What to expect in 2023 – Part 2 – Duncan Financial Group
What to expect in 2023 – Part 1
January 18, 2023
OSHA recordkeeping deadlines looming: five reasons to get it right
January 19, 2023
What to expect in 2023 – Part 2

What to expect in 2023 – Part 2

A continuation of issues employers should have on their radar in 2023…

  1. Claim cost drivers: Don’t overlook exposure to severity or Long-COVID — Wages and medical care are the drivers of work comp costs. As employee wages rose, many states saw increases in workers’ compensation temporary total disability (TTD) and permanent total disability (PTD) rates for 2023. While medical inflation is concerning, workers comp facility services have been the dominant contributor to rising medical costs. Staffing shortages, lack of competition, increase in surgeries, and increases in medical malpractice insurance premiums are driving costs up. This is likely to continue, but employers can help control costs by working with occupational medicine providers, using nurse case managers, and providing alternatives to emergency room care.While claim frequency continues to decline, high claim severity and fatalities remain elusive. Medical inflation from expensive technology, catastrophic claims, the aging population, and rising wages are major contributors to increasing costs. Catastrophic claims, which include severe burns, brain injuries, spinal cord injuries, and significant amputations, are rare but extremely costly. Some employers overlook their exposure to these claims because of the low frequency, but while high-risk industries are more prone to such claims, they can happen anywhere. The leading causes do not differ significantly from other claims – slips, trips, and falls, motor vehicle accidents, struck by machinery or fallen objects, burns, exposure to harmful substances, and improper operation of heavy or dangerous machinery. The costs are significant and often involve lifetime care with standards of care continually evolving.

    A concerning emerging trend is the impact of Long-COVID claims. Initial analysis by NCCI found that nearly a quarter of all worker’s compensation COVID patients had Long-COVID. For patients hospitalized, worker’s compensation paid out an average of $216,000 per claim, compared to $53,000 for hospitalized patients without Long-COVID. Moreover, Long-COVID is a potential disability under the ADA. While the impact remains uncertain, smart employees recognize the seriousness of the illness and are educating managers to recognize troubling symptoms and working with affected employees to provide accommodations.

  2. Remote workers: Assess the post-pandemic policies that were adopted in 2022 — In 2022 employers grappled with changes brought on by the pandemic and defining the future of work. COVID-19 changed how and where many people want to work and their expectations of work and employers. In response to the new employee priorities of flexibility, work-life balance, and health and wellness, many employers introduced remote or hybrid work policies. At times, the approach has been erratic and buzzwords such as “productivity paranoia” and “quiet quitting” reflect the resulting conflict between employees and employers. Productivity, which had soared when the coronavirus forced an overnight switch to remote, plunged by the sharpest rate on record in the first half of 2022 according to the BLS.The trend has resonated strongly with younger workers who are focused on rewriting the rules of the workplace. While an economic slowdown may mean the power paradigm shifts back to employers, it’s important to examine the overall impact of the policies and benefits to maintain a competitive advantage. In addition to productivity, employers need to evaluate the effectiveness of telecommuting policies, ergonomic training, onboarding, new work comp exposures, types of claims filed, cybersecurity issues, possible insurance gaps in coverage, and multi-state legal risks. Insurers are watching this new phenomenon carefully and waiting for post-pandemic data to gain insight into injury rates for at-home and hybrid workers.
  3. Mental health: Look beyond support services to promote wellbeing — With the rise of mental health awareness and changing employee expectations, mental well-being took center stage in 2022. Employers focused on expanding their support services, stepping up communication efforts about mental health and wellbeing, and training managers to understand the signs of distress. Workers comp compensability for post-traumatic stress disorder (PTSD) remained a hot button.The push for PTSD compensability for frontline workers and mental injuries will continue in 2023. NCCI said it monitored 61 bills throughout 2022 addressing workers compensation for workplace-related mental injuries, including approximately 46 bills related to PTSD. Only four passed and one is still under consideration.

