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What CVS/Aetna Can Teach Insurers

In early December 2017, CVS Health entered an agreement to buy Aetna for approximately $69 billion. Not only would this acquisition be the largest health insurance deal on record, but it is also likely to change the face of the health insurance industry.

So what can we learn from it? Quite a bit.

What can the insurance distribution business learn from CVS?

Lesson 1: Perhaps the biggest lesson is that, rather than wasting your energies resisting change, it is wiser to put change to work for you. The specter of disruption and the trends underlying disintermediation can be your business’ greatest assets if you’re willing to adapt, work within the laws of economic physics and embrace customer-centricity

Lesson 2: The consumer and his/her omnichannel convenience needs to drive future-facing strategy. With this in mind, companies will need to work to better understand their customers and to tell apart their different customer types.

Lesson 3: Once that’s done, companies can identify which customer type — which unique market segment — is most important to their business and how that relationship can be strengthened and sustained.

Lesson 4: You may need to tweak or even somewhat redesign your product/service offering to better accommodate those clients best-served by the unique combination of your available and potential resources, expertise, technology and employees.

Lesson 5: In some cases, you’ll discern gaps in your offering that require you to invest in new technology or to recruit and train new employees to specialize in specific markets. You might even look at merging with or acquiring another firm that will strengthen, complement or supplement your offering and help you to meet the demands of tomorrow’s more sophisticated and demanding customers.

If all that sounds like a tall order, it’s because it is. You’ll have to use some elbow grease and put in the leg work. But there are also ways to make the work a little less daunting and give yourself an edge. Leveraging digital platforms and big data innovations, smart businesses are enabling highly efficient transactions that are both customized and scalable.

See also: Global Trend Map No. 9: Distribution  

Of course, there are also lessons aplenty to be taken not just for your business on a granular level but on a wider economic level. Consumers will no longer tolerate a supply chain that sees their vital products and services changing too many hands with too little added value. Today’s customers expect service providers to go out of their way to not just meet their demands but to anticipate their needs. This is especially true when it comes to services delivered by supply-side intermediaries.

This isn’t just the case for healthcare; it holds for all essential services. The insurance industry at large, and especially brokers and agents, besieged by the forces of disintermediation, can learn a lot from CVS.

When it comes to insurance intermediaries, that means keeping a finger on the pulse of the demand side of the industry, identifying transformational market forces and re-examining your business model to see how you can put those forces to work for you.

As demonstrated by CVS’s acquisition of Aetna, if you can streamline the delivery of your goods and services so that your presence is a benefit rather than a detriment to your customers, you’ll not just win the day but the morrow as well. The value proposition of an end-to-end, customized and data-driven experience is not unique to healthcare. In fact, that experience should be adopted as the guiding mantra and policy-shaping battle cry for insurance agencies and brokerages the world over.

Final thoughts

CVS is a giant in its industry, and it still had the humility and foresight to understand its predicament and prepare accordingly. It would have been much easier for the company to rest on its laurels and for the C-Suite to take solace in its strong earnings reports. It would have been easier, and it would also have been a mistake. You cannot ensure future success on the basis of past actions alone. Whether you realize it or not, if you work as an insurance intermediary, disruption is coming for you.

As Eric Andersen, CEO of Aon Benfield, bluntly declared in 2015, “The traditional broker chain… could collapse… as reinsurers, carriers and their brokers all look to move more closely to the ultimate client.”

Whether through M&A, joint ventures, a niche strategy or a technology-driven continuance strategy (or something else altogether), now’s the time to explore every possible avenue to improve your business’ market resilience. The underlying forces of change are sweeping through the insurance industry and compelling forward-thinking operations to act.

2017 clocked in with more than $20 billion worth of M&A deals. What’s more, the second half saw a 50% increase from the first. That’s remarkable.

At the same time, technological innovation is pushing forward at an equally rapid pace. Accenture reports that “Some 83% of insurance executives expect platform-based business models to become part of their growth strategy over the next three years.”

Either way, one thing remains clear: Insurance distribution businesses will need to adapt to a fast-changing environment to ensure that their value propositions remain viable in the face of uncertainty.

