It’s time once again to see how I did on my 2021 predictions for workers’ comp.

Joe Paduda

Today we’ll dive into the first five and finish up with the last five tomorrow.

Prediction: Total premiums will stay low

"As employment, payroll and injury rates all remain under pressure, total premiums will remain significantly lower than we’d expect in a non-COVID, non-recession environment. We are also on the tail end of the opioid cost bubble, with actuarial projections still overcompensating for what was rampant overuse of opioids.

"Unemployment will persist at least thru the first half of 2021 — and likely the first three quarters —helping to keep premiums lower. There are some predictions that employment will ramp up towards the end of the year; let’s hope so. Implications abound."

Verdict: True. 

Wages did increase significantly (good news indeed for hospitality, leisure, construction, logistics, health care and retail workers) but premiums and rates mostly dropped. Florida, California and other states saw decreases, continuing a decade-long decline in rates and premiums.

Note: Actuary Mark Priven and I both believe rates are still too high.

Prediction: Facility costs will spike

"Hospitals are in dire financial straits, with 2021 bringing no respite from the cash crunch experienced by the entire industry when people avoided facilities, put off elective procedures or weren’t able to get care due to facility restrictions.

"As desperate financial managers look high and low for any and all revenue sources, you can bet your house they’ll be focused on workers’ comp. Payers have:

• Few effective price or utilization controls.
• An often lackadaisical approach to cost management.
• Bill review programs and processes hopelessly outclassed by sophisticated revenue maximization technology.
• Management that doesn’t know that it doesn’t know.

"Thus, payers are going to see facility costs, already the largest part of medical spend, jump."

Verdict: It's too early to tell. We won’t know until we get 2021 data, which will be sometime in mid-Q2 for most states. I’ll go out on a limb and double down on my prediction: Facility costs as a percentage of total spend increased significantly in 2021.

Prediction: More consolidation

"Seems I’ve been forecasting increased industry consolidation for years. It’s not a prediction but more acknowledgment of reality. Workers’ comp is a declining industry with shrinking claim counts and flat expenses, and that isn’t going to change.

"COVID has accelerated the process dramatically. With claim counts down 15%-20%, there are fewer claims to adjust, fewer services to medically manage, fewer bills to pay, fewer dollars to compete for.

"Because there will be fewer revenue and premium dollars next year than this, more consolidation is inevitable.

"I expect this to be most pronounced among medical management firms and third-party administrators, and the big to get bigger. Genex/Mitchell/Coventry, Sedgwick, Concentra are all likely consolidators. Not sure about Paradigm."

Verdict: True.

Paradigm has bought HomeCareConnect; Enlyte (Mitchell/Genex/Coventry) acquired QualCare (and reports indicate Enlyte is for sale); and Sedgwick is buying up tangential businesses (JND Legal Administration, Temporary Accommodations, Managed Care Advisors and several other firms).

Prediction: Drugs will reemerge as a significant problem

"After several years of declines in opioid prescription volumes, it looks like things headed in the wrong direction last year.

"Prior auth requirements were relaxed, refills extended and states loosened restrictions on prescribing. Add to that patients weren’t able to get to their PT visits and surgeries were postponed. The result: I expect we’ll see drug costs in 2020 flattened out, and opioid usage actually increased (we will know a lot more in mid-late March when I complete my survey of drug management in comp).

"That was last year. As COVID is returning with a vengeance, expect to see continued increases in 2021."

Verdict: False.

Drug costs continued to drop in 2020 and reports from multiple industry contacts indicate that it continued into 2021.

Prediction: COVID claims aren’t going to be costly

"Despite all the caterwauling we heard back in 2020, COVID costs have been minimal. That will not change. Yes, there will be long-haulers, but those will be very few indeed. Yes, there will be more claims, but most will cost just a few thousand dollars."

Verdict: True.

All credible research and reporting indicate COVID claim costs have been pretty low. Not surprising to those who actually have a grasp of health care cost drivers and treatment expenses.

The net

Three were true, one was false and one is pending.

What does this mean for me?

I’ve got to relook at my thinking on drugs and drug costs. I know as much about drugs in workers' comp as anyone, and I clearly got this one wrong.  

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.