NCCI's State of the Industry 2010 the Details

Friday, May 14, 2010 | 0

By Joe Paduda
Health Strategy Associates

The much-anticipated "State of the Line" presentation by the National Council on Compensation Insurance's Dennis Mealy is the highlight of the NCCI Annual Issues Symposium. Here's what Dennis had to say.

First, the overall property and casualty (P&C) industry's results weren't too bad, despite a 3.7% drop in net written premium from 2008. And the combined ratio industry-wide improved three points to 101, led by property's strong results. The decent news helped keep the combined ratio for the last seven years well under the historic average.

Dennis got into detail re the decline in comp premium over the last few years, and his numbers included high deductible plans and keeping everything consistent by putting historical costs on a common rate level. The net indicated comp in 2007 would have been $89 billion on a common rate basis if all comp was insured, declining to $76 billion in 2009.

The combined ratio medical and indemnity expense plus admin expense was up nine points to 110 in 2009, a big jump from their initial prediction back in September of a 106. The difference was driven largely by a big addition to reserves by one large carrier an addition of about a billion dollars.

Without that reserve adjustment, the combined would have been about 107.

NCCI is making a big investment in, and focusing on, medical costs going forward. While they've always reported on medical costs, expect their emphasis to increase, led by the Medical Data Call and results and uses thereof.

Comp medical costs per lost time claim went up five points, an improvement over last year's 6.7%, but consistent with the last few years. (I'd note that the preliminary numbers for 2008 indicated a 6.0% increase)

Medical costs now seem stuck at 58% of claim costs.

Frequency may spike just a bit as employment grows, but Mealy does not expect the two-decade-long downward trend in frequency to turn around.

Dennis closed with a discussion of the potential impact of the health reform bill and the implementation thereof. His main points were the direct impact of the black lung entitlement and potential changes to Medicare reimbursement; this last is a two-part process, first being what do the Feds do, and then what do the states do in response to any federal changes in Medicare reimbursement.

Dennis noted that among the other issues worth watching are the effect of:

• Increased health care coverage among the general population
• Consumers' greater access to drugs, particularly generics
• New taxes on pharma, devices, and health insurance companies
• Medicare secondary payer issues