COVID is Whacking Work Comp...Let's Play this Out.
If survey respondents' estimates of claim count reductions are accurate, we're looking at about 20% fewer work comp claims in 2020 than last year.
So, what does that mean?
That's about 1.2 million fewer claims. We can expect a greater percentage of those filed will be lost time; in tough economic times, workers tend to not file claims for minor issues.
Insurers, State Funds, and TPAs
Profit margins for insurers and funds will be higher because there are fewer claims; yes revenues will be lower, but combined ratios will actually improve. But, while margins will be up, dollars of profit will be stable or, more likely, somewhat less.
I'd expect insurers to hunker down and hold on to as much cash as possible. Expect a big push to reduce Unallocated Loss Adjustment Expenses; think fewer dollars for IT projects and the like.
Execs will be looking for ways to reduce allocated expenses and claim costs. Here are a few that may get traction.
Pharmacy – with PBM pricing declining over the last few years, payers that have not gone to market recently would be advised to make sure they are paying market-competitive pricing.
Facility costs – hospitals and health systems are looking for pennies in the couch cushions; with margins on WC higher than any other payer, rest assured insurers are the center of attention. Few bill review entities have all the tools necessary to keep hospitals' sticky fingers out of payers' wallets – make sure yours does.
Offload variable costs by offloading claims to TPAs – with volumes dropping its better to pay-as-you-go than have a building, equipment, staff, and all the necessary support soaking up overhead dollars.
Companies with very good customer relations and high service standards will win. While staff reductions are inevitable as case loads drop, service companies that manage those reductions wisely and humanely will reap benefits as the workers still employed will show their loyalty by going above and beyond for customers.
On the product side, many vendors are figuring out ways to help employers get safely back to work, prevent workplace infections, and facilitate medical access for patients with injuries. On-site employee assistance, testing access, cleaning services, scheduling support are all in play as is stress management and support for families dealing with illness.
Tele-services are a big part of this; big winners will be those that make the leap from using tele-as just a face-to-face visit to something more substantive, more diagnostic, more useful. There's lots of creativity at work here…dare I say it innovation may actually become acceptable!
Expect more consolidation as private equity and venture capital owned firms (and others with solid cash reserves) try to buy out competitors, get their customers on board, and do it all on the cheap.
What does this mean for you?
Chaos brings opportunity – especially for those who remember this business is about helping people who are hurt get better.
Disclaimer: WorkersCompensation.com publishes independently generated writings from a variety of workers' compensation industry stakeholders. The opinions expressed are solely those of the author and do not necessarily reflect those of WorkersCompensation.com.