Category: Daily News

Underwriting results for the U.S. workers’ compensation market is set to improve over the remainder of 2013 reversing several years of poor performance, according to a new Fitch Ratings report.

Workers’ compensation is the largest segment of all U.S. commercial lines, representing 18% of property/casualty industry commercial lines net written premiums in 2012. Workers’ compensation has been the worst-performing major commercial lines segment for some time. However, the 2012 industry aggregate segment combined ratio improved to 110% from 117% in the prior year.Fitch projects a 105% workers’ compensation calendar year combined ratio in 2013.

Following a long period of declining premium rates, workers’ compensation pricing has increased for two consecutive years, with little sign that pricing trends will reverse in the near term. The Council of Insurance Agents smf Brokers most recent commercial lines market survey indicates that workers’ compensation rate hikes are accelerating with a nearly 10% increase in first-quarter 2013.

Fitch notes that workers’ compensation claims costs are influenced greatly by medical cost factors that tend to expand at a higher rate than general inflations. Healthcare costs in 2012 were a bit more stable than historical patterns, but sustainability of this trend is questionable given pending implementation of healthcare reform in the U.S.

A return to economic stability is promoting a return to declining claims frequency trends. Loss reserves in the workers’ compensation segment have developed adversely for the last four consecutive years. Fitch’s analysis suggests that the industry’s loss reserve position in workers’ compensation remain inadequate. Given the prominence of workers’ compensation as a percentage of many insurers’ book of business, continued market hardening and underwriting improvements promote earnings stability that is viewed favorably from a credit perspective. Reductions in workers’ compensation loss reserve deficiencies and uncertainty would also contribute towards stability of insurer ratings at current levels.

The report ‘Workers’ Compensation Insurance Market Update’ dated June 21, 2013, is available at ‘www.fitchratings.com’ under ‘Insurance’ and ‘Special Reports’.

Workers’ compensation insurance executives gathered in San Francisco alongside public policymakers and other industry stakeholders on June 13 to attend the WCIRB Annual Workers’ Compensation Conference. The conference agenda included two speakers well-known to the workers’ compensation industry -David DePaolo, founder and president of WorkCompCentral, and Dave Bellusci, Executive Vice President and Chief Actuary at the WCIRB.

David DePaolo kicked off the morning session with a discussion of the role of the media in a healthy workers’ compensation system. As a frequent blogger and founder of an online news outlet, Mr. DePaolo has a unique, first-hand view of the role that new and traditional media plays in our society and the workers’ compensation industry.

Following Mr. DePaolo’s presentation, the WCIRB’s Dave Bellusci discussed the latest workers’ compensation industry results and made the following observations:

• California written premium continues to grow at a double-digit rate due to increases in average rates and total payroll
• Average insurer rates have increased sharply in 2012 and 2013
• After increasing in 2010, indemnity claim frequency has remained relatively flat, while claim frequency in other states have declined
• Claim severity trends are moderating, however, pharmaceutical costs continue to increase sharply
• Expense ratios declined in 2012 with increasing premium levels and the loss adjustment expense severity trend is moderating
• The accident year 2012 combined ratio decreased significantly in 2012, but remains above the national average.
• SB 863 is estimated to moderate claim cost trend in 2013 and beyond and the WCIRB will continue to actively monitor the impact of the bill as data becomes available.

In the afternoon session, WCIRB President and CEO Bill Mudge moderated a panel discussion entitled SB 863 – A View from the Front Lines. Panelists included claims management professions, medical experts from private practice and the Division of Workers’ Compensation, an independent medical review expert, a workers’ compensation defense attorney and an applicant attorney, and a Workers’ Compensation Appeals Board Judge. Each panelist offered attendees his/her view of SB 863 based on their direct experience implementing the law.

Mayo Clinic researchers found that nearly 70 percent of Americans are on at least one prescription drug, and more than half take two. The study found that antibiotics, antidepressants and painkilling opioids are most commonly prescribed, Twenty percent of patients are on five or more prescription medications, according to the findings, published online in the journal Mayo Clinic Proceedings.

The statistics from the Rochester Epidemiology Project in Olmsted County, Minn. are comparable to those elsewhere in the United States, says study author Jennifer St. Sauver, Ph.D., a member of the Mayo Clinic Population Health Program in the Mayo Clinic Center for the Science of Health Care Delivery.

“Often when people talk about health conditions they’re talking about chronic conditions such as heart disease or diabetes,” Dr. St. Sauver says. “However, the second most common prescription was for antidepressants – that suggests mental health is a huge issue and is something we should focus on. And the third most common drugs were opioids, which is a bit concerning considering their addicting nature.”

Seventeen percent of those studied were prescribed antibiotics, 13 percent were taking antidepressants and 13 percent were on opioids. Drugs to control high blood pressure came in fourth (11 percent) and vaccines were fifth (11 percent). Drugs were prescribed to both men and women across all age groups, except high blood pressure drugs, which were seldom used before age 30.

Overall, women and older adults receive more prescriptions. Vaccines, antibiotics and anti-asthma drugs are most commonly prescribed in people younger than 19. Antidepressants and opioids are most common among young and middle-aged adults. Cardiovascular drugs are most commonly prescribed in older adults. Women receive more prescriptions than men across several drug groups, especially antidepressants: Nearly 1 in 4 women ages 50-64 are on an antidepressant.