To survive, your business will need to deliver a more customer-centric and more end-to-end experience.

At the company level, this means having more support staff and specialists to provide not only quick and comprehensive but also innovative and customized solutions for problems that your customers might not yet even realize they have.

It’s here that smart technology can be the game changer.

First, it provides better integration and visibility across the entire organizational structure. Data points are collected and centralized on the account level through a number of input sources — including email correspondences, the client portal, broker/agent-entered data, public records, social media, telemetry devices, BI insights and more. This ensures that all relevant information is at the fingertips of the interested party — anywhere at any time. Information will no longer be siloed between departments, and it will be shared automatically. After all, it’s often these extra customer insights that can make a difference.

For example, any number of data points can speak to a new policy need or an opportunity for upselling or cross-selling. If that information is kept with, say, the marketing department and not shared with agents, a huge potential opportunity could be missed.

Of course, this streamlined system also needs to be monitored and managed in an intelligent, timely, appropriately granular and end-to-end way. Not every approach or idea is going to work, so agents and brokers will need to understand where they are seeing a return on investment and what needs refinement. Risk taking will be a required part of the business moving forward, but that risk can be mitigated with smart tracking and analytics.

See also: Distribution: About To Get Personal  

Today, consumer preferences are shifting, and this will only continue. Forward-minded insurance professionals know this and are working to build their businesses to dominate tomorrow’s industry landscape.

In fact, 84% of insurers report being increasingly pressed to reinvent themselves and evolve their businesses to survive and thrive in disruptive environments.

Companies need to be constantly thinking about how they can cater to a new generation of consumer, those who want one-stop shopping and value the ease of buying products and services above all else.

The agencies that are smartly leveraging technology to develop ways to make their customer experiences more personalized and convenient are going to succeed over the long run.

In other words, the CVS-Aetna deal is — at its core — about streamlining the supply and distribution of healthcare in a way that meets shifting consumer expectations and provides a more end-to-end, customized and data-driven service.

You can find the full paper here.

3 Ways to Tame Healthcare M&A

The healthcare business is broken for consumers and taxpayers in America. And we can expect to see more mergers, acquisitions and large alliances in the coming months and years, all forming in the name of trying to control rising costs and taking better care of patients.

The question is: Will they?

Unfortunately, the answer usually is generally no. Let’s take a look at two recent headlines, starting with the CVS acquisition of Aetna.

While the CVS acquisition of Aetna makes financial sense for shareholders, the same cannot be said for consumers. CVS and Aetna, which individually represent severe conflicts of interest, together create an even larger systemic problem. American consumers need healthcare intermediaries to clearly represent the interests of either the patient or provider — they can’t do both.

Maybe we’re suffering from amnesia because we’ve forgotten why the Pharmacy Benefit Manager (PBM) industry exists in the first place. Years ago, insurers managed drugs themselves. However, the conflict of interest and the resulting price gouging was so bad that the PBM industry took off in the 1980s and became the de facto broker (intermediary) for the drug industry. Over the next three decades, the PBM industry “evolved,” and, today, the PBM business model looks worse than the insurance industry it once set out to fix. Considering the conflicted business models involved, it seems highly ironic that today’s largest PBM is buying one of the largest health plans. This was a bad idea 30 years ago, and it’s an even worse idea today.

See also: How Amazon Could Disrupt Care (Part 3)  

So why isn’t this going to control costs? Because it really is just a mechanism to switch roles from the “broker function” to that of the supplier. In this case, there is the added benefit that Aetna can get over the 85% Medical Loss Ratio (MLR) limitations by paying themselves as a supplier. All this does is further reduce choice, lock out competition and increase profitability for itself while increasing costs for purchasers.

Planning on larger mergers to control costs is a fool’s errand. Take a look at UnitedHealth Group (UHG), which owns UnitedHealthcare (UNH) and OptumRx. The company’s structure and scale is on par with a combined CVS and Aetna. UHG owns one of the largest health plan providers and one of the largest PBMs, and UHG continues to aggressively acquire other health care services companies.  Many corporate customers will tell you UNH is one of the most difficult insurers to work with because of restricted data sharing and lack of transparency. UNH also makes it nearly impossible to use services other than their own.  This is not a recipe to control costs, and it’s going to get worse because UHG recently announced the purchase of Davita’s Medical Group, which has hundreds of care facilities and about 30,000 affiliated physicians.

