Paduda: 2022 Predictions for Workers' Comp, Part 1

Friday, January 7, 2022 | 0

Once more, I head out on a limb to prognosticate the events and trends that will shape 2022. Here are the first five.

Joe Paduda

Prediction: The soft market will continue

Carriers are still over-reserved, rates are still too high (see the opioid hangover), capital is still flowing into workers' comp (gotta love that looooong tail), and employment growth may continue to be modest (low-wage workers have discovered that working at crappy jobs isn’t always a have-to, especially when child care is unavailable and unaffordable).

On the other side, wage growth will likely continue (thus partially mitigating the above drivers) as more employers finally figure out that people aren’t interested in crappy jobs for crappy wages.

Caveat: Toward the end of 2022, we may well see a bit of tightening as construction, infrastructure, green energy and other initiatives start up and get operational.

Prediction: TPAs will add more business, mostly from carriers

As work comp continues to shrink, insurers will ramp up efforts to shed assets and expenses to reduce their cost structure. By outsourcing claims, carriers are trading the high fixed costs of a claims infrastructure for the variable cost of a per-claim admin fee.

The smarter carriers will negotiate hard so they don’t get screwed by medical management and other non-fixed fees, but many carriers aren’t that smart.

Prediction: Insurers will reduce staff, particularly in claims

Well, of course. See No. 2 above. However, third-party administrators will look to add claims staff, so experienced, well-trained claims folks will be highly sought-after.

If total medical costs go up — and I doubt they will — the increase will be marginal

Yeah, I know there’s lots of press and punditry about work comp medical costs, aka “severity,” increasing — and most of it is flat out wrong.

I’ve read far too many investment banker slide decks, “research” reports and surveys of work comp executives that talk about rising medical costs. Almost all are not based on data or solid research.

Facility and therapy costs will go up

Mostly because medicare is increasing reimbursement for therapy, which trickles down to work comp fee schedules, and some health care systems and for-profit entities (looking at you, HCA, especially in Florida) have figured out how to bust open the work comp piggy bank.

What does this mean for you?

Work comp will just muddle along.

Next time: five more predictions.

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.