Insight, analysis & opinion from Joe Paduda


The long haul

This isn’t going to be “over” for at least a year. Probably longer. Long enough that all of us must focus not on preparing for the end of the pandemic, but adapting to it and accepting that tomorrow will look just like today.

Allow me to make the case.

The only thing that will bring back “normal” life is “vaccinating” all of us. Period. That will happen – either by herd immunity (at least 2/3rds of us get infected and survive, so the virus can’t find enough carriers to keep the pandemic going) or by development, production, and use of a vaccine.

But…”Immunity” isn’t binary – think of it as a continuum rather than an on/off switch. Many vaccines reduce the severity of an illness rather than preventing it entirely. This means that COVID19 may well be with us for a long time, although its impact will be reduced.

Here are the issues. (caveat – there’s much we don’t know for certain, the following is culled from the most credible sources I could locate)

Stopping COVID19’s spread requires enough of us to have immunity that the virus can’t find hosts.  That immunity can come from antibodies created by our immune system reacting to an infection, or a vaccine. Antibodies are blood proteins produced in response to and counteracting a specific antigen – in this case COVID19.

Herd immunity

For myriad reasons, few countries have been able to stop COVID19’s spread. (New Zealand is an outlier, Taiwan and Vietnam have had notable success).  At the other end of the spectrum are Russia, the US and Brazil where the disease continues to spread rapidly.

There’s some research that suggests people who have had relatively mild cases of COVID19 don’t produce a lot of antibodies, thus may be vulnerable to future infections. Other research suggests antibodies may be pretty effective.

Another study found COVID19 patients’ antibody levels remained stable two months post-infection (that was when they were tested, it is possible levels remain high over a longer period).

Eventually, herd immunity will reduce the ability of COVID19 to spread, and likely reduce the severity of the illness – or prevent it entirely – among those who’ve been previously infected


There’s been much wildly optimistic and wholly unrealistic happy talk about a vaccine this fall. Is this possible?

Sure – about as possible that my beloved Chicago White Sox go undefeated and win the World Series.

  • The average development time for vaccines is about ten years. Lots of vaccines take even longer.
  • The fastest vaccine development  – for mumps – took four years (but that was way back in 1967, and we’ve got a lot smarter since then and technology is a gazillion times better) But, humans are still humans, and biology moves at its own pace, so there are inherent limits in the testing process
  • Despite 17 years of effort, we’ve never successfully developed a vaccine for a coronavirus.
  • If we don’t have a vaccine by this time next year, it won’t make much difference as COVID19’s spread will push us closer to herd immunity.
  • Once a vaccine is developed, hundreds of millions of doses and needles must be manufactured and an entire delivery infrastructure implemented. Good news here, the Feds are investing hundreds of millions in manufacturing potential vaccines, the idea being they will be ready to go IF they are found to be effective and safe.

If you want to track vaccine development, this link is pretty useful.


One of my favorite movie quotes is from Shawshank Redemption;  just after he learns his release from prison is not going to happen, Andy tells Red “I guess it comes down to a simple choice…get busy living, or get busy dying.”

Some will rail against the unfairness of it all, accuse others of all manner of sins, pine for the “old days”, and otherwise waste precious time and energy uselessly bemoaning our fate.

Which will keep them imprisoned behind walls of their own making. Others will accept the new reality, not resigning themselves to it but rather adapting, creating, building and eventually thriving.



COVID’s impact – Work comp payers and service companies weigh in

If you really want to know what COVID is doing to workers’ comp, you have to hear from those on the front lines.

35 workers’ comp insurers, TPAs, state funds, self-administered employers, and service companies gave me their views on the impact of COVID19 and employment on their businesses, claims counts, costs – and how they are adapting to a very different climate.Quick takeaways:

  • COVID claim costs are pretty low, with just a handful of claims exceeding a few hundred thousand dollars.
  • Shutdowns/Lockdowns = drop in payroll + business closures -> premium decreases, delayed RTW 
  • Respondents see total claim counts dropping 20% for 2020
  • Tele-everything is growing rapidly, but still has a long way to go
  • Many filed claims are not accepted because:
    • patient does not have a positive COVID test
    • patient is asymptomatic
    • Employers tend to give workers exposed to COVID19 two weeks of paid leave; they become WC claims if/when medical care is needed to treat COVID
  • Presumption is a concern, but less so than it was a couple months ago

Winners and losers

Service companies with the following attributes are generally doing much better than their counterparts:

  • no or low debt service cost and
  • on-shored business functions that
  • provide services typically used later in the claim’s life e.g. pharmacy.

Here are more details – and your free copy of the summary report is here.

