Tag Archives: Workers Comp

Women in Insurance: Crystal Eastman

I.I.I. chief actuary James Lynch brings us a timely post on one of the most important female contributors to the history of property/casualty insurance:

Constituting nearly 60 percent of the insurance work force in the United States, women are clearly important to the insurance industry.

March is Women’s History Month and this is the perfect time to honor the importance of women in the industry. Our earlier post on this topic can be read here.

The Casualty Actuarial Society (CAS) plays its part, in an indirect way. This month’s Actuarial Review, as part of the organization’s centennial, touches on one of the most important female contributors to the history of property/casualty insurance.

The woman is Crystal Eastman (pictured).

Eastman  wasn’t an actuary, and to my knowledge she never worked in insurance. She was a lawyer, a radical in her day, and one of her causes was workers’ rights. Her 1910 publication, Work-accidents and the law, detailed worker injuries in 1907 and 1908 in Allegheny County, Pennsylvania, and the economic toll those injuries took.

In those 12 months, 529 workers died from job-related maladies (see table). Eastman led a team that investigated every death, plus another 509 workers hospitalized between April and June 1908.

About one third of the accidents were unavoidable, the study found, while  one third were the fault of the workers themselves and another third resulted from employers failing to provide a safe workplace. The financial burden of the accidents, though, fell overwhelmingly on the victims and their families. They lacked the resources to sue, and common law at the time was stacked against them anyhow.

The solution: workers compensation – insurance covering worker injuries without regard to fault. But early workers comp laws were ruled unconstitutional, typically because they took from employers their right to due process – their day in court. New York’s law, for example, was found unconstitutional on March 24, 1911.

The next day, 146 workers – 123 of them women – died in the Triangle Shirtwaist factory fire. The tragedy led to a state commission, headed by Frances Perkins – later the first female Cabinet member – that documented dismal and dangerous working conditions across the state. The result: a workers comp law that passed constitutional muster.

The law addressed the workers problems – now they could be compensated for their injuries. It created an insurance problem: without a court to adjudicate, how does one set a fair compensation for an injury?

It was for this task that, in 1914, the Casualty Actuarial Society (CAS) was created. So it is not much of a stretch to say that women, both famous and not so famous, are at the fountainhead of the organization.

Check out I.I.I. facts and statistics on workers compensation here  and on careers and employment here.

Impact of ACA Like Hurricane, Says WCRI Exec Victor

I.I.I. chief actuary James Lynch reports from Day  2 of the WCRI annual conference in Boston:

Health insurance and workers compensation are sort of kissin’ cousins, in that changes that affect one inevitably affect the other.

But that’s my metaphor. Dr. Richard Victor, executive director of the Workers Compensation Research Institute (WCRI), likens the impact of health care reform to a hurricane.

Like a storm whose path is not quite defined, health care reform could take a significant toll – but we don’t know precisely where. Since workers comp differs from state to state, the impact of the Affordable Care Act (ACA) will differ from state to state. Like a good weatherman, Dr. Victor told an audience of about 400 at WCRI’s annual conference in Boston on Thursday he could make some educated guesses what might happen.

He is assuming the ACA is enacted exactly as written – a tough assumption but as good a starting point as any. In that case, the increase in insured Americans will increase demand.

The marketplace might decrease the use of doctors, relying instead on well-trained nurses or even sophisticated computers to help provide care.

Or doctors might raise prices in the face of rising demand.

What actually happens will differ by state. Some states make it difficult to take diagnosis and treatment out of the doctors’ hands. In those states, medical costs – and their kissin’ cousin, comp costs — are likely to rise. Elsewhere, the effect will be muted.

Other insights:

â–  Health care reform will result in a healthier work population. This will tend to help the comp system, because healthy workers are less likely to get hurt on the job, and if they do get hurt, they get well faster.

â–  Changes in billing, Dr. Victor said, will “absolutely† lead to upcoding – in which a doctor exaggerates the severity of a treatment to receive a bigger reimbursement. The practice is well-documented in workers comp, he said, citing examples from Florida and California.

