Originally published on Insurance Thought Leadership | January 21, 2021
Out Front Ideas with Kimberly and Mark kicks off every year with our popular 20 Issues to Watch webinar. While there are certainly more than 20 issues to discuss after the unprecedented events of 2020, we focused on the high-impact issues relating to workers’ compensation, healthcare and risk management. These are all important issues for every risk manager and insurance professional to monitor in 2021.
1. Healthcare Watch
President Biden’s healthcare plan has been referred to as ACA 2.0, as his approach is expected to build on the Affordable Care Act. As a longtime supporter of public options, President Biden will likely give consumers access to Medicare-style health plans, along with an option to continue private insurance. In keeping with the ACA, expect to see the return of the individual mandate and associated penalty removed in 2017.
For most of 2020, there was a significant decrease in employer healthcare spending due to limited in-person care caused by COVID-19. Many employers spent less than in 2019, with average savings around .5% to 2%. Ambulatory care settings and hospital admissions accounted for the largest areas of decreased spending. However, pharmaceutical costs, as projected, increased roughly 6% due to the pandemic.
Telehealth continues to rise in popularity, with its ever-increasing accessibility. Its long-term use remains unknown due to dependence on government regulations, but expect its continued use in the short term from health providers accustomed to its use.
2. Political Polarization
With Democrats holding a narrow majority in the House and controlling the split Senate, it is uncertain whether there will be a sweeping or incremental change, especially because President Biden has historically been a political moderate. The secretary of Labor nominee, Marty Walsh, was a former union leader and strong supporter of organized labor, so expect potential Department of Labor policy changes, especially in Occupational Safety and Health Administration (OSHA) enforcement and independent contractor classification.
Political polarization has created continued conflicts for much of our history. There is much work to be done to restore public trust, reduce conflicts and provide a better path forward for our country.
3. COVID-19 Vaccine Considerations for Employers
Employers are currently assessing their options for requiring employee vaccinations. While employers that primarily have employees working from home have fewer concerns than those working directly with the public, all employers have questions regarding a mandatory vaccine policy. Updated Equal Employment Opportunity Commission (EEOC) guidelines published Dec. 16 state that employers can require workers to be vaccinated, with some limitations, including:
Like all employment law, expect there may be litigation over employer mandates to require the vaccine. In developing policies, employers will be considering not only their workforce but the expectations from the general public they interact with.
4. Supply Chain Diversification
COVID-19 caused significant disruption in the U.S. drug supply chain because 80% of the necessary components used in pharmaceutical manufacturing for the country come from China and India. China is also responsible for around 80% of the essential elements used in personal protective equipment (PPE), leading to a shortage during the start of the pandemic.
These supply chain disruptions were widespread and illustrated the need to diversify sources and not rely on imported goods for critical components. Diversification will make companies more resilient to unexpected events such as natural disasters, political unrest, trade sanctions and other pandemics.
5. Public Health Policy
Over the decades, public health achievements have included childhood vaccination programs, fluoridation of drinking water and the global commitment to eradicating HIV/AIDS. There are many public health services we should be able to rely on, including preparedness and response capabilities, addressing and diagnosing health hazards, informing and educating the public and strengthening and mobilizing communities, to name a few.
However, a lack of coordination between the federal government and state public health officials led to poor planning and response to the pandemic. Successful public health initiatives rely on people’s trust in public health, but poor communication, mixed messaging and inconsistency in applications and expectations only furthered challenges.
Public health in the U.S. has generally struggled to make a clear and compelling case for prevention and non-medical approaches to health and well-being. Public health would benefit from leaders focusing on building trust and connecting with communities’ shared values, inspiring participation and active listening.
6. COVID-19 Claims Development
The workers’ compensation industry has seen tens of thousands of COVID-19 claims. According to industry data, the vast majority of those claims are small, with average paid figures just over $1,000. However, the industry has also seen many claims over $1 million incurred on cases that resulted in death or had an extended ICU hospitalization. There could be additional development on these claims as long-term health consequences from COVID-19 become apparent.
Businesses are seeing COVID-19 related litigation in other areas, including business interruption, employers’ liability, general liability, employment practices liability and even directors and officers coverage.
