The first "Out Front Ideas with Kimberly and Mark" webinar of 2017 provided our thoughts on the 20 workers compensation issues to watch in 2017. What follows is a summary of the challenges discussed.
Here are the 20 issues we have identified, along with our comments.
1. Election Impact
The US Department of Labor under President Barack Obama had made it clear that it felt state workers compensation systems needed reform and was prepared to recommend minimum benefit standards to the states. President Donald Trump's recommendation for the secretary of labor has been a vocal opponent of many federal labor regulations. For now, any talk of the federal government getting involved in state workers compensation issues seems to be on hold.
However, one issue that could involve the federal government is related to potential costs being shifted from workers compensation to Social Security disability. Efforts to preserve the solvency of Social Security could result in action intended to limit this cost shifting.
2. Healthcare Reform
Regardless of which side of the aisle we find ourselves, surveys have shown that most Americans believe the Affordable Care Act is not working as it was originally intended or as well as they would like. A few things are clear: access to health insurance does not dictate better health. If care remains unaffordable, people will not access care for themselves or their family. Health care is increasingly complex, and accessing the right care at the right time remains a struggle for the general public. We are challenged to advance the approach of well care when, in fact, we remain largely a sick-care system.
While we wait to see how the GOP evolves health reform, we are hopeful that efforts underway to shift from fee-for-service to value-based and outcomes-focused care will continue to advance. We hope healthcare suppliers will continue to advance population health wellness as much as they focus on chronic disease. Kimberly George views this as the single most important issue to watch in 2017.
3. Occupational Safety and Health Administration (OSHA)
Another potential impact of the election results is the direction OSHA may take in 2017 and beyond. In recent years, employers have complained that OSHA was more focused on enforcement than education and training. In fact, OSHA did shift resources out of education into enforcement. Recent OSHA policies—such as the publicly accessible online database and restrictions on postinjury drug testing—were met with significant resistance from the employer community. OSHA falls under the Department of Labor and, as mentioned before, the expectation is that the Department of Labor will have a new direction under the Trump administration.
4. Americans with Disability Act (ADA)/Family and Medical Leave Act
During the Obama administration, we saw an increase in enforcement actions and also broadening of regulations that placed more burdens on the employer. Leave-of-absence regulations have become increasingly more complex over the past 8 years.
ADA accommodation requests were initially related to ergonomics and transitional work accommodations following an illness or injury. Today, they have become more complex, including everything from bringing service animals into the workplace, allergies, and noise accommodations to establishing work-from-home accommodations. The list goes on and on. What constitutes a "covered" disability has evolved, and employers are tasked with ensuring compliance. Under the Trump administration, the Feds are less likely to pursue actions that would expand existing boundaries of the law.
5. Rates and Premiums
One of the interesting things about workers compensation market cycles is that they are generally driven by changes in competition more than changes in exposures. If you look at claims costs over the last 20 years, they have steadily increased, yet premiums during this same period have gone up and down.
During the January 1, 2017, renewal cycle, rates trended flat or slightly down compared to expiring premiums. There are some problem states that saw higher rates, including California, New York, Illinois, and Florida. The declining rates compared to increasing claims costs have caused A.M. Best, Fitch, and others to issue a negative outlook on workers compensation. It is expected that this hyper-competitive market cycle is going to end soon as the new entrants into the marketplace start to see the long-tail losses from their business hitting the books.
6. Workers Compensation Long-Tail Exposures
One of the things that makes workers compensation such a challenge for employers and insurers is the long-tail nature of the claims. "Long tail" means that premiums collected today must cover losses for years to come. The claims tail is an issue to watch because of the impact it has on both insurers and employers in terms of cost of insurance today and future reserves.
The biggest driver of increasing claims-tail costs are advances in medical science. Better medicine means life expectancies are getting longer. This increases the exposures for lifetime indemnity and medical benefits. In addition, new drugs and treatments almost always cost more than what they are replacing, especially when you consider the cost difference between brand-name drugs and generic medication. Prosthetics are so much more advanced today than they were 10 years ago, but they also cost significantly more.
7. State Legislative Agendas
We expect to see new workers compensation legislation established in at least four states during 2017.
Florida. Last year, the Florida Supreme Court tossed out multiple elements of its workers compensation statutes as unconstitutional, which caused a significant increase in claims costs and premium rates. There will be bills introduced to address these issues.
Illinois. Last year, and again this year, Illinois Governor Bruce Rauner has made workers compensation reform a key element in his job-growth agenda. He is calling for medical fee schedule reductions, higher causation standards for conditions to be found compensable, and legislation to reverse court decisions that have expanded benefits.
New York. This is another state where reform efforts stalled last year. Employers are pushing for limits on the time for an employee to reach maximum medical improvement, which triggers the 10-year cap on indemnity benefits.
