MAY. 01, 2021
- For every year a person ages, the medical cost of an injury increases by 1.1%, and the indemnity cost increases by 3.5%
- In recent years, there has been an uptick in mega claims workers’ compensation claims in excess of $3 million
- Telemedicine is becoming increasingly popular, and recent estimates indicate the market could reach nearly $7 billion in value by the end of 2020
Workers’ compensation is a critical form of insurance coverage that can benefit both employees and businesses alike. Should an employee get injured or become ill as a result of a work-related incident, workers’ compensation insurance reimburses that employee for lost wages and medical expenses related to treatment and rehabilitation. Not only is workers’ compensation insurance required in most states, but it also plays a critical role in connecting injured employees to the care they need to return to work as quickly and safely as possible.
Given its importance, businesses need to be aware of sweeping workers’ compensation trends — including trends related to an aging and inexperienced workforce, comorbidity, telemedicine and mega claims — that have the potential to impact their operations now and into the future. This article will examine some of these trends in detail, arming businesses and the agents who represent them with the information they need to respond effectively to an evolving workers’ compensation market.
Workers’ compensation trends
The average annual growth rate for the 55-years-or-older worker population is projected to be 1.8% in 2020 — three times the rate of growth of the overall labor force. Additionally, this population’s share of the labor force is anticipated to increase from 21.7% in 2014 to nearly 25% in 2024.1
This is notable, as the cost of workers’ compensation claims generally increases as employees age. One study from the American Journal of Industrial Medicine found that, for every year a person ages, the medical cost of an injury increases by 1.1%, and the indemnity cost increases by 3.5%.2 In terms of less severe injuries (e.g., strains), the study also found that claimants ages 65 years or older had a higher indemnity cost than those between the ages of 18 and 24.
Additionally, because health often diminishes with age — particularly from age 55 onward — the impact of seemingly minor injuries can be much more severe for older workers. In general, older workers tend to remain out of work longer after an injury, compounding costs for employers.3
However, it’s also important to note the benefits of an older workforce. These workers are very knowledgeable and can help train and coach less experienced workers. Still, to navigate the potential risks of an aging worker population, it’s important for businesses to place each individual worker in a position that is a good fit for their physical capabilities.
Employers, regardless of the industry they operate in, need to give extra attention to their inexperienced workers when it comes to training and safety oversight. These employees may be youthful employees entering the workforces, mid-life employees who are re-careering, or employees who left the job market but have returned due to social or financial reasons. This is especially true when you consider the results of a recent survey, which found that workers with less than five years of experience accounted for 43% of reported workplace injuries.4
In general, inexperienced workers are more prone to workplace accidents, as they are often employed in riskier industries (e.g., construction or manufacturing). Additionally, these workers typically lack years of safety training, may be willing to take unnecessary risks and face pressure to work too fast in stressful conditions.4 A young worker combined with inexperience, according to the CDC, is associated with high rates of job-related injury.
The workers’ compensation risks associated with inexperienced workers will only get more prevalent as ongoing labor shortages force businesses to relax their hiring practices. More and more, companies are struggling to attract and retain qualified talent. Being ready by knowing the labor market and building an onboarding with hands-on learning applications may minimize the risk.
As a result of ongoing labor shortages for skilled workers, many companies will continue to hire unseasoned staff members who are less familiar with the appropriate safety practices. Employers that fail to invest in solutions for issues related to an inexperienced workforce are likely to see an increase in injuries and workers’ compensation claims.
For employers, various factors may contribute to high workers’ compensation costs. Of these factors, one emerging cost driver relates to comorbidities. In simple terms, comorbidity refers to instances in which a worker is impacted by one or more ongoing medical or psychiatric conditions independent of another condition (e.g., a workplace injury). Common comorbid conditions include:
- Depression and/or anxiety
- Alcohol and/or drug abuse
Comorbid conditions are often long-lasting and may exacerbate the severity of workplace injuries, thus lengthening an employee’s recovery time following an injury. Comorbid conditions may also make it more difficult for employees to diagnose workplace injuries, further elongating return-to-work timelines.
As an example, the median duration of disability is 10 days for a lumbar strain and 26 days for depression with anxiety. Should these conditions occur at the same time, the median duration of disability increases to 153 days.5 Furthermore, the average cost of workers’ compensation claims connected to a comorbid condition is almost twice as much as claims that aren’t.6
This increase in workers’ compensation costs is probably tied to the often complex, long-term nature of claims that involve comorbidities. Individuals who have comorbid conditions typically take longer to heal from an injury, are more prone to develop additional complications due to an injury and are even at an increased risk of being left permanently disabled by an injury.
While the risk for comorbid conditions increases with the growth of the older workforce, these conditions also impact younger workers. One common example among frequent smokers is chronic obstructive pulmonary disease (COPD), which is a chronic inflammatory lung disease that causes obstructed airflow from the lungs.