Another major issue with this acquisition is that it enables the combined entity to collect even more patient data and constrict its availability and use. CVS CEO Larry Merlo stated, “By integrating data across our enterprise assets and through the use of predictive analytics, we will create targeted interactions with patients to promote healthy behaviors and drive adherence, and this will further improve the quality of care for patients while also resulting in healthier outcomes.”  Mr. Merlo fails to acknowledge that the data the company integrates, uses for its benefit and sells for its profit is their customers’ data — to which the company claims ownership and restricts for others’ use. After the CVS-Aetna deal closes, restrictive data hoarding will stifle potential health benefits and further limit innovation opportunities.

Just a few weeks ago, another headline about an alliance forming to control rising costs captured our attention. Intermountain Healthcare, Ascension, SSM Health and Trinity Health announced they are joining forces to create a new generics drug company.

Again, on paper, the announcement seems like it could help control costs and benefit consumers. But taking a closer look at the match, the marketing value to the hospital chains has already vastly exceeded the cost reduction of the generic drugs in question as well as the pressure this places on big pharma by at least three or four orders of magnitude. Big Pharma isn’t in the generics business.

As egregious as the examples are that we keep talking about with Valeant and Turing, those are rounding errors in aggregate compared to the global sales of just one brand drug, Humira, which brought in $14 billion last year, alone.

Big Pharma is laughing all the way to the bank as the press keeps writing about how big a deal this is and how four hospital chains are going to change the landscape. These large monopolistic systems get the great publicity as they try to lay claim to the moral high ground. More importantly, we have, yet again, given providers of services (a.k.a hospital systems) who already have the reputation for marking up medicine such as Tylenol the power to mark up these new generics they will manufacture.

The most important announcement of the past few days is the one from Amazon, Berkshire-Hathaway and JP Morgan. While there are few concrete details, the message from the top is clear that these companies have decided to take matters into their own hands to control costs as all the intermediaries they have relied on haven’t delivered.

As those who represent consumers, benefits professionals have a crucial role to play as we continue to learn about more mergers, acquisitions and large alliances. As such, there are three things each of us as HR benefits professionals can do to help tame the M&A beast.

First, insist on transparency. This starts by making sure intermediaries (insurers and PBMs) never control supplier performance data. You should have the right to see whatever data you need about your suppliers — just as you would in any other industry. Stop working with intermediaries and suppliers that restrict or refuse to provide data. You should also require intermediaries to provide all supplier contracts they have in place. Trust, but verify.

See also: The PBM vs. the Drug Manufacturer  

Second, require your suppliers to pick a side — yours, or theirs, but not in between. You, not an intermediary, should be able to choose who provides services to you. You should never be penalized for choosing a supplier that isn’t your intermediary’s preferred choice.

Third, demand independence. Intermediaries must represent the company and customer interests. There’s an obvious conflict of interest when an intermediary also represents a seller of goods that constitutes a significant source of the intermediary’s revenue. Stop doing business with intermediaries who have such conflicts.

Congratulations to all the CVS and Aetna stockholders out there; there’s a big payday headed your way. Because one person’s profit is another person’s cost, expect the price of health care to increase in this brave new world.

However, in the long run, the rest of us are going to bet on the new Amazon/Berkshire-Hathaway/JP Morgan model from Bezos, Buffett and Dimon to lead the charge of purchasers taking control of their own destinies.

Pursuing Purpose? Or Just Propaganda?

U.S. pharmacy chain CVS recently announced that it would no longer use “materially altered” imagery to market beauty products in its stores.

That means no more perfect, digitally modified wrinkle- and blemish-free photographs to sell everything from moisturizer to lipstick. Instead, consumers will see more realistic pictures of models, complete with crow’s feet and birthmarks.

Why did CVS make this change? It all has to do with the company’s brand purpose, the “reason for being.”

In a statement announcing the change, CVS noted the connection between the propagation of unrealistic body images and negative health effects, particularly for girls and young women. Given that the company’s stated corporate purpose is to “help people on their path to better health,” the use of airbrushed images in promotional materials seemed contradictory and ill-advised.

