Report: Florida Workers’ Comp Reforms of 2003 Impacted Costs Per Claim

May 12, 2008

Workers’ compensation costs per claim in Florida appear to have decreased in 2004 in the wake of reforms enacted in 2003, but the decrease did not continue in 2005, according to a new study by the Workers Compensation Research Institute.

This observed pattern – a one-time change – is consistent with what might be expected, given the nature of the 2003 reforms in Florida.

In 2005/2006 (the second-year post-reform), the average total cost per claim in Florida increased 5 percent – a more moderate pace than in the pre-reform period. This moderate growth was driven mainly by increasing medical costs per claim in that year.

In 2004/2005 (the first-year post-reform), the average total cost per claim in Florida fell nearly 5 percent, a shift from three prior consecutive years of very rapid growth. In contrast, most study states continued to show moderate-to-rapid growth in 2004/2005. All major cost components – medical, indemnity, and benefit delivery expenses per claim – showed decreases or little change in Florida in 2004, in each case a shift in the direction of the trend from the years just before the reforms.

The average medical payment per claim with more than seven days of lost time in Florida increased 8 percent in 2005/2006. One factor underlying this increase might be the fee schedule increases for physical medicine services in May 2005, WCRI reported.

In 2004/2005, medical costs per claim were stable, after continuous rapid growth in the three years before the reforms.

Indemnity benefits per claim with more than seven days of lost time in Florida were stable in 2005/2006, following an 11 percent decrease in 2004/2005 (the first year post-reform). In contrast, before the reforms this measure had double-digit growth in 2001/2002 and 2002/2003 and little change in 2003/2004.

In 2005/2006, the frequency of permanent partial disability (PPD)/lump-sum claims increased slightly in Florida and the average PPD/lump-sum payment per claim was stable during this second year post-reform. In 2004/2005, there was a drop of 2 percentage points in the frequency of PPD/lump-sum claims and a decrease of 16 percent in the average PPD/lump-sum payment per claim – two key factors contributing to the drop in indemnity benefits per claim in the first year post-reform.

Another contributing factor to the decrease in indemnity benefits per claim in 2004/2005 was an 8 percent (about one week) decrease in the duration of temporary disability. In 2005/2006, the duration of temporary disability changed little.

These were among the findings of the WCRI study, Monitoring 2003 Reforms in Florida: CompScopeā„¢ Benchmarks, 8th Edition, which provides baselines for evaluating the evidence of the impact of the 2003 reforms.

The 2003 legislation included revisions to the medical fee schedule; increased limits on chiropractic services; redefined eligibility standards for permanent total disability (PTD) benefits; revised PPD benefit amounts; limits on the number of independent medical examinations; and reduced fees for workers’ attorneys by retaining the attorney fee schedule and establishing that judges of compensation claims cannot award fees that exceed the schedule.

WCRI also reported that defense attorney involvement remained stable in 2005/2006, following a decrease of 2 percentage points in 2004/2005. In contrast, this measure had been growing at 2-3 points per year in the three years pre-reform. The average defense attorney payment per claim was stable in 2005/2006 after 6 percent growth in 2004/2005 – a much slower rate compared to double-digit increases in the two prior years pre-reform.

Source: The Workers Compensation Research Institute

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