While it's important to celebrate the centennial of the workers' compensation system and appreciate how much worse off we might be without this crucial safety net, I'd be remiss in not considering the considerable challenges facing insurers and risk managers in the years and decades to come.

In the short term, the economy will be the biggest threat facing both employers and their comp carriers. We'll need a strong recovery to get millions off the unemployment rolls and back into paying jobs (with comp coverage) once again. At the same time, state-by-state reform battles will continue, seeking to save money without undermining care for injured workers.

Longer term, however, there are a number of critical macro-trends—positive and negative— that are likely to have a major impact on insurers and their stakeholders as the second century in workers' comp unfolds. Among them:

The Changing Workforce. We're likely to see an aging workforce, in part due to the need for many to stay on the job so they can build more personal savings and afford retirement. Having more experienced workers usually means lower frequency of claims, but at the price of higher severity. Medicare Secondary Payer considerations will likely be more common as an increasing number of people work past the age of 65, adding both administrative costs and logistical headaches.

Meanwhile, we're dealing with a much heavier workforce, as obesity reaches epidemic proportions. That factor alone could increase claims frequency and severity, particularly in terms of back injuries, while a growing number of workers will likely have to cope with the effects of diabetes and high blood pressure. (In New Jersey, a court granted comp benefits to an obese worker who died from a blood clot formed after sitting for hours at her work computer.)

In addition, we're going to be managing a far more diverse workforce over the next 100 years, with many blue collar employees requiring training, written safety information, and direct supervision in their native languages, rather than in English only.

There is likely to be far more telecommuters as well, which means employers might have less control over working environments than they currently enjoy. One woman in Oregon, for example, recently was granted comp benefits after tripping over her dog and breaking her wrist while getting fabric samples out of her garage for a work presentation. On the other hand, it might be easier and quicker to get telecommuters back on the job since they don't have to travel to some remote work facility.

I believe we're likely to see greater employer emphasis on wellness programs, as more organizations try to promote a healthier workforce to lower workers' comp as well as health insurance claims. But we're also more likely to have a "smarter" workforce, just like we have a far "smarter" military force today, with a greater reliance on advanced technology allowing people to do their jobs not only more efficiently, but more safely. That leads to our next section:

Tech to the Rescue! You can expect to see more sophisticated electronic monitoring of the workplace, particularly with industrial jobs. This trend is already accelerating in commercial auto, and is likely to pick up steam in factory, warehouse, packaging, and shipping locations—although office workers won't necessarily be excused from this development. The safety and cost containment imperative is likely to ultimately overcome any "Big Brother" concerns.

From the insurer's perspective, we'll see more automation of the claims process. The more time adjusters are free to deal with claimants and medical providers, and the less time they spend chasing down data and filling out documents, the better.

Predictive modeling, while no "magic bullet," could provide a competitive advantage to those carriers that treat data as a strategic asset. Proactive analysis can raise red flags and head off potentially bogus claims, as well as steer claimants towards more productive and cost-effective treatments.

Telemedicine is likely to be spurred on by an increased demand for services following full implementation of health-care reform. Remote examinations and diagnoses could provide easier and cheaper worksite access to health professionals who specialize in occupational medicine. Such immediate injury assessments could lead to more effective treatments and a quicker return to work.

While we're at it, why not try teleadjusting as well? Rather than waste travel time or lose invaluable face-to-face assessments via telephone interviews—or worse, investigation via e-mail—teleadjusting might make it easier to interview more claimants, supervisors, and witnesses while reviewing accident locations without actually having to be on site.

Social media will become a bigger factor in comp as well, on a number of fronts. It can certainly serve as another potential claims fraud investigation tool—albeit with very careful consideration of how it's handled from a privacy perspective. But social media could also provide an invaluable loss control and safety communications platform.

Why not have mobile apps for workers' comp? Mobile technology could very efficiently gather first notice of claims, as well as statements and documenting pictures for incident reports, while monitoring an injured worker's ongoing rehabilitation and recovery.

We're already seeing major administrative savings by replacing checks with debit cards for claimants and providers. The introduction of the digital wallet, with mobile devices widely used as a credit card, will only accelerate this positive trend.

The development of a nationwide system of electronic medical records—also being driven by health-care reform—will likely have a big impact in patient care and claims investigations in comp. That leads to our next section:

Medical Cost Containment. A growing share of the comp claims dollar is going to pay medical expenses rather than replacement wages—with medical up to about 60 percent of the pie now, likely to rise to 70 percent before this decade is out if no major changes are made.

If the comp system is to survive to celebrate its bicentennial, insurers and employers will have to get a handle on the growth of medical costs—particularly when it comes to expensive prescription drugs.

Health-care reform is likely to have a major impact on comp, again both positive and negative, should the law survive constitutional challenges and go into full effect as scheduled in 2014.

The near-universal coverage called for will shrink the ranks of the uninsured substantially and likely decrease the number of comp claims filed fraudulently by those without health insurance. But the addition of millions of health insurance policyholders may drive up demand for medical services, thus raising costs, limiting availability and increasing wait times.

In addition, cuts in Medicare reimbursement levels might have an impact on states where comp payments are based on federal benchmarks. However, there could also be cost-shifting in states where providers can make up what they lose with Medicare patients by charging higher rates to treat comp claimants.

The biggest question, of course, is whether the revamped health insurance system might eventually absorb the medical component of workers' comp. Could workers' comp survive if medical and replacement wages are covered under two different policies? The majority would suggest comp could not endure under those conditions, but that existential threat is only theoretical at this point.

In the meantime, expect comp insurers to expand the use of medical networks to secure doctors who are better trained to handle occupational injury and more concerned with getting patients back to work, at least for modified duty.

You can also expect the widespread adoption of the Explanation of Benefits model used by health insurers to cut down on fraud, particularly by providers.

Evidence-based medicine and pharmacy benefit management will become even more sophisticated, as insurers command greater amounts of data to show what works—and what doesn't.

There are other threats to worry about—including the ongoing risk of terrorism and the potential for new occupational exposures facing those working with emerging technologies—but these macro-trends will suffice for today.

As we commemorate the centennial of the workers' comp system, insurers, employers, and workers have much to celebrate and be thankful for. The next century will pose some predictable and no doubt many unforeseeable challenges. What's certain is that change is ahead, and the biggest question is whether you are prepared to meet it proactively.

Special Reports /

Workers’ Comp Faces Big Challenges in Its Second Century

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