1. 2022 elections

With a narrow Republican majority in the House, a Democratic majority in the Senate, and minimal compromise to be made, there likely will not be significant federal legislation passed in the next two years. Statewide, Democrats gained gubernatorial and legislative branch control in Maryland, Massachusetts, Michigan and Minnesota, making it easier to pursue legislative agendas. Maryland and Massachusetts could face more significant impacts, with both states flipping gubernatorial parties.
Florida's recent special legislative session passed a reform bill addressing litigation abuses in their property marketplace that led to carrier insolvencies and significantly limited consumer choice. There will be further litigation over this bill, so the intended savings may or may not be realized. Nonetheless, this was a significant reform bill pursued for many years.
In California, there is much discussion around workers' compensation reforms. Their prior reform bill's cost savings measures have run their course and costs are rising again. Large employers are requesting cost savings focused on the litigation process, while labor is pushing for higher indemnity benefits.
Finally, legislation allowing PTSD benefits for first responders has been passed in many states over the last few years. For many of these states, this legislation benefits first responders only. With an increasing focus on mental health in the workplace, many more states may take steps to include "mental-mental" injuries as part of their workers' compensation.
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2. Health care industry challenges

The talent crunch is a primary concern for the health care industry, with continuously worsening statistics. The American Medical Association reports that 35% of the physician workforce will be within retirement age over the next five years. A recent study from the journal Health Affairs found that the supply of registered nurses decreased by more than 100,000 between 2020 and 2021. That is the largest drop observed over the last four decades.
Technology will be a priority for the industry this year, whether digital patient health management tools, artificial intelligence (AI), or machine learning for treatment protocols. Telehealth continues to expand, providing virtual primary care for managing chronic conditions and growth through mental health services. Startups and venture capitalists aim to further health technology services to tackle the challenge of fragmentation in health care. With the vision for more specialist tech-enabled care, AI and machine learning are prime for cancer care, neurology and primary care.
Retail health also continues to expand offerings in local communities to bring health care closer to where people live and work. Amazon and Walgreens have announced significant primary care clinic deals while Walmart Health continues to expand locations. CVS is focusing on its retail health hubs within existing sites while continuing to look for a meaningful primary care acquisition.
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3. Inflation & recession

Inflation hit a 40-year high in 2022, with interest rates surging. Low unemployment rates have supported wage increases, but inflation has drastically increased the prices of food, energy, housing and most goods. The Federal Reserve had seven consecutive rate hikes in 2022, with more expected this year. Expect increases by 25-50 basis points through at least June 2023 and for interest rates to hold at 5%-5.25%.
Weak growth is anticipated worldwide, at 1.4%-1.6%, with many economists predicting a mild recession by the end of the year. With expected job losses, households will focus on tightening spending while businesses are evaluating cost control measures. The Federal Reserve's inflation target is 2%, but with current rates at 5.9%, it will likely take two to three years to meet that goal.
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4. COVID continues

Overall, workers' compensation trends related to COVID-19 have remained consistent. Some of the key findings across 195,000 claims were:

• 95% of claims involve minimal medical treatment and time away from work.
• Fatality claims remain at approximately 0.5%, most of which occurred during the early variants.
• Health care remains the industry most impacted, accounting for roughly 45% of claims. The following two most affected industries are public entities (22%) and retail (16%).
• Roughly 97% of the claims are closed, with only 3% open.
• The average cost for closed claims is less than $2,000, excluding zero-dollar paid claims.
• Litigation remains very low, with only slightly above 1%.
• Data indicates that Long COVID, defined as claims with medical treatment beyond 90 days, represents 1.5% of the claims. These claims are complex and require advanced strategy and support for the claims team via medical directors, pharmacists and behavioral health specialists.

