Texas Ranks High in Workers’ Comp Costs per Claim

January 23, 2004

Workers’ compensation costs per claim in Texas increased at double-digit rates for the third consecutive year, according to a new study by the Workers Compensation Research Institute.

Workers’ compensation costs per claim remain among the highest of the states in the study. At $5,320, the average cost per claim in Texas is 68 percent above the median of the 12 states in the study.

The study reported that the average total cost per workers’ compensation claim rose 10 percent between 2000 and 2001, following an 11 percent increase between 1999 and 2000 and a 13 percent increase between 1998 and 1999. Annual growth in costs per claim averaged 8 percent in the two previous years.

The major drivers behind the increase in overall costs per claim were a 10 percent growth in medical payments per claim, an 8 percent rise in indemnity payments per claim (wage replacement payments for lost time injuries) and a 23 percent growth in benefit delivery expenses per claim (largely fueled by medical cost containment expenses).

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

The study, CompScope Benchmarks: Multistate Comparisons, 4th Edition, provides a meaningful comparison of the workers’ compensation systems in 12 large states on key performance measures such as benefit payments and costs per claim, timeliness of payments, and attorney involvement by analyzing a similar group of claims and adjusting for industry mix, wage levels and injury type. These states represent about 60 percent of the nation’s workers’ compensation benefits paid.

Factors contributing to the most recent growth in indemnity benefits per claim include a longer duration of temporary disability and an increase in the percentage of cases with permanent partial disability or lump-sum payments.

The study also reported that benefit delivery expenses per claim for claims with those expenses rose 19 percent between 2000 and 2001 (for claims with more than 7 days of lost time), driven mainly by growth in medical cost containment expenses.

“Overall, workers’ compensation costs per claim remain high in Texas and continue to rise,” said Dr. Richard Victor, executive director of the Cambridge, Mass.-based WCRI. “This report can assist policymakers in Texas to understand why costs are high and growing at a rapid pace,” Victor said.

Texas led the study states in medical costs per claim. At $2,931, medical payments per claim were highest among the 12 states and 21 percent higher than in Illinois, the next highest state.

Other WCRI studies identified some of the factors behind higher medical payments—mainly substantially higher than average visits per claim to physicians and chiropractors, compared to physicians and chiropractors in other states.

Indemnity payments per claim were also among the highest of the states studied, 28 percent higher than the median state for claims with more than seven days of lost time.

The study pointed out that the higher indemnity payments in Texas resulted from a higher percentage of claims with more than seven days of lost time, a higher frequency of claims with PPD or lump-sum payments, and the longest duration (at an average of 18 weeks) of temporary disability among the study states.

Average benefit delivery expenses per claim in Texas were 14 percent higher than the 12-state median largely due to higher medical cost containment expenses (claims with more than seven days of lost time). Helping to offset the higher medical cost containment expenses is a low frequency of defense attorney involvement in workers’ compensation claims.

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