Pa. Workers’ Comp Claims Costs Below Median But Growing Steadily

May 26, 2006

Average total costs per workers’ compensation claim in Pennsylvania showed steady growth, increasing more than 8 percent for claims evaluated in mid 2004 with 12 months’ maturity, according to a new report by the Cambridge, Mass-based Workers Compensation Research Institute (WCRI).

But the study also reported that workers’ compensation costs per claim in Pennsylvania were around 10 percent lower than the median of the study states for the more mature 2001/2004 claims (2001 claims evaluated in mid 2004).

The rate of growth in costs per claim in Pennsylvania was similar to the median growth rate of the 13 states in the WCRI study. In the most recent period studied, medical payments per claim and indemnity benefits–wage replacement payments for lost-time injuries–per claim with more than seven days of lost time showed moderate growth (5 to 6 percent), the report said. Double-digit growth in benefit delivery expenses continued.

The study, CompScope Benchmarks for Pennsylvania, 6th Edition, provides a comparison of the workers’ compensation systems in Pennsylvania and 12 other states on 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 Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, North Carolina, Tennessee, Texas and Wisconsin.

One reason for Pennsylvania’s lower costs per claim was that there were fewer claims with more than seven days of lost time from the workplace. In Pennsylvania, only 18 percent of workers’ compensation claims involved more than seven days of lost time, compared to 21 percent for the 13-state median.

In addition, average medical payments per claim with more than seven days of lost time were 16 to 18 percent lower in Pennsylvania than the median of the study states. Lower medical costs per claim were mainly the result of lower medical prices and lower utilization of physician services, according to other WCRI research.

Within 21 days of their injury, 45 percent of Pennsylvania workers received their first indemnity check–typical among the 13 study states. The study found that the speed of injury reporting was faster than typical of the 13 states, but the speed of payments once the payor received notice of injury was slightly slower than typical.
Expenses to manage claims (benefit delivery expenses) were 13 percent higher in Pennsylvania than the 13-state median for the more mature claims. 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.

The study noted that the higher benefit delivery expenses per claim were mainly the result of higher litigation-related expenses per claim.
For example, defense attorney payments per claim, for claims with defense attorney involvement, were 35 percent higher than the median of the study states, and the average medical-legal expense per claim was nearly double that in the median state.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization which conducts public policy research on workers’ compensation, healthcare and disability issues. Its members include employers, insurers, insurance regulators, state administrative agencies and state labor organizations.

Source: WCRI

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