Insight, analysis & opinion from Joe Paduda


Pandemic’s impact on workers’ comp financials has been…

A new report ($25 to download) from the National Foundation for Unemployment Compensation and Workers’ Compensation sheds light on the pandemic’s impact on work comp financials.

MCM readers will not be surprised that the impact has been pretty positive – Mark Priven and I predicted this back in September of 2020.

Several key takeaways.

  1.  Medical costs plummeted  – by over $3.5 billion – almost 12%, likely due to lower employment resulting in fewer claims, coupled with the relatively lower cost of COVID-related claims (much more on this here).
  2. Total benefit payments dropped by almost $3.9 billion…
  3. Over the last decade, the national average benefit cost per employee dropped by 10.2% – BEFORE adjusting for inflation. After adjusting for cumulative inflation of 17%, the real decline in benefit cost per employee was 27.3%. 

What does this mean for you?

Workers’ comp financials are pretty strong…for insurers and employers.

Mark Priven is a really insightful actuary. 



The state of work comp pharmacy

is pretty good.

Here are the very preliminary takeaways from the latest Survey of Prescription Drug Management in Workers’ far 21 phone interviews completed and several more still to go.

[if you’re new to MCM, we’ve done an annual Survey since 2004, past public reports are here (respondents get a much more detailed version)]

  • Drug spend continues to decline, although at first blush it looks like the drop is less than we’ve seen in recent years
  • Opioid spend is also continuing its downward trend
  • Generic efficiency – the percentage of scripts that could be filled with generics that are filled with generics – is just shy of 100%
  • Payers are still struggling with legacy opioid patients with respondents identifying patient resistance (mostly fear driven), recalcitrant prescribers, attorneys and the lack of regulatory/legislative support as key obstacles
  • Physician dispensing is once again rearing its ugly/profiteering/self-serving/taxpayer-abusing head.
  • Payers want more transparency while fully understanding PBMs need to make a profit.
  • Topicals seem to be the latest in the scam-a-rama that is the physician dispensing industry.
  • Respondents are generally very open to non-pharmaceutical approaches to pain management – much more on this in a future post.

What does this mean for you?

PBMs and payers  – well done. Your work has saved countless lives while helping countless others regain control of theirs.



Work comp and P&C – diabolical opposites

The property and casualty insurance industry is looking at increasing underwriting losses in 2022...while workers’ comp (which represents perhaps 1/10 of total P&C premiums) continues to be hugely profitable.

Which begs the question..will multi-line insurers try to use work comp to offset lower profits in other lines?

According to the Insurance Information Institute;

The (P&C) industry’s combined ratio — a measure of underwriting profitability in which a number below 100 represents a profit and one above 100 represents a loss – is forecast to be 105.6, a worsening of 6.1 points from 99.5 in 2021. [emphasis added]

Amidst troubling trends from other P&C lines – personal and commercial auto, property, multi-peril and homeowners, workers comp stands out…this from Milliman’s Jason Kurtz:

“The workers compensation line continues to stand alone, with its multi-year run of strong underwriting profitability forecast to continue for 2022 and into 2023-2024.”

Premium rates are increasing for pretty much every P&C insurance sector – except workers’ comp – where rates in almost all states are headed in the other direction.

Actuaries at III and Millman project an overall P&C combined ratio of 105.6 for 2022 – while work comp’s looking a combined of 87.2…almost 20 points better (yeah I know those are different years, but not that different).

courtesy NCCI

What does this mean for you?

While multi-line insurers may try to jack up work comp rates to offset losses in other lines, the soft work comp market makes it extremely unlikely that will work…employers will find plenty of carriers very willing to write their business.


Happy Monday – for my American readers, hope your holiday was most excellent.

here’s good stuff you might have missed…

WCRI is hosting a no-cost webinar on Behavioral Health in Workers’ Compensation Thursday Dec 15 at 2 pm eastern. The webinar will discus their recent primer on BH in WC (available here for download)

The good folks at NCCI published their latest take on work comp industry financials...suffice it to say the party continues…although it may be getting close to ending.

courtesy NCCI

The final countrywide analysis of 2021 results shows:

      • WC Calendar Year 2021 private carrier net written premium (NWP) increased from 2020 by 0.5% to $38.2 billion
      • The WC Calendar Year 2021 private carrier combined ratio was 87.2%, and the operating gain was 23.7%

Meanwhile early data makes 2022 look even better; direct written premiums were up almost 10% over 2021, while the loss ratio for the first two quarters of 2022 is even lower (!!!) then 2021 (no figures cited).

