Claim severity: up.
Claim frequency: down.
New business quotes: down.
What 2021 workers’ comp trends are affecting work comp claims and insurance – and how will those effects trickle down to your clients? Taking a look back at the first half of the year is Dhara Patel, president of American Claims Management (ACM), the claims administrator for Arrowhead’s Workers’ Compensation Program.
“Certain trends vary by state, but across the board we’re seeing eight that are influencing the current workers’ compensation scenario,” Patel said. “Some will have a positive effect on rates; some a negative; and some – well, it’s too soon to tell.”
#1 of workers’ comp trends: the pandemic
Of all the 2021 workers’ comp trends affecting claims, #1 is the malingering coronavirus. COVID-19 has had a significant impact on both the U.S. and global economy, creating an economic fallout akin to the Great Depression of the 1930s, says KPMG. For insurers, this impact has already made its mark on workers’ compensation claims, both in the short term, most likely through a lengthy recovery period. The good news is that COVID-19 claims in the workplace have been outpaced by a decline in other types of reported occupational injuries. Initial analysis shows that the average severity of COVID-19 claims is lower than expected. And new tools such as telemedicine are helping employers stay ahead of the curve.
Even though the workers’ compensation insurance market remains competitive, employers face considerable challenges, such as how to manage payroll and properly classify employees, when many are WFH and have cut their hours. Add to the mix new laws that allow employees to more easily submit claims alleging workplace exposure to COVID-19, and the result is complex confusion.
Higher-priced medical advances
Medical and technological breakthroughs and upgrades come with a higher price tag to help offset years of research, testing and development. These innovations have significantly prolonged life and improved the quality of life, but directly impact workers’ compensation expenses, due to their at significant costs.
“While all of us are delighted with medical breakthroughs, the fact is the technology and implementation costs can be staggering,” Patel explained.
Rising drug prices
Not only are we seeing exorbitant pricing on new medications, but generic drug prices are rising as well. As Forbes recently reported, a study of drug prices by GoodRx found that since 2014, prescription drug prices have risen by 33 percent.
Holistic healing approach
A positive influence is the fact that the medical community is embracing a more holistic approach to healing and wellness: one that involves not just physical healing from an injury, but also overall physical, mental and emotional health.
“Two examples are tobacco use and obesity,” Patel elaborated. “Studies show that tobacco users are 40 percent more likely to suffer a work injury – and cost employers 11 times more in claims. And workers with a high obesity risk factor file twice as many claims, which cost 10 times more.” Companies with strong wellness measures in place, coupled with a well-planned Return-to-Work Program whereby qualified injured workers return to modified or light duty work, can positively impact their claims frequency and costs.
Outcomes-based healthcare and treatment guidelines
Two factors are at play here, explained Patel. First, there’s a continuing push to develop one set of medical treatment guidelines and drug formularies across all states; right now, the same diagnosis in one state results in a more intense and longer treatment (and disability) than in other states. The second influence is shifting the focus from primarily price containment to programs with better outcomes that lead to increased productivity – and ultimately, lower costs.
Changes in cannabis laws
Many states have already legalized marijuana in some form or another, whether for medical or recreational purposes. An upswing in traffic accidents and fatalities linked to cannabis was recorded a couple of years ago in Colorado. “Not only are states seeing an increase in vehicle accidents where cannabis was involved, but employers are seeing a marked increase in workplace injuries where both cannabis and opioids were in use,” explained Patel. At the same time, drug testing has become more difficult to manage.
Premiums decline, renewals are stable, new business is down
Driven by declining loss costs, premiums are down. Average policy payrolls have remained flat. Renewals are stable, but attracting new business remains a challenge, reports PropertyCasualty360. New business submissions were down as much as 23 percent last year.
Employees are on the move more than ever before. Roles that were once mainstays in companies are now outsourced to various freelancers. Having two or three part-time jobs is commonplace for many Millennials – note the popularity of Uber and Lyft, allowing drivers to be their own boss. The lines between employer/employee and client/freelancer continue to blur, causing uncertainty in many areas as to who legally must be covered under workers’ compensation laws.
“If you have workers within some of these gray areas, it’s best to check with your underwriter or marketing representative to determine whether these workers are required to be covered under a workers’ compensation policy,” Patel suggested.
This article originally appeared on Arrowhead’s corporate blogpost. It has been modified to better fit the needs of ACM’s self-insureds and insurance company clients.