WORKERS COMP COSTS PER CLAIM IN MASSACHUSETTS MAY BE MODERATING AFTER NEAR DOUBLE-DIGIT GROWTH

CAMBRIDGE , MA , Feb. 4 – Following a very rapid increase from 1997 to 1998, growth in workers’ compensation costs per claim in Massachusetts has slowed to a more moderate rate, according to a new study by the Workers Compensation Research Institute (WCRI).

The study by the Cambridge, Mass.-based WCRI found that workers’ compensation costs per claim grew at a modest five percent rate between 1998 and 1999 as of mid-2000.  By contrast, costs per claim rose 9 percent between 1997 and 1998.

Indemnity benefits – wage replacement payments for lost-time injuries – which rose 6.5 percent are a stronger contributor to this per-claim growth than medical payments, which grew just 2 percent.

The study, CompScope™ Benchmarks:  Multistate Comparisons, 1994-2000, provides a meaningful comparison of the workers’ compensation systems in 12 large states on key performance measures such as benefit payments and claim costs, timeliness of payments and defense attorney involvement by analyzing a similar group of claims and adjusting for injury and industry mix and  wage levels.

The 12 study states, which represent 50 percent of the nation’s workers’ compensation benefits, are California , Connecticut , Florida , Georgia , Illinois , Indiana , Massachusetts , North Carolina , Pennsylvania , Tennessee , Texas and Wisconsin .

The study also reported that Massachusetts’ costs per claim are typical compared with other study states, reflecting the offsetting effects of medical payments per claim that are the lowest among the 12 study states ($1,039 in 2000) and the fact that Massachusetts has higher duration of disability – the highest percentage of claims with more than seven days of lost time (28 percent) and longer duration of temporary disability than typical of the states studied.

“The moderate increase in Massachusetts workers’ compensation costs per claim is an encouraging sign,” said Dr. Richard Victor, executive director of WCRI.

“But it is too early to tell if this signifies a trend or is a pause before costs per claim rise again as they have in the past following similar lulls,” he said.

Dr. Victor further observed that while overall workers’ compensation costs per claim are not out of line with other states, “the high percentage of lost-time claims remains a concern. Without the significantly lower per claim medical costs, average costs per claim in Massachusetts would probably be higher than in many study states.”

 With regard to Massachusetts ’ lower medical payments per claim, Dr. Victor also noted that, “if you can lower prices, manage utilization of medical services, and get good outcomes for workers, Massachusetts may have some lessons for other states, but lower medical costs alone don’t provide this information.” He added that WCRI has begun a study of injured workers in Massachusetts and several other states that will assess worker outcomes.

The study reported that benefit delivery expenses (at $1,291 per claim with more than seven days of lost time) are fairly typical among the 12 states. These expenses include litigation and claims adjusting expenses (defense attorney fees, medical-legal exams, ancillary legal) and medical cost containment expenses.

The rate of litigiousness as measured by defense attorney involvement has dropped, according to the study, from 25 percent of claims with more than seven days of lost time in 1994 to 20 percent of claims in 1997 (claims with 36 months’ experience).

Growth in defense attorney payments per claim was slower in 1999 – 6 percent over the previous year, after annual double-digit growth from 1994 to 1998 (claims with 12 month’ experience).

The study also found that nearly 60 percent of injured workers in Massachusetts were sent their first indemnity payment within 21 days of injury, the highest percentage of the 12 study states.

Massachusetts has experienced a steady increase in the proportion of workers who were sent their first indemnity payment within 21 days.  This gain is contrary to the trend in most study states.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducing public policy research on workers’ compensation, healthcare and disability issues. Its members include employers, insurers, insurance regulators and state regulatory agencies in the U.S. , Canada , Australia and New Zealand as well as several state labor organizations.