7. Evolving Employee Benefits
In 2021, expect more employer emphasis on addressing mental health and well-being in the workplace. There are more employer offerings with telehealth’s continued use, like mental health apps and videos with on-demand options. The Center for Workplace Mental Health provides a wealth of employer support for workplace well-being, like the new program Notice. Talk. Act, which offers training for company leaders to improve their understanding of mental health on employees and the organization.
Understanding financial health is a primary concern for employees across the country because the pandemic left many unemployed. Many employers have partnered with their 401K providers to provide webinars and online tools to assist their employees with budgeting and forecasting expenses. Group health solutions are also assisting employees in better understanding copays, deductibles and high-quality care options, ultimately driving down costs and improving healing times.
Flexible work schedules and time away programs are being altered for 2021. Split schedules or starting earlier or later are options many employers are adopting as workers are challenged with their children’s online learning needs or caregiving opportunities. Additionally, the pandemic has caused financial problems for many, adding to stress and anxiety for workers. Allowing and encouraging time away from work is necessary to create a healthier, more productive workforce.
8. Redefining Workers’ Compensation
Presumptions for COVID-19 are just the latest example of how workers’ compensation continues to expand beyond its original design of covering only traumatic accidents in the workplace. As more conditions and diseases are deemed work-related, and more presumption laws are passed, the line between workers’ compensation and group health continues to blur.
9. COVID-19 as a Comorbidity
While we still know very little about the long-term effects of COVID-19, we know that there is an increasing number of patients experiencing new symptoms months after recovery. These symptoms range from blood clots to neurological symptoms, like brain fog and confusion, to continued respiratory challenges, like shortness of breath. There have also been reported psychosocial effects like anxiety, hopelessness, depression and post-traumatic stress disorder (PTSD), especially in healthcare workers and ICU patients.
If a large percentage of COVID-19 patients develop long-term physical and mental side effects from the disease, it could increase claims for years to come and even have the potential to be comparable to existing comorbidities such as obesity or diabetes.
10. Post-COVID-19 Analytics and Benchmarking
The insurance industry and risk managers rely heavily on actuarial models and benchmarks to analyze performance and predict future exposures. One of the core assumptions of analytics and benchmarking is that most analysis components are under conditions similar to the past. However, the pandemic introduced several variables into the analysis that raise questions about the validity of those models in the future.
In workers’ compensation, frequency models have been disrupted, and there have been delays in medical treatment, litigation and return to work. Carriers are also having to develop new risk models that take into account the potential impact of future pandemics.
11. Employers Addressing Caregiving
Caregiving challenges were mounting for employers in advance of the pandemic. They were magnified because of work from home, school closures, after-school programs, day care and elder care programs. Supporting employees who are also caregivers means first understanding the impact of caregiving on your workforce, then implementing policies, programs and benefits that offer them tools to assist. These may include offerings to support balancing work and caregiving and case management support to coordinate or find caregivers. Employers that are advancing programs such as these use employee peer groups to partner with human resources and business leaders to create programs and offer a feedback loop regarding effectiveness.
12. Expanding Regulatory Burden
Amid the pandemic, regulators released new regulations regarding claims reporting, COVID-19 tracking, premium collection and job classifications. Systems had to be modified to collect the latest information, and already stretched resources needed to adjust to fulfill these additional requirements.
All these regulatory changes were made with little input from stakeholders, and the increased requirements added additional administrative costs for everyone involved, including employers, third-party administrators (TPAs) and carriers. Temporary emergency rules and regulations are continually expanding and show no signs of letting up.
13. Workforce Evolution
Companies have adjusted their approach when addressing performance, productivity and workplace safety after a major shift to work from home in March 2020. Employee engagement and technology were just a few of the many impacts of this shift. Social distancing and office redesign coupled with consistent communication have proven successful for companies that brought their employees back to the office full- or part-time.
For companies opting to continue work from home policies, there are many unanswered questions regarding when to bring employees back. Whether or not employees are comfortable returning, if vaccines will be mandated or even just waiting until the surge subsides are all considerations for a potential return to the office. Regardless of when return to work becomes a viable option, expect the expansion of remote work opportunities post-pandemic.