This isn’t the first time CVS has made a bold move inspired by its brand purpose. A few years ago, the firm stopped selling cigarette and tobacco products, forgoing an estimated $2 billion in revenue. That decision, too, was triggered by the inconsistency between the company’s purpose and the well-documented health effects of those products.

What CVS is giving us here is a master class in the difference between corporate purpose and corporate propaganda.

Most firms practice the latter – articulating a business purpose that makes for good annual report copy but doesn’t translate into tangible action. It’s nothing more that corporate window dressing.

See also: How to Apply ‘Lean’ to Insurance  

Far less common, but much more notable, are firms like CVS that don’t just define a brand purpose but actually live by it (even when it requires really tough decisions, like walking away from a $2 billion business).

Such actions help pave the way for a better and more distinctive customer experience because, in the eyes of consumers, it makes the company more appealing, more genuine and more authentic.

Kudos to CVS for taking yet another bold stand that helps make their brand purpose more than just a piece of corporate propaganda. Those kinds of decisions can spruce up a company’s brand image far more effectively than even the best airbrush.

This article was originally published on WaterRemarks.

2018 Workers’ Comp Issues to Watch

The first Out Front Ideas with Kimberly and Mark webinar of 2018 provided our thoughts on the 20 Workers’ Compensation Issues to Watch in 2017. What follows is a summary of the issues discussed:


The healthcare industry continues to evolve at a rapid pace, and the evolution is vast, encompassing everything from pharma to practice to technological disruptors.

Consolidation and mergers and acquisitions in the healthcare space will continue in 2018. As CVS looks to broaden with the acquisition of Aetna, do not be surprised if Amazon, Walmart and other large employers expand their reach into health, as well. Health systems have been merging for years. In some of the mergers, we are now beginning to see hospital and facility exits resulting in local disruption for patients, providers, insurers and the benefit and risk programs of those affected. For many years, health plans have been in the business of delivering patient care. Probably the best example is Kaiser Permanente, operating as both a health plan and healthcare provider. Similar to UHG’s announcement of its DaVita acquisition, we will likely see more payer/practice mix in 2018. Drug companies are purchasing other drug companies, and, given their R&D cycles, generic and biosimilar opportunities, we do not anticipate this to decrease.

Under Dr. Scott Gottlieb’s oversight at the FDA, expect to see approval and safety pathways accelerated in 2018, which will enable speed to market for new generic drugs, digital health software and medical devices.

A few additional hot topics will include:

  • Scope-of-practice advancements for physician assistants and nurse practitioners given their underutilization.
  • Competition for convenient, quicker, more-accessible options for care with growing emphasis on community care, home care, retail clinic care and telemedicine.
  • For most medical providers, revenues are flat while expenses continue to rise, prompting significant focus on efficiency. Offices and systems need to improve speed of delivery and agility at all levels.
  • Value-based care models and value-based reimbursements. Examples in workers’ compensation include physician/health system pay for outcomes and bundled payments arrangements. Health plans look at population health outcomes and continue to advance accountable care organization (ACO) models.
  • Pharma continues to aggressively address the need to create value for outcomes related to drug pricing. The debate there continues. How much is a drug worth if it literally saves the life of a patient?

Legislative Watch

Thirty-four of the 50 state governors are currently Republicans. This, combined with the fact that insurance rates are down in most of the U.S., means we have not seen a significant push for workers’ compensation reforms the last few years. However, there are still some states where significant activity is expected in 2018.

  • Florida will again attempt to fix the plaintiff attorney fee caps that were found unconstitutional by the state supreme court two years ago.
  • Pennsylvania had the part of its workers’ compensation statutes dealing with the evaluation of impairment found unconstitutional in 2017. Efforts are underway to correct this legislatively.
  • Expect the workers’ compensation reform battles between Illinois Gov. Rauner and the Democrat-controlled legislature to continue. This is an election year for the Illinois governor.
  • In California, it is Gov. Brown’s last year. Expect yet another push by the legislature to undermine prior workers’ compensation reforms. Universal healthcare will likely be an issue in the 2018 governor’s race, and the outcome of this election could have a significant impact on workers’ compensation in 2019.

