average. For shoulders, the cost is $8,551 more – a 326 percent increase.

Preliminary WCRI research indicates that fee schedules in health insurance can drive workers compensation claims higher.

The issue emerges because in many states, workers compensation fee schedules pay more than do group health schedules, said WCRI president and CEO John Ruser.

That creates an incentive for doctors to call an injury work-related–particularly if the cause of the injury is murky, like a strain of the knee or shoulder.

Workers also have an incentive to say the claim comes from work. Workers comp doesn’t have co-payments or deductibles, so the workers save money while the doctor receives more.

“This is not about fraud,” Ruser said, though the study showed that “financial incentives might have a role to play” in the classification of some injuries.

The study showed that when workers comp schedules are 20 percent richer than group health, the odds of a soft-tissue injury being called work-related grows by 6 percent.

Total cost: 1.5 percent of comp claims.

Putting a claim in the workers comp world creates additional hits for employers. First, they pay more for the medical treatment because the comp fee schedule is more expensive. Second, injured employees receive payments for lost income; the payment is covered by workers comp, but eventually the employer pays for it through higher premiums. Finally, where comp benefits are higher, claims can last longer – an additional cost.

Annual Workers’ Comp Conference To Focus On Opt-Out Legislation

I.I.I. chief actuary James Lynch previews the upcoming Workers Compensation Research Institute (WCRI) annual conference:

My job involves a lot of travel, and the travel tends to be in the spring and the kickoff always seems to be the WCRI conference in Boston, which this year will be March 10 and 11 at the Westin Copley Place. It’s a great place to start.

This is my third conference. The first two have been both important and controversial.

In (my) year one, Jonathan Gruber spoke about the Affordable Care Act. It generated a lot of media coverage because he is considered one of the big thinkers behind Obamacare and its Massachusetts predecessor.

I blogged about it at Terms + Conditions. He said health care reform should help the workers comp system. Fewer workers would be uninsured, and those newly insured would be less likely to try to game their malady into a comp claim.

Last year’s conference also had a preview of research that WCRI would release formally later in the year documenting the way that Obamacare’s structure promises to shunt millions of dollars in medical costs onto workers compensation.

The short story: Obamacare encourages health plans in which doctors receive a set amount from health insurers for each patient in the doctor’s practice. If one of those patients is a borderline case between workers comp and traditional health insurance, the doctor has an incentive to call it a comp claim–it brings him more money. In his research, Dr. Richard Victor, who then was in his final months as WCRI’s executive director, showed that when presented with a similar health plan–the HMO–doctors appear to behave just that way.

In another talk, Victor said ACA’s impact will be like a hurricane. I wrote:  “Like a storm whose path is not quite defined, health care reform could take a significant toll, but we don’t know where.”

Dr. Victor has retired; his replacement is Dr. John Ruser, formerly at the Department of Labor.

This year I’m looking forward to a discussion of whether employers should be allowed to opt out of the workers compensation system. An employer that opts out of the comp system still has to provide injured workers protection but can be sued for negligence by injured employees.

Texas has always allowed qualified employers to opt out. Oklahoma became the second state to permit opting out with legislation passed in 2014. Opt-out proponents hope Tennessee and South Carolina will be next.

Insurers generally oppose opt-out legislation, feeling that the workers comp system remains a fair tradeoff of tort rights for quick, sure recovery in case of injury.

WCRI will spend a big part of its first day discussing the issue. One panel will spell out what opt out is and will feature Bill Minick, an attorney who is one of the movement’s strongest promoters. He will be joined by Trey Gillespie of the Property Casualty Insurance Association of America, which looks much more skeptically on the idea.

The second panel will include advocates on both sides of the issue, representing insurers, regulators, workers and employers.

The highlight of Day Two, for me, will be seeing my boss, Robert Hartwig, speak about how the sharing economy is likely to impact the workers compensation system. The idea: If sharing economy workers are not employees, as companies like Uber contend, they are ineligible for workers comp benefits. What will happen when those workers get hurt?

As most insurance observers know, Bob is leaving the I.I.I. in August to join academia–teaching risk management, insurance and finance courses at the University of South Carolina. He is likely the most dynamic speaker in the insurance world, and in the future he won’t be speaking nearly as frequently as he does now (that is unless you become one of his students!) So I plan to enjoy Bob’s show as often as I can the next few months.

Details on the conference, including registration information, can be found here.

One Ruling, But Uber Impact

A California Labor Commission ruling that an Uber driver is a company employee, not an independent contractor may dampen fears that the on-demand economy spells the end for workers compensation, liability and health insurance. At least for now.

As reported by numerous news outlets, here and here, the decision out of California — though it applies to a single driver — could significantly increase costs for the ride-sharing business if it is copied by other states and in other cases.

It could also have potential implications for other segments of the economy important to property/casualty insurers.

As the New York Times reports:

The classification of freelancers is in dispute across a number of industries, including at other transportation companies. And the debate is set to escalate as the number of online companies and apps like Uber and others rises.”

The ruling, which commentators say could hurt Uber’s $40 billion-plus valuation, orders Uber to pay Barbara Berwick, $4,152 in expenses for the time she worked as an Uber driver last year.

