What's Up for 2012: Predictions for Work Comp in the New Year

Tuesday, January 17, 2012 | 0

There's a lot happening in the work comp industry: a hardening market; frequency ticking up; consolidation/mergers/acquisitions and buyouts; legislative and regulatory changes; and management moves. And all this against the backdrop of a very big election year.

So here's what I'm going to be watching for.

1. Health reform will impact workers comp.

I have no idea what the Supremes will do when they rule on the constitutionality of the Patient Protection and Affordable Care Act, aka health reform bill. Their ruling could kill the law, leave it alone, or eliminate the individual mandate. But no matter what the official decision is, the health financing and delivery industries have changed dramatically over the last two years, and that change will only accelerate over the next two.

The rapid consolidation of health care providers, growth (via acquisition) of delivery systems, and acquisition of providers and provider-based managed care plans by payers is changing the landscape, as is the expansion of Medicaid. Health plans KNOW they have to change their models, get bigger, invest billions in technology and solidify and strengthen relationships with providers, regardless of whether reform survives or not.

All health plans are very tightly focused on those strategic imperatives. As a result workers comp, long a sideline, has been relegated to a position of insignificance, with one exception Anthem. I'd expect to see the Big Blue continue to expand their work comp presence, but they'll be the only one to keep pushing. The rest are too busy worrying about the 98% of the business that is group, Medicare and Medicaid.

For comp, network discounts will diminish, That doesn't mean medical costs will increase, as discounts don't always, or even most of the time, equal savings. Network options will change, and we'll see more piecemealing of networks as other payers follow the lead of Broadspire and now Esis and diversify their network relationships.

2. Mergers and acquistions in comp is going to accelerate.

There was a lot last year, but 2012 is going to be the year of the deal. With the pending changes in capital gains slated to kick in a year from now, several private equity-owned companies getting well past the three year horizon (and a couple past five), some long-time entrepreneurs looking to ride off into the sunset, and what appears to be an uptick in valuations, it's a no-brainer.

3. Comp rates will go up.

Well, this already started, but it bears repeating. After a way-too-long soft market, it's about time pricing sanity returned. Higher work comp premium rates will drive business to third-party administrators, encourage risk managers to, well, actually manage work comp risks, increase vendor business (think utilization review/case management, physical therapy, bill review, and networks) and generally help all of us in the industry.

4. Attacking opioid addiction and dependency will hit the top of many payers', regulators', and employers' agendas.
Led by reports and publicity from notables including Gary Franklin, Medical Director of Washington State's work comp fund, Alex Swedlow of the California Workers' Compensation Institute, the Workers' Compensation Research Institute and the National Council on Compensation Insurance, there's been a tremendous awakening among stakeholders to the human and financial cost of opioid abuse in workers comp. The quicker payers are already moving from "oh my it's a big problem" to "here's the plan to fix it."

It's about time. The damage caused by rampant over-prescribing of opioids is immeasurable. Devastated families, dead claimants, rising insurance premiums, increased crime, completely unnecessary disability and higher costs for employers and taxpayers are the result.

Identification of claimants at high risk for addiction and treatment of those individuals must must be a priority. Intelligent payers will stop ignoring the problem or hoping it will go away, and work to a) prevent more overuse and b) help those already addicted/dependent to get healthy.

5. Now that Illinois is starting to approve Preferred Provider Programs, there will be lots of interest followed by disappointment that they really don't do much to control over-utilization.

I know, this is a gimme. The good folk at the Illinois Department of Insurance have been forced to come up with regulations to implement legislation that is about as convoluted as it could possibly be. Unfortunately, claimants who are interested in gaming the system will use the loopholes in the PPP system to get what they want when they want it from the providers they want to get it from. The PPP will only really work for claimants who weren't interested in gaming the system.

Unfortunately the PPP isn't much of a solution.

6. As work comp premiums begin to rise, we're going to see a renewed interest in loss control, risk management, and medical management.

With rate increases coming in California, Florida, and Massachusetts (among other states), employers are going to have to dust off those yellowed risk management plans, recall the basics of loss prevention, and perhaps re-hire the loss control pros they laid off over the last few years when their services weren't 'needed'.

Look for the big consulting houses, and smaller boutique firms, to emphasize their loss control expertise and capabilities; mono-line (and heavily-work-comp-focused) carriers will also tout their knowledge and ability to help employers control comp program costs.

The ball is dimming, and client work calling...time to put the sphere back in the charger.

7. The physician dispensing cost control bill currently pending in Florida will pass.

After several years of political intrigue, huge campaign contributions from companies making enormous profits from physician dispensing, and continual efforts by good actors in the system, outraged taxpayers and employers will finally succeed in limiting reimbursement for drugs dispensed by docs to the original underlying price of the non-repackaged drug.

I hope. And so should you.

That won't' be the end of the issue; Maryland, South Carolina, and other states are also battling to limit this latest and greatest abuse of the comp system. Even if we win in Florida, there will be many more battles ahead.

8. More payers will diversify their provider network partners.

As Aetna winds up its work comp network operation, payers' interest in exploring other network options will increase. Following the lead of Broadspire and Esis and enabled by technology that makes it easier than ever to mix and match provider networks, we'll see several other large payers award more network business to more network companies. Expect firms such as Anthem, HFN, Horizon, Cofinity, Rockport and Prime to gain share.

That doesn't mean anyone should count Coventry out. They are the oldest, largest, and most entrenched, and are working hard to address network gaps that will arise when their relationship with Aetna finally ends (which is still a long way away).

9. York Claims will finish the year well on its way to becoming a top-tier TPA.

Through savvy deal-making, a pretty intelligent sales approach, and what is by several accounts a strong focus on doing the right thing for the employer (and not just generating fees for York), York has transformed itself from what was a not-very-good TPA a decade ago to a well-regarded and very well run organization. York's robust technology and strong market share in key sectors (especially governmental entities in several states), coupled with the expertise they've added as a result of acquisition (I'm especially impressed with the JI Companies deal) bodes well for their future.

Perhaps I should modify the headline York already is a top tier TPA in terms of capabilities; these capabilities will drive them towards the top tier in terms of revenue and market share.

10. Oklahoma will eliminate the requirement that all employers have workers comp insurance.

There are moves afoot in several states to reconsider the work comp mandate, but none have more traction than the one in OK. Whether it's because they share a long border with the only state that doesn't require comp (Texas), many of their larger employers also have big operations in Texas and like the opt-out there, or there's something more ephemeral, a sense that work comp as currently constructed doesn't work the way it should anymore, Oklahoma may well be the next state to allow employers to opt out.

There's already a study group authorized by the State Senate that's looking into the feasibility of the change; their findings should be released in the next few weeks. that will be just in time for the next legislative session which starts in February.

This may not become law in 2012, but I'd expect some movement that allows some employers to opt out, perhaps in a pilot program as early as next year.

Well, there we have it. Oh, there's one more..

11. My annual April Fool's post will generate some controversy, tick off a few people, and generally cause consternation among those who either don't have a sense of humor or can't read a calendar. It will also not get me in as much hot water as some others because I have to vet it through my PR department...

Joe Paduda is co-owner of CompPharma, a consortium of pharmacy benefit managers, and owner of Health Strategy Associates, an employer consulting firm in Connecticut. This column was reprinted with his permission from his Managed Care Matters blog.