By Tony Payne, VP/Business Development, Clark Insurance
Maine once led the nation in the cost of workers’ compensation insurance but reforms and hard work have changed all that. Since 1992, costs have been cut in half. The two most important changes were reducing the number of work-related injuries and removing costly conflicts from the claim management process.
In addition, lost time injuries have dropped precipitously contributing to more than $180 million in dividends paid back to the customers of Maine Employers’ Mutual Insurance Company (MEMIC), the state’s largest and leading workers’ compensation insurer. So, what worries a workers’ compensation insurance executive?
At the annual meeting of the Maine Insurance Agents Association (MIAA), independent agents were updated on the trends within the property/casualty segment by John Leonard, president and CEO of MEMIC.
Despite dramatic improvements depicted in Leonard’s slide presentation, a myriad of factors are conspiring to impact the long term cost of workers’ compensation insurance for employers in the state and in much of the nation.
Let’s start with incomes. Wages are part of the calculation for workers’ compensation premiums. However, Americans’ wages have remained relatively unchanged for nearly 15 years. Until there is a labor shortage, wages likely will simply track with inflation which has hardly budged since before the Great Recession. But while wages have been steady, the cost of medical care has continued to rise. In fact, since 1993 the cost of workers’ compensation medical costs have gone from 49% of claims dollars paid to 59%. Conversely, replacement wages paid for those recovering from injuries have dropped from 51% of the claims paid to 41%. Now, hold that thought and read on.
Maine’s aging workforce. On-the-job fatalities for workers over the age of 65 are about four times the number for workers age 25-34. That makes sense. However, the percentage of the workforce is Maine that is over 65 is high and growing quickly. For example, 7.6 percent of those 75 years or older currently are working. The size of that 75+ group is projected to exceed 10 percent by 2022 according to the U.S. Bureau of Labor Statistics. That’s a real challenge when it comes to workplace health. As people age, it often takes longer to recover and multiple medical conditions can complicate a timely return to work.
In addition, Leonard suggested that the workplace may have to be re-engineered to accommodate physical limitations of older workers. Most work-related injuries continue to be injuries to muscles and bones. Lifting, pushing, being struck by objects and falling are the common causes of claims. Older workers just don’t spring back from these events quite as fast.
Obesity. Obesity is a workplace safety issue for employers. Science indicates that weight and chronic disease are closely related. When diabetes and heart disease are added to the challenge of injury management, recovery can be longer and more complicated than expected. Though an employer can manage workers who work unsafely, no employer can easily direct employees to lose weight yet obesity is a contributing factor to injury costs. That makes cost management a significant challenge.
Opioids. Leonard also cited this class of drugs as a contributing factor to changes in workers’ compensation costs. Drug use and abuse continues to grow in Maine and around the country. According to the National Institute on Drug Abuse, “opioids are medications that relieve pain. They reduce the intensity of pain signals reaching the brain and affect those brain areas controlling emotion, which diminishes the effects of a painful stimulus. Medications that fall within this class include hydrocodone (e.g., Vicodin), oxycodone (e.g., OxyContin, Percocet), morphine (e.g., Kadian, Avinza), codeine, and related drugs. Hydrocodone products are the most commonly prescribed for a variety of painful conditions, including dental and injury-related pain.”
An alarming article in the Portland Press Herald (4.13.15) indicated that a needle exchange program for drug addicts in Southern Maine has grown by 238 percent in just five years with nearly 565,000 needles exchanged in just the last year.
Plain and simple: drug abuse makes for an unsafe workplace which means employers need to be vigilant to symptoms and behaviors. Having a clear policy on drug use is a start but education and employee assistance can help prevent this destructive and harmful behavior.
The foundation of the social compact in workers’ compensation is that employers must provide a safe place of work. Employees, in turn, must perform their work safely. Today that includes accommodating aging workers, living healthy lives and never abusing drugs.
Article originally published in the Phoenix (April 13, 2015) http://www.clarkinsurance.com/blog/emerging-workplace-challenges-age-weight-and-drugs/