California. Every year the Legislature passes bills to reverse recent reforms, and with few exceptions, the governor has vetoed those bills. There will inevitably be more reform bills introduced in 2017, so we will see what those bills address and whether the governor will approve any of them.
Options to Workers Compensation
In 2016, we saw efforts to push for options to workers compensation stall. Legislation in Tennessee and South Carolina did not move forward, and the Oklahoma option was found unconstitutional by the Oklahoma Supreme Court.
There is talk of a Texas-style opt-out bill being introduced in Florida in 2017. This bill would make workers compensation optional. There are also rumors about an option bill being reintroduced in Tennessee. It remains to be seen if there is enough momentum in either state to move this legislation forward.
8. Treatment Guidelines
Workers compensation stakeholders have become very familiar with medical treatment and return-to-work guidelines, along with evidence-based medicine. Payers and managed-care suppliers work diligently to embed guidelines in their systems for nurses and claims adjusters to improve efficiency with access to the guides and workflow for their colleagues. States have implemented a variety of guideline solutions, which include creating unique formularies and treatment guides and also adopting industry-available workers compensation guidelines. The lack of guideline consensus across stakeholders—including physicians, regulators, payers, and suppliers—is an ongoing challenge to the system.
9. Constitutional Challenges to Workers Compensation
In 2016, elements of the workers compensation statutes in five states were found to be unconstitutional by such states' respective supreme courts. Among the issues found unconstitutional in 2016 were the following.
Caps on temporary total disability benefits
Exclusion of coverage for certain farm workers
Caps on attorney fees
Time limits for filing cumulative trauma claims
Use of current edition of American Medical Association guidelines for impairment ratings
When an aspect of the law is found unconstitutional, that change goes back to when the law was enacted. In Florida, the rulings changed the laws governing years of existing claims, significantly increasing the exposure on such claims retroactively. This created unanticipated liabilities for insurers and self-insured employers.
The success of attorneys in challenging these statutes provides a road map for attorneys in other states to pursue similar challenges.
10. Mental Health
The notion that workers are not impacted by mental illness when a work injury occurs or that mental health is always separate from workers compensation is an increasing challenge for the industry. Mental health is among the top three-to-five reasons for short-term disability absences across white- and blue-collar workers; mental health crosses industry verticals. More than ever, employers understand that lack of mental health care impacts productivity, regardless of how an injury or illness occurred. Ways in which employers are addressing mental health and workers compensation include promoting employee assistance programs and behavioral health programs for employees, regardless of how an injury or illness develops.
One challenging aspect of this issue is the fact that many states significantly limit or completely prohibit workers compensation benefits for mental injuries without any physical cause. There will be more discussions in the future about the need to revisit laws around the country dealing with mental injuries.
11. Impaired Workforce
After the November elections, eight states and the District of Columbia allow for recreational use of marijuana. This means around one-in-five people live in a state where recreational marijuana is now legal. For employers, this means the reality that a percentage of your workforce is likely impaired.
Years ago, many employers stopped doing preemployment drug testing because they could not get enough applicants to pass to fill their jobs. New OSHA regulations from 2016 seek to significantly limit the use of postinjury drug testing, which further inhibits employers looking to maintain a drug-free workplace policy.
The answers to this issue are very challenging. Drug testing for marijuana always focused on whether the drug was present in the system because it was illegal. It can be detected in the system 30 days after use, but showing the presence of the drug does not show impairment. This is an area where the science needs to catch up with social reality. We need an established standard for what constitutes impairment when it comes to marijuana.
12. Alternatives to Opioids for Chronic Pain
For a number of years, there has been significant focus on reducing prescription opioid use in workers compensation. With President Obama supporting awareness of the opioid epidemic in 2016, the management of opioids and opioid-related deaths became a household topic across America. In 2017, we believe there will be greater emphasis on the options outside of opioids for both acute and chronic pain. Admitting patients into functional restoration programs and multidisciplinary integrated pain management programs have proven successful ways to eliminate opioid use. Meditation, exercise, mindfulness, yoga, and cognitive behavioral therapy have also shown success.
In the quest to offer nonopioid treatment options in workers compensation, one of the challenges is coverage. Insurers have been quick to pay for opioids and hesitant to pay for alternative treatments. One-size-fits-all approaches to care will not work for these patients. Treatment is outside of guidelines and requires coordination and care, rather than simply approving or denying treatment. This should be our year to improve functionality for patients currently on opioids, and alternative treatments must be considered.
13. Occupational Disease
We know that exposure to certain substances in the workplace can lead to diseases, such as cancer. It can take years after the exposure for these diseases to manifest themselves. Yet, most statutes only cover certain defined diseases and, in many states, the statute of limitations for reporting a claim is less than the manifestation period for the disease. This creates a gap in the coverage for these diseases.
