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Keenan and Milliman have prepared this report in collaboration, in order to help assist in the development of improved workers’ compensation management practices.
Executive summary
The issues that hospitals and other facilities are facing today are more complex and continuously changing. The risks of providing medical care and the costs of protecting against those risks alone, including the protection of your employees from injury or illness in the delivery of that care, require hospitals to look closely at questions related to taking fully insured, partially self-funded or self-insured positions. As these facilities are well aware, workers’ compensation laws in California make the choice increasingly complex—and important.
Keenan HealthCare and Milliman are pleased to present the results of our first annual California Hospital Workers’ Compensation and Payroll Benchmarking Survey. Our hope with this survey and report is to provide industry-wide benchmarks in terms of the fundamentals from which informed decisions related to workers’ compensation and maintaining appropriate risk can be made: claim frequency and severity, medical and indemnity costs, the allocated loss adjustment expense (ALAE), and the impact of specific factors such as age, occupation, and more.
In the course of our work on this survey, we gathered data from over 18 hospital systems and/or individual facilities within California (over 35 facilities altogether). In aggregate they provided data on over 3,000 annual claims. Additionally, to facilitate analyzing data on a consistent basis among all participants, we relied on payroll and utilization information obtained from the California Office of Statewide Health Planning and Development (OSHPD) website.
As a result, we identified some general trends in the hospital sector which include:
- Overall losses per $100 of payroll are largely the same in 2013 as they were in 2004; however, we identified two noteworthy trends: 1) Severity of claims is on the rise, increasing by approximately 9.5% annually from 2004 to 2013, and 2) Claim frequency has been declining.
- Losses as a function of payroll appear to have bottomed out in 2008.
- Reforms in 2003 reduced losses as a function of payroll by approximately 40%.
- The projected 2014 loss cost per $100 of payroll (as found in OSHPD reports1) comes to $2.65. Eleven of the 18 systems or facilities included in this study appear within +/- 25% of this projection. Two facilities are greater than 25% of this projection and five are less than 25% of this projection.
This report is divided into sections with charts providing results on an overall basis as well as in specific areas. The first section looks at some of the broad trends as well as others identified in the overall survey results. In the next section, we present numerous charts illustrating trends in specific areas of interest, including payroll and utilization, age, occupation, litigation status, cumulative trauma (CT), and future medical (FM).
Keenan and Milliman are committed to providing the annual California Hospital Workers’ Compensation and Payroll Benchmarking Survey and Report. In this first annual report, we have endeavored to provide meaningful data comparisons to assist California hospital management in measuring their hospitals’ results against California peers. We believe these key indicators will be valuable in developing plans for improving your results.
The next survey will begin early fall 2014. Our expectations include a much broader participation by California hospitals in 2014.
Your feedback is important to assure this report meets your needs and expectations. This being the first annual report we enlist your support to make this a tool all hospitals will utilize in measuring results and planning improvements. Please email your comments, thoughts and ideas to:
Bill Poland, Marketing Director-Property & Casualty at bpoland@keenan.com
Ron Srajer, VP, Keenan HealthCare at rsrajer@keenan.com
Richard Lord, FCAS MAAA, Principal, Milliman at richard.lord@milliman.com
Stephen Koca, FCAS MAAA, Principal, Milliman at stephen.koca@milliman.com
We are eager for your feedback.
RESPECTFULLY,
Keenan HealthCare and Milliman
Overall results
The big picture for workers’ compensation in California today is not necessarily the right one. The overall results of our survey disclosed two interesting hidden trends, which together paint a picture that is a little different from what it first appears. The exhibits in this section, Figures 1 through 6, provide a review of workers’ compensation loss trends for California hospitals over the past decade. They are based on benchmark participant claim experience, Milliman analysis of that claim experience, and payroll or FTE information for benchmark participants as reported to OSHPD.
The first trend of note is that severity per paid indemnity claim—i.e., indemnity, medical, and allocated loss adjustment expense (ALAE) combined—showed an increase of approximately 9.5% annually in the period from 2004 through 2013. This may be seen in Figure 1. Note how the drop off in claim severity that occurred in 2003 (represented by the blue bars in Figure 1) actually did little to halt the trend of increasing severity. The drop off was the result of the enactment of reform laws, which provided only short-term measures to halt that trend. The effect was a one-time downward shift in severity with otherwise no effect on the year-to-year upward trend.
At the same time, however, the indemnity claim frequency (represented by the red line in Figure 1) was declining dramatically. This continued until about 2007, when it seemed to find a floor. The net effect of these two trends combined has been that overall losses per $100 of payroll were largely the same in 2013 as they were in 2004.
In reality, while it appears there has been little change there has actually been quite a bit of upward change in severity and downward change in frequency of claims. Read more here!
For information regarding workers’ compensation, contact Chivaroli & Associates.
