Workers’ comp claim frequency expected to drop

You can expect fewer workers’ compensation claims this year, but the ones you do see are likely to be more severe, according to the first Health Care Workers’ Compensation Barometer report from Aon Risk Solutions, the global risk management business of healthcare consultant Aon, based in Chicago.

The report is based on a study of workers’ compensation exposures from more than 1,000 healthcare facilities across the country. For the 2013 accident year, Aon projects that healthcare systems across the country will experience an annual loss rate of $0.79 per $100 of payroll, which continues the stability that has been in place since 2008. Aon’s study also shows that loss rates will continue to increase at a 1% annual rate. (An abridged version of the report is available online at http://tinyurl.com/aonbarometer.)

The stability in workers’ compensation loss rates has been driven by the decrease in claims frequency, which has experienced a steady decline over the past decade and is expected to continue that trend at an annual rate of 1% in 2013, explains Dominic Colaizzo, chairman of Aon Risk Solutions’ Health Care Practice in Philadelphia. “We think there is a correlation between employee safety and patient safety,” Colaizzo says. “We did this study because it had never been done before, and this is a key expense area in risk management.”

Colaizzo says there are several factors likely responsible for the consistent decrease in frequency, including these:

  • The healthcare industry’s intense focus on patient safety has direct implications for workers’ safety, as an environment that is safe for patients is also an environment that is safe for employees.
  • The use of new technology, including beds and patient lifting devices, has helped to make the workplace safer.
  • With nursing staff turnover at the lowest levels in years, the average experience and competency has risen dramatically with favorable implications for workers’ compensation.

Claims frequency remains low, but claim severity, including medical, indemnity, and expense costs, has been steadily increasing and projected to continue at a rate of 2% per year. There are several reasons causing the increase, mostly related to outside influences such as the challenging economy, Colaizzo says.

“We were surprised to see that two-thirds of the hospitals do not have a return-to-work program,” which provides physical therapy and other ongoing care as part of a specific plan to help employees heal and get back to work, Colaizzo says. “It’s been very well established that return-to-work programs help the injured employee and save the hospital money, so it’s a concern that so many facilities do not use them. That’s a lost opportunity.”

The costs associated with workers’ comp can vary significantly by state, Colaizzo notes, so healthcare providers in the high cost states should be even more motivated to make the changes within their control.

“You can’t change your venue, but you can change the way you do business,” he says. “People have done that for medical malpractice, and these results tell me we may have to do the same thing for employee safety.”

The workers’ comp rates are directly tied to issues of nurse staffing, says Greg Larcher, FCAS, MAAA, regional director and actuary with the Actuarial & Analytics group within Aon Global Risk Consulting. “It is interesting to note that employee turnover is at the bottom of our report’s list. The economic condition of the last several years has dramatically changed the employment landscape for nurses,” Larcher says. “Part-time nurses are working full-time, and nurses that left the profession for other industries are coming back to nursing. The bright side for healthcare providers is that they are now able to select the best and brightest to join their staff.”

Colaizzo says, “This benchmarking report allows healthcare leaders to gauge their level of performance against their peers, providing opportunity to differentiate themselves in the market and identify key areas for improvement and growth. In addition, the report is a critical tool for any organizations looking to measure and promote patient and employee safety.”

Sources

  • Dominic Colaizzo, Healthcare Practice Chairman, Aon Risk Solutions, Philadelphia. Telephone: (215) 255-1728. Email: dominic.colaizzo@aon.com.
  • Greg Larcher, FCAS, MAAA, Regional Director and Actuary, Actuarial & Analytics Group, Aon Global Risk Consulting, Columbia, MD. Telephone: (410) 381-2254. Email: gregory.larcher@aon.com.