Report Says Comp Costs per Claim in La. Higher Than in Median State

Louisiana’s average total cost per claim placed it among the group of states with higher average costs per claim when compared to the median study state, according to a new report by the Cambridge, Mass.-based Workers Compensation Research Institute (WCRI).

Higher than typical medical payments per claim were the major driver of Louisiana’s higher costs per claim. The average medical payment per claim was 42 percent higher than the median of the 13 states in the study for claims evaluated in mid 2004 and with 36 months’ average maturity.

Indemnity benefits–wage replacement payments made to injured workers–per claim with more than seven days of lost time were 22 percent higher than the 13-state median for claims with 36 months’ average maturity and evaluated in mid 2004.

This was largely the result of longer durations of temporary disability typical of a wage-loss state. Under a wage-loss system, compensation is based on the injured worker’s earnings history. An injured worker is compensated if he or she experiences wage loss or a loss of earning capacity. Among the wage loss states in the study, Louisiana had the longest duration of temporary disability.

Costs per workers’ compensation claim in Louisiana were stable in 2003 claims as of 2004. This contrasts with more rapid annual growth of 8 to 12 percent in the four prior years.

Two factors contributed to the recent trend in overall costs per claim. Louisiana experienced little change in medical payments per claim in the most recent year studied, after four years of rapid, accelerating growth. A drop of nearly 3 percent in indemnity benefits per claim with more than seven days of lost time and stable medical cost containment expenses per claim also contributed to the recent trend.

The study, CompScope Benchmarks for Louisiana, 6th Edition, provides a comparison of the workers’ compensation systems in 13 large states on key performance measures such as benefit payments and costs per claim, timeliness of payments, and defense attorney involvement by analyzing a similar group of claims and adjusting for interstate differences in industry mix, wage levels, and industry type.

The other states in the study were Arkansas, California, Florida, Illinois, Indiana, Maryland, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin.

The study also pointed out that the costs of delivering medical and indemnity benefits to injured workers in Louisiana were among the highest of the 13 study states.

One of the major drivers of this result was defense attorney payments per claim that, at more than $5,000 per claim, were 58 percent higher than the median of the 13 states for 2001 claims evaluated in mid 2004. Higher than average expenses per claim for medical cost containment services were another factor.

Injured workers received their first payment of indemnity benefits somewhat faster in Louisiana, with 48 percent of the initial payments made within 21 days of injury. This compared with 45 percent in the median state. Recent improvement in time to first payment was driven by a faster reporting of injuries.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit 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 U.S., Canada, Australia and New Zealand as well as several state labor organizations.

The report can be purchased at Contact: WCRI Karen Holt, (617) 661-9274.

Source: WCRI