FASTER GROWTH IN CALIFORNIA WORKERS’ COMPENSATION INDEMNITY COSTS PER CLAIM AFTER 2007 MAY REFLECT IMPACT OF RECESSION, SAYS STUDY

CAMBRIDGE, MA, January 23, 2012 –  Impact of the recession on California's workers' compensation system was observed as indemnity costs per claim grew faster from 2007 to 2009 than in prior years, according to a new study, CompScope™ Benchmarks for California, 12th Edition, by the Workers Compensation Research Institute (WCRI). 

Indemnity costs per claim—payments for lost wages, loss of earning capacity, or permanent impairment or disability—grew at an annual rate of 7 percent between 2007 and 2009, after the large decrease of nearly 30 percent from 2002 to 2005 due to reforms.  This growth in indemnity costs per claim was faster than the average growth rate from 2005 to 2007, and indicated some impact of the recession in California. 

The study noted that the average weekly wage of injured workers in California changed little from 2007 to 2009, slower than the 4 percent growth rate in prior years as wage growth declined during the recession period. At the same time, the average duration of temporary disability benefits increased by nearly one week per year, likely indicating the slower return to work because there were fewer jobs available. 

The study also reported that rapid growth in medical payments per claim to injured workers in California—8 percent per year for claims with more than seven days of lost time—resumed since 2005, after large decreases from the reforms in earlier years. In addition medical payments per claim grew rapidly in all regions in California after 2005. 

In spite of the recent growth in average medical payments per workers' compensation claim in California, the interstate ranking of the state shifted significantly due to the reforms, from being the highest of the 16 WCRI study states pre-reform to being lower than typical post-reform. 

Recent growth in medical payments per claim stemmed from multiple factors, including an increase in prices paid for office visits due to a fee schedule increase; growth in payments per service for facilities associated with surgical procedures; more complex office visits with higher prices billed more frequently; and moderate increases in services per visit for physical medicine. 

Medical-related expenses per claim also grew continuously over the study period, including the average medical cost containment expense per claim and the average medical-legal expense per claim. 

The Cambridge-based WCRI is recognized as a leader in providing objective, credible, and high-quality information about public policy issues involving workers' compensation systems.

ABOUT WCRI: 

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA.  Since 1983, WCRI has been a catalyst for significant improvements in workers' compensation systems around the world with its objective, credible, and high-quality research.  WCRI's members include employers; insurers; governmental entities; managed care companies; health care providers; insurance regulators; state labor organizations; and state administrative agencies in the U.S., Canada, Australia and New Zealand.