A comprehensive version of the report including respondents’ detailed statements (respondents are not identified) and the accompanying raw data is available for purchase; contact jpadudaAThealthstrategyassocDOTcom. (substitute symbols for capitalized letters)

What does this mean for you?

For workers’ comp, the economic fallout from COVID is far more significant than COVID itself.


Masks and IWP gets hammered.

So, who knew masks could be so dangerous?

In our continued effort to keep us all honest about “science” and “research”, I have to weigh in on a recent piece wherein some folks seem to be concerned about mask wearing’s impact on a person’s health. The Risk & Insurance piece noted:

A study (italics added) conducted by PN Medical, and as reported in The New York Times, found that extended mask wearing could lead to improper breathing, which could result in possible negative side effects such as anxiety, headaches, increased heart rate, dizziness and fatigue.

This wasn’t a “study”; it was a “small investigative trial”. Details are here.

The person who described it is not a clinician.

There’s no information on how many subjects were involved, if there were any controls, the demographics of the test subjects, the methodology used, how the multi-site “trial” was conducted to ensure consistency, weather conditions, temperature and humidity, time of day, and the many other factors that could influence a person’s post-mask behavior and physiology.

The story goes on to describe all the bad stuff that “might” happen, all of which are assumptions based on assumptions based on what is most definitely not credible research.

Further, the story is based on another reporter’s failure to accurately describe the “small investigative trial;” a New York Times reporter at that.

It is entirely possible that masks cause some issues…but they’ve been in use for decades and this is the first report I’ve seen that there is any concern.

We need to do better, folks.

IWP gets hammered by Massachusetts’ Attorney General

Finally, IWP Pharmacy, long the bane of many adjusters, agreed to a Consent Decree that requires major changes at the Massachusetts-based mail order pharmacy. Mass AG Maura Healey announced that IWP will pay an $11 million settlement and make major changes to resolve:

allegations that it failed to implement adequate safeguards against unlawful and dangerous dispensing, resulting in the shipment of thousands of potentially illegitimate controlled substance prescriptions across the country.

In perhaps the most stunning example of spin I’ve yet seen, IWP’s statement doesn’t even mention the settlement… in a post entitled “IWP Expands Compliance Program” the multiple changes to staffing, operations, compliance, and sales were characterized as:

steps…developed in collaboration with the Attorney General of Massachusetts, as part of a recent review they undertook of past business practices.

The AG’s statement read in part:

“Injured Workers Pharmacy created an illegal operation that put dispensing speed and volume over patient and public safety…They dispensed thousands of prescriptions for dangerous drugs, including opioids like fentanyl, with a shocking lack of regard for whether those prescriptions were legitimate.”

What does this mean for you?

Question reporting and go to the primary source.

Check your files for IWP patients.


COVID catch-up

Apologies for the dearth of posts; vacation and slammed with client work.

Went bike-packing last week in the wilds of Pennsylvania and Maryland – had a great time off the grid, camping out, solving world problems around the fire at night.

Alas the world just created more…

Here’s a quick update on what I missed.

the great re-opening…or, what scares the bejesus out of me.

About 25 million people that can’t work remotely are at high risk if they contract COVID19. So, they a) have to go to work, b) many take public transportation, and c) are at high risk due to pre-ex conditions and poor health. This does not bode well for states experiencing increases in COVID19 cases.

Many states appear to have decided the healthcare implications of opening up outweigh the economic and societal costs of staying closed.

Florida is one such state:

This from JHU’s site.

Here’s a snapshot of positive tests, go here to get data on your state. The graphs show case counts from January thru yesterday; the greener the background the steeper the decline, the redder the steeper the increase.

Hospitals in seven states are in danger of being overwhelmed with new COVID-19 cases as fatalities increased yesterday for the first time since June 7. 33 states and territories have a higher rolling average of cases yesterday than they did last week.

Meanwhile the Federal government is scaling back its support for testing in 5 states.

Employment, payroll, and workers’ comp

As I noted in an earlier post, the biggest impact on workers’ comp will not come from COVID19 itself, but rather the dramatic drop in employment, business failures, and payroll.

According to NCCI, job losses peaked a couple months ago and employment has recovered somewhat…however there is wiiiiiiide variation across states, with some states as low as 8% unemployment and others up to 20%.

Remember the PPP dollars run out in a week, and when those $$ disappear, employers who had to keep workers on payroll to qualify for PPP won”t have to keep them “employed.” So, watch the unemployment numbers for early July closely.

Insiders are expecting a big increase in the number of corporate bankruptcies driven by way too much debt, changing buyer tastes, and of course COVID19. My take is COVID19 will accelerate the jump in bankruptcies, but the underlying drivers are the root cause; lots of debt works great…until it doesn’t.

