As you may have seen in recent insurance news, the United States workers compensation system turns 100 this year. That milestone is being observed over at Insurance Journal with both a look back – in Christopher Boggs’ article Workers’ Compensation History: The Great Tradeoff! – and with a look to the future in the article Workers’ Compensation – Now What? This article links to eight more articles, one by each of eight industry leaders. It’s all interesting reading, but in case you don’t have time for it all, I wanted to highlight a few trends and quotes that stood out to me, and of course relate what I can back to the specific niche of experience rating mod analysis.

It was significant to see how the same issues came up repeatedly with the majority of these eight writers examining future trends in workers comp. These themes included:

The tangle of the economy, growing healthcare costs, and healthcare reform.

Trends in these areas relate to the increase of medical costs as compared to indemnity costs, the corresponding decrease in claims frequency, and how workers comp may eventually be impacted by health care reform or other reforms at the federal and/or state levels:

General healthcare costs are growing as a share of U.S. GDP, and in workers’ compensation, there has been a gradual shift in the balance of medical/indemnity costs towards medical…Are we starting to see a bottoming of the reductions in claim frequency? Stephen J. Klingel, NCCI Holdings, in A Changing Workforce Among Many Challenges

Clearly, understanding medical loss components and their respective trends are going to play an increasingly important role in our industry. Reserves established on prior development models will ultimately prove inadequate in most cases. – Mike Britt, Accident Fund Insurance Co. of America, in Medical Losses, Top Line Growth Top Challenges

The changing nature of our work and workforce

Several writers pointed out the trend toward more service jobs and automation and away from construction and manufacturing jobs. The aging work force and the obesity epidemic also made the list of trends for many of the writers:

The workforce is getting older and less physically fit. Many Baby Boomers can’t afford to retire and will stay in the workplace longer. This is not such a big issue for clerical employees, but will be a problem for those who are engaged with physical labor. Obesity, diabetes, and high blood pressure are on the increase which complicates and extends injury recovery. – Frank Pennachio, The WorkComp Advisory Group, in Safer Workplaces, But Older Workforce

Improved technology

This, of course, is a category that very much interests me:

The industry needs to develop new strategies for identifying cost drivers, controlling medical costs, and understanding the impacts and implications of trends. To develop these strategies, insurers should tap into new ways of collecting data, such as using transactional reporting and data reporting standards, and new technologies, such as predictive analytics. – Arthur Cadorine, ISO, in Demographics, Healthcare Reform, Economy and Data Will Help Define Future

Corporate silos that have separated risk management from benefits management are breaking down. Agencies that offer a broad range of skills and integrated knowledge will be able to compete. – Preston Diamond, Institute of WorkComp Professionals, in For Agencies: Not Business as Usual

We believe there are substantial benefits waiting for the company that digs into its data, gains a better understanding of its customers and their environment, and takes the innovative action necessary to capitalize on those opportunities. Mike Britt, Accident Fund Insurance Co. of America, in Medical Losses, Top Line Growth Top Challenges

How do these trends relate to experience rating analysis?

To me, these trends are very much about the data and how it can be used in mod analysis – which, with the right data, can be a step beyond claims analysis.  Here are a few ideas and question I have. I’d love for you to respond through a blog comment or by emailing me at [email protected] with your ideas.

• It will become more important than ever to include demographic data with basic loss information in a mod analysis. Of course, all that’s needed to calculate a mod, in terms of claims, is to know the loss date, the loss amount, and if it’s a type 6 medical-only loss (for the majority of states). But the power of mod analysis comes from associating each loss with its demographic data. I hope you realize that in ModMaster, if you load “optional” information into the large loss page, you can produce numerous reports which “slice and dice” the data to show how certain demographics have affected the mod. This can help the employer see, for example, that “operating equipment” and “failure to follow procedure” are contributing the most to the mod points – and therefore premium. Or that “hand injuries” are a particular problem in their organization, which may point to an ergonomic issue that needs improvement. How often do you load “optional” information into the large loss page of ModMaster? What are the challenges to you doing so?

• New demographic data associated with the claimant’s medical profile needs to be included in mod analysis data. The trends above seem to indicate an option to input and report on data such as age and weight (which I talked about in Is It Time to Report Height and Weight on Workers Comp Claims) – into ModMaster. This certainly gets into the integrated knowledge and better sharing of data mentioned by the writers above. It also points to the integration of analytics to action, such as the opportunity for certain claimants to be flagged for specific wellness programs to help assure the best possible outcomes. I see this working something like an enhanced version of the WorkCompEdge Proposal Report in ModMaster. That report has been a big hit – even with users who don’t use WorkCompEdge – because it doesn’t just say “here are your problem areas.” It goes further and says “here are the things you need to do to address those problem areas.”

• Loss reserves will become a more important component of mod analysis. If, as Mike Britt suggests, reserves are going to start proving inadequate, this could mean that reserves will more often be adjusted upward year to year for a the three years that a loss is in the mod. Or, it could mean that a backlash effect causes reserves to spike. Currently you can enter paid and reserve components on large losses in ModMaster (to do so, you must enable ERM-6 reporting in the System Administration area.) Honestly, though, we don’t do much with reserves on reporting. Do we need to enhance this area so that you can see trends in reserving that may improve dialog with employers and claims adjusters?

Finally, as the comments by Preston Diamond and Mike Britt indicate, the future is in going both deep and wide with the data. If you’ll forgive the shameless self-promotion, I can’t resist pointing out that Zywave’s acquisition of Specific Software is combining their very strong benefits background and technology infrastructure with our work comp expertise to, in time, produce exactly that capability. But your ideas and feedback will be, as always, important to us providing both innovative and practical solutions. Let us hear from you!

– Kory Wells, WorkCompEdge Blog Editor

© 2011 Zywave, Inc.  All rights reserved. For reprint permission, contact the blog editor.