Treatment Guidelines and Drug Formularies

We have seen a positive trend in states adopting treatment guidelines and drug formularies, which can help injured workers get proper, timely care and help to reduce unnecessary treatment.

In 2018, California, New York and Arkansas will all be implementing new treatment guidelines or drug formularies. Montana is also implementing a drug formulary, but the timeline for this is not set yet.

Georgia, Pennsylvania, North Carolina and Louisiana all considered either treatment guidelines or drug formularies in 2017, and we expect them to revisit this again in 2018.

See also: The State of Workers’ Compensation  

Judicial Watch

Every year around the country, judges modify the practice of workers’ compensation in their state based on their interpretation of the statutes. These interpretations can significantly expand or restrict workers’ compensation benefits in the state. It is as important to monitor the court decisions in your state as it is to monitor legislative activity.

Along those lines, challenging the constitutionality of workers’ compensation statutes is a trend that is expected to continue in 2018. Last year, Pennsylvania joined the list of states to have a portion of their workers’ compensation statutes found unconstitutional by the state supreme court. There is a case on appeal in Kansas right now challenging the constitutionality of a portion of their statute, as well. The basis for these constitutional challenges exists in many other states.

Finally, last year, a judge in Alabama declared the state’s entire workers’ compensation statutes unconstitutional. This was appealed, and the case settled on appeal, so that decision ultimately was rendered moot. However, the issues raised in that court case regarding benefit adequacy are something we could see again anywhere.

Workplace Violence

Companies are working to raise awareness of workplace violence. Whether they are engaging consultants to assist with planning or conducting revised employee training, risk managers and human resources are working together to ensure they have a solid program in place. There is an uptick in patient attacks on healthcare workers. This is happening all too often, ranging from emergency room to mental health facilities and nursing home care settings.

Given that 2017 marks an unprecedented awareness of sexual harassment in the workplace, we are adding workplace harassment as an issue to watch. Employers small and large are looking at their sexual harassment policies, training and complaint-investigation processes.

State Variations

Workers’ compensation is a state-based system, and the variation between the states is something that has been attracting consistent attention. Two people performing the same job for the same company in different states can receive significantly different workers’ compensation benefits. The very definition of an employee varies by state. From the administrative side, a lack of consistency with regard to state forms, data templates and even the definition of disability is very challenging to payers.

The U.S. Department of Labor started looking into these issues in late 2016, but those efforts stopped after the election of President Trump. However, those issues are still very real and need to be addressed. Now is probably the best time to establish standards between state workers’ compensation systems – now, when the federal government is not pushing for it. If no action is taken, it is likely that the federal government will push for this in the future.

Pain Management

Everyone is keenly aware of the opioid crisis and the importance of tapering narcotics, narcotics avoidance, formularies and deaths related to opioids. 2018 provides the opportunity to advance our understanding of these issues and willingness to change treatment protocols for patients in pre-pain, acute pain and chronic pain states. With pain, one size does not fit all. Personalization of care and working in partnership with the patient, the family or support system and providers to collectively create a treatment pathway for the patient is important to ensure success.

Natural Disasters

2017 was an unprecedented year for natural disasters in the U.S., with multiple major hurricanes and widespread wildfires. Natural disasters can have a big impact on workers’ compensation and healthcare systems, including the risks faced by first responders, the disruption to your workforce, challenges to the benefit delivery system and supply chain disruption.


Every company has cyber risks and preparedness, and recovery is a daily priority for the CIO. Cyber risk reaches beyond hacking and selling personal identifiable information on the deep dark web. It can be a life and death concern. Health systems locally and worldwide were hit with ransomware in 2017, shutting down hospital and practice computer systems while money was demanded in exchange for digital keys to unlock the systems. Patient data hacks have resulted in medical device malfunctions and treatment delays. A recent cyber attack on Merck hurt its ability to produce medicines. Workers’ compensation payers, service providers and stakeholders are equally at risk. History shows that companies without a solid cyber insurance program put their business at risk. Companies and customers will place even greater emphasis on cyber risks in 2018

Rate Adequacy

For the last few years, workers’ compensation rates around the country have been flat to down in most states. This is in spite of the fact that NCCI data shows that, over the last 20 years, the average medical and indemnity costs per lost time claim have increased at rates greater than inflation.

