Study: Mass. WC Costs Rising for Third Straight Year

Workers’ compensation costs per claim in Massachusetts grew for the third straight year, according to a new study by the Workers Compensation Research Institute (WCRI).

The study by the Cambridge, Mass.-based WCRI found that workers’ compensation costs per claim increased 12 percent between 2000 and 2001 as of 2002, nearly twice the growth rate in the previous year (for claims with more than seven days of lost time).

The major cost drivers were a 13 percent rise in medical costs per claim, a 12 percent increase in indemnity benefits per claim – wage replacement payments for lost-time injuries – and an eight percent increase in benefit delivery expenses per claim.

The increase in indemnity costs per claim reflects wage growth in the state and a rise in the duration of time away from the workplace resulting from temporary disabilities, the study said.

The increase in benefit delivery expenses per claim – costs associated with managing claims – was driven by a 12 percent rise in medical cost containment expenses per claim.

The study, CompScope(TM) Benchmarks: Multistate Comparisons, 4th Edition, provides a comparison of the workers’ compensation systems in 12 large states on key performance measures such as benefit payments and costs per claim, timeliness of reporting and first payments and defense attorney involvement by analyzing a similar group of claims and adjusting for interstate differences in injury mix, industry mix and wage levels.

The 12 study states, which represent over 50 percent of the nation’s workers’ compensation benefits, are California, Connecticut, Florida, Illinois, Indiana, Louisiana, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin.

The study also reported that costs per claim are typical compared with other study states, reflecting the offsetting effects of medical payments per claim that are the lowest among the 12 study states ($1,241 in 2001 as of 2002) and the fact that Massachusetts has the highest percentage of claims with more than seven days of lost time (28 percent).

“The recent double-digit increase in Massachusetts workers’ compensation costs per claim bears watching,” said Dr. Richard Victor, executive director of WCRI.

Victor further observed, “Massachusetts has a high percentage of claims with more than seven days of lost time. Without the significantly lower medical costs per claim, average costs per claim in Massachusetts would probably be higher than in many study states.”

The study reported that average costs per claim in Massachusetts were 33 percent below the median of the study states for claims with lost-time injuries of more than seven days (2001 claims as of 2002). The average indemnity benefit per claim was similar or somewhat lower than the 12-state median, while the average medical payment per claim was about one-half that of the typical study state.

The lower medical payment per claim resulted from both lower prices and lower utilization of medical services.

The study also found that nearly 54 percent of injured workers in Massachusetts were sent their first indemnity payment within 21 days of injury, the highest percentage of the study states (the same as Wisconsin).

The proportion of workers who received their first indemnity payment within 14 days of payor notice of injury was fastest in Massachusetts, 15 percentage points above the 12-state median.

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.

Visit WCRI’s web site at www.wcrinet.org.