Study: Ill. W/C Costs Higher Than Most

June 25, 2003

Workers’ compensation costs per claim in Illinois were among the highest of the states analyzed in a new study and continuing to rise, according to the Workers Compensation Research Institute (WCRI).

The study of 12 states, representing 50 percent of the nation’s workers’ compensation benefits paid, reported that higher payments for the medical care of injured workers and a larger proportion of claims with more than seven days of time away from the job were key reasons why costs per claim in Illinois ranked higher than other states.

Workers’ compensation costs per claim in Illinois also continued to grow rapidly, increasing 10 percent between 1998 and1999 (evaluated as of mid-2000), at about the same rate than the 11 percent growth experienced between 1997 and 1998, according to the Cambridge, Mass.-based WCRI.

Increases in medical payments per claim were cited as the strongest and most consistent factor behind the ongoing rise in overall costs per claim, up an average of 10 percent per year from 1997 to1999. The study noted that Illinois is one of four states among the 12 states studied that does not have a medical fee schedule to control costs.

The study, CompScope Benchmarks: Multistate Comparisons, 1994-2000, provides a meaningful comparison of the workers’ compensation systems in 12 large states on key performance measures. The other states included in the study were California, Connecticut, Florida, Georgia, Indiana, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin.

The study found that workers’ compensation claim costs in Illinois averaged $3,376 per claim in 2000, 30 percent above the median of the 12 study states. Medical payments per claim were the major cost driver—43 percent above the median.

Illinois also had a slightly higher percentage of claims with more than seven days of lost time, 22 percent versus the 12 state median of 20 percent.

Claims for the more serious injuries, called permanent partial disabilities (PPD), and lump-sum settlements, occurred more frequently in Illinois. More than one-half (53 percent) of claims with more than seven days of lost time were PPD/lump-sum claims and 35 percent had lump-sum settlements (1997 claims at an average 36 months’ experience).

“Policymakers should take a close look at the factors behind higher claim costs in Illinois,” said Richard Victor, executive director of WCRI. “Medical costs per claim were high and continued to rise,” he observed. “The absence of a medical fee schedule also is cause for further study.”

The study reported that medical payments per claim were a major cost driver. At an average of $2,015 per claim in 1999 of mid-2000, medical payments per claim in Illinois were 43 percent above the median of the 12 study states, second only to Texas.

Indemnity benefits—wage replacement payments to injured workers—averaged $1,065 per claim for 1999 claims (evaluated as of mid-2000), 11 percent higher than the 12-state median.

The study also pointed out that Illinois had lower to typical benefit delivery expenses— medical cost containment expenses, defense attorney payments, medical-legal expenses, and other litigation-related expenses—compared with the other states studied.

This result occurred largely because medical cost containment expenses per claim and defense attorney payments per claim were lower than typical of the states in the study.

However, litigiousness in Illinois, as measured by the percentage of claims with defense attorney involvement, was among the highest of the study states. Payments to defense attorneys were made in 41 percent of 1997 claims (36 months’ experience), nearly 20 percentage points higher than the 12-state median.

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 regulatory agencies in the U.S., Canada, Australia and New Zealand as well as several state labor organizations.

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