While today's workers' compensation market is generally favorable, there are many demographic and medical factors that are threatening to upset these favorable conditions in the future.

Medical challenges:

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. This domino effect will certainly impact workers' compensation.

The growing use and cost of 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.

The variability of workers’ compensation costs and treatments among states: The cost for treating the same type of work-related injury differs significantly from state to state, but it shouldn't.

Pharmacy trends: There are disturbing pharmacy trends at the provider level. For example, some treating physicians appear to be trying to avoid fee schedules by dispensing prescriptions, compounding medications, or prescribing and filling common medications at uncommon strengths. Americans spent $392 billion on prescriptions in 2014, up 6% from the year before. Per-capita pharmacy spending in America is twice as high as the averages of other developed nations around the world.

Demographic challenges:

The birth of the “sharing” or “Labor on Demand” economy, driven by technology’s ability to enable people to develop a unique work-life balance: The on-demand economy is best exemplified by online taxi services such as Uber and Lyft. This new economy could impact the workers' comp market by significantly decreasing the number of employees in formal relationships with companies, and changing the definition of a workplace injury.

The aging workforce: Today, roughly 20% of the workforce is aged 65 or older, double the rate in the 1990s. This group typically has fewer, but more expensive, workplace accidents and injuries. Their experience tends to make them safer, while their age often requires longer treatment when they do become injured. In fact, the number of days away from work for employees age 55 and older is nearly double that for other employees, according to the federal Bureau of Labor Statistics.

Obesity rates: Today, all 50 states have adult obesity rates of 20% or more. In fact, 35% of Americans are currently obese, and that figure could reach 50% by 2030. Workers' compensation costs are 5.9 times higher for obese employees. While the rate of obesity growth in American adults is beginning to slow, it still remains too high and will stay that way for the foreseeable future.