WCRI Study Reports Pa. Workers’ Comp Costs Per Claim Continue Upward Trend

January 21, 2004

Workers’ compensation costs per claim in Pennsylvania continue to grow, according to a new study by the Workers Compensation Research Institute (WCRI).

The study by the Cambridge, Mass-based WCRI found that costs per claim rose 8.5 percent per year on average from 1999/2000 to 2001/ 2002, for claims with 12 months of experience. This contrasts with more moderate growth of four to five percent per year in the two years prior to 1999.

Nevertheless, at an average of $2,710 per claim, total costs per workers’ compensation claim in Pennsylvania are 15 percent lower than the median of the other states in a national study, CompScope(TM) Benchmarks: Multistate Comparisons, 4th Edition. The study of 12 states, representing about 60 percent of workers’ compensation benefits paid nationally, provides a comparison of key system performance measures.

The major factor behind the recent cost increases in Pennsylvania was a double-digit increase in medical costs per claim. This rise was partly attributable to the annual adjustment in the fee schedule levels to reflect the percentage increase in the statewide average weekly wage.

The cost of indemnity benefits per claim – wage replacement payments for lost-time injuries – rose 5 percent in 2001 claims as of 2002 over the previous year, according to the study. Several factors drove the increase. The growth in indemnity costs per claim for the claims involving more serious injuries – permanent partial disabilities (PPD) – or lump-sum settlements was one factor. Another was an increase in the duration of temporary disability.

Benefit delivery expenses per claim increased at double-digit rates from 1996/1997 to 2001/2002 driven mainly by growth in medical cost containment expenses per claim.

In addition to Pennsylvania, the other states in the study were California, Connecticut, Florida, Illinois, Indiana, Louisiana, Massachusetts, North Carolina, Tennessee, Texas and Wisconsin.

“Efforts to control rising workers’ compensation costs should focus on the cost drivers in Pennsylvania,” said Dr. Richard Victor, executive director of WCRI. “This report will help policymakers in Pennsylvania assess the root causes of what’s behind the increases – rapidly increasing costs per claim, particularly double-digit increases in medical costs per claim and benefit delivery expenses,” he said.

The study found that 44 percent of workers in Pennsylvania received their first check within 21 days of injury for 2001 claims as of 2002. This result was typical of the states in the study. Unlike most study states, Pennsylvania saw a two-point increase in the percentage of claims paid within 21 days of injury for the most recent year.

The study noted these results may reflect the impact of efforts by public officials, insurers and employers during the past few years to improve time to first payment.

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