To combat the potential impact of comorbidities, many employers have found success by implementing wellness initiatives. These initiatives specifically target common comorbidities, such as hypertension, diabetes and obesity, in an effort to ensure employee health.7 Put another way, employers that take the time to address chronic health conditions and improve the overall health of their employees may enjoy the benefits of lower comorbidity rates (e.g., improved workforce health and reduced absenteeism), while simultaneously reducing the potential severity of workers’ compensation claims.
When serious accidents occur, costs related to medical treatment and lost-wage benefits can sometimes reach millions of dollars. In recent years, there has been an uptick in these mega claims — workers’ compensation claims in excess of $3 million.
Often, mega claims stem from critical injuries to a worker’s neck, spine, head, brain or multiple body parts. While the causes of these injuries vary, mega claims are usually attributed to falls, slips, motor vehicle accidents and struck-by incidents. In some instances, however, mega claims develop slowly and may be caused by sprains or strains that simply go untreated.8
According to the National Council on Compensation Insurance, the frequency of mega claims has reached a 12-year high.9 These claims were particularly prevalent in the construction industry, which accounted for 37% of claims between $3 million and $5 million, 42% of claims between $5 million and $10 million, and 46% of claims above $10 million.9
One potential reason for this uptick in mega claims relates to medical advances. Strides in health care have made treatment more effective, and people are living longer, fuller lives after a serious accident.10 While this is a positive trend, it has had an impact on compensatory damages and benefits, particularly when they are paid out over a lifetime. Additionally, U.S. employer health care costs rose 6.5% in 2020 — nearly double the rate of general inflation, further increasing claims costs.11
Mega claims are unpredictable and have long-term implications for workers and their families. Mega claims are expensive but may be preventable in some instances. To combat such claims, it’s critical for employers to ramp up their safety efforts, particularly when it comes to preventing slips, trips, falls and motor vehicle accidents, which account for 70% of mega claims.12
The adoption of nurse triage and telemedicine
It can be a challenge for employers to ensure high-quality yet affordable care for an employee following a work-related injury. That’s where nurse triage and telemedicine can help.
A nurse triage program is usually a 24/7, convenient, cost-effective, care-centered resource to support timely reporting and appropriate treatment for work-related injuries. It uses the skills of a registered nurse to help determine if and what type of medical action is needed for non-life-threatening injuries.
Telemedicine uses technology to facilitate communication between a doctor and patient who are not in the same physical location. Medical evaluations, diagnoses and treatments can all be provided virtually through telemedicine. In the scope of workers’ compensation, examples of telemedicine in action include:
- Video consultations with care providers immediately following an injury, allowing for a virtual evaluation and diagnosis
- Remote measurements of an employee’s vital signs after an injury
- Text message alerts that remind the employee of treatment steps, prescription information or upcoming appointments
Through nurse triage and telemedicine, care can be provided quickly and efficiently, reducing overall medical and workers’ compensation costs in the process. Telemedicine can be especially useful in situations where medical care isn’t easily accessible to employees (e.g., the workplace is located in a remote area, the employee frequently works off-site where the availability of care is unpredictable, or the employee is injured at a time of day when the only option for care is an emergency room, which can be expensive).
Telemedicine is becoming increasingly popular, and recent estimates indicate the market could reach nearly $7 billion in value by the end of 2020.13 Those figures probably don’t even take into account the impact of COVID-19, which greatly accelerated the adoption of telemedicine. In fact, COVID-19 helped transform telemedicine from an alternative medical offering to a necessity.
The pandemic has made people wary about going to brick-and-mortar hospitals for treatment out of fear of getting sick. Furthermore, from a workers’ compensation perspective, many care facilities deemed nonessential (e.g., physical therapy centers) either had limited in-person availability or were closed temporarily to help slow the spread of COVID-19.14 Without these facilities, telemedicine was the only option to ensure continuity of care for injured workers.
This new, widespread use of telemedicine is good news for employers, as the service has many benefits, particularly when it comes to lowering workers’ compensation costs. In addition to providing employees with easy access to medical care following an injury, utilizing telemedicine allows employees to receive medical attention without having to physically travel to a care facility, saving them the trip to the doctor.
Additionally, in the event that an employee’s injury requires specialist care (e.g., a burn specialist), telemedicine can make it easier for an employee to get the treatment they need as quickly as possible — especially if the nearest specialist care facility is miles away. For many employees, telemedicine is an affordable option, as every state in the country offers coverage for it, either through Medicaid or a private insurance provider.
Telemedicine also minimizes the risk of missed appointments or other potential treatment delays. This means that recovering employees will most likely be able to return to work sooner rather than later.
For employers, the benefits of telemedicine become more pronounced the more it’s used. Businesses that regularly use telemedicine will have doctors that are familiar with their operations, whether it be construction or manufacturing. This increases the likelihood that employees get appropriate care and that the incident won’t become recordable on the employer’s Occupational Safety and Health Administration (OSHA) log, further driving down rates. Because the calls are recorded, telemedicine also improves overall transparency and helps ensure that injuries are reported when appropriate.