Unpacking this –

  • If 2022 numbers hold up 2022 will be the tenth year in a row profits exceeded the historical average…
  • And the sixth consecutive year the operating margin was above 20%
  • Oh, and this all happened while rates decreased every year since 2014

My take…insurers are still enormously profitable because rate declines aren’t accurately accounting for the opioid hangover.

[A CWCI report addressed this issue; my informed opinion is claims without opioids are much less costly, therefore the continued drop in opioid prescriptions is driving lower claims costs…actuaries develop rates based on historical data – which is not keeping up with what’s actually happening.]

Former Labor Secretary Robert Reich believes organizations aren’t valuing workers correctly…Reich notes workers are considered “costs” instead of assets, a mis-characterization that leads to all manner of bad executive decisions.

Key line –

“increasingly, corporations aren’t just production systems. They’re systems for directing the know-howknow-whatknow-where, and know-why of the people who work within them.”

Hat tip to a very good friend for the head’s up.

What does this mean for you?

  1. It’s great to see behavioral health get more exposure – it is a key driver of recovery.

  2. Actuaries use historical data to project the future; execs should factor in what’s really happening to understand where things are heading.


Work comp pharmacy…

has changed dramatically in the last 18 years.

Costs are much lower, brand drug usage has fallen off a cliff, PBMs are by far the dominant delivery channel, and there aren’t any real problems these days/

At least that’s what I’ve gleaned from doing 15 surveys of work comp execs on their perspectives and quantitative measures related to pharmacy.

Way back when:

Expect we’ll have the latest version of our annual survey in late January; in the meantime (and VERY preliminary:

  • generic fill rates are around 90%
  • generic efficiency is north of 98%
  • inflation trends appear to be negative – for about the 7th straight year.

Yet payers are still concerned about drugs, mostly because they are seen as major contributors to disability duration and recovery.

What does this mean for you?

Its not just the cost – it’s the knock-on effects. 


Musk, Michael Jordan, Twitter, and private equity

Stick with me here…it will be worth it.

Yesterday’s post about private equity’s investments in worker’s comp services generated a flurry of private emails and a few comments – most echoing the “service is king” mantra.

Today’s news that Twitter is near collapse adds depth to the service discussion – and the ultimate cost of hubris.

Elon Musk is both one of the most transformational leaders and one of the biggest (insert anatomical reference here) of the last century. He is in large part responsible for shifting personal transportation away from fossil-fuel driven cars, an incredibly difficult and critically important transition.

If your boss shows up wearing this, call your favorite recruiter.

He also has a severe case form of “Michael Jordan Syndrome” or MJS. Jordan was a transformational basketball player, perhaps the greatest ever. His skills, ability, drive and impact on the game are unparalleled.

Then he tried baseball, because, you know, if you’re great, you’re…great.

Well, no…Jordan was not good at baseball. He had a hole in his swing you could drive a bus through, made a ton of mistakes on the base paths and in the outfield, and generally was a not very good minor league player.

After a couple seasons sitting in a bus driving around the South playing in front of a few hundred fans every night, Jordan recognized that being awesomely great at one thing did not mean you would be great at other things.

Musk’s amazingly stupid, shortsighted, arrogant and destructive decisions in the very few days he’s owned Twitter have been breathtakingly bad and may well cost him his entire $44 billion investment. And has helped tank Tesla stock in the process; Tesla has lost $700 billion in value in less than a year.

Besides electrifying transportation, bringing reliable internet to remote areas, and launching rockets into space, Musk can lay claim to another singular achievement – Never in the course of humanity has so much “value” been destroyed so quickly. So he’s got that going for him.

His catastrophically bad leadership of a social media giant also makes Jordan’s aborted foray into professional baseball look like an overwhelming success – and Musk like the best example ever of Michael Jordan Syndrome (also known as hubris).

Rather than walk through all of Musk’s more notably destructive decisions, all of which I am quite sure made perfect sense to him at the time, because similar decisions “worked” at Tesla, let’s just focus on one – treating people like &^%$(@#$.

Musk seemed to think he could force Twitter employees to work like galley slaves while insulting them.
Hundreds have given Musk the single-finger salute, leading to major service issues.

