The National Council on Compensation Insurance (NCCI) presented the details of its proposed +0.4 percent loss cost increase for the state of Louisiana at its annual State Advisory Forum in Baton Rouge yesterday. Local leaders in the workers’ comp space were generally pleased with the move after years of significant rate decreases. If approved by the Department of Insurance, the change will take effect on May 1st, 2018.
“It is good to see a recognition of medical and overall claim severity and not just frequency driving ratemaking,” said Troy Prevot, Executive Vice President of LCTA Workers’ Comp. Frequency was the oft-cited reason for previous years’ decreases, including last year’s relatively steep -9.8 percent decrease. Prevot added that, given the shift, he would have liked more state-specific talk during the presentation, as opposed to the information about the health of the national system.
NCCI actuary Nadege Bernard-Ahrendts gave the breakdown on the loss cost increase, which is attributed to four components of the overall Louisiana workers’ comp system: declining premium volume, deteriorating combined ratios, declining frequency, and increasing indemnity and medical costs.
Total Louisiana direct written premium for workers’ comp decreased from $869 million in 2015 to $814 million in 2016. Meanwhile, lost time claim frequency has dropped 49 percent from 2001-2015, but average medical claim severity has increased 114 percent during that same time period.
Mike DePaul, LUBA Workers’ Comp’s Chief Operating Officer, echoed Prevot on the severity element of the latest loss cost filing. “The NCCI data shows that the primary driver in the +0.4 percent increase in loss cost is due to the continued increase in claims severity,” he explained. “Although we’ve seen a decrease in loss cost over the past several years, the upward trend in severity has reached a point where it is now offsetting the factors that were driving those declines, primarily decreases in frequency.”
Despite this year’s increase, Gary Patureau, Executive Director of the Louisiana Association of Self-Insured Employers (LASIE), believes that NCCI’s base severity numbers for Louisiana should actually be higher. “The hidden factor that isn’t taken into account [in NCCI’s data] is the cost of Medicare Secondary Payer compliance,” he said. “If it were, you would see even higher costs in Louisiana. MSAs are basically a matter of public record and we’d like to see NCCI collecting that data.”
The numeric value of the overall proposed loss cost level change is comprised of four factors, which taken together add up to the +0.4 percent factor. According to NCCI’s presentation, the previous year’s data saw:
- +4.9 percent change in experience,
- -3.9 percent change in trend,
- -0.3 percent change in benefits, and
- -0.1 percent “all other” change
Louisiana is one of just three NCCI states (37 in total, plus D.C.) for which an increase was filed for 2018. The other two were Virginia with a +1.1 percent pending filing and South Carolina with a +2.5 percent approved increase.
Yesterday’s presentation also included a discussion of the general economics in Louisiana (payroll growth, private employment, and average weekly wages are below the national average here) and a closer look at the legalization of medical marijuana as it relates to workers’ comp payers.
Overall, the forum was an opportunity for local stakeholders to come together and take stock of the market’s vital signs. For Elizabeth Lowry, Area Manager for CorVel Corporation, the presentation’s benefit was in its service to the diverse workers’ comp community that touches everyone in the state somehow. “As work comp leaders, it’s valuable to understand trends and projections in our state, compared to the region and nation. This kind of objective information allows our clients to benchmark against their own losses.”
NCCI detailed the changes in individual class codes and reviewed its methodology and data in a circular issued October 24th, 2017. Download that here: NCCI May 2018 Filing Loss Cost
Image Credit: NCCI