In Part 1 of this series, I discussed such concerns as risingprices for generic drugs and medical treatment advances as someissues to be aware of. Here I share my thoughts about additionalworkers compensation issues to watch in 2015.

Evolving healthcare model and integrated disabilitymanagement

Larger employers are developing outcome-based networks, not onlyfor workers' compensation, but for their group health as well.They're contracting directly with the healthcare networks to ensurethat their workers receive the best medical care and tyingcompensation to outcomes. We're seeing a shift from a focus onprice to programs with an understanding that better outcomes leadto increased productivity and overall lower costs.

Employers also are recognizing the importance of mental healthto wellness. We're seeing a wellness revolution more focused on thepatient as a whole person and the importance of managing healthboth physically and mentally.

The evolving health care model is tied directly to an evolvingviewpoint on disability management. More employers are realizingthe importance of managing all disability, not just that associatedwith workers' compensation claims. I feel this integrateddisability management model is the future of claims administration.Employers who retain risk on the workers' comp side usually do thesame thing with non-occupational, short-term and long-termdisability.

Opt-out

Non-subscription or opt-out has been allowed in Texas for manyyears. In reality, Texas is an opt-in system becauseemployers who choose not to subscribe need only notify the stateand their workers of this decision. There's no requirement toreplace workers' comp with an alternative benefit plan althoughlarger employers in Texas who opt-out do use such a plan.

The Oklahoma Option that started last year is viewed as a moreexportable version of opt-out. Under this system, employers canopt-out of workers' compensation, but they must replace itwith a plan that provides the same (or better) benefits than thoseavailable under traditional workers' compensation.

Although some view the Oklahoma Option as the start of anopt-out revolution, it's too early to tell what impact itultimately will have. I expect to see opt-out legislation in ahandful of other states in the next three to five years.

Employee or independent contractor

Employee classification should be a fairly basic issue: is aworker your employee or an independent contractor?

The right to control is one of the most significant factors usedin this determination. For example, if you're a trucking company,you hire drivers who can work only for you, and you determine whatloads they haul and where, then they will likely be considered youremployees, and subject to workers' comp protection. You shouldconsult with an attorney on the status of your work force becausethese considerations go well beyond the workers' compensationimplications.

Medical marijuana

Much of the attention has been focused on medical marijuana as atreatment option. My concern is around employment practices, whichhave been centered on the fact that marijuana is illegal underfederal law, so any trace in the system is unacceptable. I fullyexpect the federal government to reclassify marijuana from ScheduleI to Schedule II in the next few years. When that happens, zerotolerance policies in the workplace will no longer be valid.Instead, the focus will have to be on whether the person isimpaired, as it currently is with alcohol.

The next pandemic

With workforces that travel around the world, the threat of aglobal pandemic is very real. As an employer, are you allowed toquarantine an employee who traveled to an infected country onvacation, not on business? How do we protect our employees from thenext pandemic? How do we continue business operations if we had toclose for 30 days because of a disease outbreak? When is a diseasesuch as this covered under workers' compensation? How will yourinsurance coverage respond? These are all questions that employersneed to be asking before the next pandemic comes along.

Medicare secondary payer compliance

I mentioned Medicare Secondary Payer Compliance in my issues towatch last year, and it's returned this year. This area ofcompliance is constantly evolving. There are not a lot of hard andfast laws, so most of this evolution is driven by advisory memosfrom the Centers for Medicare & Medicaid Services and case law.Payers can think they are following all the rules yet they canstill end up in costly litigation.

There also is an alarming trend of whistleblower lawsuits thathave been filed alleging intentional noncompliance with Medicaresecondary payer regulations. The potential exposures here are hugeif noncompliance is found.

Rates and market cycles

After several years of increasing rates around the country, theNational Council on Compensation Insurance is projecting that, in2014, workers' compensation combined ratios will be below 100% forthe first time since 2006. Writing workers' compensation isprofitable again.

What should buyers expect in 2015? As in the past, individualloss experiences will determine what happens with premiums.Employers with favorable loss experiences get lower rates, so itpays to stay diligent in the areas of loss prevention and claimsmanagement.

Constitutional challenges similar to Padgett inFlorida

In 2014, a judge in Miami-Dade County sent a shockwave throughthe state when he declared the workers' compensation law to beunconstitutional. Although I don't think the Padgett casewill be upheld on appeal, I am concerned that it's the first ofmany similar cases we could see around the country. [Padgett v.State of Florida, CASE NO. 11-13661-CA 25, Aug. 13, 2014.]

The judge in Padgett ruled that the workers'compensation statutes were unconstitutional on their merits becausethe benefits provided are no longer an adequate replacement for theright to sue in civil court that that the workers gave up. I expectwe're going to be seeing more of the constitutional arguments inthe future.

Predictive analytics

The one thing in this area I see lacking is results. Predictiveanalytics are valuable only when they change behaviors. Askyourself, what is the goal of the analytics? What actionable issueswill they identify? What actions will you take in response to theidentified issues? How will you measure outcomes?

The only way to know whether the analytics are working is to seeyour claim costs decrease, but, in the long tail of workers'compensation, this can take time. Most of the predictive modelshave only been available for a few years, so it's too early to tellwhether they are indeed changing behavior and saving the employermoney.

There also is a potential danger associated with predictiveanalytics that I don't hear anyone talking about. What happens whenthese analytics are used in litigation as evidence that an injuredworker was “labeled” and treated differently because the analyticidentified certain red flags? What may be a routine claim handlingfunction can look unusual to a jury that doesn't understand suchthings.

Overall, I feel some predictive models sound good, in theory,but it's too early to statistically validate their impact.

Changing workforce

One of the biggest issues I see impacting workers' compensationin 2015 and beyond is the evolving workforce, with technologyreplacing people more and more. What happens when it becomescheaper to automate than to hire a human worker? If they candevelop self-driving cars, why not self-driving trucks? Just thinkabout how that would alter the risk profiles in the transportationindustry.

Also, we're seeing more part-time versus full-time workers.Unfortunately, part-time workers may have less training, whichcould lead to higher injury frequency.

With a mobile work force, where is the line between work andpersonal life when you're using a company cell phone, tablet orcomputer to check e-mails any place, any time? Where do you drawthe line for someone who works from home regularly? There have beennumerous court cases around the nation trying to determine wherethat line is.

Finally, consider the evolving workforce as it pertains to theworkers' compensation industry itself. You see more adjusters overage 50 than under age 30. Claim handling also is more complex,which makes an experienced adjuster even more valuable. Whathappens when those adjusters retire? What are we doing to recruitand train that next generation? Will we see more use of automationto compensate for the lack of experienced adjusters?

What should you do in 2015? Stay aware of these issues and stayin touch with your broker and workers' compensation carrier so youhave a strategy in place.