Workers’ Comp Payments Grew Faster Than Wages for the Second Year in a Row, Study Says

August 23, 2004

Total payments for workers’ compensation rose faster than wages in 2002 for the second year in a row, according to a new report released today by the National Academy of Social Insurance (NASI).

In 2002, total workers’ comp benefits grew by 7.4 percent – for a total of $53.4 billion. Spending for medical care contributed to the increase in total payments. Medical spending rose by 9.4 percent, while cash payments to workers rose by just 5.8 percent.

According to the report, in providing health care and cash payments to disabled workers and their families, workers’ comp is second in size only to the sum of Social Security disability insurance and Medicare.

“Workers’ compensation benefits and costs grew faster than wages in both 2001 and 2002, in large part because wages grew hardly at all following the economic recession that began in March 2001,” according to NASI Study Panel Chair John F. Burton, of Rutgers University. The year 2002 saw the slowest growth in wages in more than a decade (0.4 percent) and a decline in the number of covered workers for the second year in a row. Benefits per $100 of wages grew by eight cents, to $1.16 in 2002 from $1.08 in 2001, but were still lower than their peak in 1992 when benefits were $1.68 per $100 of wages.

Total employer costs rose by 13.0 percent in 2002 to $72.9 billion. Costs to employers reflect premiums charged by insurers and benefits plus administrative expenses of employers who self-insure. Employer costs per $100 of wages rose to $1.58 in 2002 from $1.40 in 2001, but still remain well below their 1990 peak of $2.18 per $100 of wages.

“Because each state has its own rules for workers’ compensation,” noted Burton, “it is essential to have comprehensive and consistent national and state data to evaluate the impact of these programs on workers and employers.”

The report, Workers’ Compensation: Benefits, Coverage, and Costs, 2002, is the seventh in a NASI series. The study provides estimates of workers’ comp payments – cash and medical – for each state, the District of Columbia, and the federal programs providing workers’ comp benefits.

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