The Top 10 Issues Facing the Workers’ Compensation Industry

For most of the United States, workers’ compensation rates are on the rise. This is driven by high medical costs, the low-interest-rate environment and the general unprofitability of the workers’ compensation industry.

But this is just one of the obstacles facing the workers’ comp industry. Here are the top ten issues facing the industry:

1.The Affordable Health Care Act (AHCA)

There has been much speculation about the impact that the ACHA will have on workers’ comp. Many feel it will increase leakage from group health to workers’ comp, others feel it will have the opposite effect. Though research shows modest changes, it’s still too early to determine the ACHA’s effect on worker’s comp.

2. Not Enough Premium Growth to Cover Costs

The average U.S. salary increases for 2014 held steady at 3% for the past two years in a row, but pay rises still remained at about one percentage point below pre-recession levels. Low to moderate pay wages hurt the workers’ compensation market.

2. Not Enough Premium Growth to Cover Costs

If wages continue to stay low, soon there will not be enough premium growth to cover costs associated with the medical component of the claim dollar.

3.Lack of Technology

The workers’ compensation industry is lagging behind other industries when it comes to the use of technology. Experts believe that the workers’ compensation industry must start using technology and align itself with the rest of the health care system to avoid rising costs.

3.Lack of Technology

 “Even now, today, the usual way is that when you have a claim, you’ll go online and file a report online or you’ll make a phone call. Why couldn’t you take out your smartphone, have a voice activated app that could allow you to report directly into your carrier’s system says Thomas Lynch, founder of a management consulting firm for workers’ comp.

4. Prescription Pill Addiction

A big issue facing the industry is the long-term use of opioids. “There are probably more than 200,000 workers’ comp claimants who have been on a opioids for more than 6 months. The majority of those are addicted. Usually these claimants don’t go back to work and their claims continue, running up employers’ costs, and taxpayers’ costs, quite significantly.

5. The legalization of Marijuana

Even though marijuana has been legalized in 20 states for medical use, it’s still considered an illegal substance under federal law. The problem for the workers’ comp industry is that there’s no proof that medical marijuana is effective. This is a huge issue and what the industry is buzzing about, even though there has been no claim activity to date

6. Manufacturing jobs

Thanks to falling domestic natural gas prices, global manufacturing jobs are on the rise in the U.S. As new workers enter the manufacturing industry, there is a higher chance of work-related injuries. Studies confirm that new workers are more subject to injury than experienced workers.

7. Safety in the Workplace

While workplace safety has improved over the years, there’re still areas in certain industries where accidents happen because people are trying to cut corners. OSHA is focusing on working with the Justice Department and people are being charged for doing things that are willfully unsafe in the workplace – where people are getting killed.

8. The Rise in Mobile Workforce

The mobile workforce has risen to 80% since 2005. This presents a new issue to workers’ compensation insurers. “If you consider that in 2013, 26% of all automobile crashes in the U.S. involved the use of a cellphone that brings home the idea that if you’re working in a building, the employer can control a lot of things. But once you leave that building and get into your own little car or your employer’s car and you drive somewhere, that arm of control isn’t quite there like it used to be,” says Lynch.

9. The Expiration of Terrorism Risk Insurance

The Terrorism Risk Insurance Program Reauthorization Act will expire at the end of this year. This this is essential to the workers’ comp industry because, they cannot tell somebody their injury isn’t covered because it resulted from a terrorist attack.

10. Workforce Demographics

Experts see the younger generation as a growing concern. “Their labor force participation rates are down. Many of them are not even looking for work. Many do not have job skills or can’t pass a criminal background check or a drug test.” says chief economist Harry Shuford.