NCCI Proposes Reduction for Workers Compensation Rates in Florida
National News • August 29, 2007
Driven by significant declines in claim frequency and improvement in loss development (i.e., claims are developing to a lower ultimate value) the National Council on Compensation Insurance is ...
Insurance Journal is not responsible for the content of the message below.
Subject: RE: NCCI rates - Are the rates sustainable?
Posted On: October 24, 2007, 12:24 pm CDT
Posted By: Margaret Spence
Comment:
After reading this article I wanted to pose the question to regulators – Is the current rate reduction sustainable?
After working in the workers' compensation system for more than 20 years, first as an adjuster and now as a consultant – I do not feel that the rate reductions are sustainable for the long haul.
The key factors that influence workers' compensation cost are medical treatment and ancillary services like prescription drugs. Yes, the claims frequency is declining but the indemnity and medical severity continues to rise – this is from studies conducted by the NCCI. According to their 2006 report – medical cost inflation, increases in utilization of medical services including prescription drugs, are the significant cost drivers within the overall workers' compensation system. Have we done anything to address these costs? – No! The 2003 reforms did not change the way injured workers receive medical treatment. In fact over the last 3 years, Florida has increased the medical reimbursement fee schedule and as of October 1, 2007 – we have also increased the hospital fee schedule. While this was necessary to attract quality providers to treat injured workers it does nothing to address the overall cost drivers built into the system.
The rate reduction for employers who have an injury free work environment is great but for employers who have injured employees the rate reduction will present new challenges. For those employers a rate decrease generally results in a significant premium increase, because their experience modification will be adjusted to reflect the new rate structure.
Another factor that is being glossed over is the fact that most claims take 3 years to develop or trend. Even the best claims models have been wrong – there is no magical crystal ball that will allow us to predict how many times an injured worker seeks medical treatment or fills a prescription. 2007 is the first year to really analyze the impact of the 2003 reforms – the data is still too raw to justify continued rate decreases.
The question we should be asking both the NCCI and our regulators is: how do you justify a rate decrease when medical cost are trending up?
My fear is 24 months from now Florida employers will have a reality check that they will not be prepared for. The reality check – a significant increase in premiums to recoup the imbalance between skyrocketing medical cost and premiums collected.
Margaret Spence, CWC is the President/CEO of Douglas Claims & Risk Consultants, Inc and WorkCompSeminars.com a Boca Raton, based workers' compensation consulting company and author of a new book - From Workers' Comp Claimant to Valued Employee - Injured Employee's can Return to Work.
Subject: RE: NCCI rates - Are the rates sustainable?
After working in the workers' compensation system for more than 20 years, first as an adjuster and now as a consultant – I do not feel that the rate reductions are sustainable for the long haul.
The key factors that influence workers' compensation cost are medical treatment and ancillary services like prescription drugs. Yes, the claims frequency is declining but the indemnity and medical severity continues to rise – this is from studies conducted by the NCCI. According to their 2006 report – medical cost inflation, increases in utilization of medical services including prescription drugs, are the significant cost drivers within the overall workers' compensation system. Have we done anything to address these costs? – No! The 2003 reforms did not change the way injured workers receive medical treatment. In fact over the last 3 years, Florida has increased the medical reimbursement fee schedule and as of October 1, 2007 – we have also increased the hospital fee schedule. While this was necessary to attract quality providers to treat injured workers it does nothing to address the overall cost drivers built into the system.
The rate reduction for employers who have an injury free work environment is great but for employers who have injured employees the rate reduction will present new challenges. For those employers a rate decrease generally results in a significant premium increase, because their experience modification will be adjusted to reflect the new rate structure.
Another factor that is being glossed over is the fact that most claims take 3 years to develop or trend. Even the best claims models have been wrong – there is no magical crystal ball that will allow us to predict how many times an injured worker seeks medical treatment or fills a prescription. 2007 is the first year to really analyze the impact of the 2003 reforms – the data is still too raw to justify continued rate decreases.
The question we should be asking both the NCCI and our regulators is: how do you justify a rate decrease when medical cost are trending up?
My fear is 24 months from now Florida employers will have a reality check that they will not be prepared for. The reality check – a significant increase in premiums to recoup the imbalance between skyrocketing medical cost and premiums collected.
Margaret Spence, CWC is the President/CEO of Douglas Claims & Risk Consultants, Inc and WorkCompSeminars.com a Boca Raton, based workers' compensation consulting company and author of a new book - From Workers' Comp Claimant to Valued Employee - Injured Employee's can Return to Work.