The term for companies that are having big problems covering their interest expense is “Zombie”, signifying an entity that is dead but still stumbling around. About one out of five publicly-traded companies earns this sobriquet.

What does this mean for you?

Stay tuned to reports on unemployment and payroll changes in July. If the numbers aren’t good, the implications are broad and deep.


Do you know how to knit?

A good friend and colleague sent me this note; with their permission I am posting it in its entirety.
I read your post today with interest.
Your projection that ALAE will be depleting the result of changes to operations during Covid19 is likely on target.  However—the WC insurers (including some self insured corps.) that I survey regularly all indicate that they are already reaping the “benefit” of having changed operating model to virtual—w/ a majority of claim staff working remote from home due to Covid19—the transition has actually worked out better than most anticipated in terms of efficiencies—in turn driving fixed operating expenses very low.
This comes at a time when emerging technology including AI is pushing for a place at the operations “table” hoping to supplement front line staff with algorithm-based analytics—for far less operating expense (and with the value proposition of better/more accurate predictive analytics and outcomes).
I am getting the impression from these fireside chats that lots of COOs/CFOs are considering retaining the operating model even after Covid19 is through with us. [Joe note – I got a similar impression from many survey respondents, specifically big insurers/TPAs are questioning why they need offices when WFH [work from home] is working really well. 
While the choice may initially drive reduced ALAE, what I am concerned about is that many WC insurers will falsely rely on lower operating expense as a justification for work force reductions, i.e., reducing front line staff or eliminating key positions in specialty areas (think Large Loss Examiners, Subrogation Specialists, Triage staff, etc.) in an effort to artificially suppress fixed costs.  While that may support short term diminution of operating expense and combined ratios——it may not serve best interests in long term.  Claim Management is the insurer’s “service department.”  If too-harsh staff cuts result in diminution of service quality—those choices could eventually boomerang, especially if insurers also choose to sharply increase premium post Covid19.
Joe says – What does this mean for you?
COVID19 is going to force big changes in workers’ comp – and we are an industry that doesn’t do change well – if at all.
Those who get comfortable being uncomfortable will succeed.
Those who think the world won’t change will not.
Hey, do you know how to knit? I’m gonna need a sweater…


COVID is whacking work comp…Let’s play this out.

If survey respondents’ estimates of claim count reductions are accurate, we’re looking at about 20% fewer work comp claims in 2020 than last year.

So, what does that mean?

That’s about 1.2 million fewer claims. We can expect a greater percentage of those filed will be lost time; in tough economic times, workers tend to not file claims for minor issues.

Insurers, State Funds, and TPAs

Profit margins for insurers and funds will be higher because there are fewer claims; yes revenues will be lower, but combined ratios will actually improve. But, while margins will be up, dollars of profit will be stable or, more likely, somewhat less.

I’d expect insurers to hunker down and hold on to as much cash as possible. Expect a big push to reduce Unallocated Loss Adjustment Expenses; think fewer dollars for IT projects and the like.

Execs will be looking for ways to reduce allocated expenses and claim costs. Here are a few that may get traction.

  • Pharmacy – with PBM pricing declining over the last few years, payers that have not gone to market recently would be advised to make sure they are paying market-competitive pricing.
  • Facility costs – hospitals and health systems are looking for pennies in the couch cushions; with margins on WC higher than any other payer, rest assured insurers are the center of attention. Few bill review entities have all the tools necessary to keep hospitals’ sticky fingers out of payers’ wallets – make sure yours does.
  • Offload variable costs by offloading claims to TPAs – with volumes dropping its better to pay-as-you-go than have a building, equipment, staff, and all the necessary support soaking up overhead dollars.

Service companies

Companies with very good customer relations and high service standards will win.  While staff reductions are inevitable as case loads drop, service companies that manage those reductions wisely and humanely will reap benefits as the workers still employed will show their loyalty by going above and beyond for customers.

On the product side, many vendors are figuring out ways to help employers get safely back to work, prevent workplace infections, and facilitate medical access for patients with injuries. On-site employee assistance, testing access, cleaning services, scheduling support are all in play as is stress management and support for families dealing with illness.

Tele-services are a big part of this; big winners will be those that make the leap from using tele-as just a face-to-face visit to something more substantive, more diagnostic, more useful. There’s lots of creativity at work here…dare I say it innovation may actually become acceptable!

Expect more consolidation as private equity and venture capital owned firms (and others with solid cash reserves) try to buy out competitors, get their customers on board, and do it all on the cheap.

What does this mean for you?

Chaos brings opportunity – especially for those who remember this business is about helping people who are hurt get better. 




Work comp is worried about the wrong thing.

