The meeting provided a platform for the exploration of trends and topics affecting the workers compensation biosphere while also offering insights about issues impacting the insurance industry as a whole.
Presentations from the 2018 National Council on Compensation Insurance (NCCI) Annual Issues Symposium can be found on the organization's website.
Bill Donnell, Chartered Property Casualty Underwriter (CPCU), president and CEO of NCCI, kicked off the meeting with his presentation, The Future@Work. Mr. Donnell advised that the future is coming fast and that the workers compensation system needs to be able to adapt to new challenges that impact the work, the worker, and the workplace. To achieve this, he suggested that all stakeholders should be connecting with each other and technology as the challenges of the future unfold. How the parties react to change will shape that future.
Some of the future work challenges Mr. Donnell noted include the move to more robotics, automation, and self-driving vehicles. This will, in turn, create different needs for the worker, and the workers compensation system will have to adapt to meet these needs. And, as a consequence of some of these technological advances, the workplace will be safer and more connected. Hazardous work in the future could be virtual and not physical at all. Return to work programs could reach an entirely new dimension with the use of wearables and exoskeletons. In the end, he remarked that workers compensation must stay connected to technology to evolve and meet the demands of the future.
State of the Line Report
The State of the Line was delivered by NCCI Chief Actuary Kathy Antonello, Fellow of the Casualty Actuarial Society (FCAS), Fellow of the Society of Actuaries, Member of American Academy of Actuaries (MAAA). Ms. Antonello began her speech by providing an overview of the property and casualty (P&C) insurance results.
Overall, the industry enjoyed strong premium growth in 2017 with workers compensation being the outlier with net written premium for 2017, down slightly from 2016. The combined ratio for the P&C industry for 2017 stands at 104 percent, up 3 percentage points from 101 percent in 2016. Part of this increase is the result of the catastrophic losses experienced by the industry in 2017 (three Category 4 hurricanes, wildfires in California, and violent storms throughout the Midwest).
Turning to the state of the workers compensation line, Ms. Antonello noted that the calendar year net combined ratio for 2017 dropped to 89 percent from 94 percent for 2016. This is the lowest combined ratio in at least the past 20 years. Other line statistics to note are that net written premium remains fairly steady, slightly down from 2016, and that NCCI residual market premiums for 2017 were also down slightly from 2016, as was market share. This continues a 5-year trend of stable premiums and market participation.
In reviewing line loss drivers, Ms. Antonello advised that the decline in lost-time claim frequency continues, with the 2017 number down 6 percent from 2016. She stated that this trend is not expected to change. Average indemnity claim severity along with lost-time claim medical severity saw modest increases in 2017. The average indemnity portion of a claim rose about 4 percent from $23,400 in 2016 to $24,400 in 2017.
NCCI estimates that the average medical portion of a lost-time claim also increased 4 percent from 2016 to 2017. The 2016 claim amount is $28,800, and the 2017 figure is $29,900. In looking at the role that prescriptive drugs play as a medical cost driver, Ms. Antonello mentioned a positive trend related to opioid use. In 2012, 55 percent of injured workers with prescriptions were dispensed opioids. By 2016, this number had dropped to 45 percent.
Additional information related to the presentation is available in 2018 State of the Line Guide. This document does a deeper dive into each slide in the talk, highlighting the significant aspects of each.
The Economics of Workers Compensation
Robert P. Hartwig, PhD, CPCU, clinical associate professor of Finance at the Darla Moore School of Business at the University of South Carolina, assessed the different factors driving the economy in The Economics of Workers Compensation. One issue of particular interest as it relates to workers compensation is the proposed federal infrastructure spending. Since this initiative targets transportation and its ancillary businesses, Dr. Hartwig feels that more payroll will be reported under high-rate class codes increasing written premium. Interestingly and contra to this, he noted that potential trade disputes could lead to layoffs in the United States, shrinking the workers compensation exposure base and premium.
Marijuana—The Move to Schedule II
In Medical Marijuana: The Move to Schedule II, David Deitz, MD, PhD, principal at David Deitz & Associates, discussed the medicinal value of marijuana, the workplace issues it creates, its interaction with opioids, and the future of its use. Dr. Dietz began by reviewing the two species of marijuana, Cannabis sativa and Cannabis indica, and their two most important medicinal elements—tetrahydrocannabinol and cannabidiol. These two substances are collectively referred to as cannabinoids and have varying effects on the human body.
Little study has been done regarding the medicinal impact of marijuana since it has been classified for more than 50 years as a Schedule I drug by the Federal Drug Administration (FDA), severely limiting the potential for medical research. As to the workplace, Dr. Deitz indicated that, clearly, the biggest issue is safety, particularly in the more hazardous occupations like construction and trucking.
As respects interaction with opioids, he remarked that data has shown in states where marijuana is legal, fewer opioids are prescribed and that cannabinoids might be helpful in dealing with opioid addiction. Dr. Deitz then discussed the future of marijuana. Noting that polls have indicated the majority of voters support the legalization of medicinal marijuana, he expects the substance to be moved to FDA Schedule III or IV, which will allow easier research and more permissive use.
Opioids—Killer Pain Relief
Moving on to the number one issue impacting prescription drug utilization in workers compensation claims, Raji Chadarevian, director of Medical Regulation and Informatics for NCCI, analyzed Opioids—Killer Pain Relief. Mr. Chadarevian noted that in the service year (SY) 2016 for NCCI states, 2 in 5 prescription claims received an opioid and that 1 in 4 dollars spent for workers compensation claim prescriptions paid for opioids. But the good news is that opioid utilization in these states is on the decline with the change in opioid cost per active claim down 9 percent.
Additionally, the oxycodone pill equivalents (OPE) per claim is decreasing, while the OPE per prescription is holding steady. Mr. Chadarevian also offered information demonstrating that the vast majority of opioid prescriptions (80 percent) in SY 2016 were being written for the heavy opioid users (classified based on yearly OPE consumption) who represent only 10 percent of the total opioid-related claims. He also stated that 1 in 5 of these same heavy users has also been prescribed benzodiazepines for concurrent use.
Provider Networks and Workers Compensation Medical Costs
Alex Swedlow, president of the California Workers Compensation Institute, and Barry Lipton, FCAS, MAAA, practice leader and senior actuary at NCCI, examined the effectiveness of the use of medical care networks in the workers compensation system. In The Changing Nature of California's Medical Provider Networks, Mr. Swedlow charted the impact of various legislative reforms over the last 15 years on the delivery of medical services and noted that two-thirds of all benefit costs associated with a claim are now medical in nature. He also advised that medical network use in California is at about 90 percent. Mr. Swedlow then offered information indicating that not all networks provide equal quality of care and that the location of the network really does impact outcomes.
Mr. Lipton then reviewed the Efficacy of Medical Networks. Among his findings were that the use of medical networks has shown steady growth in the states that NCCI serves. The rate of in-network payments for the current accident year is hovering at 80 percent. And, it also appears that utilization is higher in-network for common injuries.
Mr. Lipton also analyzed the impact of the Affordable Care Act on workers compensation claims and found no difference in the time to first treatment for sprain and strain injuries. A final topic addressed by Mr. Lipton was workers compensation megaclaim (incurred loss reserve of $10 million or more). He noted that 70 percent of these claims result from motor vehicle accidents and falls from heights.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.