Ten Critical Challenges Facing the Workers’ Compensation Industry

Topics: Workers' Compensation

AmTrust has been an insurance industry leader in Workers’ Compensation insurance for more than two decades. Our agent partners and their clients rely on our ability to succeed in strategizing and innovating in response to whatever challenges the ever-changing world of Workers’ Compensation sends our way.

Workers’ Compensation Challenges Ahead

workers' compensation claim form

Let’s take a closer look at ten critical issues facing the industry for 2020 and beyond.

1. The Changing Workforce/Population Demographics

One of the biggest demographic shifts for the Workers’ Compensation industry is the age of workers. According to this study, “the average annual growth rate of the 55-years-and-older group projected to be 1.8%, more than three times the rate of growth of the overall labor force. The group’s share of the labor force is anticipated to increase from 21.7 percent in 2014 to nearly 25% in 2024.”

What impact can this have on the industry? The costs of Workers’ Compensation claims increase with age, though experienced workers are hurt less frequently. Not surprisingly, health tends to diminish with age – this means that the length of disability resulting from a workplace injury increases as well.

2. Mental Health Exposures and PTSD Coverage

Studies have shown that following a work-related injury that results in chronic pain, many individuals suffer from depression. When combined with the physical injury, depression plays a major role in slowing the recovery process and delaying the return to work. Plus, it’s common for these individuals to be prescribed opioids at higher doses. This makes diagnosing and treating the psychological effects of the injury as important as treating the physical pain. Health care providers and Workers’ Compensation carriers should be prepared to offer the maximum support the individual needs to recover. Patients with post-traumatic stress disorder (PTSD) or severe anxiety are more likely to develop chronic pain after a surgical procedure and are at greater risk to develop an opioid use disorder.

A recent Business Insurance article discussed the topic of PTSD legislation that is impacting claims for first responders. According to the Substance Abuse and Mental Health Services Administration, an estimated 30% of first responders develop behavioral health conditions such as depression and PTSD, and firefighters and law enforcement officers have higher suicide rates than the general population. While states across the country continue to develop laws that provide first responders diagnosed with PTSD with Workers’ Compensation coverage, these laws aren’t working as intended, leaving first responders without care and making it increasingly difficult for municipalities to handle the costs.

3. Increasing Complexity of Claims

While most Workers’ Compensation claims usually don’t start out as being complex, they develop into complex claims due to several factors – one of which is attorney involvement. A recent article reported that the average total claim paid among claims without attorney involvement was $15,936 and $77,807 among claims with attorney involvement. The medians were $5,768 and $48,385, respectively. Additionally, the mean claim duration was 305 days among claims without attorney involvement, versus 901 days among those with attorney involvement.

With proper training in place, claims representatives should be able to direct injured workers to the best possible care for their case and help get them back to work as soon as possible. This can help reduce the possibility of litigation and reduce the overall claim cost. Insurance companies can also place even more emphasis on utilizing “smart software” to determine accurate settlement amounts, thus helping reach a faster conclusion to a claim.

An increase in mental health and PTSD concerns as discussed above will also have an impact on the complexity of Workers’ Compensation claims, and will be an issue for the industry to continually monitor in 2020 and beyond.

4. New and Expensive Medical Claims

Catastrophic injury claims can reach around $10 to $15 million (sometimes called “mega claims”), with industry data indicating that the amount of claims topping $5 million incurred continues to rise. Carriers are even seeing some claims as high as $40 million, which obviously can have a major impact on premium rates. An increased emphasis on loss control measures, especially those designed to prevent slips/trips/falls and motor vehicle accidents, can go a long way toward preventing the occurrence of mega claims.

Since 2016, there has been a consistent uptick in these types of claims, so this will certainly be a trend to keep an eye on in the years to come.

5. Opioid and Substance Abuse

The opioid epidemic affects employers in every industry, from farming to nonprofits. From 1999 through 2017, almost 400,000 individuals died of an opioid overdose. Every state in the country introduced legislation related to prescription drugs back in 2018, with around 20 of them considering legislation addressing prescription drugs in Workers’ Compensation. Two states, Hawaii and Arizona, passed such legislation.