In 2017, two of the top 10 writers of workers’ compensation posted multimillion-dollar reserve increases to cover their developing losses. This attracted the attention of rating agencies such as A.M. Best, which, in a September report, raised concern about the threat of inflation on workers’ compensation tail costs and the impact this could have on industry reserves.

Multiple brokers have indicated that the workers’ compensation rate outlook for 2018 is relatively flat. But with workers’ compensation being such a long-tail business, premiums collected today must cover losses 30 years into the future. As losses continue to climb, it is inevitable that insurance rates will need to increase in the future to offset those losses.

Job Accommodation

Silos within companies result in multiple return-to-work policies, both formal and informal. Return to work is not a workers’ compensation issue, alone. The issue is inconsistent with job accommodations across organizations. Whether an employee is injured on the job, requests an accommodation as part of a disability or leave of absence or has the need for an accommodation in general does not alter the way in which an accommodation is handled. In 2018, we encourage you to break down the RTW silos and get comfortable outside your typical area of responsibility. We should not only meet ADA requirements but also provide employees the accommodations they deserve.

Impaired Workforce

2018 means that recreational marijuana is now legal in more states than ever before, with California becoming the largest state to allow use.

However, the reality of recreational marijuana is that this likely means that a percentage of your workforce is impaired on the job. Many employers stopped pre-employment drug testing for marijuana because too many potential workers failed the drug test and because the presence of marijuana in your system does not mean you are currently impaired. That’s the problem. Right now, there is no reliable method for employers to determine if their employees are impaired on the job. There is no “marijuana breathalyzer” that can quickly and accurately show whether a person is impaired. The bottom line is that the science of marijuana has not caught up with the social realities of marijuana.

What can employers do? Courts have consistently ruled that employers with drug-free workplace policies can terminate an employee who tests positive for marijuana, even if the employee is using medical marijuana. There is one notable exception. Last year, a Maryland court allowed an employee to pursue a wrongful termination claim under these circumstances. Will other states follow the Maryland precedent or the cases in California, Colorado, Michigan and other states where the termination was allowed?

In addition, what happens now that the Department of Justice has rescinded the Obama administration policy memo that indicated the federal government would defer to the states to enforce marijuana laws? Does this mean the federal government will start to arrest marijuana users and producers? No one knows for certain. Perhaps this will force Congress to take action on marijuana.

Digital Health

Digital health is a broad term related to the use of technology and health. Examples include mobile health apps, telemedicine products, tools to track consumer/patient data, education and patient reminder programs and treatment adherence. For those working in the digital health space, connectivity is the issue. There are plenty of technology solutions; the issue is how to connect all the stakeholders: patients, doctors and service providers, pharmacists and payers. Without connectivity, silos remain, and the system is too clunky to be effective.

Probably the most common digital health discussion in workers’ comp is telehealth. We have been slow to adopt comprehensive programs, whereas the benefits space has been at it for more than five years. Group health has moved past triage of physical symptoms to treating mental health and, in 2018, moving into chronic disease management. Look for more hospitals to offer telehealth services as they diversify care offerings and seek to enhance their offerings. Technology has improved, and consumer awareness and interest is growing, so now is the time for workers’ comp to jump on board.


Under the Obama administration, OSHA had a publicly stated policy of “shaming” employers in compliance. That meant frequent press releases highlighting violations, even if those violations were later rescinded. In 2016, there were more than 200 OSHA press releases on enforcement actions.

OSHA under President Trump has been much more focused on education than penalties. As of late October, the administration had issued less than 20 press releases on enforcement actions. Scott Mungo, who worked for FedEx Ground, was nominated by President Trump to head OSHA in October. In December, his nomination was approved by the Senate committee, and it is expected he will be confirmed by the full Senate soon.

What should we expect from OSHA under President Trump? If the first year of his term is any indication, we will see fewer new regulations and perhaps even a rollback of some existing regulations. The approach has been more consultative with employers, rather than combative.

