The U.S. workers’ compensation sector reported a record high $58.5 billion in direct premiums written in 2016 despite economic, regulatory and legal issues that threaten to reshape the market, according to a new A.M. Best special report.
However, the Best’s Special Report, titled, “Workers’ Compensation: Costs, Legal Activity and Employment Rolls Are Increasing—But So Are Profits,” states that despite the record premiums, year-over-year growth slowed. Net premium growth declined to 0.2 percent after expanding at a five-year compound annual growth rate of 6.3 percent from 2010 to 2015. The deceleration in growth is due mainly to consistent rate decreases in 2015 and 2016, as well an increase in net ceded premiums.
Louisiana Comp Blog reached out to local voices to get their take on the report, including why, in this profitable environment, the need for reform remains a constant refrain.
Trey Mustian | President, Louisiana Workers’ Advocates: Louisiana has offered a profitable environment for workers comp carriers for many years. Louisiana Workers’ Advocates believes that claims of a crisis in medical spending are overblown and merely voiced to seek increases in profits. The advent of the Medical Treatment Guidelines has greatly reduced and slowed authorization of medical treatment for injured workers which likely has contributed to lower medical costs. However, we have witnessed an increase in length of disability due to reduction in timely treatment attributable to the guidelines and its attendant appeal process. Carrier complaints of longer TTD duration in Louisiana are at least partially attributable to this phenomenon of less timely treatment.
Troy Prevot | Executive Vice-President, LCTA Workers’ Comp: I think [the report] is partially true. The large multistate insurers are more insulated to these high medical costs by being in other lines and other states. Those numbers reflect large reserve recoveries which can mask true losses. Are they reserving appropriately? Remember just because we are getting ridiculous bills doesn’t mean we aren’t fighting to make them reasonable. In some cases those costs to mitigate them aren’t part of these numbers.
Greg Hubachek | Attorney, Workers’ Compensation LLC: Some of the profits are certainly attributable to better claims administration techniques. A.M. Best correctly observed that “large writers decreased their exposure to the workers’ compensation business;” this circumstance opened an opportunity for more specialized workers’ comp insurers to capture a larger slice of the market. In my opinion, these more specialized insurers are able to administer benefits more efficiently and, therefore, return larger profits.
I suggest to the Louisiana Legislature that the A.M. Best Special Report is further evidence that we must pause and study the quantifiable metrics of our workers’ compensation system over the period following the implementation of the [Medical Treatment Guidelines]. Too often, the call for further reform of the Louisiana Workers’ Compensation Act is predicated upon data which pre-dates the Guidelines and is, therefore, not relevant to the current challenges confronting all stakeholders in Louisiana.
Wayne Fontana | Attorney, Roedel Parsons: I suspect that these numbers reflect a continued drop in injury occurrence which has been a trend for the last several years. Specific to Louisiana, accident occurrence is now at one of the lowest rates nationally. As far as overall costs, and particularly costs per claim, Louisiana continues to fare poorly when compared to the rest of the country. The WCRI studies have Louisiana at the top of the bad lists related to time off work, medical costs and costs per claim to name a few. Bottom line is that we have fewer claims but more expensive ones leading to overall rising costs and certainly runaway costs per individual claim.
Bobby Truitt | Attorney, The Truitt Law Firm: At least from my perspective, I think that the implementation of the Medical Treatment Guidelines in Louisiana has helped to drive costs down on medical treatment for workers’ compensation claims. Approval of treatment modalities, such as platelet rich plasma injections (PRP), which has shown great clinical benefit and approval in the medical community, is still being denied in the state. Treatments such as that, which are really non-invasive, can help to avoid surgeries and help to drive costs down even further. I think that a lot of insurers are penny-wise and pound foolish in this regard.
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