Costs of Workers Comp Claims Accelerating

July 19, 2001 ( - The costs of workers compensation claims are accelerating, with costs in California outpacing all other states researched in a recent eight-state study.

Research by the Workers Compensation Research Institute (WCRI) showed claims costs growing by 11% between 1997 and 1998, with both the medical cost component and the income benefit component growing significantly.

The study compared the workers’ compensation systems on measures such as benefit payments and claim cost, timeliness of payments, and attorney involvement by analyzing a similar group of claims and adjusting for industry mix, wage levels and injury type.

Legal Fees

Results show California to have the most cost drivers. Topping the list were increasingly high benefit delivery expenses such as claim-adjusting, medical cost containment expenses and litigation expenses.

Indeed, litigation expenses represent 12 to 13% of total claim costs and the percentage of claims involving defense attorneys is growing, reaching 26% of claims between 1996 and mid-1999, an increase of 5% from 1994 numbers.

The study also found that a quarter of California’s claims involved medical-legal exams – also the case in Massachusetts. The cost of the exams was also highest in California, more than double the average costs in Georgia, the state with the lowest medical-legal expenses per claim.

Other Drivers

Vocational rehabilitation services also sent costs soaring in California, where they were 30% higher than the next highest state, probably because in California, qualified workers are entitled to these services, and in the other states they are provided voluntarily.

An increasing number of lump sum claims or payments for permanent disabilities also drove costs higher.  In both California and Texas, such claims made up more than 50% of total claims between 1996 and mid-1999, an increase of 6% on 1994 figures.

In addition, costs ballooned due to an increase in time away from work. The average duration for a temporary disability claim in California was 14 weeks, a two-week increase since 1995, and almost double that of the average claim in Wisconsin and Connecticut, where the lowest per-claim income benefit costs were recorded.

The percentage of claims with more than one week of lost time increased by 2% from 1996 to 1998.

The other states included the study, CompScopeBenchmarks: Multistate Comparisons, 1994-1999, which represent 40% of US workers’ compensation benefits, were Connecticut, Florida, Georgia, Massachusetts, Pennsylvania, Texas and Wisconsin.