For several drug groups, use increases with advancing age. “As you get older you tend to get more prescriptions, and women tend to get more prescriptions than men,” Dr. St. Sauver says. Prescription drug use has increased steadily in the U.S. for the past decade. The percentage of people who took at least one prescription drug in the past month increased from 44 percent in 1999-2000 to 48 percent in 2007-08. Spending on prescription drugs reached $250 billion in 2009 the year studied, and accounted for 12 percent of total personal health care expenditures. Drug-related spending is expected to continue to grow in the coming years, the researchers say.

This new study demonstrates the statistical likelihood that there are opportunities for apportionment of permanent disability that may be overlooked by employers.

Issues concerning former NFL player, Wesley Carrol’s claim for California workers’ compensation benefits initially were tried on December 2, 2008. On March 17, 2009, the WCJ issued a Findings of Fact and Award, finding that Carrol incurred cumulative industrial injury to several body parts in the course of his employment by the Saints and Bengals,causing 46% permanent disability. The Bengals’ petitioned for reconsideration which was granted. On May 24, 2010, the Appeals Board panel issued its Opinion And Decision After Reconsideration in which it rescinded the WCJ’s earlier March 17, 2009 decision, “because the evidence on the issue of section 3600.5(b) is incomplete.” The case was returned by the panel to the trial level for development of the record on that issue.

In this case, the Bengals established at trial that applicant was hired outside of California and that he was only temporarily in California doing work for the Bengals when the team played one game in the state in 1993. The Bengals further showed that as a permissibly self-insured employer under the workers’ compensation laws of the state of Ohio it furnished workers’ compensation coverage that covered applicant’s employment while in California. Ohio law recognizes the extraterritorial provisions of other states, including California, and likewise exempts out-of-state employers and employees who are temporarily doing work within Ohio from the provisions of its workers’ compensation statutes.

After remand, the WCJ again found that Carroll, incurred cumulative industrial injury to numerous body parts while employed as a professional football player by the New Orleans Saints from July 14, 1991 through August 30, 1993, and by the Bengals from September 1, 1993 to April 12, 1994, causing 46 percent permanent disability and a need for future medical treatment. The WCJ further found that the “Bengals are not exempt from workers’ compensation laws of the State of California, with respect to this case, by operation of Labor Code § 3600.5(b).” The WCJ reasoned that “the essential issue in this case is whether the applicant’s employment within the State of California while employed by the Cincinnati Bengals is considered ‘regularly employed,’ as set forth in Labor Code § 3600.5(a).” In this regard it was noted that a “”professional football player in the NFL, such as Mr. Carroll, regularly engages in his employment away from his home city and state. Typically, each NFL team plays one-half of their regularly scheduled games in their home city. The other half are played in the various other states and cities, including California,” For this reason the WCJ concluded “[I]t remains the opinion of the undersigned that Mr. Carroll’s employment with the Bengals while he was in the State of California was regular employment per Labor Code § 3600.5(a)”

The Appeals Board disagreed and reversed the finding of the WCJ in the en banc decision of Carrol v Cincinnati Bengals and held that an employee and his or her employer are exempted by Labor Code section 3600.5(b) from the provisions of the California workers’ compensation law when the employee was hired outside of California and all of the following apply: (1) the employee is temporarily within California doing work for the employer, (2) the employer furnished coverage under the workers’ compensation or similar laws of another state that covers the employee’s employment while in California, (3) the other state recognizes California’s extraterritorial provisions, and (4) the other state likewise exempts California employers and employees covered by California’s workers’ compensation laws from the application of its workers’ compensation or similar laws.

The Division of Workers’ Compensation has issued the notice of public hearing for a resource – based relative value scale (RBRVS) based physician fee schedule. A public hearing on the proposed regulations has been scheduled at 10 a.m., July 17, in the auditorium of the Elihu Harris Building, 1515 Clay Street, Oakland, CA, 94612. Members of the public may also submit written comment on the regulations until 5 p.m. that day.

Senate Bill 863 directs DWC’s administrative director to adopt a physician fee schedule based upon the federal RBRVS used in the Medicare payment system.

“I am thrilled that the Division of Workers’ Compensation has issued the proposed physician fee schedule regulations. We believe these regulations will put in place a fee schedule for physicians that will support the right incentives for appropriate care and return to work. We also believe that with these regulations we can more readily keep pace with updates and ensure all the changing technologies are available,” said Christine Baker, the director of the Department of Industrial Relations.

In the RBRVS – based system, relative value units interact with payment ground rules and the conversion factor to determine the maximum fee in light of the resources to provide the service. The new provisions of Labor Code section statute 5307.1 direct the administrative director to “adopt and review periodically an official medical fee schedule (OMFS) based on the resource – based relative value scale for physician services and nonphysician practitioner services.”

“We expect the workers’ compensation system to see many cost saving and efficiency benefits from adopting the RBRVS-based fee schedule, and the benefits will be enhanced by adopting the schedule prior to the ‘default’ fee caps that will automatically apply on Jan. 1, 2014 if a regulation is not adopted,” said Destie Overpeck, acting administrative director. Adoption of the regulations is preferable to the “default” option in Labor Code section 5703.1 that would apply on Jan. 1, 2014 if the administrative director does not adopt a RBRVS-based fee schedule. The proposed regulations differ from Medicare where appropriate for workers’ compensation. Adoption of conversion factors in the regulations improves accuracy over the “default” fee caps, as the proposed conversion factors were derived by RAND with updated and more representative data.

The notice, text of the regulations, and forms can be found on the proposed regulations page.