Workers Compensation Reserving Issues

1. Workers Compensation Reserving Issues in Texas

2. 1/1/91 Reform - Overview • Encourage less attorney involvement • Promote employer safety • Introduce medical fee guidelines • Large decreases in indemnity frequency • Overall-reduced costs 30-50%

3. 1/1/91 Reform - O/S Issues • Supplemental Income Benefits (SIBs) • Effect on Loss Development Patterns • Trends since Reform

4. Supplemental Income Benefits • Add-on to traditional indemnity benefits • 15% impairment rating required • Often disputed • Very few SIBs in loss data currently available

5. Loss Development Patterns • NCCI data suggests smaller tail, but larger development at earlier ages. • Effect of reform on tail unknown • Effect of SIBs, if any, not in data

6. Trends Since Reform • Medical frequency lower, but overall costs up • Medical severity higher than other states • Medical severity growing faster than other states • Use of Chiropractors Increasing

7. WC Medical SeverityTexas vs. Other States 18 Month Valuation

8. WC Medical SeverityTexas vs. Other States 18 Month Valuation

9. Texas WC Paymentsto Chiropractors 9.9% 7.3% 6.2% 4.8% 5.1% 5.5%

10. Conclusions • 1/1/91 Reform effect on tail still unknown • Medical costs increasing