Here are a couple of key excerpts from the California Labor Commission decision:

Plaintiffs’ work was integral to Defendants’ business. Defendants are in business to provide transportation services to passengers. Plaintiff did the actual transporting of those passengers. Without drivers such as Plaintiff, Defendants’ business would not exist.”

And:

Defendants hold themselves as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that Defendants are involved in every aspect of the operation.”

In response to the ruling (which it has appealed) Uber stated:

The California Labor Commission’s ruling is non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’ Five other states have also come to the same conclusion.”

Potential insurance issues arising out of the on-demand or sharing economy are a recurring topic of conversation these days.

In a recent presentation I.I.I. president Dr. Robert Hartwig noted that traditional insurance will often not cover a worker engaged in offering labor or resources through these on-demand platforms.

For example, private passenger auto insurance generally won’t cover you while driving for Uber and a homeowners insurance policy won’t cover a homeowner for anything other than occasional rents of their property.

Also, Dr. Hartwig said: “Unless self-procured, on-demand workers (independent contractors) will generally have no workers comp recourse if injured on the job.”

NCCI Conference Roundup

Insurance Information Institute (I.I.I.) chief actuary James Lynch is on the road.

Spring is heavy conference season. I type this from an Orlando hotel room on May 14, after day one of the Annual Issues Symposium put on by the National Council on Compensation Insurance (NCCI). Ahead are trips to Colorado, Philadelphia and Atlanta, as well as two meetings close to home, in New York.

The NCCI conference is perhaps best known for president and  chief executive officer  Steve Klingel’s summary of the workers compensation line in a single word or phrase. This year: Calm now . . . but turbulence ahead. With premium up 4.6 percent and the combined ratio (98) at its lowest since 2006, workers comp results have been good, but outside pressures could make the ride bumpy.

One pressure is low interest rates. Years can pass from the time an insurer collects premium and injury claims get paid, and insurers in the meantime invest that premium, with the proceeds helping pay for claims and bolstering profits.

Interest rates have been so low for so long that the industry can’t rely on interest rates to deliver results anymore.

Another is the sharing economy. As  Dr. Robert Hartwig, president of the I.I.I. and an economist, noted later that day, the smartphone has made it easy to summon people to do ad hoc jobs, with the best known being Uber’s ride-sharing battalion.

Those workers are independent contractors (though that has been challenged) and as such don’t get traditional benefits, including workers comp coverage. As the sharing economy grows, workers comp could shrink.

The third is a series of attacks on the basic principles of workers compensation. News reports suggest workers comp doesn’t compensate injuries equitably; lawsuits suggest the line has violated the Grand Bargain that gives up a big tort payoff in exchange for a steady flow of benefits; and a nascent movement would let employers opt out of the workers compensation system altogether.

But workers comp has survived a lot in the century since it took hold in the United States and seems well-equipped to handle the, well, turbulence.

“While I am confident that we will work our way through these challenges,” Klingel said, “it is important to be realistic about current conditions and to recognize that the current positive results may not last.”

The I.I.I. has more workers comp  facts and statistics available here.

Too Few Aware of Opioid Risk

I.I.I. chief actuary Jim Lynch brings us some surprising numbers on America’s addiction to opioids:

Americans are grossly misinformed about the dangers of opioid drugs, according to a recent survey by the National Safety Council (NSC).

Opioids are commonly prescribed painkillers like Vicodin, OxyContin and Percocet. The drugs are meant to mimic the nervous system actions of heroin and morphine and all too often lead to similar levels of addiction and suffering. More than 170,000 Americans have died from opioid overdoses this century, nearly triple the number of U.S. military deaths in Vietnam (see my earlier post).

I wrote about the epidemic in Contingencies magazine, focusing on the toll the drugs have taken in the workers compensation system.

Too few Americans are aware of this risk, according to the survey of 1,014 adults, reported in the March 24 edition of Workers’ Compensation Report. Just one in five considered opioids to be a serious safety threat. Only 12 percent said addiction was a concern; two-thirds were unconcerned about any side effects from the drugs.

Education is part of the problem. Only 29 percent of respondents said they had taken or been prescribed an opioid in the past three years, though the number jumped to 42 percent once they were provided with a list of common opioids.

Nearly 60 percent of users had at least one addiction risk factor. Common risk factors include alcoholism, depression, use of psychiatric medication or being the victim of physical, mental or sexual abuse.

Users held opioids in high esteem. For example, 78 percent said they were the fastest method of pain relief, 74 percent said they were stronger pain relievers than alternative prescriptions, and 71 percent said they were the best way to relieve pain.

They underestimate the risk. Though 16,235 people died from prescription drug overdoses in 2013, just 19 percent of survey respondents said they had major concerns about the risk of injury or death from the drugs.

That’s less concern than they had about injury or death from severe weather or a natural disaster, from which 586 people died in 2013, and about the same level of concern as riding in a commercial airliner in the U.S., an activity that in 2013 killed eight, roughly 0.5 percent as many as opioids.

Details on the NSC survey can be found here.