This from
“I know of six critical systems (like ‘serving tweets’ levels of critical) which no longer have any engineers,” a former employee said. “There is no longer even a skeleton crew manning the system. It will continue to coast until it runs into something, and then it will stop.”

Musk slashed staff, trying to force them to return to the office within 12 hours (helloooo…parents of small kids!!), and demanding obscenely brutal work schedules, all to create bigger profits.

Instead, he’s on the verge of turning $44 billion into a gigantic mountain of ash.

There’s a clear lesson here – employees create “value” – management doesn’t.

Employees do this by showing up every day committed to doing good work, by using their brains and muscle to produce goods and services, by thinking hard about how to do things better, faster, and more effectively.

Beating them over the head, firing half of them, and telling survivors you don’t give a rat’s rear end about them is monumentally dumb.

Of course, Musk’s arrogant stupidity represents the worst-case of employee under-valuing. BUT, just because PE firms don’t push things this far does NOT mean many aren’t making the same mistakes, mistakes that will take longer to play out in the form of unhappy customers, lower revenues, and lost business.

But play out they have – and will.

What does this mean for you?

Execs serve management.

Management serves the workers.

Workers are the ones that actually serve customers. 


Private equity and work comp services…lessons learned

After 15 years working with private equity firms looking to invest in workers’ comp service companies, I’ve learned a couple of things.

  • Work comp is attractive primarily because it is viewed (accurately) as horribly inefficient, with admin expenses that are many multiples of those in group health, medicare, medicaid, and Exchange healthplans. PE firms LOVE inefficient industries…think old-school logistics replaced by just-in-time supply chain management; small physician practices snapped up by ever-growing health systems; and now rental housing.
    BUT…work comp is inherently inefficient because:

    • when you’ve seen one state you’ve seen one state. If you want to be a big player, you need coverage in South Dakota and Vermont as well as New York and California. So, you have to comply with constantly evolving regulations, reporting requirements, reimbursement standards, certifications and licensing.
    • each large employer has its own list of wants needs and must haves, which make “standardization” inherently impossible.
    • it is a shrinking industry, which means an investment today has to be evaluated against the reality that one out of twelve claims will not exist in three years.
  • High-touch service is absolutely mandatory. This flies in the face of “improving efficiency”… you can’t have people on the phone if you want to cut admin expenses. What many (but not all) PE execs don’t understand is adjusters and case managers and risk managers and injured workers and providers need quick accurate answers.
    Think calling your health plan, cellular carrier, tech service and on and on…an immensely frustrating experience certain to make you cranky for the rest of the day.
    Enough  adjusters complaining about endless automated responses (in order to best serve you I’ll have to ask a few questions, click one if you are in Pennsylvania, two if you’re in New York…cue cell phone being thrown at the wall) will get the managed care execs’ attention, and its off to RFP!
  • Firms that push their companies to create “value” defined as more revenue will ultimately destroy the value of the company.
    PE execs (again not all) define “value” purely in financial terms – how much EBITDA/free cash flow does a company generate – because the more earnings, the higher the price.
    This is nonsense. 
    “Value” is ultimately determined by your customers. Sure the quarterly numbers will look rosy for a quarter or two, but all those cost reductions, layoffs, and other “efficiency” measures will bite you in the butt when customers leave.
  • Decisions to sell/not sell companies are often driven by PE execs’ personal financial and “reputational” concerns and not by what’s smart and best for PE investors.
    Think Apax’ investment in One Call; after a couple of years pretty much everyone in the industry knew it wasn’t going to be a success, yet One Call’s board refused to recognize the obvious anti…to no one’s surprise, they had to write down their entire $700 million investment.
    Individual PE execs with decision power don’t want to admit their mistakes – or don’t want to sell for less than X times what they paid for the company. In the latter case, PE execs typically don’t get a big bonus – or any bonus at all – unless the company sells for 2.5 or more times what they paid.
    Meanwhile company execs and staff with stock options – who would get a nice payday if the company sells for less than that 2.5 number – get frustrated/angry/demotivated with obvious impact on their enthusiasm and work quality.

What does this mean for you?

Understanding what really creates “value” is critical – happy customers and happy staff. If you’re buying or own a company, focus on those two things and not on some BS number. 


The state of workers’ comp

The National Academy of Social Insurance has just released its latest report on workers’ compensation. This is required reading for any serious student of work comp; it’s stuffed with insights just waiting for you.

