The National Council on Compensation Insurance (NCCI) held its annual State Advisory Forum in Baton Rouge on Tuesday, November 27th. The event, attended by about 100 people across the workers’ comp industry, provides a range of actuarial and statistical information as it relates to NCCI’s loss cost filing for the year. The filing this year, which was accepted by the Louisiana Department of Insurance last week, means a -5.6 percent decrease. Check out video interviews from attendees just after the event here.
The change will become effective on May 1st, 2019. According to NCCI, the impact of change in experience and development was -6.0 percent and the impact of the change in benefits and loss-based expenses was +0.2 percent. The impact of trend was +0.0 percent.
NCCI appeared to take extra care this year to explain how the data it receives from employers is utilized in its filing. Presenters Laura Hart Bryan (State Relations Executive for Louisiana) and NCCI actuary Brett Foster presented a five minute video from NCCI delineating the departments that assess the data, and Bryan took pains to justify the delay in the data used (NCCI is usually two years in arrears) by saying that it takes a significant amount of time to verify the data.
Stakeholders in the system have complained for years that NCCI is not taking severity enough into account versus frequency in its filings. Foster addressed that in some detail in the presentation, explaining that although severity is experiencing a long term upward trend in Louisiana, “for both indemnity and medical severity, there was a blip in 2015, but since then [severity] has flattened out.”
The presentation includes two graphs showing the 2015 spike. On indemnity severity, 2015 saw a +7.0 percent increase versus a +0.6 percent increase in 2016. For medical severity, 2015 data showed a +9.1 percent increase versus a +0.1 percent increase in 2016.
Indemnity claim severity outpaced changes in wage inflation by 1.9 percent on average across the country, according to Foster. Medical severity saw a much larger differential – medical lost-time claim severity grew approximately 4.5 percent per year faster than medical care prices.
The -6.0 percent component of the loss cost filing is driven by the decrease in frequency of claims in Louisiana’s system. Although steady decreases in loss cost filings are a major factor, contributing further to the soft market conditions in Louisiana is the decline in written premium volume. Foster noted that premium declined again in the most recent year, to $798 million in direct written premium in 2017, from $814 million in 2016.
Bryan spent a significant chunk of the presentation discussing the economic picture in Louisiana, noting that Louisiana is “lagging behind” the national unemployment rate at 4.7 percent unemployment compared to 4.1 nationally. Mississippi matched our unemployment and Alabama was consistent with the nation.
The final section of the presentation, which changes each year based on industry interests, focused on opioids. NCCI collects data on opioid utilization across the workers’ comp system and it has found that injured workers who were prescribed at least one prescription in 2016 received three times as many opioid prescriptions as the overall United States opioid prescribing rate. The U.S. prescribing rate is 61 prescriptions per 100 people. As Bryan explained, “That’s why it’s a particular issue in the workers’ comp industry, because we’re seeing so much higher rates. Around two in five prescriptions claims receive an opioid, that’s down 10 percent from 2012. The average cost of an opioid prescription claim is four times higher than a non-opioid prescription claim.” She also noted that Louisiana spent $6 million on 45,000 opioid prescriptions in 2016.
Bryan and Foster concluded the event by encouraging stakeholders to visit the NCCI website, in particular its Insights page, which now posts analyses and other content at regular intervals.
Download the entire presentation here.
Corrections: A previous version of this article incorrectly identified the number of prescriptions in Louisiana and the dates of a marked increase in severity as 2015 and 2016. The increase discussed in the presentation referred only to 2015 data. Additional statistics from the presentation have been added to clarify the severity increases.