Other technology trends
For many employers, technology has made the prospect of managing workers’ compensation insurance exposures considerably less daunting. The use of technology — including wearables, drones and artificial intelligence — not only improves employee monitoring, but can also help reduce injury risks and claims:
- Wearables— Wearables are electronic devices that can be comfortably worn on the body. These devices may be equipped with sensors, GPS systems, heart rate monitors and other functionality that can help organizations track specific metrics related to workplace health and safety. For instance, wearables may be equipped with sensors that help employers track behaviors that increase the risk of injury. They can be used to monitor signs of fatigue, alert employees of poor posture or even warn workers of nearby hazards (e.g., excessive noise). Wearables can even alert an employer and employees of a work-related incident (e.g., a fall) or a company emergency, which ensures injured parties receive any help they need in a timely manner.
- Drones — Many firms, particularly those in construction, are leveraging commercial drones to streamline their work and reduce the risk of injury. In addition to taking useful aerial photographs of a site, many drones aid in the inspection of areas that are difficult, time-consuming or unsafe to evaluate.15For instance, drones allow employers to inspect remote sites for hazardous conditions or unstable structures, eliminating the need to put workers in harm’s way. Additionally, aerial photographs can help firms identify hazards, such as power and gas lines, that were missed in initial surveys by engineers or other personnel.16
- Artificial intelligence (AI) — AI is a complex topic, but essentially, it allows computer systems and programs to simulate intelligent behavior. Effectively, AI refers to instances in which machines are programmed to think and learn like a human. While the technology remains in its infancy, AI is already being used in applications such as predictive analytics and autonomous vehicles. From a workers’ compensation perspective, AI could help firms gather worksite data on injuries and accidents, forming a profile of each job task and isolating specific risk factors. This is especially useful for identifying and preventing common claims.One study from the Centers for Disease Control and Prevention found that AI could efficiently categorize claims. In the study, AI determined the cause of 1.2 million claims over the course of just three hours. The study estimated that, if done manually by a human, this same task would take nearly 4.5 years. Simply by speeding up this process, researchers, insurers, brokers and employers can get to the root cause of claims faster, which can help lower costs. Additionally, when claims data is processed quickly, it allows stakeholders to use the most recent data when they examine specific injuries and their causes. Furthermore, today’s AI technology isn’t limited to post-accident data analytics. It can interface with wearables, drones and other monitoring systems to identify at-risk behaviors before an accident occurs.
By investing in these technologies, employers can improve overall safety at their facility, safeguarding their employees from common on-the-job risks. This, in turn, can have a positive impact on worker morale, particularly when employees feel their employers are genuinely concerned for their safety.
The importance of return to work programs
Workplace injuries can be costly and taxing for employers and employees alike. For employers, the well-being of their staff members is a primary concern following an injury, and businesses will do everything in their power to ensure that workers are safe and healthy on the job. However, in the face of an accident, employers also face steep costs related to medical care and lost productivity, both of which can negatively impact their bottom line.
On the employee side, injured workers not only have to deal with the physical pain and stress of an injury, but they may also experience emotional strife due to a loss of independence or their inability to work. As such, having a system in place that helps injured workers return to work benefits both employers and their staff by reducing time away from the job. That’s where return-to-work programs come into play.
Return-to-work programs help injured employees return to normal or modified job duties as quickly and safely as possible, bridging the gap between unemployment and an employee’s ability to successfully re-enter the workplace as soon as possible. Such programs may entail having an employee return to work with shortened hours, lighter workloads or modified tasks as they continue to recover from their injuries.
Return-to-work programs are proven to get injured workers back into the workplace quicker. In fact, according to the RAND Institute for Civil Justice, return-to-work programs can reduce the length of an injured employee’s absence by an average of 3.6 weeks.17
While return-to-work programs are intended to help staff members ease back into the workforce, these programs can also provide the following benefits to employers:
- Increased retention — These programs help retain valued staff and reduce the risk of turnover by allowing employees to return to work as soon as they’re able.2
- Reduced costs — Such programs can also cut workers’ compensation costs by having employees gradually start working again and collect less in disability benefits. These programs may also improve a business’s ability to manage an injury claim and any restrictions. If claim costs are managed, many states offer an experience rating adjustment (ERA) program incentive that may reduce the experience modification rate.3.
- Higher productivity — Having experienced staff return to work, even with reduced hours or workloads, can boost productivity more than hiring replacements.
- Improved morale — Implementing a return-to-work program shows employees that you value their recovery and well-being, fostering a positive working culture.
Many companies fail to implement return-to-work programs because they don’t have the resources or expertise to get started. Return-to-work programs must be organized and implemented efficiently. Organizations that partner with a qualified insurance professional find the most success, as these individuals can provide the resources necessary to make the program successful, including educational articles, forms and policies.
- Workers’ compensation insurance is critical for any organization and can benefit employees and businesses alike when it is managed effectively
- Not only is workers’ compensation required in most states, but it also plays a critical role in connecting injured employees to the care they need to return to work as quickly and safely as possible
- Given the importance, businesses need to be aware of sweeping workers’ compensation trends that have the potential to impact their operations now and into the future