â–  Changes are likely to shift into workers compensation. That’s because many employers are increasing deductibles that employees pay for treatment. Workers comp, meanwhile, has no deductibles and no co-pays – giving an employee the incentive to label an injury as work-related.

I blogged about Day  1 of the conference here. Other highlights from Day 2:

â–  Alex Swedlow, president of the California Workers Compensation Institute (CWCI) noted that even after all appeals are exhausted only about five percent of denials of comp claims are overturned. Swedlow also said evidence-based pain management guidelines effectively control costs; and a comparison of California and Washington pharmaceutical costs show that more cost savings are possible.

â–  Harry Shuford, chief economist of the National Council on Compensation Insurance (NCCI), argued that underwriting cycles are closely linked to bond yields and that when it comes to managing their business, insurers in the long run “do a much better job than other financial intermediaries† like banks.

MIT Economist Speaks on ACA Impact @WCRI

Workers compensation insurance will have to move quickly to keep from being a net loser from health care reform, said Dr. Jonathan Gruber, one of the architects of what ultimately became the template for the Affordable Care Act (ACA).

Dr. Gruber, an MIT economist who helped construct the Massachusetts health reform that the ACA modeled, spoke to more than 400 attendees at the Workers Compensation Research Institute (WCRI) conference in Boston.

Health care reform should help the workers compensation system, he said. Fewer workers will be uninsured, so fewer people will get injured over the weekend and then claim on Monday they got hurt at work.

But Dr. Gruber, an MIT economist, noted that the comp system is incredibly inefficient. It pays higher rates for services than most health plans. And it changes slowly, which could be a big disadvantage as the ACA forces efficiency on the other parts of the health care system – hospitals, doctors and health insurers. If the comp system can’t keep up, the rest of the system will find ways to dump costs on it.

Dr. Gruber said it will be three years before we can tell whether ACA has been successful. At this point – in ACA’s early days, its proponents and opponents are “saying too much.†

Gruber also gave a nod to researchers like those at WCRI. With ACA’s many moving parts, he said, it will be important to intelligently determine which of those parts are truly working.

Day One of the WCRI conference also featured two examinations of how changes in state comp laws play out.

The first showed how Texas successfully reduced the rate of claims through changes enacted in 2002, 2003 and 2005. The changes brought individual claims under greater scrutiny.

The good news: the rate of claims in Texas lagged those of 15 states studied, said WCRI senior analyst Carol Telles. The rate of claims from chiropractors fell more sharply than other professional services, though Texans continue to use chiropractors more than the other states.

Costs per claim, though, increased, in part because the changes aren’t free. It costs money to review claims. Any changes to a workers comp system must consider whether savings will be able to justify those costs.

The second study showed how Illinois took a more blunt approach in 2006. It cut fee schedules 30 percent across the board. One interesting result, said senior public policy analyst Rebecca Yang: costs per claim fell, as you might expect, but only by 24 percent overall.

Among the reasons: the rate of claims increased, and there were signs that doctors were billing for more complex office visits than before.

Day Two of the conference will take a longer look at the impact of ACA on workers comp. Other sessions will look at how the economy drives workers comp results; accountable care organizations; and medical dispute resolution.

WCRI Conference Preview

With the Affordable Care Act (ACA) at center stage, interest is high in this week’s workers compensation conference in Boston, Massachusetts.

We read a lot about how ACA is changing health insurance and the world of business, but an effect of less renown is how the health law will affect workers compensation insurance.

Check out previous T+C posts on this topic here and here.

The conference, sponsored by the Workers Compensation Research Institute (WCRI), will feature health care experts like economist Jonathan Gruber, an MIT professor and one of the architects of the ACA, teasing out how health care and workers comp will intertwine in the coming years.

More than a dozen media organizations are scheduled to attend, from industry blogs to national media. I.I.I. will be there, too, with chief actuary James Lynch reporting and tossing off the occasional tweet @III_Research under the hashtag #WCRI.

WCRI is an independent, not-for-profit research organization that provides high-quality, objective information about public policy issues involving workers compensation systems. The conference is March 12 and 13, with details here.

A roundup of I.I.I. workers comp  work can be found here.

NCCI: Workers Comp Outlook Encouraging

The workers compensation insurance market showed some signs of recovery in 2012, according to the annual “State of the Line† report from NCCI.

