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Paduda: Opioids and Work Comp Premiums

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Two seemingly unrelated papers hit the inbox yesterday: the California Workers’ Compensation Institute's just-completed analysis of opioid usage in California, and the National Council on Compensation Insurance's report on 2019 workers’ comp financials.

Joe Paduda

Joe Paduda

The key takeaways from NCCI’s report include:

  • Premiums are expected to drop 10% in 2019, driven by rate/loss cost filings. In other words, losses are declining, which leads to lower insurance costs.
  • This marks the sixth consecutive year of decreased premium levels.
  • Not coincidentally, 2019 is the sixth consecutive year of underwriting profitability.

So, even though premiums are dropping like a rock, insurer profits are better than they’ve ever been.

Why?

Well, declines in frequency are certainly a big contributor. Reduced worker benefits are likely a factor as well — and a big problem we’ll address in a later post.

If anything, investment profits are a drag on profitability (NCCI reports 2018 investment gains averaged 9.2%).

Which brings us to CWCI’s report, “The Impact of Declining Opioid Use on Lost-Time Claim Development & Outcomes in California Workers’ Compensation” (disclosure: I provided input as a peer reviewer for the final report).

Key takeaways:

  • ... “from 2008 to 2017, chronic opioid use … declined from 13% to 3% of all lost-time claims (a relative decline of 77%).”
  • ... the strength of the opioids dispensed within the first 12 months of treatment, measured in cumulative morphine milligram equivalents, declined 59% for chronic opioid use claims.

Later, I'll discuss the connection between opioid reductions and premium levels — and what it means for the industry and you.

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.

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