March 2022 Casualty Report: Early Signs of Industry Stabilization
By Erik Bahnsen
As we progressed through 2021, we saw shades of “business as usual” as the economy reopened or partially reopened across the country. We also saw volatility that included historic inflation of consumer goods and home prices, widespread supply chain disruption, and rampaging waves of COVID-19 variants.
Despite these trends, there are early indicators of stabilization in the world of Casualty medical billing, especially in the latter half of the year. It’s certainly not business as usual from a pre-pandemic perspective, but the chips are settling into a “new normal” as much of the country continues to reevaluate and integrate virtual/remote-based work into their business models.
Let’s take a closer look at the evolving story from the perspective of impact severity, first-party casualty, and third-party casualty.
Auto Physical Damage Impact Severity
Auto claim frequency is recovering from the pandemic disruption of 2020, with increased traffic and building congestion throughout 2021 (slide 1) and collision claims recovering faster than liability or comprehensive claims (slide 2). Since collision claims are most often associated with front-end impacts, the percentage of claims with airbag deployment has remained well above the 2019 baseline but lower than post-pandemic peaks (slide 3).
First-Party Casualty (MP, PIP) Insights
First-party claim frequency stabilized throughout 2021 above the prior year but well below the 2019 baseline (slide 4). Cycle times for “average days date of loss to first date of service” have climbed post-pandemic onset as many people continue to delay initial treatment (slide 5). Cycle times for “average length of treatment per injured party” peaked after pandemic onset and appear to be decreasing through 2021 (slide 6). Like cycle times, treatment complexity (average procedures & average unique procedures per injured party) rose and ultimately peaked post-pandemic onset but appears to be decreasing throughout 2021 (slide 7).
Pivoting to severity (price inflation), we must first examine overall Consumer Price Index statistics for context (slide 8). According to the U.S. Bureau of Labor Statistics, medical inflation increased 4.11% in 2020 and 1.23% in 2021. This is the inverse of overall U.S. inflation of 1.4% in 2020 and 7% in 2021, which is the largest annual gain in 40 years. The medical trend tracks closely with CCC first party industry data showing stabilization of “average $ billed per bill line” in 2021 after notable gains in 2020 (slide 9).
Reviewing the distribution of dollars billed by procedure category, we see an increasingly large percentage of surgical billing in 2021, which was a trend that started post-pandemic onset (slide 10). We are also seeing gains in percentage of physical medicine/chiro, evaluation & management, inpatient, and psychiatry procedures after decreases in 2020. The surgical increases are driven by price inflation on injection codes and frequency increases on Arthroscopy (knee surgery) and “Other Surgical” (primarily “360 Operating Room/Other” Revenue Code). The physical medicine/chiro increases are driven by price inflation on active and passive treatments as well as frequency increases for active treatments (slide 11).
On the diagnosis side, we are seeing “soft tissue injury” primary diagnoses percentage increases, which started in 2020 and continued into 2021 (slide 12). This increase is driven primarily by associated gains in percentage of primary diagnoses for soft tissue nerve and disc injuries (slide 13). Lastly, we are seeing the distribution of injured parties by age group continue to change. The largest age segment (31-40) continued to increase year over year, while we also saw a resurgence of injured parties in the 61-80 segments as more “baby boomers” returned to the roads in 2021 (slide 14).
Third-Party Casualty (BI, UM/UIM) Insights
Third party demand package frequency stabilized in 2021 well below 2019 baseline after recovering from post-pandemic disruption (slide 15). Treatment cycle times climbed after pandemic onset, but there are signs of reduction in the latter half of 2021 (slide 16). Treatment complexity also increased during the post-pandemic period, with indicators of stabilization or reduction in the latter half of 2021 (slide 17).
Average severity per demand package peaked in late 2020 and early 2021 as a delayed effect of lower claim frequency and higher impact severity losses occurring immediately post-pandemic onset (slide 18).
Data maturation is a factor for third-party claims, as the average cycle time from date of loss to receipt of a demand package is 9-10 months. This same metric shows a decrease throughout the latter half of 2021.
At the procedural level, we are seeing a continued year-over-year increase in the percentage of dollars billed attributed to surgical procedures (slide 19). We are also seeing an increase in non-standard bill forms submitted with no procedure codes. Drilling into the surgical trend, we have observed cost inflation on all surgical subcategories (slide 20). We are seeing both cost inflation and frequency increases on spinal injection procedures.
In reviewing the diagnosis trends, we see continued year-over-year increases in primary diagnoses of disc injury (slide 21). In addition, we have observed gains in sprain/strain primary diagnoses in 2021 after reductions in 2020. Finally, we are seeing continued increases in the percentage of third-party injured parties aged 21-40, although the trend is subject to change (resemble first party) with continued maturation of data (slide 22).
The world continues to evolve and change at a breakneck pace, and subsequently our business partners’ needs for proactive, actionable data insights have become increasingly critical for continued success. CCC is all in on the big data mission as we march into the future.
For an expanded version of this report and/or additional discussion of this content, please reach out to your CCC Account Team.