Carriers Identify Emerging Workers’ Compensation Market Trends

Senior Executives from three of the top California workers’ compensation carriers identified emerging trends that are of great importance to California employers at the 2015 California Workers’ Compensation & Risk Conference.

Panelists included:

• Moderator: Pamela Ferrandino, National Casualty Practice Leader at Willis North America
• Mike Mulray, Chief Underwriting Officer at Everest National
• John Dickey, Regional President at Liberty Mutual
• Mike Hessling, Chief Client Officer at Gallagher Bassett
• Glen-Roberts Pitruzzello, VP of Workers’ Compensation, Group Benefits Claim Strategy & Clinical Operations at The Hartford

How do you balance the growth and profitability in this market?

• We do not want to grow if we can not do it profitably, and the market dictates that. We have to try to anticipate how the market will perform. That allows us to smooth the peaks and valleys through different climates.

The WCIRB projects the estimated average medical cost-per-claim will be the lowest since 2007. What do you think are the key drivers behind this improvement?

• The independent medical review (IMR) process. The number of IMRs are being upheld in favor of the employer – around 90%. That is showing the evidence-based protocols are being followed.
• Medical inflation has decreased. Effective utilization review (UR) programs have had a positive effect on controlling medical costs.

Will the greater use generic drugs in in California Drug Formulary materially lower workers’ compensation costs?

• Texas is a good example. We have not seen any major push back from what they have done. They were very proactive in communicating to the providers so they know how to work within the new environment. There are reports showing that their new system has been successful.
• It could help decrease employers’ costs by 10-15%. There could be much broader implications to the claimant as well. It is not just about the money, though, the upside is also the social benefit of avoiding addiction issues.

How do you see medical marijuana impacting employers?

There are three areas:

1. Intoxication policies come into play when you have an employee using it not related to their workers’ compensation claim.
2. To date, New Mexico is the only state who ruled for compensable treatment, however, the employee was already using it prior to injury. This will likely continue to be challenged in various states.
3. Medical advocacy will continue to prove effectiveness versus the alternatives like opioids.

 What insights have you gleaned from predictive modeling?

• We have had some great success from the claims standpoint. There have been some great advances in tools to help with predictive modeling over the past 5-10 years like text mining, which allows modelers to look for keywords in cases that show a trend.
• Predictive modeling can be used to see how to prevent the claims from even happening. It is more effective to try to avoid the claim from occurring, rather than controlling costs once a claim has occurred.
• We are using it more to drive early intervention of claims to reduce the costs, but we also are trying to see how we can use this information for risk control and reducing claims altogether.
• Almost all predictive models have a level of false positives. We need to learn to filter out the white noise that is not providing useful information.

Collectively, do you think SB 863 improvements will continue to adhere or will they be chipped away just like the others?

• The instant you change the rules, people try to find new loopholes. You can not stop. One or two years of results is not a trend line to claim a victory. We will probably see erosion and we will have to come up with solutions as an industry to fight this.
• I’m not sure if we are seeing it play out as intended, with issues like IMR and liens. There will probably be tweaking to make improvements.
• Many stakeholders are taking an interest to try to prevent erosion, so that might help. Because of this, there is cautious optimism.

What are the future trends to look for?

• Formulary – we could adopt the Texas system and it wouldn’t play out here exactly the same way, but I think we need it.
• Ways to reduce frictional costs for employers like IMR.
• The impact of a new president and immigration reform on the workers’ compensation system.
• Attracting new talent for claims adjuster positions.
• The next generation of workers entering the workforce and becoming injured workers. Engaging with them as injured workers will be vastly different from how we have engaged with workers in the past. They will have different expectations.
• Changes in the market cycle and how it impacts the health of the workers’ comp system.