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Severity, the cost of claims increases



The employment compensation sector is still a relatively stable and profitable segment of the commercial insurance industry, but some claims are becoming more expensive and concerns about the degree of difficulty are increasing.

While a year-long focus on workplace safety and changes in the law has limited workers’ costs, and the frequency of claims continues to decline, experts say a confluence of factors drives up the cost of claims when workplace injuries occur.

“The severity trend has been fairly stable,” said Jason Beans, CEO of Chicago-based Rising Medical Solutions LLC, a company that provides medical expenses.

The aging workforce, medical inflation that is partly spurred by expensive medical technology and rising wages, leading to higher compensation costs, are among the reasons why the severity of claims is increasing, according to experts. The severity of catastrophic injuries is also a factor, albeit a minor problem as attenuating events are rare (see related history).

The changing workforce – from older workers taking longer to recover to less experienced workers being injured more often – and rising medical costs, partly due to medical inflation, treatment innovations and hospital consolidations, were considered the biggest problems for workers. sector in a survey this year of 100 heads of insurance by Boca Raton, Florida-based National Council on Compensation Insurance.

“The bottom line is that we are always looking at the degree of difficulty,” said Donna Glenn, NCCI’s chief actuary, who said other factors could compensate for the steady increase (see related history).

The Cambridge, Massachusetts-based Workers’ Compensation Research Institute has also kept track of the increase in claims per claim. “Is it medical inflation? Is it the aging workforce? Are it comorbidities? Yes, to everything,” said Ramona Tanabe, vice president.

Complicating the problem, she said, is that “every state has a reason for increases.” WCRI releases annual reports on 18 states, representing data from more than half of the country’s compensation claims. The latest figures, released in late April, show a steady increase in lost time claims for most states. The states without fee schedules see a steeper rise.

Most experts agree that the aging workforce is a prominent cause of the increases.

In 2000, 32.4% of the U.S. population was 55 years of age or older; By 2020, that share had climbed to 39.2%, according to the U.S. Bureau of Labor Statistics. In 2021, 23% of the US workforce was older than 55, up from the 13% reported by the BLS in 2000.

“The aging workforce is clearly a factor,” said Russell Pass, Itasca, Illinois-based chief information officer, executive vice president of product development at third-party administrator Gallagher Bassett Services Inc. “Workers 55 and older account for over one-fifth of absenteeism injuries. and 31% of the costs. ”

Virna Rhodes, Cherry Hill, New Jersey-based senior vice president, claims for work injury compensation, for Liberty Mutual Insurance Co., said older workers are more likely to have comorbidities. “It is likely that their treatment will be more expensive than that of a younger worker,” she said.

“Co-morbidities are beginning to affect the severity issue (and) much of it has to do with the health of our society,” said Max Koonce, Fayetteville, Arkansas-based chief claims officer for third-party administrator Sedgwick Claims Management Services Inc.

While an estimated 80% of workers’ claims are only medical, claims for compensation, which compensate for lost wages, are where the severity will hit, said Mr. Koonce.

For an older worker “it takes a little longer to bounce back” after an injury, said Mr. Beans, with reference to data on age-related injury costs. It is a “crystal clear straight line” upwards as the age of workers and costs increase, he added.

“In many cases, aging workers are more susceptible to having certain comorbidities such as diabetes, heart disease or mental health problems, and these comorbidities can contribute to an increase in the severity of an occupational injury benefit,” said Mary Beth Pittinger, Whitehouse Station. New Jersey-based Vice President, Compensation, at Chubb Ltd.

“A slower healing process, more complex and expensive treatments and longer time away from work can all result when a worker with a comorbidity is injured,” she said.

Tammy Bradly, Birmingham, Alabama-based senior head of clinical product marketing for comp service conglomerate Enlyte Group LLC, takes it a step further: “It’s not just the aging workforce; it’s the entire workforce. We are not a healthy population.” Advocating for injured workers and the well-being of workers (see related history) has been a best practice to alleviate the degree of difficulty overall, she said.

Although younger workers do not have the same incidence of comorbidity problems, they can also lead to more expensive claims.

With many employers reporting labor shortages, some may employ less experienced staff, whose lack of training may make them more vulnerable to injury, Pittinger said.

“Some industries affected by labor shortages, such as design and manufacturing, are more susceptible to incidents that could lead to catastrophic damage; such as falls from heights, burns and machine- or driving-related accidents,” she said.

Medical inflation

One factor that is more difficult to deal with is medical inflation.

Among workers, medical inflation rose to 6.6% in 2021, compared with the three-year average of 6.4%, said Mr. Beans from Rising Medical Solutions. Increased utilization, or more treatments per injured worker, accounted for 2.8% of the increase, he said, adding that 85% of the remainder of inflation was due to an increase in the services provided in a hospital environment.

“The majority of the shift goes to more expensive care,” said Mr. Beans. Outpatient “outpatient” hospital services, rather than procedures performed at a doctor’s office, also drive up costs, as payers have to pay expensive extra, facility-based fees, he said.

Mr. Pass by Gallagher Bassett said mergers between medical facilities and the consolidation of medical practices are also contributing to rising costs.

“The fewer (facilities) there are, the more bargaining power they have,” he said.

“From a gravity standpoint, from a cost standpoint, claims will cost more,” Koonce said of medical inflation, adding that some states saw fee increases in recent years as “part of the normal process” stemming from regular federal Medicare cost increases, which helps set comp schedules in most cases by law.

Emerging technology is also affecting claims costs, says Tanabe, who cited advances in medical imaging as an example.

“An MRI machine has a greater ability to see things than 20 years ago; things will be picked up and processed,” she said.

“Technology has improved but it is more expensive. The equipment is more expensive; the treatment is more expensive, ”said Tanabe.




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