Ohio BWC Reports Paid Medical Costs for WC Claims Lower Than Expected

August 10, 2004

The Ohio Bureau of Workers’ Compensation (BWC) announced this week paid medical costs for workers’ compensation claims were 8.5 percent, or nearly $80 million lower, than expected medical costs for fiscal year 2004. The reduced costs are the result of a joint effort among BWC and other Ohio stakeholders to implement containment measures designed to curb skyrocketing medical costs.

Despite medical inflation increasing by 4.42 percent between July 1, 2003, and June 30, 2004, BWC’s health-care costs for public and private employers decreased from $858 million in fiscal year 2003 to $854 million in fiscal year 2004.

Gov. Bob Taft praised BWC for its efforts.

“Today’s news represents a tremendous achievement by BWC to control health-care costs without affecting the high quality of care Ohio provides to injured workers,” the Governor said. “This is another positive step in Ohio’s efforts to continue to provide a competitive, high-quality workers’ compensation system.”

BWC Administrator/CEO James Conrad touted the news as a huge success for Ohio’s workers’ comp system. “Keeping medical costs in line is paramount in our quest to ensure premiums stay low in Ohio,” he said. “Not only have the bureau and Ohio stakeholders put together an effective plan that has led to immediate savings and greater cost efficiency, but these successes have not affected one injured worker’s benefits.”

Conrad did caution that more work was needed to make sure costs stay low. He specifically cited drug costs as the biggest challenge, pointing out that actual payouts outpaced expected payouts by nearly 7 percent, or more than $9 million.

“We must work more aggressively to identify opportunities to bring pharmaceutical costs under control without interrupting the quality of care provided to Ohio’s injured workers,” Conrad said.

The expected payments are prepared by an outside actuarial firm using the payment patterns, trends and development factors for the past five years.

The need for cost containment reportedly resulted from an explosion in health-care costs, which rose more than 48 percent between 1999 and 2003. The most dramatic increases were in hospitalization, which jumped 68 percent and drug costs, which spiked 104 percent. These factors led to a premium increase in 2003 for private employers for the first time in more than 10 years.

However, in January 2003, BWC, the managed care organizations (MCOs), and stakeholders such as, the AFL-CIO, National Federation of Independent Businesses, the Ohio Academy of Trail Lawyers and the Ohio Hospital Association, hosted a Healthcare Symposium. From the symposium, several workgroups began to look at opportunities to reduce medical costs without affecting injured worker benefits.

Despite the escalating medical costs, premiums still remain an average of 32 percent lower since 1995. The average company that paid $10,000 in premiums in 1995 now pays only $7,310. In addition, more than $10 billion in dividends have been returned to companies in the form of credits or rebates during that time.

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