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5. Cyber risk

The frequency and costs associated with cyber risks continue to grow. According to the Cost of a Data Breach 2022 report from IBM, the average price of a data breach in the United States is $9.44 million, more than double the global average for a data breach. The health care industry faces the highest costs, averaging $10.1 million per breach, a 42% increase since 2020. The report also indicated the share of breaches caused by ransomware grew by 41% in the last year and took 49 days longer to identify and contain.
State-sponsored cyberattacks from Russia, North Korea and China are a growing concern. Carriers and reinsurers are attempting to classify these as "acts of war." Still, courts have not consistently supported these exclusions, leading carriers and reinsurers to try and tighten up the language in their policies.
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6. Technology transformation

The most innovative companies are discussing automation opportunities, live chat use case scenarios, and using customer sentiment to build resilience within the claims team and improve customer service. These companies have also expanded their data science capabilities due to the massive benefits of large data sets and the integration of data science in technology solutions. Organizations must get comfortable with uncomfortable conversations around technology innovation to avoid delays in driving their business forward.
Adjusters and nurses want to focus on helping workers, physicians, employers, and claimants and avoid duplicative documentation and repetitive tasks within their claims and case management systems. Digital solutions that expedite policy verification, eligibility, claims intake and reporting, document validation, rules-based decisioning and automation of simple, low-dollar claims should all be considered.
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7. Employee benefits

Health benefits experts predict medical plan cost increases from 6%-10% in 2023 due to rising labor costs, health care costs, prescription drugs and supply chain issues. Employers are offering holistic leave, flexibility for caregivers, backup childcare services, personalized work schedules and expanded opportunities to meet family obligations.
Fertility and family planning services are increasingly popular, with employers offering fertility, adoption, foster placement, and surrogacy programs to support diversity, equity, and inclusion (DEI) goals and meet the needs of their workforce. These programs are increasingly gender-neutral and inclusive of employees' family planning situations.
City and statewide-mandated paid leave programs are anticipated to expand. Currently, 12 states mandate paid leave, with the additions of Oregon in 2023, Colorado in 2024, Maryland in 2025 and Delaware in 2026. Additionally, plan administrators must be mindful of surprise billing and comply with the ban on surprise billing for emergency services, air ambulances and specific medical treatments.
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8. Employee/independent contractor classification

States and the federal government have debated the definition of employee versus independent contractor for years. The definition within employment and tax laws may be different than it is under workers' compensation, creating a confusing situation for employers and workers.
In October 2022, the U.S. Department of Labor announced proposed rules to correctly classify workers, intending to significantly reduce the number of workers classified as independent contractors and reverse a previous Trump administration ruling. The October proposed rules were an extensive, multiprong test focused on the control of the work, the worker's skill and whether the work performed was integral to the principal's business. The final rules are expected to be issued in early 2023.
Regardless of these rules, it will ultimately be the court's interpretation of them that determine whether someone is classified as an employee or independent contractor. Employers could be subject to litigation that may eventually change their current classifications. Risk managers should continue to pay special attention to the agreements and insurance certificates affiliated with their independent contractors.
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9. Talent

With more job openings than unemployed workers, the labor market has been a hotbed of opportunities for workers, driving higher pay and better positions. Economists report the job market is likely to slow in 2023, with lower inflation and higher unemployment later in the year. As of the beginning of 2023, four jurisdictions in the U.S. have legislation requiring disclosure of salary in their open job postings, which may pressure organizations to improve pay transparency across their business.
With job openings surpassing the pool of applicants, now is the time to rethink hiring practices. HR teams should review job descriptions, education and years of required experience to ensure they align with the necessary skillsets. Lived experiences should be considered, as they are critical to understanding empathy and patience, active listening, fact-finding, problem-solving and negotiation.
Risk and claims managers should be mindful of safety programs and worker training, since some employers are experiencing an uptick in injuries for younger employees and those with less than a year of experience.
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10. Workplace well-being

Corporate culture, collaborative work environments, communication, inclusivity, reasonable workloads, recognition and employee resource groups all impact workplace well-being. Many organizations include workplace well-being questions in employee surveys to understand their areas of opportunities. Leadership training focused on creating safe and inclusive environments can inspire leaders, helping them to understand the impact an inclusive team has on performance and employee satisfaction.
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