FLORIDA WORKERS’ COMPENSATION COSTS PER CLAIM HIGHER AMONG 12 STATES AND RISING, WCRI STUDY REPORTS

Cambridge, MA, July 14, 2003 – Workers’ compensation costs per claim in Florida for all paid claims were higher than most states analyzed in a national study and growing at a double-digit rate, according to a new study by the Workers Compensation Research Institute (WCRI).

The WCRI study found that a workers’ compensation claim in Florida cost an average of $3,081 for 1999 claims evaluated in mid-2000 – 18 percent higher than the median of the 12 states in the study.

In addition to Florida, the states included in the WCRI study were: California, Connecticut, Georgia, Illinois, Indiana, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin.

Among the factors behind the high costs per claim in Florida were higher frequency and costs associated with claims for the more serious injuries – called permanent partial disabilities (PPD) – and lump-sum settlements.  Lump-sum settlements are agreements that typically close out a workers’ compensation claim and result in a single payment to the worker. 

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

The study reported that the average cost per claim for all paid claims in Florida rose an average of 10 percent per year between 1998 and 2000, for claims with 12 months of experience.  During this two-year period, both medical and indemnity payments – payments to injured workers for lost-time injuries – per claim grew rapidly at an annual average of 9 percent and 10 percent respectively.

WCRI reported that Florida’s growth in costs per claim during the most recent period analyzed (1999 claims as of mid-2000) was fueled in part by an increase in the share of claims with more than seven days of lost time, up nearly one percent.  Minor shifts in this area can have a large impact on costs.

Other factors behind rising costs were longer durations of temporary disabilities, higher PPD benefits per claim and lump-sum settlements, and more frequent lump-sum settlements.

“Public policymakers in Florida should examine the higher costs per claim in Florida and what’s behind them, in particular the higher frequency and costs of PPD claims and lump-sum settlements,” said Dr. Richard Victor, executive director of the Cambridge, Mass.-based WCRI.  “They also are among the factors driving the rising claim costs.”

The study also reported that benefit delivery expenses – payments to defense attorneys and other litigation-related expenses and expenses for medical cost containment services – were among the highest of the study states, accounting for 14 percent of total costs per claim.

The main reasons were a higher percentage of claims with medical cost containment services and higher expenses per claim for those services, more frequent defense attorney involvement, and higher than typical defense attorney payments per claim.

The study found that Florida was among the most litigious of the twelve large states studied as measured by the percentage of claims in which defense attorneys were involved – 32 percent versus the 12-state median of 22 percent (1997 claims evaluated as of mid-2000).   

By contrast, defense attorneys were involved in less than ten percent of claims in Indiana, Texas and Wisconsin.

Defense attorney payments also were highest in Florida at more than $3,600 per claim – nearly 90 percent higher than the12-state median of $1,918 (1997 claims evaluated as of mid-2000).

Florida was among the fastest states in delivering workers’ compensation benefits to injured workers, according to the study. Fifty-four percent of injured workers in Florida received their first payment of indemnity benefits within 21 days of injury, compared to the 12-state median of 45 percent.    

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization supported in its public policy research by employers, insurers, insurance regulators and state regulatory agencies as well as several state labor organizations.