Introduction
Overall workers compensation (WC) results for 2021 were strong and consistent with the recent past.1 The WC industry has remained resilient as it faces challenges, including the COVID-19 pandemic and various economic-related influences, such as inflation and the Great Reshuffle. These factors have impacted both the labor force and the WC system at large.
NCCI analyzes factors impacting the WC industry to provide insights to stakeholders. Topics that are top concerns for the industry2 include:
- Rate adequacy
- COVID-19-related impacts
- The shifting workforce and workplace
- Medical costs
With the dynamics of the current environment, the demand for insights has never been greater and NCCI is responding to that demand. This article highlights actuarial and economic insights that NCCI has provided in 2022 and shares top-of-mind considerations heading into the second half of the year.
Rate Adequacy
Despite an ever-changing landscape, the WC industry has proven to be resilient, with strong results in 2021. Eight consecutive years of underwriting profitability and a calendar year combined ratio of 87% indicate this. While COVID-19 may have contributed to anomalies in recent claim frequency and severity results, data suggests continued long-term frequency declines and stable changes in severity. Additionally, WC reserves remain robust.3
NCCI continually evaluates its methodologies, including how COVID-19 may impact various aspects of ratemaking, including the rate filing’s experience period, premium and loss development factors, and individual state dynamics.
For example, NCCI took a fresh look at the catastrophe provision in the wake of the pandemic. This led to an update in the definition of catastrophes and a greater understanding of the potential impact of pandemics on the WC system.4
NCCI regularly updates resources available to stakeholders, such as Frequency and Severity Results by State and Underwriting Results by State. This year NCCI added a new product, Claim and Cost Diagnostic packages, which includes various summaries of state-specific, aggregate ratemaking data and that requires authentication. Another resource launched this year is the
NCCI Academy, which includes courses on several topics, including ratemaking.
Resources related to rate adequacy on
ncci.com include:
COVID-19
COVID-19 presented new challenges for the WC industry and created a need for countrywide information to better understand the pandemic’s impact on the WC system. NCCI collaborated with nine independent bureaus to analyze COVID-19-related claim and loss activity. NCCI shared these insights in a report and a webinar and highlighted them in a video during the
State of the Line presentation at its
Annual Insights Symposium 2022. The COVID-19 analysis relied on combined data from 45 jurisdictions, representing approximately $630 million in COVID-19 incurred loss dollars associated with approximately 80,000 COVID-19 claims. The estimated average cost per COVID-19 claim was about $7,800.5
Relative to 2020, the number of COVID-19 claims declined in 2021. Most COVID-19 claims continued to be relatively low cost, with more than two-thirds having incurred losses of less than $1,500. Additionally, the pandemic continues to impact healthcare workers the most.6
COVID-19 resources on
ncci.com include:
The Changing Workforce and Workplace
Both the workforce and workplace are changing rapidly. The COVID-19 pandemic and the consequent Great Reshuffle in labor markets have produced wide-ranging effects, including increases in short-tenured workers and remote work.
Additionally, the labor force is experiencing shifts in industry mix. Job losses affected low-wage workers the hardest. Nationally, the Leisure and Hospitality sector lost more jobs during the past two years than any other major sector.
Wage inflation has modestly impacted WC results. This is because payroll, used as the WC exposure base, is inflation-sensitive and helps to keep premiums and benefits in relative balance.7
These changes in the workforce and workplace will likely have implications on injury frequency. For example, more remote work is expected to put downward pressure on claim frequency, while a reduction in the average tenure of workers is expected to put upward pressure on frequency.
Resources related to this subject on
ncci.com include:
Medical Costs
Another issue that is top of mind for NCCI is medical costs. Updates to Medicare reimbursement rates may impact WC medical costs. In contrast to 2021, revisions to the Medicare physician fee schedule in 2022 were relatively minor. Furthermore, adjustments to the facility fee schedules were consistent with recent history.8
Return-to-work programs are an important component in helping an injured employee recover. They support achieving a successful post-injury outcome by developing a strategic plan before an accident occurs and establishing connections between injured employees and their workplaces. In addition, they can help reduce costs for both employers and the overall WC system.9
And, while general inflation is up, workers compensation medical cost trends have been mild. In the near future, medical trends are expected to remain relatively moderate, reflecting changes in utilization patterns.10
To better understand trends, detailed medical data is available by state in the Medical Indicators & Trends dashboard, which provides quarterly updates on various key metrics. The most recent update added active claim volume metrics to allow users to observe state-specific claim volume results.
Medical-cost-related resources on
ncci.com include:
Upcoming
NCCI is actively reviewing the following topics and anticipates providing additional information in the upcoming months:
- NCCI’s ratemaking methodology
- Long COVID-19
- The Great Reshuffle
- Injury frequency and severity
- Wage inflation
- Medical costs
This article is provided solely as a reference tool to be used for informational purposes only. The information in this article shall not be construed or interpreted as providing legal or any other advice. Use of this article for any purpose other than as set forth herein is strictly prohibited.
