Study: Workers’ Comp Costs Per Claim in North Carolina Rising Rapidly

Workers’ compensation costs per claim in North Carolina grew 6-14 percent annually throughout the study period, according to the Workers Compensation Research Institute.

The Cambridge, Mass.-based WCRI study of 14 states found that double-digit growth in medical costs per claim was the major driver behind the rising costs per workers’ compensation claim in North Carolina between 2001 and 2005 for claims at an average 12 months of experience.

Over the five-year period, the average medical cost per claim with more than seven days of lost time increased, on average, 10 percent per year, including 11 percent growth in the most recent year.

In spite of this growth, total costs per claim in North Carolina were fairly typical of the study states. However, this result masked two offsetting factors.

On one hand, the percentage of claims with more than seven days of lost time was somewhat lower in North Carolina than in the median study state. On the other hand, the average indemnity benefit per claim with more than seven days of lost time in North Carolina was the highest of the 14 states studied.

The average indemnity benefit per claim in North Carolina with more than seven days of lost time grew nearly 5 percent per year for the two-year period from 2003/2004 to 2005/2006, after growing an average of about 3.5 percent per year over the three previous years.

WCRI observed that in the earlier years of the study period, growth in indemnity benefits per claim generally kept pace with wage growth. But in the most recent year, a rise in the duration of temporary disability of nearly one week contributed to the growth in excess of wages.

The study, CompScope™ Benchmarks for North Carolina, 8th Edition, provides a meaningful comparison of the workers’ compensation systems in 14 large states based on key performance measures by analyzing a similar group of claims and adjusting for interstate differences in injury mix, wage levels, and industry type.

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

The study observed that North Carolina’s benefit structure has attributes of a permanent partial disability (PPD) benefit system—in which typically payments of temporary total disability (TTD) benefits stop at the end of the healing period and PPD benefits may be paid for any remaining impairment or disability—and a wage loss system—where income benefits typically continue as long as the worker is unable to return to work or earn the same wages as before the injury.

Workers in North Carolina who have not returned to work at the end of the healing period can receive either ongoing temporary total disability benefits or PPD benefits. Those who returned to work with permanent impairments can receive PPD benefits.

This combination of benefit systems contributed to a longer duration of temporary disability in North Carolina. According to WCRI, the average duration of temporary disability in North Carolina was 9 weeks longer than the median of the ten non-wage-loss states and 4 to 10 weeks longer than three of the four wage-loss states in the study for 2003 claims at 36 months of experience.

The study also reported that the average benefit delivery expense per claim with more than seven days of lost time grew an average of 14 percent per year over the two most recent years, somewhat faster than the 11 percent annual growth in the three previous years.

This growth was driven largely by increases in the average medical cost containment expense per claim.

The study noted that the time in which injured workers in North Carolina received their first indemnity payment was longer than in most of the 14 study states, mainly because of the slower speed of payments once payors received notice of injury.

Source: The Workers Compensation Research Institute