The keynote speakers for Breakout for Agents at the 2016 WCI Conference were Mark Walls, Vice President Communications & Strategic Analysis at Safety National and Kimberly George, Senior Vice President, Corporate Development, M&A and Healthcare at Sedgwick. They discussed the state of the workers’ compensation marketplace and significant issues impacting workers compensation.
State of the market – For the first time since NCCI started tracking industry combined ratios, workers’ compensation has been profitable for three consecutive years. This is due to the combination of better underwriting and increased rates over several years. Interest rates remain low so carriers are still challenged with investment income. Around the nation, employers with good loss experiences are seeing rates that are flat to slightly down. There are some notable exceptions. In New York, reform efforts stalled in the legislative committees and as a result employers there are seeing double-digit rate increases. Court decisions in Oklahoma could result in significant rate increases for employers there. Finally, court decision in Florida have significantly increased claims exposure and because of this NCCI is recommending rate increases over 20%.
The viability of workers’ compensation – There is a growing debate around the gaps and shortcomings of workers’ compensation. The industry needs to engage in a critical analysis of these issues and agents are big stakeholders.
The upcoming election – This is also important in shaping the future of workers’ comp. In the coming election, there are 12 gubernatorial seats and five insurance commissioner positions to be decided. The workers’ compensation industry needs to be paying attention to these elections because the insurance commissioners can have significant influence over procedures, policies and enforcement in their states. In addition, the President significantly impacts the direction of OSHA and the Department of Labor, both of which have a significant impact on employers and workers’ compensation.
The Affordable Care Act (ACA) – The ACA will continue to be a subject of discussion in 2016. NCCI and WCRI have both conducted studies on how the ACA has affected workers’ compensation. Results have not conclusively tied treatment delays or actual cost shifting to workers’ compensation. Additional research by these organizations and others are important to evaluate the impact of ACA on workers’ compensation. From the agents standpoint,it is important for employers to consider the interplay between their group health and workers’ compensation as there can be overlapping provider networks that contribute to the overall patient experience.
Federalization – Some are concerned that there are sign the federal government is becoming more involved in state workers’ compensation systems. OSHA has a tremendous impact on workers’ compensation. Medicare Secondary Payer Compliance is another example of federal law affecting the system. Depending on the election results we could see a push for some minimum standards for states with regard to their workers’ compensation laws. In particular, the Federal government is very concerned about cost shifting from workers’ compensation to SSDI so there is strong probability this will be addressed.
Holes in workers’ compensation – Workers’ compensation protections are not available to all workers within the U.S. In 14 states, smaller employers with five employees or fewer do not have to secure coverage. In 17 states, there is no legal requirement for coverage of agricultural workers. Half of the states do not require coverage for domestic workers, and five states specifically exclude coverage for these employees. There are also states that create exceptions for certain types of workers. These are some of the “holes” that critics point to when talking about the inadequacy of workers’ compensation.
Evolving Claims Model – Employees are the most valuable asset of an employer. If a worker is injured on the job the employer is going to want that claim handled properly. Agents need to be talking to employers about not just price but also service when considering different carriers.
Constitutional Challenges – In the last year, state Supreme Courts in Louisiana, Pennsylvania, New Mexico, Florida, and Oklahoma have invalidated a portion of the workers’ compensation statutes on Constitutional grounds. This has created significant market turmoil in Florida and Oklahoma. They expect to see similar Constitutional challenges in other states. In addition, a Florida case has been appealed to the US Supreme Court. Given that workers’ compensation is a State issue it is interesting to see if the US Supreme Court accepts the case. The makeup of the Supreme Court is another election issue that could impact workers’ compensation.
Predictive Analytics – Predictive analytics are being used on the claims side to try and identify cases with high potential for adverse development so that appropriate intervention can be taken early in the case. In addition, carriers are using predictive analytics on the underwriting side to better forecast loss development and allow them to make more informed underwriting decisions.