Study: Comp Costs Per Claim Rising in Illinois

May 10, 2004

Workers’ compensation costs per claim in Illinois are increasing rapidly, driven by higher medical costs per claim and greater use of medical services to treat injured workers, according to the Workers Compensation Research Institute (WCRI).

The study of 12 states, representing more than 50 percent of the nation’s workers’ compensation benefits, reported that costs per workers’ compensation claim in Illinois rose an average of 10 percent per year from 1996 to 2001, as of 2002.

An increase in both the price and utilization of medical care contributed to the rapid growth, the study said, noting that rising use of services was the more significant cost driver.

The study pointed out that Illinois is one of four states among the 12 studied that does not have a medical fee schedule. Medical costs per claim rose 14 percent between 2000 and 2001 for claims with 12 months maturity.

The study reported that the average cost per workers’ compensation claim ($4,000) in Illinois was among the highest of the 12 study states.

Illinois had higher than typical payments per claim for the medical care of injured workers (38 percent higher than the 12-state median). Higher statutory maximum weekly benefits for temporary disabilities and a somewhat larger proportion of claims with more than seven days of lost time were other reasons why costs per claim in Illinois ranked higher than many study states.

The study, CompScope Benchmarks: Multistate Comparisons, 4th Edition, provides a comparison of the workers’ compensation systems in 12 large states on key performance measures. The other states in the study were California, Connecticut, Florida, Indiana, Louisiana, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin.

The study pointed out that Illinois has typical benefit delivery expenses per claim—medical cost containment expenses and litigation-related expenses, including payments to defense attorneys and expenses for medical-legal reports—compared with the other study states.

This result occurs largely because medical cost containment expenses per claim were 5 to 11 percent lower than the median of the study states, depending on claim maturity. Litigiousness, as measured by the percentage of claims with defense attorney involvement, is among the highest of the study states. However, payments to defense attorneys were among the lowest of the states.

The study also noted that benefit delivery expenses per claim—the costs of managing claims—grew at or near double-digit rates in Illinois from 1996 to 2001 (as of 2002). This growth was driven mainly by a very rapid increase in medical cost containment expenses per claim.
It took longer for injured workers in Illinois to receive their first indemnity payments than in other study states. For example, 41 percent of injured workers in Illinois received their first indemnity payment within 21 days of injury, compared with the 12-state median of 45 percent.

WCRI is a nonpartisan, nonprofit 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 United States, Canada, Australia and New Zealand as well as several state labor organizations.

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