What's New with Workers Comp Insurance?

The workers' compensation insurance industry is constantly evolving. If you’re not keeping a close eye on recent developments, you risk non-compliance with important regulations.In today’s post, we’re going to cover just a few of the most notable recent changes and trends in the workers' comp insurance industry, including:

• New regulations
• Market trends
• Technological developments
• Predictions for the future of workers comp insurance

Let’s start with the most important regulatory changes that every workers’ comp insurance provider should know.

Legislative & Regulatory Changes to Workers Comp Insurance

The past year has seen a wave of legislative and regulatory trends in workers’ comp insurance. Specifics can vary across states, but here are some notable changes observed nationally:

NCCI Experience Rating System Update

Changes to the NCCI’s experience rating system are designed to more accurately reflect the risk and cost variations across different states. These changes include adjustments to the primary/excess split points in experience modification calculations, helping to better align with state-specific loss experiences.

Telehealth and Remote Evaluations

Across various states, the adoption of telehealth services for managing workers' compensation claims has increased. Catalyzed by the COVID-19 pandemic, this has continued to evolve with more states formalizing the role of telehealth in workers' compensation systems in providing more accessible medical evaluations and care​.

Changes to Opioid Prescriptions

New regulations mandate that all opioid prescriptions covered by federal workers' compensation must be managed through a Pharmacy Benefit Manager (PBM). The regulations impose strict guidelines on opioid prescriptions, including limitations on supply duration and mandatory pre-authorizations for ongoing treatment​.

Increased Burden of Proof Timeline

A significant procedural change was the doubling of the time limit — from 30 to 60 days — for workers to provide additional supporting evidence for workers’ comp insurance claims. This applies when the initial claim does not meet the burden of proof.​

These are just a few of the changes we’ve noticed over the last 12 months, but more are certain to come.

Workers Comp Insurance Market Trends and Financial Indicators

The workers’ compensation insurance market is looking strong, but there are reasons to be cautious in the face of possible economic headwinds.

Continued Underwriting Profitability

The workers' compensation insurance market has demonstrated strong financial health with continued underwriting profitability, marking several consecutive years of gains.

This trend reflects a decrease in claim frequencies, albeit with a modest increase in claim severities due to factors such as wages and medical inflation​.

Economic and Demographic Shifts

Changes in workforce demographics and economic conditions are also influencing the workers' comp landscape.

These include variations in workforce participation and ongoing adjustments to workplace practices post-pandemic, which continue to impact the nature and frequency of workers' comp claims.

Premium Rate Changes

Premium rates across different states are mixed. 

For instance, in Washington, the workers' compensation premium rate is set to increase by an average of 4.9% in 2024. This adjustment reflects the rising costs of wage replacement and medical services due to wage increases.

Potential Challenges

Despite the stability, there are warnings of potential challenges due to economic headwinds. Factors such as wage inflation and broader macroeconomic issues could add pressure to the market​​.

However, the frequency of claims has been trending downward. Historically, this has helped keep loss costs and actuarial projections lower, facilitating continued rate reductions​.

Overall, the financial trends are mixed but mostly positive. The future of workers' compensation insurance will depend on insurers' ability to predict and adjust to the changing landscape while keeping an eye on inflation.

Technological Advances and Their Impact on Workers' Comp Insurance

Technology continues to profoundly impact the workers’ compensation insurance industry, especially with regard to how claims are processed. However, changes in medical practices and techniques have also leaked into the workers’ compensation world. Here are a few examples:

Telehealth Services

The adoption of telehealth has streamlined the medical evaluation process, making it more accessible to injured workers. This technology reduces the need for physical travel, speeding up the treatment process​.

Telehealth has also reduced the cost of claims, and ensures that workers have better access to the care they need when they get injured on the job.

Automation and AI

Advanced algorithms and machine learning are now used to automate claims processing and detect patterns that may indicate errors or fraud.

This not only speeds up the claims process, it also increases claim accuracy and reliability​.

Data Analytics

The use of big data analytics in workers' compensation allows insurers to predict trends, assess risks more accurately, and set premiums more precisely. It also helps in identifying the best treatment protocols, which decreases recovery timelines for many types of injuries.

Ultimately, technological advancements mean two major things for the workers’ compensation world:

1. Enhanced safety practices and monitoring are making it easier to keep workers safe on the job.
2. When claims do come in, workers’ compensation insurance companies are better able to manage and process them quickly.

Challenges and Opportunities for the Future

The future of workers' compensation insurance will be shaped by a combination of demographic shifts, technology, and evolving workforce dynamics. Here’s a preview of what to expect:

Technological Integration and Automation

As workers' comp insurance systems incorporate more advanced technologies, such as artificial intelligence, the efficiency of claim processing and management will improve.

These technologies help improve the accuracy of claims handling and reduce the workload on human staff.

Aging Workforce and Talent Shortage

A significant portion of the insurance industry workforce is nearing retirement, creating a "retirement cliff."

This demographic trend poses challenges in maintaining a skilled workforce. The workers’ comp insurance industry will need to shift towards recruiting younger, tech-savvy professionals who can handle the rapidly evolving technological landscape.

Regulatory Complexity

Workers' comp insurance systems are dealing with increased regulatory complexity and expanding coverage requirements.

As different regions update their legislation in response to new workplace risks and public health challenges, navigating these changes will require continuous adaptation and compliance efforts.

Stay Ahead of the Workers Comp Insurance Curve with BBSI

Despite constantly shifting regulations, disruptive technologies, and an unpredictable economy, the workers’ comp insurance industry is doing as well as ever.

To keep it that way, industry leaders will need to keep their eyes on the horizon. One effective way to do that is to outsource it to someone else.

BBSI’s professionals stay on top of the changes and developments that are always happening in the dynamic workers’ comp insurance industry.

We aim to enable our partners to focus on growing their client base and keeping their customers happy. To us, that means staying on top of the shifting tides and keeping our partners prepared for tomorrow.

If you’re interested in expanding your service offerings by becoming a referral partner of one of the nation’s leading PEOs, contact us today, and let’s start building together.