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Column: Workers' Comp
Disquiet on the Workers’ Comp Front
Roberto Ceniceros is a retired senior editor of Risk & Insurance® and the former chair of the National Workers' Compensation and Disability Conference® & Expo. Read more of his columns and features.
With the Affordable Care Act’s fate tied to Washington politics, it must be challenging for workers’ compensation insurers and anyone else needing a longer-term view of how claim expenses will trend.
Perhaps one of the biggest challenges is the unknown of how any changes to the ACA will impact the number of Americans able to purchase health coverage.
In an April commentary, Phil Kalin, CEO of Colorado’s Pinnacol Assurance, warned that business leaders in his state “regardless of their opinions on the ACA — should be aware of how its dismantling could slow a favorable trend for their work comp costs.”
His premise: a lack of health insurance leads to more claim shifting onto workers’ comp.
Before joining Pinnacol, a state-chartered workers’ comp insurer, Kalin served as CEO of the Denver-based Center for Improving Value in Health Care, an organization supporting moving away from fee-for-service health care to quality care. He has also served in hospital system senior-management roles. It makes sense he would opine on how shifts in health insurance coverage will impact worker’s comp costs.
The uncertainties of Washington and health care insurance’s future make it even more imperative to bet on the certainty of strategies that embody proven risk management concepts.
Workers’ comp claims and costs have slowed in recent years as more Americans obtained health insurance, Kalin wrote. He supports his premise by citing statistics from Colorado and other states showing “there is a clear association” between more Americans covered by health insurance and a decline in workers’ comp claims.
From 2010 to 2016 medical only claims insured by Pinnacol dropped 28 percent. Although other factors played a role, Kalin believes the ACA’s impact was significant.
Similarly, a Fitch Ratings report released in May stated that workers’ comp has been a bright spot among commercial lines insurance with the line exhibiting combined ratios of 95 percent in 2015 and 2016. Employment growth, stable claims trends and macroeconomic improvements contributed to workers’ compensation’s profitability.
“Implementation of the Affordable Care Act and a corresponding shift of individual medical care delivery away from workers’ compensation to other markets may also be a factor that bears further study,” Fitch’s report stated.
By contrast, information released nearly two years ago by the venerable Workers’ Compensation Research Institute forecasted that “case shifting” caused by the ACA could migrate hundreds of millions of dollars in costs from group health onto workers’ compensation.
The premise: The ACA’s capitation of medical provider reimbursement would encourage doctors to find more injuries to be work related so they could tap into more lucrative worker’s comp medical care payments.
That prognosis, right or wrong, was made in 2015 when the ACA enjoyed President Barrack Obama’s protection, making its future seem more certain.
Now, as I write this column, the ACA’s future is in the hands of a Republican president and Republican-dominated Congress that are searching for a way to deliver on campaign promises of eliminating the ACA and finding a replacement.
What that replacement would look like, if indeed it comes about, remains a big mystery, especially with the Republicans crafting legislation out of public view.
That makes it impossible to venture a guess on how any new legislation might impact workers’ comp claims and expenses. Add in the normal uncertainties of making such forecasts, even when information is readily available, and you get a very difficult environment for predicting the impact on a line of insurance with a long tail exposed to medical inflation.
“We are sitting here with bated breath,” a Pinnacol spokeswoman told me.
The rest of us will have to join her.
Meanwhile, there are the risk management fundamentals we know consistently work no matter the political landscape. They are the investments and actions good risk managers and insurers can engage in to improve operations overall.
They are the things that always reduce costs, like driving accident rates even lower, immediately getting injured workers quality medical care, and fortifying return-to-work efforts.
The uncertainties of Washington and health care insurance’s future make it even more imperative to bet on the certainty of strategies that embody proven risk management concepts.
