Dennis Mealy, NCCI's Chief Actuary, in a "State of the Line" report at NCCI's annual issues symposium on May 5, 2011, characterized the condition of the workers' compensation insurance market as "deteriorating." Most discouraging of all was his announcement that the combined ratio for workers' compensation insurance in 2010 was 115, a five-point rise from 2009. However, the report noted, three points of this increase were produced by one carrier's addition of more than $800 million to excess workers' compensation reserves. Read more.

Healthcare Solutions, a medical cost management firm, released a paper on May 3, 2011, at the annual conference of the Risk and Insurance management Society, identifying 10 emerging trends in medical treatment of workplace injuries:

Greater use of surgical implants: Although hip and knee joint replacements are commonly performed surgical procedures, management of surgical implant costs is in its infancy.  Cost containment strategies include verification of whether the surgery is warranted and is work-related, whether the device being implanted is appropriately priced, and whether costs of the operation itself are adequately controlled. Read more.

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Larson's Spotlight reports noteworthy workers' comp cases each week. This list was compiled by Thomas A. Robinson, a staff writer for Larson's Workers' Compensation Law, the nation's leading authority on workers' compensation law. 

 

 

 

 > Read the summaries & court decisions.

 

1. CT: Apprentice's Tort Action Against Employer Fails-No Substantial Certainty of Injury Shown

 

2. KY: Stable Groom Was "Traveling Employee" and Auto Crash Injuries Were Within Course of Employment In Spite of Fact That He Was Riding in Friend's Personal Vehicle

 

3. NJ: Defendants in Auto Negligence Action May Not Maintain Third-Party Complaint Against Plaintiff's Co-Worker

 

4. NY: Bricklayer's Injuries While Eating Lunch in Nearby Bus Shelter Were Not Compensable

 

5. TX: Retaliatory Discharge Action Barred by Governmental Immunity 

 Private workers' compensation carriers posted a pre-tax operating loss of one percent in 2010, the first such loss since 2002 and the worst result since 2001. This negative bottom line occurred despite investment gains for the insurance industry in 2010. Still, investment returns for both the total property/casualty industry and the workers' compensation portion of that industry remain at historically low levels, and 2010's gains are unlikely to be maintained without rises in interest rates.

Workers' compensation net written premium continued to decline, by 1.3 percent in 2010 for private carriers. This represents a much smaller decline compared to the annual decline in the years 2007-2009, perhaps a sign that the economic recovery is having a beneficial effect.

Although the reserve position of private carriers continued to worsen somewhat in 2010, with a deficiency estimated at $10 billion, an increase of $1 billion from year-end 2009, the report noted that, when taking into account allowable discounting of indemnity reserves for lifetime pension cases, the deficiency falls to $5 billion, a relatively modest figure in a total carried reserve base of more than $109 billion.

An increase in small lost-time claims was recorded in 2010, producing two notable results: (1) an increase of average medical cost per lost-time claim of only two percent, the smallest such increase since 1993; and (2) a drop of three percent in the cost of indemnity claims, the first such actual drop since 1993. The report notes, however, that these results are probably aberrations produced by a temporary growth of small lost-time claims, which would have been medical-only claims in more "normal" times, as the economic recovery takes hold and do not reflect any underlying reduction in medical and indemnity cost drivers.

The multi-year trend in declining lost-time claim frequency halted in 2010, replaced by what the report calculates as a three-percent increase. The report attributes much of this increase to the many small lost-time claims, which may have been medical-only claims in more "normal" times, as discussed in the preceding paragraph.

Finally, the report discusses several market challenges in the future. Deteriorating underwriting results are prominent among these. Very simply, with investment yields stuck at their historic lows, present levels of underwriting losses cannot be sustained. In other words, the combined ratio must decline substantially if a reasonable return on capital is to be earned. Secondly, the industry must determine whether 2010's frequency increase betokens a long-term trend or is a transient phenomenon associated with recovery from the recession. Thirdly, the industry will be concerned with political developments on the national level. Enactment of the financial reform bill and establishment of the new Federal Insurance Office presage a growing influence of the federal government over the industry. Moreover, the size of the federal deficits and the potential for significantly higher inflation must be monitored. Finally, the impact of the healthcare reform bill on workers' compensation insurance remains to be seen.

Read the full report: https://www.ncci.com/Documents/AIS-2011-SOL-Presentation.pdf

© Copyright 2011 LexisNexis. All rights reserved.

 Changing demographics of workforce, aging and obesity: Studies have found that older workers have a higher incidence of slips and falls, require more time to heal, and are more severely impaired when injured.  Similarly, a study found that obese workers filed more claims, had more lost workdays, had higher medical costs, and caused more claims costs than their normal-weight peers.

Increased regulatory oversight of pharmaceutical practices: The current system of pharmaceutical pricing, until recently in many states tied to the Average Wholesale Price (AWP) index, is changing.  Many suppliers who have published the data are abandoning AWP, leaving states to search for another pricing index to use.

Increased treatment with personalized medicine: Personalized medicine, customized treatment aligned to a patient's genome, is on its way.  While treatment with personalized drugs may lead to faster recovery, the required individualized testing may lead to higher costs.

Improved treatment for traumatic brain injury: Traumatic brain injury (TBI), a contributing factor to more than 30 percent of injury-related deaths, does not always manifest itself until months after the injury.  The longer TBI goes undiagnosed, the longer, more expensive, and even futile is the road to rehabilitation likely to be.

Greater use of e-prescribing and digitization of records: The medical/pharmaceutical professions are digitizing their records at an increasingly rapid pace, with prescriptions routed electronically having grown from 68 million in 2008 to 191 million in 2009.  Digitization offers benefits to patients, whose records and diagnostic results can be shared quickly and accurately among specialists, as well as to physicians and insurers, with records and images from diagnostic tests passing quickly from physician's office to an insurer's utilization review team.

Proliferation of compound and repackaged drugs: The growing use of compound drugs, made when a pharmacist or physician combines, mixes, or alters ingredients to make a substance unique to the patient, and repackaged drugs, which are prescription or over-the-counter drugs repackaged by physician or clinic dispensers, is a challenge to cost controls.  Such medications may not comply with state pharmacy fee schedules, and payers need to be alert to billing practices.

Growth in use of medical foods: Medical foods, i.e., foods formulated to be used under the supervision of a physician, are increasingly being prescribed to treat conditions such as depression, sleep disorders, neuropathic pain, and osteoarthritis.  These foods, however, do not have to be submitted to clinical trials or FDA approval, thus raising questions regarding their safety and effectiveness.

More injuries related to distracted driving: Distracted driving is involved in 20 percent of all injury crashes, with use of a cell phone present in almost one in five distracted driving fatalities.  Employers need to develop protocols regulating the dispatching of a driver known to be taking medications whose use may impair driving, as well as protocols regulating employee cell phone use and text messaging while behind the wheel.

Advances in bionic implants to restore functions lost to disease or injury: Today's prosthetic legs and arms make such actions as running and picking up objects routine, and prosthetics controlled by the mind and neural connections are coming.  Implants of chips lined with electronic sensors that send impulses to the optical nerve have recently occurred in Germany.

Read the report: http://www.healthcaresolutionsmediakit.com/files/press_releases/1385-3_rims-position-paper.v2.downloadable-pdf.pdf

© Copyright 2011 LexisNexis. All rights reserved.