Originally published on Business Insurance | September 2, 2020
The surge in workers compensation “mega claims” of at least $3 million continues as medical treatments and technologies advance, according to research by ratings bureaus around the country.
While mega claims comprise a statistically small percentage of all workers comp claims, claims are reaching the mega threshold more quickly, primarily because of the associated costs of technological advances in medicine. Experts say that upward trend is likely to continue.
“Today, because of innovations in technology and medical advancement, people are able to survive injuries and may require additional interventions like transplants to support their ability to recover to full function,” said Dr. Michael Choo, Walnut Creek, California-based chief medical officer and senior vice president at Paradigm Management Services LLC. “I do believe that medical costs associated with injury care will continue to climb.”
Overall, mega claims account for upwards of $2 billion in workers comp costs each year, according to research compiled by the National Council on Compensation Insurance, California’s Workers Compensation Insurance Ratings Bureau and other states that pooled their data to report on mega claims trends across the country.
The study includes data from 43 states and the District of Columbia. It found that more than 4,500 claims from these states and D.C. incurred losses in excess of $3 million (at 2018 cost levels) from 2001 through 2017. Of those claims, 57% cost between $3 million and $5 million, 33% between $5 million and $10 million, and 10% in excess of $10 million, with mega claim counts for 2017 at a 12-year high, according to the report released on Aug. 25.
While fewer than 50% of mega claims reach the $3 million threshold by 18 months from policy inception, these claims are reaching that number more quickly than in the past, the study found.
“This is likely driven by a combination of several items, including a general increase in the number of mega claims arising from the construction sector — potentially due to the higher relative hazardousness of the construction industry compared with other industry sectors,” Ryan Voll, an associate actuary with NCCI and one of the report’s authors, said in an email. In addition, he said, many insurers have increased their use of analytical models that help identify potentially high-cost claims earlier and increase their reporting of such claims, he said.
“We’re noticing a higher frequency of claims hitting those thresholds,” Dr. Choo said. “Especially after 2013-2014, we’re definitely seeing more cases with high price tags related to medical costs.”
The types of claims most likely to develop into mega claims include spinal cord injuries, brain injuries and severe burns, said Mark Walls, Chicago-based vice president of communications and strategic analysis for Safety National Casualty Corp. “For those injury types, we’re seeing a lot of those medical advances, both increasing accident survivability and prolonging life expectancies, but also increasing function and quality of life. All these medical advances are very expensive.”
He noted that one of the limitations of the study is that it included only data from insurers, not self-insured entities such as police and fire departments, and many public schools, hospitals, colleges and universities.
Public entities are the biggest drivers of mega claims for Safety National, and with civil unrest and the uptick in police-related shootings this year, the insurer may see an increase, Mr. Walls said.
Presumption laws — such as those covering a range of cancers for firefighters or heart conditions for law enforcement officers — can also lead to claims cresting the mega threshold.
“We’ve seen cancer claims turn into mega claims,” Mr. Walls said.
Then there are the “massive claims that shouldn’t be that big,” said William Zachry, San Carlos, California-based workers compensation consultant and board member of California’s State Compensation Insurance Fund. “We’ve seen an increase in the severity of claims, but not an increase in the severity of the injuries.”
These claims, which Mr. Zachry refers to as “jumper claims,” are those that cost millions of dollars not due to a severe injury, but such issues as a worker’s lack of coping skills, plaintiffs’ attorneys adding multiple body parts to the claim, repeat surgeries, overprescribing and poor care, leading the worker to believe he or she is disabled.
“If you can identify and intervene very early, it is possible to really change the dynamic, change the outcomes,” he said.
Mr. Walls agrees that early intervention is crucial. “If you get off on the wrong path, it can add months to years to the recovery,” he said.
“It’s very critical to take into consideration not just the physiological issues but also the psychological and behavioral health, as well as socioeconomic factors … to get the best outcome,” Dr. Choo said.