Paduda: Opioids and Work Comp Premiums

Thursday, November 14, 2019 | 0

Two seemingly unrelated papers hit the inbox yesterday: the California Workers’ Compensation Institute's just-completed analysis of opioid usage in California, and the National Council on Compensation Insurance's report on 2019 workers’ comp financials.

Joe Paduda

The key takeaways from NCCI’s report include:

• Premiums are expected to drop 10% in 2019, driven by rate/loss cost filings. In other words, losses are declining, which leads to lower insurance costs.
• This marks the sixth consecutive year of decreased premium levels.
• Not coincidentally, 2019 is the sixth consecutive year of underwriting profitability.

So, even though premiums are dropping like a rock, insurer profits are better than they’ve ever been.

Why?

Well, declines in frequency are certainly a big contributor. Reduced worker benefits are likely a factor as well — and a big problem we’ll address in a later post.

If anything, investment profits are a drag on profitability (NCCI reports 2018 investment gains averaged 9.2%).

Which brings us to CWCI’s report, “The Impact of Declining Opioid Use on Lost-Time Claim Development & Outcomes in California Workers’ Compensation” (disclosure: I provided input as a peer reviewer for the final report).

Key takeaways:

• ... “from 2008 to 2017, chronic opioid use … declined from 13% to 3% of all lost-time claims (a relative decline of 77%).”
• ... the strength of the opioids dispensed within the first 12 months of treatment, measured in cumulative morphine milligram equivalents, declined 59% for chronic opioid use claims.

Later, I'll discuss the connection between opioid reductions and premium levels — and what it means for the industry and you.

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.