Here’s a few.

Note – COVID’s impact on 2020 results are significant especially re medical costs and the relation of medical to other work comp financial metrics.

  • From 2016 – 2020, medical benefits paid (per $100 of covered wages) dropped by almost 25%.
  • This followed a 17 point drop over the previous five years …
    • this massive decline is (likely) due primarily to lower claim frequency
  • Medical costs…
    • totaled $27.7 billion in 2020, $2.5 billion less than 2019
    • accounted for 53% of benefits in 2020, down from 56% in 2019
    • a reminder to those who predicted massive increases in medical costs due to COVID; a much deeper understanding of healthcare delivery, cost drivers, and sources of cost data would be quite helpful.
  • CWCI’s analysis indicated the Golden State accounted for a fifth of all benefits paid (Bulletin available at no cost to CWCI members)
  • Overall, employers’ work comp payroll-adjusted costs dropped almost 9 percent from 2019 to 2020

The report can be downloaded for free.


Here’s a quick-albeit-still-somewhat-up-in-in-the-air take on how the midterms may/will impact healthcare. Much depends on final results in several key elections (Senate in GA, NV, :

Medicare and Medicaid

Drug prices – Biden’s Inflation Reduction Act will reduce seniors’ drug prices; if the GOP takes control of the House (which appears likely) it may try to hold up/block/hinder Medicare drug price negotiation through oversight on how HHS implements the new policy.

If Dems hold onto the House (which is highly doubtful),  we can expect legislation that would expand Medicare and Medicaid.

South Dakotans voted to expand Medicaid; this is a big win for rural hospitals and the uninsured – 40,000+ South Dakotans will now have access to health care. For South Dakotans, the impact – healthier people and financially healthier hospitals = healthier economy.

Abortion rights

Ballot measures in 5 states addressed abortion rights with voters in California, Vermont, Michigan, and Kentucky (!) passing measures to protect women’s right to choose; as of early this morning no word on Montana.  Note there are nuances specific to each state; CA MI and VT’s votes enshrined a right to an abortion in their respective state Constitutions while KY defeated a measure that would have explicitly stated nothing in the state’s Constitution creates a right to abortion.

impact – while the votes in CA and VT were no surprise, MI was less certain and KY’s result is notable indeed; Kentucky joins Kansas as another relatively red state whose voters protected abortion rights.

These wins may well drive anti-abortion candidates and politicians to re-think their stance or risk voter backlash.

Investigations, oversight, and the like

If Republicans gain control in the House (likely) and/or Senate (maybe/maybe not) expect a raft of investigations into all manner of Medicare, Medicaid, COVID response, drug pricing and other issues real and imagined.

The biggest thing no one is talking about

Voters in Arizona overwhelmingly backed a measure intended to protect people from medical debt collections and collectors. 

From the Arizona Mirror:

Prop. 209 would reduce the maximum interest rates that could be collected from 10% to 3% annually. Currently, up to 25% of wages can be garnished by creditors, but Prop. 209 would limit that to just 10%. Courts would also be allowed to reduce the amounts being garnished in cases of extreme economic hardship, a power they don’t currently have.

I fully expect activists in other states to jump on this; it is hugely popular and desperately needed.

What does this mean for you?

Watch the updated results to see what happens with the House and Senate. That will drive what really happens…



The core issue – the anti-Americans.

Those who continue to deny the results of the 2020 elections are anti-American; they seek to reject any result they don’t like. That is incredibly dangerous and a threat to our Republic.

Across more than 60 cases in 12 states, final rulings in every court case – including every one overseen by Trump-appointed judges – rejected allegations of fraud and confirmed the results of the election. 

If you care about democracy, you need to know which candidates are election deniers – or more accurately anti-American.

here’s just a few…

To find election deniers running for office in your state; just click on this link, then your state to identify those who refuse to accept the will of the people.

Need more info?

Trump’s own Presidential Advisory Commission on Election Integrity disbanded having discovered nothing.

The Heritage Foundation Election Fraud Database has compiled every instance of any kind of voter fraud it could find since 1982. It contains 1,296 incidents, a minuscule percentage of the votes cast.

study of results in three states where all voters are mailed actual ballots, a practice some allege to be rife with fraud, found just 372 possible cases of illegal voting of 14.6 million cast in the 2016 and 2018 general elections — 0.0025 percent.

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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