As these diseases continue to manifest themselves over time, this is an issue we are going to see in more courts around the nation. Medical science is becoming more precise in identifying the sources of these diseases, and, as this happens, workers compensation statutes will need to be amended to provide better coverage for those workers who contract such diseases.
The opposite end of the spectrum when it comes to occupational disease coverage are the presumption laws that impact police, firefighters, and other first responders. There are currently 34 states with various presumption laws covering a variety of cancers, diseases of the heart and lungs, and certain blood-borne diseases. Opponents of these bills argue that the science does not support an increased risk for disease due to the occupation alone and that these claims should be subject to the same causation standards as other occupational disease claims.
14. Transparency with Workers
How many times have you heard an injured worker say they didn't understand the information that was provided to them? Oftentimes, injured workers retain attorneys simply because they are confused and do not feel like anyone is there to help them. Many of us in the industry believe the pendulum has swung too far toward the process of workers compensation instead of taking care of the injured worker.
There was great industry momentum in 2016 with advocacy-based claims models. In 2017, look for ways that the advocacy discussion evolves into transparency discussions. Transparency is helping the injured worker be a good consumer within the workers compensation arena, helping them understand the process and providing them the best available information to make proper decisions.
15. Insurance Talent Gap
We know that a significant percentage of the workforce in the insurance industry is expected to retire in the next 10 years. The pipeline of workers to replace these retiring employees is insufficient. To address this, we need a multifaceted approach that includes working with colleges in developing risk management education and a focus on talent attraction and recruitment.
Training programs need to continue to be refined so that the knowledge of retiring employees can be passed on. Finally, employee retention is also a concern. Employers need to be more flexible with working arrangements to compete with other occupations that allow for flexible hours and work-from-home options.
16. Workers Compensation's Public Image
There is a growing effort underway to promote the good in our industry. Every day our companies and our colleagues are making the right decisions and helping people in their time of need. Yet, we also have such a long way to go in the area of public relations. We need to talk more about the good we do in helping injured workers regain their quality of life. This will not only help with the stakeholders in the system but will go a long way with recruiting the next generation into our field.
Workers compensation is about taking care of people, and it is very meaningful work. Let's all focus on improving workers compensation's reputation this year.
17. The Evolution of Workers Compensation
In the last year, several industry groups have had discussions on how workers compensation should evolve to better meet the needs of today's workforce. The threat of federal intervention was the driving force behind much of these discussions. With that threat on hold for now, it is important that the industry takes this opportunity to continue these discussions while we can control the agenda. If change is needed, then we want to be the ones working with legislators and regulators to draft those changes.
18. Machine Learning and Artificial Intelligence
Predictive analytics have been around for over 10 years. Claims professionals began using predictive analytics to identify the claims that had a propensity for adverse development. Other models evolved to address litigation, sports medicine care opportunities, and return-to-work goals. It is safe to say that nearly all payers have predictive models today, and probably just as likely that there is little-published data on the outcomes associated with these models.
In 2017, we believe the conversation will shift to machine learning. What payers have evolved or are building new claims systems to address artificial intelligence and machine learning? Should all claims be handled by a claims adjuster? Do interventions on every claim impact the ultimate exposure, or are we at a point in the industry where processing a claim should be as easy as a warranty or auto claim? There is tremendous untapped potential in this area.
19. External Disruptors
Looking to the future, there are many areas where external disruptors could have a significant impact on workers compensation. Mark Walls feels this is the biggest issue for the industry to watch in 2017.
Many large employers have been looking at the merits of a 24-hour healthcare model. With medical making up close to 60 percent of workers compensation costs, what happens if that element is removed from the system?
Changing retail-buying habits are also having an impact on workers compensation. Retailers are closing stores and going out of business. With more Americans doing their shopping online, what is the future for the retail industry?
Finally, automation is a reality that has potential to be a significant disruptor. The manufacturing and distribution industry has seen significant job loss due to automation. Think of all the jobs in the trucking, shipping, and transportation industry that could be lost to self-driving vehicles. Automation could be the ultimate disruptor for the workers compensation industry.
20. Innovation in Action
While the insurance industry is traditionally not known for innovation, we are certainly hearing more about innovative solutions. Digital health, insure tech, med tech, machine learning, and automation are all terms we are becoming familiar with, and each brings its own value to workers compensation. As the innovations come to fruition in the marketplace, we will be focused on understanding the value of the innovation. Is the innovation going to improve the experience of the user, or is it designed for internal processes and workflow? Will the solution drive efficiency and speed to decision or process improvements? How will quality, compliance, and outcomes be impacted and measured?
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