WCRI: Pennsylvania’s Upward Trend in Workers’ Comp Costs Per Claim Slowed

March 14, 2005

Costs per workers’ compensation claim in Pennsylvania rose 6 percent between 2001 and 2002, according to a new report by the Cambridge, Mass.-based Workers Compensation Research Institute (WCRI). This contrasts with more rapid annual growth of 9-10 percent in the two prior years.

The study reported that the rate of growth in costs per claim in Pennsylvania was at or below the rate of growth in the median state over the study period. Rapid growth in medical costs per claim in the latest two years combined with moderate growth in indemnity benefits per claim – wage replacement payments for lost-time injuries – accounted for the recent trend in overall costs per claim, the report said.

The study, CompScope Benchmarks for Pennsylvania, 5th Edition, provides a meaningful comparison of the workers’ comp systems in Pennsylvania and 11 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 California, Connecticut, Florida, Illinois, Indiana, Louisiana, Massachusetts, North Carolina, Tennessee, Texas and Wisconsin.

The study also reported that workers’ comp costs per claim in Pennsylvania were around 15 percent lower than the median of the study states.

One reason for Pennsylvania’s lower costs per claim was that there were fewer claims involving the more serious injuries to workers – claims with more than seven days of lost time from the workplace. In Pennsylvania, only 17 percent of workers’ comp claims involved more than seven days of lost time, nearly five percentage points lower than the 12-state median.

In addition, the average medical costs per claim with more than seven days of lost time were 17 to 20 percent lower in Pennsylvania than the median of the study states.

Within 21 days of their injury, 45 percent of Pennsylvania workers received their first indemnity check – the same as the median of the 12 states.

However, the study found that the speed of first indemnity payment had improved in Pennsylvania from 2000 to 2002. For example, the percentage of claims with first indemnity payments made within 14 days following payor notification of injury increased by two percentage points in Pennsylvania. This measure fell in most of the study states.

The study noted these results may reflect the impact of efforts by state officials during the past few years to improve time to first payment.

Expenses to manage claims (benefit delivery expenses) were 21 percent higher in Pennsylvania than the 12-state median. Included in benefit delivery expenses are litigation expenses, such as defense attorney payments and medical-legal expenses, and expenses for medical cost containment services allocated to claims. In particular, the study noted that the average payments per claim for defense attorneys and for medical-legal reports were much higher than the 12-state median. Defense attorney payments per claim averaged $3,500, 45 percent higher than the median of the study states.

The study reported that average benefit delivery expenses per claim increased rapidly for the fourth consecutive year, driven mainly by sustained rapid growth in medical cost containment expenses per claim. However, the study further noted that the involvement of defense attorneys in claims was relatively stable, and growth in payments per claim to defense attorneys slowed over the study period to 5 percent in 2001 and 2002. This suggests that there is relative stability in the number and nature of disputes and the processes for handling them.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, healthcare and disability issues. Its members include employers, insurers, insurance regulators and state administrative agencies in the U.S., Canada, Australia and New Zealand as well as several state labor organizations.

To purchase the report, visit WCRI’s web site at www.wcrinet.org. CONTACT: WCRI Karen Holt, 617-661-9274 wcri@wcrinet.org http://www.businesswire.com

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