    For most mental health-related claims, compensability is complicated and will vary by state and the claim’s specific circumstances. However, experts say mental-only claims and physical injury claims with alleged mental components are on the rise and employers need to prepare to defend such claims. Also, more employees are requesting accommodations for mental, emotional, or psychiatric conditions. Especially concerning is the general acceptance among workers’ compensation stakeholders that unaddressed behavioral health issues, such as fear, unrealistic expectations, and poor social support, delay an injured worker’s recovery and return to work, significantly extending duration and costs.

    An effective strategy needs to combine strengthening support services with addressing workplace issues that adversely affect workers’ psychological well-being. Some common concerns are workplace bullying, unreasonable deadlines and workloads, fatigue, poor manager relationships, lack of trust, inadequate time off, inappropriate workplace design, stress, and stigma. A focus on total worker health (TWH) means that work practices are not only designed to be safe but also designed around workers’ physical and psychological well-being.

  4. Technology: Strategy and transparency are a must — The need for companies to invest heavily in PPE and occupational health to protect workers from COVID has lessened and safety budgets are focused on technologies that improve workplace automation, efficiency, and safety, advance capabilities, and streamline administrative functions. For injury prevention, wearables aid in work assistance and injury prevention, digital solutions such as artificial intelligence (AI) and the Internet of Things (IoT) facilitate early detection and prediction of anomalies that lead to accidents, immersive technologies and gamification simplify training processes, and collaborative robots avoid the exposure of workers to hazardous situations. A common problem is that systems are not integrated and legacy infrastructure and applications limit capabilities and create much data that is not actionable. It’s expected that IT budgets will be tight in 2023; companies need to evaluate their data management and develop a long-term strategy to effectively leverage technology.The rapid growth in technology fuels many privacy concerns, which have led to regulatory actions. The EEOC issued guidance regarding AI-related disability discrimination, the NLRB announced a focus on monitoring and algorithm-driven management, and new state laws on electronic monitoring, including in New York and New Jersey, took effect. New York City’s bill regulating employers’ use of automated employment decision tools took effect on January 1, 2023 (enforcement is delayed until April 15, 2023). California’s Privacy Rights Act includes protections for employees, job applicants, and independent contractors. Other AI laws are pending at the federal, state, and local levels and employee pushback is on the rise.

    In 2023 employers must prioritize transparency around how they collect, use, and store data, stay abreast of changing regulations, consider practices to strengthen employee buy-in, and monitor new and evolving cyber-security threats. The cyber insurance industry has tightened underwriting standards and requires extensive knowledge and monitoring of cyber-security protocols and remediation plans. New technologies should be assessed and monitored continuously beyond implementation, and vendors or digital supply chains evaluated. Efforts should focus on building cyber resilience rather than simply preventing incidents.

  5. Unions: Be aware of resurging activity — The labor movement had a resurgence in 2022 – union representation petitions were up 58 percent for the fiscal year, unfair labor practice charges increased almost 15 percent, and the NLRB continued to make changes to favor unions. Union organizing at high-profile companies such as Starbucks and Amazon attracted much media attention.Collective bargain agreements can affect workers’ comp in many ways, including limits to recovery-at-work programs. While union momentum may slow with a sluggish economy, employers are encouraged to take steps to ensure a positive work environment to help resist unionization.
  6. Workplace violence prevention: Strengthen employee involvement and leverage technology — t’s estimated that nearly two million workers experience violent acts at work annually. The country’s spike in mass public shootings has raised awareness among employers of the need to prevent violence and address mental health in the workplace. Some companies have done a good job at identifying risk factors, enhancing security measures, providing active shooter training to protect their employees, and crisis intervention post-incident; however, the threat of workplace violence is ever-present and needs constant monitoring.Increasingly, employers are recognizing the importance of employee involvement in identifying vulnerabilities in employers’ plans and preventing violence perpetrated by an employee or other known individuals. Employees should be trained in identifying troubling signs and feel secure in voicing concerns about employees’ behavior through confidential channels.

    In late 2022, The NSC released Workplace Violence: Using Technology to Reduce Risk, a new report and playbook that identifies specific steps leaders can take to enhance employee engagement and how employers can implement the latest safety technology into their workplace violence efforts. Digital floorplan mapping, virtual reality training, and weapon detection systems are just some of the technologies spotlighted.

