Workers' Compensation Managed Care Pricing Considerations

Workers' Compensation insurers have instituted significant managed care initiatives over the last 3 to 5 years. Savings can be significant. Due to the potential savings from managed care initiatives, it is important to reflect managed care in pricing workers' compensation products. The impact of managed care on insurer loss costs may vary dramatically depending on the type of product and the layer of coverage. Managed care will effect primary carriers different that excess carriers, since a managed care program will likely effect both the average cost per claim; and the distribution of these costs. This paper briefly describes managed care initiatives including fee discounts, utilization review, case management and capitated arrangements. It also discusses how managed care can be factored into actuarial pricing methodologies for both the primary layer and excess layers.