MICHIGAN WORKERS’ COMPENSATION COSTS PER CLAIM LOWER THAN TYPICAL AMONG 14 STATES, WCRI STUDY REPORTS

CAMBRIDGE, MA, March 14, 2008  –   Workers’ compensation costs per claim in Michigan were lower than typical among 14 states, according to a new study by the Workers Compensation Research Institute (WCRI).

The study by the Cambridge, Mass.-based WCRI found that lower-than-typical payments per claim for medical care of injured workers were a major factor in the lower costs per claim in Michigan.

The average medical payment per claim in Michigan was the lowest among the 14 study states, 31 percent lower than the median for injuries arising in 2003 with experience through the first quarter of 2006.

Payments per claim for lost wages, known as indemnity benefits, with more than seven days of lost time were 19 percent lower in Michigan than the 14-state median for 2003/2006 claims.

This was due to two factors, according to WCRI. First, despite the fact that Michigan is a wage-loss benefit system, the duration of temporary disability in Michigan was 4 to 15 weeks shorter than in the three other wage-loss states in the study (Louisiana, Massachusetts, and Pennsylvania).

Secondly, some workers received lower benefits and other workers received higher benefits under the Michigan benefit structure than they would have under a typical benefit structure.

A factor that contributed to lower indemnity benefits per claim was the benefit structure in Michigan, which bases weekly benefits on 80 percent of the worker’s after-tax (spendable) earnings, rather than on the more typical two-thirds of the worker’s average weekly wage. Also, the statutory weekly benefit maximum in Michigan is set at 90 percent of the statewide average weekly wage, rather than the more typical 100 percent.

 When compared with the benefit structure that is common in most study states, about 16 percent of workers (the lowest paid workers) get higher weekly benefits under the spendable earnings approach in Michigan. Some 49 percent of workers get weekly benefits that are within 5 percent of the typical benefit approach; 18 percent get 5-10 percent lower weekly benefits due to the spendable earnings approach; and 17 percent get 10 percent lower weekly benefits due to the lower maximum temporary disability benefit rate.

The WCRI study, CompScope™ Benchmarks for Michigan, 8^th Edition, provides a meaningful comparison of the workers’ compensation systems in Michigan and 13 other important 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, wage levels, and industry type.

The other states in the study were Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin.

Overall, the study showed that growth in total costs per claim in Michigan was 6 percent in the most recent study year, following two years of little change.

Total costs per claim with more than seven days of lost time in Michigan grew 6-8 percent per year over most of the study period.  Growth averaged 6 percent per year over the most recent two years.

According to WCRI, this growth was the product of three main factors: (1) rapid growth of 9 percent per year in medical payments per claim; (2) little change in indemnity benefits per claim (less than 3 percent per year on average); and (3) 8 percent per year growth in benefit delivery expenses per claim.

Growth in medical-legal expenses per claim accelerated through much of the study period, from 4 percent in 2002/2003 to 6 percent in 2003/2004 and 11 percent in 2004/2005. This may be related to the aftermath of a number of recent court decisions surrounding the definition of disability and right to continuing wage-loss benefits, WCRI noted.

WCRI reported that injury reporting time in Michigan was the slowest among the 14 study states, resulting in a somewhat longer time from injury to first indemnity payment. However, the speed of initial payments once the payor received notice of injury was faster in Michigan than in most study states.

The percentage of claims paid within 21 days of injury in Michigan also improved recently, rising by about 1 point per year from 2002/2003 to 2005/2006. The major contributing factor was an increase of 5 points overall in the percentage of claims paid within 14 days of payor notice over the three most recent years.