  7. Medicare: Monitor changing rules — With workers’ compensation systems in 22 states relying to some degree on Medicare/CMS for reimbursement rates, the Centers for Medicare and Medicaid Services’ (CMS) annual update of reimbursement rules and rates for medical services directly impacts costs. While the updates include a reduction in the physician fee schedule conversion factor, outpatient hospitals will receive a net 3.8% percent overall increase. The changes also expand access to behavioral health care, cancer screening coverage, and dental care and address billing and reimbursement for services provided via telehealth, which provides much-needed guidance on navigating the transition away from the flexibilities afforded during the pandemic. The impact of these changes will vary by state.Employers can also expect more aggressive recovery efforts under the Medicare Secondary Payer law. An OIG audit report suggests that current recovery efforts aren’t meeting the goal of that legislation and CMS agreed to continue its efforts to recover collectible portions of the $226 million in uncollected overpayments related to workers’ compensation. Particularly concerning are the proposed revisions to regulations that could narrow the window of opportunity available for insurance companies and other payers to file appeals when conditional payment amounts are not owed by the payer.
  8. Presumptions: Continue to blur lines of workers comp and increase costs —  In 2023, two areas of concern for employers are the continued extension of first responder presumptions and possible presumptions on infectious diseases. States continue to pass legislation for presumptions for “first responders” for psych-related conditions and terminal type diseases, such as cancer. Most of the COVID-19 workers compensation presumptions enacted or adopted in 2020 and 2021 contained expiration dates or sunset provisions tied to the end of the state of emergency or another specified date. However, California (AB 1751) extended the COVID-19 presumption to January 1, 2025. Tennessee and Washington established a more general “infectious disease presumption”, and other states have legislation pending looking to do the same.
  9. COVID-19: Continue to stay abreast of guidance and regulations — While most states have relaxed or eliminated workplace COVID rules, some states continue to keep COVID rules on the books and regulatory actions continue. On December 15, the California Occupational Safety and Health Standards Board voted 6-1 to adopt the COVID-19 Prevention Non-Emergency Regulations, which is expected to go into effect this month. Oregon OSHA has a permanent COVID standard. Federal OSHA submitted the permanent standard on COVID-19 for the healthcare industry to the OMB for final review in December. New York State extended its law requiring paid leave for COVID-19 vaccination through December 31, 2023 and continues to require employers to provide paid COVID-related leave. OSHA continues to issue penalties for occupational exposure to COVID-19 under the General Duty Clause and the CDC continually updates its guidance. In July 2022, the EEOC updated its guidance on viral tests. Many employees will also continue to deal with the impacts of COVID-19-related litigation, expanded state and local leave laws, long-haul COVID as a productivity disrupter and potential disability, and accommodation requests.
  10. ESG: Make workers comp an important component — Companies of all sizes are facing increased pressure to act on environmental, social, and governance (ESG) issues. Stakeholders, consumers, and employees are paying much closer attention to how companies meet sustainability concerns. While virtually all public companies have an ESG plan in place, it’s increasingly important for smaller, privately-owned companies to understand the value of a strategic commitment to these efforts to attract Millennials and Gen Z to the workplace.Marsh McLennan has begun to investigate possible correlations between ESG performance and risk performance, to better understand additional levers that influence loss outcomes by examining the relationship between ESG performance and workers’ compensation losses. Their analysis shows “an inverse relationship between ex mods and social scores. Organizations with higher social scores tend to have lower ex mods (that is, actual workers’ compensation claims performance is better than expected based on state/exposure mix), and companies with lower social scores tend to have higher ex mods.”

    The “S” component of ESG covers all the ways companies interact with their employees and the communities in which they operate. Workers compensation provides the foundations for workplace programs that are crucial to building and maintaining safe and healthy workplaces and can be a significant factor in evaluating “S.” The pandemic elevated scrutiny of safe work practices and it will likely remain permanently elevated going forward.