Today’s Workers’ Compensation market is generally favorable, but several emerging medical and demographic challenges possess the potential to upset the current balance. By better understanding the possible impact of these new variables on the market, buyers and brokers will be able to continue to protect employees—and their bottom line.

Medical challenges

Four emerging medical challenges may threaten the workers compensation market:

• The potential impact of the federal Affordable Care Act. This mandate may well increase workers’ compensation costs by increasing demand for medical services from a fixed number of providers. Simple economics dictates that if more Americans can buy medical services, the cost of those services will rise.

Beyond higher prices, greater demand will also lead to longer treatment and recovery times as claimants wait to get appointments, potentially impacting indemnity costs.

• The growing use of – and cost for – physical therapy. Fee schedules for physical therapy have increased over the past two years in nine states that have the greatest use of this service in workers’ compensation claims. California increased its fee schedule for all physical therapy billing codes by 5% to 6% in March of this year, while New Jersey increased its schedule by 3.6% last fall.

Managing the utilization and cost of physical therapy is becoming a key issue, so much so that clients, prospects and brokers are asking TPAs more questions about their strategies in this area.