The depressed economy has good news and bad news for workers’ compensation insurers, the chief executive officer of the National Council on Compensation Insurance said today at the group’s annual seminar here.
The good word is there will be fewer and less costly injuries, but the bad news is there will be fewer premiums written, said Steve Klingel, NCCI president and CEO.
Mr. Klingel, basing his remarks on data from previous recessions, said insurers’ premiums will be affected by smaller payrolls with less workers to insure. The greatest impact will be felt by insurers whose business comes from the more affected sectors of the economy.
The hardest hit sectors, he said, will be the manufacturing and construction sectors. Mr. Klingel said that as construction slows, comp insurers will see less hurt workers from an industry that generally tallies more severe and costly injuries.
There will also be a drop in injury frequency caused by the fact that fewer inexperienced workers will be arriving on the job, said Mr. Klingel.
In addition to the economy, he said workers’ comp insurers will continue to be challenged by rising treatment costs for injured workers. The main cost driver of medical, said Mr. Klingel, is the soaring amount of additional services or utilization. He said these costs from medical providers increased when action was taken to implement restrictions on fees.
The fee schedules NCCI has found that work best to restrict costs are those that are closest to Medicare, he said. But utilization “needs work” and is a main cost driver of the comp system, he said.
To get utilization costs in hand, Mr. Klingel said comp insurers are looking at pay-for-performance arrangements based on outcomes and patient satisfaction.
The NCCI executive said that in order to help state comp systems get a better handle on treatment costs for injured workers, NCCI has embarked on a new medical data call to gather information. He said the effort is a multiyear, highly detailed process.