Finishing up the second survey report on the impact of COVID19 on workers’ comp and one takeaway has me shaking my head.

There’s a lot more fear and trepidation about presumption than I think is warranted. Across the 24 payers surveyed (including very large TPAs, insurers, state funds, and employers) there were less than 7,000 COVID claims accepted to date. Yes, several have considerable business in California, Kentucky, and Illinois and more than a few have a lot of health care and public entity clients.

Relatively few of those 7,000 claims are expensive, perhaps less than 5%. And even then they aren’t nearly as costly as real cats with expenses above $1,000,000. And this in an industry that is wildly over-reserved, like $10 billion over-reserved

There’s some – but significantly less concern over plummeting premiums driven by business closures and dramatic declines in payroll. That should be a lot scarier; we are talking billions of dollars of premiums lost, and the potential that figure premiums will not return to pre-COVID levels for a long time – if ever.

This will get worse as governmental entities are forced to layoff workers when sales tax revenues aren’t sufficient to cover payroll.

This is like worrying that your cable bill is going up when your salary’s been cut 30% and your hours reduced.

What does this mean for you?

Focus on the dollars, the pennies are just pennies.


Friday funday

It’s been a not-fun week – but far better here in rural America than a lot of other places…Here’s a few of the better memes I came across.

Science marches on!

For those who remember old movies…and why our kids are VERY thankful they are out of the house…

Here in upstate New York, barber shops and salons are open (Yay!) but getting an appointment is impossible (NOOO!)

My vote for best use of humor in a pandemic goes to…

This is just a bit too close to home…

Trekkies have weighed in…

EVERYONE is figuring out how to make their stuff relevant in these troubled times…

You can always rely on SNL to make the most of adversity…love in a time of COVID.

What does this mean for you?

There is life after pandemics – for some of us…




COVID and pharmacy benefit management – an update

COVID19 is having an impact on work comp payers’ pharmacy programs – but this isn’t due to treatments for the disease itself.

That’s largely because there are no medications that have been shown to be safe and effective in treating COVID19 in credible clinical trials.  As a result, there’s little consistency in how payers are approaching medications intended to treat COVID and the symptoms thereof.

Some are approving hydroxychloroquine without a prior authorization (PA) while others require a PA for initial and refills. As the surveys were completed before the latest news that hydroxychloroquine research found less-than-promising clinical results for patients exposed to the virus, it is possible more payers will require at least a PA for future prescriptions. (Other research that reported specific health risks recently came under fire from multiple sources.)

None of the respondents mentioned remdesivir, a brand antiviral that has shown some promise (based on limited clinical trials). This may well change if and when additional trials are completed and the results are satisfactory.

What is consistent is payers’ moves to loosen other prior auth requirements to allow refills for other medications for longer periods and earlier than usual.

Home delivery has also ramped up appreciably, with many retail outlets offering delivery in an effort to keep customers tied to their local store as opposed to using the PBM’s mail order pharmacy.

What does this mean for you?

Unfortunately, we don’t yet have any medications that have been proven to be safe and effective in preventing COVID19 or moderating COVID19’s effects.

Read studies carefully, and get your clinical experts to weigh in on coverage decisions. Science matters.


Which work comp service entities are most affected by COVID?

That’s one of the questions I asked 36 payers and service providers; here’s a snapshot of their responses along with some interpretation…

Service types

Briefly, those services that happen earliest in the claim and/or require face-to-face contact have seen the greatest impact as new claims volumes dropped overnight.

Initial visits to occ med clinics, transportation, imaging, PT and rehab, IMEs, Field Case Management, surgery and management thereof have taken the biggest hit to date. Network revenues are suffering as a result, as is UR.

As the shutdown and peoples’ reluctance to expose themselves to infection continue, there have been significant reductions in bill review and network business volume.

Less  – but still somewhat – affected are sectors that get most of their revenue from longer-duration claims. Think home health care and DME, Pharmacy Benefit Management.

Business models

Cash-rich companies with manageable (or no) debt are in far better position to weather the crisis than highly leveraged firms. This generally benefits founder-owned companies and those with solid cash reserves.

Networks may well weather the crisis as they are generally high-margin businesses with relatively low staffing requirements.

Companies that have kept more of their business functions on-shore are in far better shape than those that outsourced critical functions  such as turning paper into pixels (processing documents), clinical support, provider relations, and call center operations.

There’s a lot of nuance to this; thanks to the 36 respondents for their insightful and sometimes surprising views.

What does this mean for you?

Cash is king. On-shoring is critical. 

Note – A public version of the report will be available in 2 weeks; respondents will receive a detailed version. A third version with additional interpretation will be available for purchase.

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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