Transcript No Slide Title
2009 Workers’ Compensation Update National Council of Self Insurers Annual Meeting May 18, 2009 Ken Martino President and CEO Broadspire Services, Inc.
Discussion Topics
Latest Industry Numbers Economy: Implications for Workers’ Compensation Future: Issues/Trends Questions 1
Latest Industry Numbers
Indemnity severity continues to grow; projected 5% increase in 2008
»
Average wage payments show downward trend (-1.4%)
» »
Moderating wage gains may dampen increase in indemnity severity Permanent impairment rating calculations remain a challenge in the award process 2
Workers’ Compensation Indemnity Claim Costs Continue to Grow Accident Year
2008p: Preliminary based on data valued as of 12/31/2008 1991-2007: Based on data through 12/31/200/, developed to ultimate Based on the states where NCCI provides ratemaking services, including state funds Excludes high deductible policies © Copyright 2009 NCCI Holdings, Inc. All rights reserved.
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Latest Industry Numbers
Average medical severity continues to grow; projected 6% increase in 2008
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Mix of medical services by size of claim matters
» » »
Pharmacy cost and utilization continues to be a challenge in workers’ compensation Hospital costs are on the rise; concerns about the new economic equation The use of medical networks in workers’ compensation has reached a crossroad 4
Workers’ Compensation Cost Trends — Growth Continues in 2008 Accident Year
2008p: Preliminary based on data valued as of 12/31/2008 1991-2007: Based on data through 12/31/200/, developed to ultimate Based on the states where NCCI provides ratemaking services, including state funds Excludes high deductible policies © Copyright 2009 NCCI Holdings, Inc. All rights reserved.
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Workers’ Compensation Lost-Time Claim Frequency Continues to Decline Accident Year
2008p: Preliminary based on data valued as of 12/31/2008 1991-2007: Based on data through 12/31/200/, developed to ultimate Based on the states where NCCI provides ratemaking services, including state funds Excludes high deductible policies © Copyright 2009 NCCI Holdings, Inc. All rights reserved.
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Economy: Implications for Workers’ Compensation
Frequency during a recession*
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Frequency declines in a recession are related to lack of job creation, rather than job destruction Moral hazard does exist but is tempered by a lack of job creation Rebound effect in claim frequency after a recession from expansion (creating jobs at existing establishments) rather than openings (new establishments) * According to a recent NCCI study on workplace injuries and job flows 7
Cyclical Pattern of Job Creation and Job Destruction
Note: Recessions indicated by gray bars Source: Davis, S.J., R.J. Faberman, and J. Haltiwanger (2006)”The Flow Approach to Labor Markets: New Data Sources and Micro Macro Links,” Journal of Economic Perspectives 20(3), pp. 3-26 © Copyright 2009 NCCI Holdings, Inc. All rights reserved.
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Economy: Implications for Workers’ Compensation
Medical severity and duration will likely increase
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Difficulty in return to work Uncertainty for injured workers
Wages and medical » »
Frequency of medical treatment Adjustments in state systems 9
Medical Claim Costs Increased During Prior Recessions Accident Year
2008p: Preliminary based on data valued as of 12/31/2008 1991-2007: Based on data through 12/31/200/, developed to ultimate Based on the states where NCCI provides ratemaking services, including state funds Excludes high deductible policies © Copyright 2009 NCCI Holdings, Inc. All rights reserved.
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Future: Issues/Trends
Demographics
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Obesity
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Aging workforce
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Staffing challenges Technology
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Predictive modeling
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Self-service Healthcare reform 11
Demographics: Obesity In every state (except Colorado), more than 20 percent of the adult population is obese
Source: Centers for Disease Control and Prevention, Behavioral Risk Factor Surveillance System www.cdc.gov/Features/dsObesity
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Demographics: Obesity The most obese workers file twice as many workers’ compensation claims as healthy-weight workers Lost workdays per 100 FTEs 200 180 160 140 120 100 80 60 40 20 0 5.53
40.97
5.80
14.19
7.05
60.17
8.81
75.21
10.80
11.65
183.63
14 12 10 Claims per 100 FTEs 117.61
8 6 4 2
Source: Ostbye, T.,
et al
, “Obesity and Workers’ Compensation,”
Archives of Internal Medicine
, April 23, 2007
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Demographics: Obesity Workers’ compensation claim costs are 6.8 times higher for the most obese workers $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Medical claim costs Indem nity claim costs
Source: Ostbye, T.,
et al
, “Obesity and Workers’ Compensation,”
Archives of Internal Medicine
, April 23, 2007
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Demographics: Age The fatality rate for workers 65 and older is accommodate the surge in older workers.
triple that of workers age 35 – 44. The workplace of the future will have to be redesigned to Fatal work injuries per 100,000 workers (2006) 12 10 8 11.2
6 5 4.2
3.7
4 3.3
2.8
2.7
2 0.9
0 16-17 18-19 20-24 25-34 35-44 45-54 55-64 65+
Source: U.S. Bureau of Labor Statistics, U.S Department of Labor; Insurance Information Institute
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Demographics: Age Older workers have more lost time from work due to injury or illness 14 12 Median days away from work (2005) 10 8 Age 65+ workers median lost time is 50 percent greater than workers age 35 - 44 8 10 11 6 2 0 6 4 4 4 16-19 20-24 25-34 35-44 45-54 55-64 12 65+
Source: U.S. Bureau of Labor Statistics, U.S Department of Labor
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Future: Issues/Trends
Technology
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Predictive modeling is maturing due to advances in hardware and software
Underwriting Claim Medical »
Will self-service ever come to workers’ compensation?
2000: 41.5% of Americans were online 2008: 82% of Americans were online
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Future: Issues/Trends
Healthcare reform
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Blending public and private financing programs to provide coverage
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Includes exclusions on pre-existing conditions, investing in prevention services, reducing drug costs and cutting administrative costs
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States will be very protective of the intrusion on their workers’ compensation systems 18
Questions ?
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