Workers’ Compensation in Montana: Administrative Inventory.

After a series of economic seminars held in 2006 raised concerns about business competitiveness in Montana, the governor authorized a study to compare costs and benefits of the Montana workers’ compensation system with those of thirteen other state systems. As one part of this study project, WCRI was asked to conduct an administrative inventory to help policymakers and participants understand how the Montana system is administered and functions. 

When WCRI studied the Montana system in mid-2006, system participants were discussing how to balance Montana’s costs to employers with what appears to be a broader benefit structure than in most states WCRI has studied, owing in part to some different characteristics of workers and employers in Montana. Business and insurer representatives identified high workers’ compensation premiums, rising medical costs, the scarcity of doctors willing to treat injured workers, an outdated medical fee schedule, the “unbundling” of hospital charges, the proliferation of surgical centers not covered by the hospital fee schedules, medical utilization, adverse rulings by the Montana Supreme Court, and rising permanent partial disability costs among their concerns.  Worker representatives said that indemnity benefits have eroded over time, the maximum weekly amount for temporary total disability benefits hurts higher-wage workers, many workers have limited access to attorneys, permanent total disability benefits should not cease at retirement age, and medical costs are rising.

Among Our Key Findings:

• Compared to other states in the Montana Workers’ Compensation Study Project, the benefit cost to insured employers in Montana appears to be higher than in the ten other states for which there is comparable data (policy year 2002, the most recent year available). Total incurred benefits (indemnity and medical) per 100,000 workers were almost 123 percent above the median for this group of states. A combination of factors in Montana may be at work to produce this result: 1) a higher frequency of injuries; 2) a higher proportion of incurred total claims that involved indemnity benefits; 3) a higher proportion of permanent partial disability claims; and 4) a much higher average incurred medical cost per lost-time claim.

• Montana has strikingly higher total and indemnity claim frequencies. The state’s total number of incurred claims (indemnity and medical only) per 100,000 workers was the highest among 46 U.S. jurisdictions in policy year 2002 – 52 percent above the median state (and 26 percent above the median of five neighboring study states). The frequency of indemnity claims in the same time period was 52 percent above the median of 46 jurisdictions (and 53 percent above neighboring states). The proportion of total claims per 100,000 workers that involved indemnity benefits was 22.5 percent, about the same as the U.S. median of 23.1 percent for 46 jurisdictions, but higher than the median of neighboring study states (18.4 percent).

• A higher Occupational Safety and Health Administration (OSHA) injury rate is one possible explanation for Montana’s higher claim frequency relative to most neighboring study states. OSHA data in 2005 on the private industry incidence rate for lost-time cases show that at 2.2 injuries and illnesses per 100,000 full-time workers, Montana was higher than the rates for all but one neighboring study state (Utah, 1.2; Oregon, 1.7; Washington, 2.0; and Wyoming, 2.3) for which OSHA data were available.

• The benefit structure in Montana appears to be broader than in most states WCRI has studied. Four system features appear to be working together to produce this result. First, medical benefits may remain open longer, primarily because of limitations on obtaining compromise lump-sum settlements that close out future medical benefits. Second, more workers receive vocational rehabilitation maintenance payments. Third, if a worker with a permanent impairment has not returned to work, temporary total disability benefits cannot be terminated unilaterally by the payor at the time the worker reaches maximum medical improvement. Fourth, more workers receive permanent total disability benefits than in the typical neighboring study state.

Workers' Compensation in Montana: Administrative Inventory. Duncan S. Ballantyne. March 2007. WC-07-12.