Study: Mass. Workers’ Comp Cost Trend Slows; Average Claim Typical

May 18, 2006

The costs per workers’ compensation claim in Massachusetts rose 8 percent for claims evaluated mid 2004 with an average of 12 months’ maturity, according to a new study by the Cambridge, Mass-based Workers Compensation Research Institute (WCRI). This contrasts with more rapid annual growth of 9 to 11 percent in the two prior years.

The recent trend in overall costs per claim was due to a noticeable increase in the proportion of claims with more than seven days of lost time and a slower rate of growth in medical costs per claim with more than seven days of lost time, the report said.

Growth in indemnity payments — wage replacement payments for lost-time injuries — per claim with more than seven days of lost time showed little change in the latest year (less than 1 percent) after 7 to 11 percent growth in the two prior years.

A small increase in the average wage of injured workers (1.6 percent) offset a slight decrease in the duration of temporary disability (1.8 percent or 0.2 weeks), the study said. Wage growth in the state also slowed (1 percent decrease in the latest year compared to 7 to 11 percent increase in each of the three prior years).

In Massachusetts, benefit delivery expenses per claim — costs associated with managing claims — were slightly lower than typical among the 13 study states, largely because of lower medical cost containment expenses per claim.

The study, CompScope Benchmarks for Massachusetts, 6th Edition, provides a comparison of the workers’ compensation systems in 13 large 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 injury mix, wage levels and injury types.

The 13 study states are Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin. These states represent more than 50 percent of the nation’s workers’ compensation benefit payments.

The study also reported that average total costs per claim in Massachusetts were typical compared with other study states for more mature claims (2001 claims evaluated in mid 2004), reflecting the offsetting effects of medical payments per claim that were the lowest among the 13 study states and the fact that Massachusetts had the highest percentage of claims with more than seven days of lost time.

The study reported that 28 percent of claims had more than seven days of lost time in Massachusetts, 8 percentage points higher than the 13-state median. The average indemnity payment per claim was 11 percent lower than the study median for 2001 claims evaluated in mid 2004, while the average medical payment per claim was the lowest of the states studied — 54 percent lower than the median of the states studied for claims with more than seven days of lost time.

Other WCRI studies found that the lower medical payments per claim in Massachusetts resulted from both lower medical prices and lower utilization of medical services.

The study also found that the speed at which injured workers in Massachusetts were sent their first indemnity payment continued to improve; Massachusetts already had the fastest time from injury to first indemnity payment among the 13 states.

The proportion of workers who received their first indemnity payment within 21 days increased nearly 2 percentage point in the latest year, after a 2-point increase in the prior year. The improvement was the result of even faster payments once the payor received notice of injury and faster injury reporting.

Source: Workers Compensation Research Institute

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