What is Up in Work Comp?

Monday, September 15, 2008 | 0

By Joe Paduda

After spending the last part of last week and the better part of this one preparing for two major presentations on "US health care 2009" (both requiring predictions about health reform efforts and results thereof) I've been anxious to get back to the comparatively sedate world of workers comp.

Here, in no particular order, are a few of the 'not enough for a full post' items. There's more going on which I'll focus on next week.

The good news is rates continue to decline in most states, with the notable exception of California (where if rates had gotten much lower insurers would be paying employers). The so-far not terribly bad hurricane season has certainly helped; here's hoping Ike and colleagues stay out at sea, away from the shipping lanes and fishing grounds.

As long as catastrophic costs stay modest we can expect the market softening to gradually taper off and then start to harden - say this time next year.

The good news has been the result of a continued decline in frequency, payer success in managing ancillary medical costs (particularly drugs and physical medicine), and relatively low wage inflation. Oh, and that's all been minor compared to the impact of the dramatic cost reductions in CA (which are due in part to tight limits on the number of physical medicine visits).

Florida has also been enjoying several consecutive years of rate reductions, brought on (at least in part) by the 2003 reforms. Word from the Sunshine State is that one of the key components of the reform law, limitations on plaintiff attorney fees, may be overturned. If that happens, it's 'Katie bar the door', as the plaintiff bar in Florida has long been champing at the bit to return to the halcyon days pre-reform, when they could bill hourly fees at will. Yikes.

While rate reductions and soft markets have been great for employers, third-party administrators, managed care firms, and carriers are having challenges. Several TPAs have closed shop, been acquired, or suffered dramatic losses in business, and most (particularly in Florida and other states with big premium drops over several years) are doing their best to hang on and hope things turn around soon. CorVel has added a couple TPA customers - one an existing managed care client and another new business. These deals have also required CorVel to do quite a bit of programming and IT development, work that was responsible for higher costs for the company in the most recent quarter.

I remain skeptical about CorVel's business model and attempt to sell to, while competing with, TPAs.

On the managed care side, several network companies are vying to be industry leader Coventry's chief competitor, with little success to show for all their effort - so far. This may change soon, as Coventry's continued heavy-handed, my-way-or-highway approach to customer relations is wearing a bit thin. One of their larger self-insured employer customers was handed an eight point rate increase. Not percentage but points. Word is the folks delivering these new rates, contracts and addenda are not exactly comfortable doing so. Coventry has also been expanding its staff, adding long-time industry vet Pat Sullivan in an effort to improve its image in the market.

A new firm (NovaNet) announced it's presence just this week; when I get more info will pass it on. I would note that their press release talks about some direct provider contracts and rental of other networks; there are several other PPOs with similar models already in the space. One observation - the company touts its huge network of docs - while this may be an asset in group health, the huge network model is losing followers in the comp space of late.

MedRisk has been awarded the contract to handle the Pennsylvania state fund's entire managed care program, a major win for the company. (MedRisk is an HSA consulting client).

Internal sources at the 'old' Fair Isaac, now Mitchell Medical bill review firm report the new owners are investing, listening, and supporting their efforts to revamp the WC bill review products. That's a good thing and bodes well for MM's future in work comp.

Joe Paduda is principal of Health Strategy Associates, an employer's consulting firm in Connecticut. This column is reprinted with his permission from his blog on health care and workers' compensation, http:www.managedcarematters.com