Workforce Wellbeing

Human resources, risk managers and executive leaders recognize that workforce wellbeing affects both top and bottom line performance of an organization. Benefits are a talent attraction and retention tool in 2018, and human resource officers are deploying programs to address physical, emotional and financial wellness – the three pillars of health. Wellbeing programs place emphasis on an individual’s personal needs and considerations for both health and productivity. Workplace wellbeing programs in 2018 expand far beyond weight loss and smoking cessation. They may also include financial planning tools, resilience and mental health awareness training. To promote use of benefits, human resources departments need to break down the benefit silos. The whole health model at Sedgwick health is a great example, because it integrates group health, leave of absence, workers’ compensation, short-term disability and job accommodations. Benefit integration and ease of use drives engagement, which, in turn, improves business performance.


When you hear about workers’ compensation fraud, the first thing that comes to mind is videos showing allegedly disabled workers engaged in a variety of physical activities they claim to be unable to do. While these videos are sensational, the reality is that true fraud from injured workers is rare.

The most common source of workers’ compensation fraud comes from employers in the form of premium fraud. Underreporting payroll, misclassifying workers and incorrectly classifying workers as independent contractors is something that happens all too often. Employers that commit workers’ compensation fraud drive higher premiums for honest employers and create an unfair competitive business environment. The construction and staffing industries have been dealing with this issue for many years. Many states have been aggressively cracking down on this type of fraud, but it continues to be a significant problem.

See also: 25 Axioms Of Medical Care In The Workers Compensation System  

Medical provider fraud is another area of workers’ compensation fraud getting more attention lately. In the last two years, we have seen several high-profile prosecutions of medical providers in California. The fraudulent treatment alleged in these cases amounts to billions of dollars. We have not seen medical fraud like this in other states, in part because California’s system has a high percentage of post-injury CT claims, which allows unauthorized treatment and the filing of a lien by the medical provider. These elements create an environment that is ripe for fraud and abuse. We hope that we will not see this fraudulent behavior spread to other states and that California will continue its diligent prosecution of these cases.

Consumer Experience and Engagement

We are living in a consumer’s world today. The pace with which we want our services delivered and the high standard of excellence expected has led all sectors in business, including health and workers’ compensation, to consider their definition of consumer. Failure to engage a consumer leads to complaints and negative PR and possibly lack of treatment adherence, whereas high levels of consumer experience lead to positive outcomes. You will hear more about use of net promoter score (NPS) to understand consumer experience and link to engagement in 2018, and we believe use of NPS has potential in workers’ compensation. Now is the time to engage consumers in the conversation around our products, services and certainly program design. The injured worker’s voice is often missing in the workers’ compensation system.

People, Places and Things

The aging workforce, the evolving workforce and technology are all having a significant impact on the workers’ compensation industry. In the coming years, we will see a significant exodus of talent from our industry due to retirement. How do we attract the next generation and compete against other industries for people? What will the office of the future look like? How will changes in technology affect the way we do our jobs, including how we communicate with injured workers?


If you have not checked out the latest conversations in insurtech, 2018 is the time. The market has grown considerably in the last three years with a worldwide platform. What’s insurtech? Insurtech is use of technology to bring efficiencies to the insurance industry. Those engaged with insurtech believe new tech players will disrupt the current insurance market by bringing coverage to a digitally savvy customer base. Customer expectations of seamless, instant transactions are increasingly the norm, and insurtech use of blockchain and AI are promising – although yet to be proven in most scenarios. Much of the focus of insurtech is on personal lines, but it is starting to move into commercial segments. McKinsey reported last year that 46% of insurtech companies are focused on property and casualty, 33% on health and the remainder on life. They target primarily pure risk insurance, where they have developed access points to the value chain on innovations.

Immigration Reform

Finally, immigration reform is something that has been talked about politically for years, but Congress has not been able to advance any meaningful discussions in this area. Will that change in 2018? Our country and Congress appear deeply divided on this very important issue. The outcomes of these discussions could have a significant impact on the millions of undocumented immigrants currently working in this country without the benefit of workers’ compensation coverage or other workplace rules and regulations.

To listen to the complete webinar, click on this link.