Among the positives, the combined ratio for workers compensation improved for the first time since 2006, premium grew for the second consecutive year, and clam frequency declined significantly for the first time since 2009.

The workers compensation calendar combined ratio was 109 in 2012, a six-point decrease from 2011. While a 109 combined ratio is far from satisfactory, the decline is welcome, NCCI said.

The accident year combined ratio also experienced a six-point improvement, declining to 108 in 2012, following 114 in 2011.

Net written premium (including state funds) also increased by 9 percent to $39.63 billion in 2012, after an 8 percent increase in 2011 – a welcome shift following the cumulative 27 percent decline in premium from 2006-2010.

In other good news, lost-time claim frequency improved significantly in 2012 – down 5 percent on average in NCCI states. This is slightly larger than NCCI’s long-term annual estimate of a 2-4 percent decline per year.

NCCI president and CEO Steve Klingel noted that while the positives are beginning to outweigh the negatives, there remains great opportunity for improvement:

Our optimism is tempered by knowing that external forces such as the economy, healthcare reform, and new legislation may still negatively affect the market. But for now, we view the overall industry condition as encouraging.†

Check out Insurance Journal for more on this story.

I.I.I. facts and statistics on workers comp are available here.

NCCI: Workers Comp Market “Conflicted”

There were some positives and negatives for the workers compensation insurance market in the annual “State of the Line† report from NCCI Holdings Inc.

On the plus side, written premiums saw growth for the first time since 2005, indicating that the worst of the recession is over.

Net written premiums (including state funds) increased by 7.4 percent to $36.3 billion, a welcome shift following the cumulative 27 percent decline in premium from 2006-2010, NCCI said.

However, for the third straight year, workers compensation holds the distinction of having the highest combined ratio of all the major commercial lines.

NCCI reported that the workers compensation calendar year combined ratio was 115 in 2011, the same number as in 2010.

In a release, NCCI Chief Actuary Dennis Mealy observed:

Workers compensation, because of its direct connection to employment and the labor markets, has been the property/casualty line most significantly impacted by the continued difficult economic environment. Combined ratios remain at unsustainably high levels, and investment returns are not sufficiently high to generate operating returns near the cost of capital.†

Despite the challenges, NCCI added that the industry is well-capitalized for the future.

Business Insurance has more on this story.

Check out I.I.I. information on workers compensation.

Obesity Increases Workers Comp Costs

We’ve blogged before about the rising cost of the obesity epidemic in the United States  both in terms of pounds and dollars.

Now research from the NCCI confirms anecdotal data that work-related injuries are far more costly if the injured worker is obese. Hat tip to Insurance Journal for highlighting this study.

The dramatically higher medical costs suggest that the types and nature of injuries sustained by obese workers, especially the “morbidly obese,† are more likely to result in permanent disabilities, NCCI says.

Given that obese claimants have more permanent disabilities and longer duration of medical treatments, it is highly likely that obese claimants would also have higher indemnity costs than comparable non-obese claimants, it adds.

So what can be done?

According to NCCI, one way for insurers to manage this risk for the benefit of injured workers and to control costs is to collect data on claims for height and weight:

If the data is available, insurers could be aware up front if obesity is likely to be an issue and try to improve the outcome for the injured worker and their family by keeping the claim from becoming a permanent injury, and, in turn, reducing duration. Depending on the added cost in terms of managing these claims, it may also reduce overall claims costs.†

Another important part of managing obesity risk is prevention. NCCI observes:

In terms of prevention, insurers could offer incentives similar to those already in place for drug-free workplaces. Employers can also play a role in prevention by putting programs in place to try to improve lifestyle choices in terms of nutrition and fitness.

It concludes:

However, ultimately, it is up to the individual to take responsibility for their own health.†

An interesting point.

A related article in the Wall Street Journal today reports on how local communities around the country are taking new steps to push residents to improve their health.

The WSJ quotes New York City’s deputy commissioner for environmental health saying:

To have true control over your health is not just about what you can do as an individual but what is being done at the community level.†

What do you think?

Check out I.I.I. information on workers compensation and obesity risk.