14. Economic Recovery
The pandemic has caused significant unemployment increases, with lower-wage workers in service industries being affected the most. Brick-and-mortar retailers were already struggling before the pandemic, and 29 major retailers closed more than 10,000 stores nationwide in 2020. Industries like travel and hospitality are not expecting to see 2019 revenues return until at least 2022. Because these industries rely heavily on business travel, there may never be a full return, as companies are reevaluating the necessity of travel expenses.
While government aid packages could be expanded, they are a temporary fix. Ultimately, the economy will not fully recover until we get people back to work, meaning there will need to be widespread vaccine distribution, removal of government restrictions and new job opportunities for permanently displaced employees.
15. Insurance Innovation
New models for claims processing, including automation, will continue to emerge in 2021 and 2022, widening the gap between the innovators and legacy providers. The consumer journey and engagement will begin to evolve in a material way, driving on-demand tools and solutions. With an added emphasis on customer experience, organizations must rethink their design around support models to assist with consumer education, planning, decision-making and coordination of services.
With the advancement of technology and the emergence of models not offered previously, expect pricing models to be adjusted. Early adopters wanting to engage in new models will help shape the learnings and performance of the innovation and engage in transparent discussions around value and pricing.
16. Insurance Market Challenges
In 2020, businesses saw significant price increases across multiple lines of coverage and carriers reducing policy limits in an attempt to reduce their exposure to losses that have been both historic and difficult to predict. Reinsurers reported significant price increases for 1/1 renewals with contract language changed to eliminate ambiguity around underwriting intent and reinforce exclusions. Exclusion of pandemic losses from workers’ compensation treaties means carriers will not have reinsurance available for those losses.
Workers’ compensation is the one line of commercial insurance that has been relatively stable in the last year. Due to drops in employer payroll, overall premiums and claims dropped in 2020. Several factors are putting pressure on carriers to adjust pricing, including historically low interest rates that lower carrier investment income and discounting on long-term claim payouts. There are also significant differences between the guaranteed cost market, which is drive by claim frequency, and the retention market, which is driven by claim severity. The costs of catastrophic injury claims has continued to climb at rates well above medical inflation.
Risk managers should expect more of the same this year. As losses continue to grow in multiple lines of coverage, carriers are trying to find the correct pricing to make these lines profitable. Additionally, coverage gaps are developing as carriers tighten up policy language to avoid unintended claims. For example, many policies and reinsurance contracts added tight exclusions for infectious diseases, excluding coverage for conditions like Legionnaires disease, which had been previously available.
17. Cyber Risks
Deepfake videos, increased phishing and ransomware attacks and more vulnerable remote workforces have all contributed to record cyber threats. Any vulnerabilities could leave an organization open to million-dollar ransoms, data leaks and irreparable reputation damage. As hackers become more sophisticated and organized, it is vital to remain vigilant, and training employees cannot be overlooked.
18. Public Sector Challenges
The economic recession caused by the pandemic resulted in municipalities receiving significantly lower tax revenues from areas like sales tax, hotel taxes and income taxes. The public sector faced increased costs from public health expenses and the costs associated with operating in a pandemic environment. Additionally, civil unrest and riots in larger cities resulted in billions of dollars in public property damage and thousands of injuries to law enforcement officers.
Law enforcement agencies face additional challenges due to decreased staffing and recruiting and an increase in retirements. Amid all of these obstacles, pensions remain significantly underfunded, and, as retirements accelerate, these pensions could run out. Ultimately, the events of 2020 will increase the costs faced by public entities, which will increase the burden on taxpayers to pay for all these costs.
19. Lessons on Industry Engagement
In 2020, most conferences evolved to host their first virtual events. While many industry stakeholders have voiced concern with virtual fatigue and are anxious to get back to in-person events, the value of conferences before the pandemic is in question. As companies have adapted to online certifications, prospecting virtually and partnering with clients outside of these events, organizations question the return on investment of these conferences. While there will be a return to in-person events eventually, expect to see smaller booths, fewer attendees and a larger focus on local and regional participation.
20. Litigation Management
Pandemic restrictions have forced courts across the country to postpone significant portions of their dockets, causing delays in litigation in both workers’ compensation administrative courts and civil litigation. These delays can cause claims exposures to escalate along with administrative costs associated with the litigation. In dealing with these delays, it may be best to be selective about what is litigated.
Listen to the archive of our complete Issues to Watch webinar here.