NCCI State Advisory Forum 2014: Louisiana’s Economic Prospects Positive, Indemnity and Medical Severity Highest in the Region

At the end of last month, NCCI announced its recommendation for an overall loss cost decrease of 2.4% for Louisiana. While NCCI explained several reasons for this in its circular, (discussed by Louisiana Comp Blog here) today’s highly anticipated State Advisory Forum in Baton Rouge discussed the recommendations and findings in much greater detail.

The presentation began with several updates from Charles Hansberry, Assistant Deputy Commissioner of Property & Casualty at the Louisiana Department of Insurance, and Wes Hataway, Director of the Louisiana Workforce Commission. A review of major legislative issues at the local and federal levels followed.

NCCI indicated that 2014 was a quiet year for workers’ comp legislation, given the fact that many states had pursued major reform in 2013 and because 2014 was a midterm election year. Medical cost containment issues such as opioid abuse and physician dispensing were echoed across the country as well as in Louisiana. Stakeholders anticipate that legislation attempting to control these practices will re-emerge in the 2015 session.

Based on the data presented, Louisiana appears to largely embody NCCI CEO Stephen Klingel’s “balanced” predictive outlook (as presented at NCCI’s Annual Issues Symposium in August.) Direct written premium volume (standard carriers only) has recovered to $812 million in 2013, contributing to a reversal of the downward trend seen from 2008-2010. Further, lost-time claim frequency decreased in 2012 and the combined ratio has steadily improved in Louisiana for the last three years.

In other good news, Louisiana’s economy seems to have risen from the Great Recession and become even stronger. Our state’s unemployment rate is well below the national average and has now exceeded pre-recession levels. The leisure and hospitality industry and education and health services sectors enjoyed especially strong growth, but deep cuts in state spending continue to affect the recovery of government entities including public schools. NCCI predicts that Louisiana will continue on the same positive trajectory, adding jobs to a variety of industries, investing in construction and increasing employment and wages. Just like the country as a whole though, economic recovery in the wake of the last recession will probably remain modest.

However, with respect to NCCI’s filing, the most significant data explored in the presentation related to indemnity and medical claim severity.

On the indemnity side, the 2012 data shows a decrease of 3.3% from 2011, but lost time claim severity remains a problem for Louisiana on a regional scale, though we match up with national trends. According to the latest data in the presentation, Louisiana’s lost time claim severity (in thousands of dollars) averages $38.6. This figure appears exorbitantly high when compared to our neighbors. Alabama sits at $18.2, Arkansas at $14.3, Mississippi at $20.2, Oklahoma at $26.4, and Texas at $17.7. Angela McGhee, NCCI’s lead actuary for Louisiana as well as two other states, gave three reasons for Louisiana’s apparent status as an anomaly in the region:

  1. Louisiana has a longer waiting period to begin collecting indemnity benefits (7 days) compared to our neighbors
  2. Louisiana provides supplemental earnings benefits
  3. Louisiana, probably due to a strong economic situation, has a higher average weekly wage than our neighboring states.

The data on medical claim severity told a similar story, continuing an upward trend in our state over the last several years (with the exception of 2011.) Again, this measure put Louisiana significantly above all of our neighboring states. Our average medical claim severity (excluding medical-only claims and expressed in thousands of dollars) was $48.0 for 2012. By way of comparison, Alabama was next highest in the region at $44.5, Mississippi and Oklahoma met in the middle at $30.0 and $30.3, respectively, and Texas came in at $26.1. Arkansas was once again the lowest cost state in the Deep South with a $27.7 average medical claim severity. McGhee’s reasons for the numbers are generally accepted by the workers’ comp carrier community already; she pointed again to the long lag time to begin indemnity payments and to the fee schedule, which unlike other states, does not match up with Medicare and instead stipulates “usual and customary” charges.

Looking to the future, the NCCI presenters highlighted telemedicine in workers’ comp as their major issue to watch at the end of the forum. They provided several examples of telemedicine’s potential to improve access to care for injured workers, plus the sophisticated level of patient monitoring telemedicine can provide.

Editor’s Note: Attendees appeared satisfied with NCCI’s findings generally with several comp community members speaking to the need for better legislation in the opioid arena and a continued focus on decreasing frequency. As usual, everyone is able to agree on one thing: safety. If workers do not get injured in the first place, then we all win.

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