Texas Workers’ Comp Costs Per Claim Keep Rising

January 27, 2003

A new study by the Workers Compensation Research Institute shows that workers’ compensation costs per claim in Texas continued to increase at double digit rates during recent years.

According to WCRI, workers’ compensation costs per claim in Texas rose 11 percent between 1998 and 1999 as of mid-2000, following a 10 percent increase between 1997 and 1998. This trend stands in sharp contrast to the more modest growth in costs per claim of four percent in previous years.

The major drivers behind the increase in overall costs per claim were growth of 11 percent in medical payments per claim and an increase in temporary disability duration of more than one week (a 7 percent increase).

The study of 12 states, representing 50 percent of workers’ compensation claims nationwide, also found that Texas had the highest average benefit payments per average workers’ compensation claim ($4,169) of the states reviewed (for 1999 claims as of mid-2000).

Factors that contribute to this result include higher per claim costs for medical care, higher indemnity benefits – wage replacement payments for lost time injuries – per claim, a higher proportion of claims with more than seven days lost time, a higher frequency of permanent partial disability (PPD) claims and longer duration of temporary disability. These per-claim costs are the highest or are among the highest of the study states.

The other states included in the study were California, Connecticut, Florida, Georgia, Illinois, Indiana, Massachusetts, North Carolina, Pennsylvania, Tennessee and Wisconsin.

The study, CompScope(tm) Benchmarks: Multistate Comparisons, 1994-2000, provides a meaningful comparison of the workers’ compensation systems in 12 large states on key performance measures such as benefit payments and claim costs, timeliness of payments and defense attorney involvement, by analyzing a similar group of claims and adjusting for industry mix, wage levels and injury type.

Texas led the study states in both medical and indemnity benefit costs per claim. At $2,508, medical payments per claim are highest among the 12 states, 24 percent higher than in Illinois, the next highest state. Indemnity payments per claim were $1,661.

The study also pointed out that the percentage of claims with more than seven days lost time is high in Texas—25 percent, second only to Massachusetts at 28 percent.

PPD claims in 1999 as of mid-2000 accounted for 36 percent of claims with more than seven days of lost time in Texas, highest among the study states. PPD claims are about the same proportion as in the previous year.

Expenses associated with delivering benefits to injured workers are higher in Texas than in some study states and continuing to rise rapidly, according to the study. Medical cost containment expenses are driving the growth in benefit delivery expenses. Benefit delivery expenses per claim are $341 in Texas, nearly 20 percent higher than the median of the 12 study states.

These expenses grew 11 percent between 1998 and 1999 as of mid-2000, about the same growth rate as from 1997 to 1998.

The study also reported that medical cost management expenses per claim average $1,013 in Texas and are about six percent higher than the 12-state median. Despite this investment, medical costs per claim are highest among the 12 states.

In Texas, 89 percent of claims with more than seven days of lost time have payments for medical cost containment services, slightly more than the 12-state median.

Helping to offset the higher medical cost containment expenses is a low frequency of defense attorney involvement in workers’ compensation claims—just six percent of claims with 12-months maturity and nine percent for claims with 36-months maturity. Defense attorney involvement was 22 percent in the median of the 12 study states for the 36-month claims.

The average defense attorney fees per claim in Texas ($1,617) are lower than the median of the study states ($1,918) for 1997 claims as of mid-2000.

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