According to AmTrust’s Matt Zender, SVP overseeing the Workers’ Compensation product, the opioid epidemic is an issue that has those in the Workers’ Compensation space concerned. Additionally, Dr. Melissa Burke, Head of AmTrust’s Managed Care and Clinical, says “Many workplace injuries lead to chronic pain and the ongoing use of opioids to mask that pain. Chronic use of opioids may lead to polypharmacy to treat the many side effects associated with opioid use, potentially additional comorbidities, depression, anxiety and of course the risk of overdose.”

It’s clear that measures need to be taken to address the opioid epidemic and the toll it is taking on both large and small businesses. An employer’s Workers’ Compensation program should address the crisis directly to help reduce the risk of abuse and the cycle of addiction. In many cases, there could be safer treatment alternatives to opioids to consider.

Last year, AmTrust Financial partnered with Optum Workers’ Comp and Auto No-Fault, a pharmacy care management company, to implement an innovative program to improve outcomes and reduce opioids prescribed to injured workers. The program reduced the number of prescriptions containing opioids by 13,000 compared to the prior year and assured that claimants are receiving the right treatment, at the right time and for the right duration. Additionally, AmTrust has seen a drastic reduction in the percentage of opioid-related claims, dropping from nearly 60% in Q4 of 2017 to just under 25% in Q4 of 2018.

The results of the program can be found in our AmTrust Opioid Prescription Risk Report. Download the report to learn more about the effects of the opioid epidemic on Workers’ Compensation claims, and take a deeper look into the progress that the AmTrust and Optum partnership has achieved in reducing claims with opioids and replacing these with safer, alternative treatments.

6. Drug Prices

The National Council on Compensation Insurance (NCCI) released a report last year that states prescription drugs account for approximately 14% of a Workers’ Compensation claim on average. Interestingly, the price of drugs continues to rise but their usage is decreasing. The report shows:
  • Drug costs per claim have gone down due to lower utilization.
  • Prescription drug prices continue to rise, although at a slower rate than in recent years.
  • The number of opioid prescriptions continue to decrease as doctors opt for alternative treatments.
The news isn’t all good, however. Risk & Insurance states that there are several negative trends beginning to take shape that could drive costs back up again:
  1. Specialty medications account for a large portion of costs, and their prices are continuing to increase.
  2. Claims for older workers cost more, much of which has to do with increase in drug spend.
  3. Despite a decrease in opioid use, injured workers are still too often prescribed them, oftentimes in conjunction with other drugs that can create a dangerous combination.

7. Medical Marijuana

Support for legalizing marijuana is at an all-time high in both the medical community and among consumers. As of the beginning of this year, 33 states have now legalized medical marijuana, but employee rights regarding its use is still a hot debate. Maintaining a drug-free workplace and ensuring the safety of all employees will continue to be a major concern as more individuals may be prescribed medical marijuana in the coming year.

8. Comorbidities and Poor Worker Health

Conditions such as obesity, diabetes, tobacco use, substance abuse and mental health issues can lead to Workers’ Compensation claims with a longer duration, higher costs, more temporary disability days and increased litigation rates. Insurance companies need to be able to identify comorbid conditions as early as possible, and take a more proactive and holistic approach to claims involving them. Employers can take measures such as instituting wellness programs to help improve employee health, which can reduce the impact of comorbidities.

9. Regulatory and Legislative Changes

2020 is a Presidential election year, but that also means seats for governor and insurance commissioner will be available as well. Since insurance commissioners have a large impact on Workers’ Compensation policies, changes could be coming to states across the country. For example, Risk & Insurance recently published an article outlining some updates to Workers’ Compensation laws in the Northeast. Other states are considering legislative changes as well, which could further impact the industry.

10. Claims Data Security and Privacy Laws

Consumers provide a multitude of sensitive personal data to their insurance companies that must be protected from a data breach. Workers’ Compensation insurers need to be prepared for data breaches by having secure networks and making sure that every employee is trained on how to keep confidential data secure. This training is not always enough, so data privacy laws are being enacted around the world to help give consumers protection in this time of large-scale data breaches.

The new data privacy laws are both a challenge and an opportunity for the insurance industry, and is an issue to watch closely for 2020 and in the future.

Workers’ Compensation Coverage from AmTrust Financial

AmTrust has been a trusted partner for Workers’ Compensation coverage and other lines of small business insurance for over 20 years. Contact us today to find out what we can do for you.

This material is for informational purposes only. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.

Time Zones