WCRI: Wis. Comp Costs Per Claim Continue to Rise

Workers’ compensation average costs per claim in Wisconsin grew eight percent in 2002, following two years of double-digit increases, according to a new study by the Workers Compensation Research Institute (WCRI).

The major factor behind the increase was rapid growth in medical costs per claim for the treatment of workplace injuries that resulted in more than seven days of lost time. These costs have risen 12 percent per year on average for the most recent three years studied, the report said.

Other cost drivers included rising benefit delivery expenses per claim and growth in average indemnity benefits per claim – wage replacement payments for lost-time injuries.

Notwithstanding these rising costs, the average cost per workers’ comp claim in Wisconsin was among the lowest of the 12 states in the study, 42 percent lower than the median study state.

The study attributed the lower cost per claim in the state to lower medical costs per claim, shorter duration of temporary disability, and lower indemnity benefits per claim, as a result of quicker return to work by injured workers and fewer payments for permanent partial disability (PPD) and lump-sum settlements.

Lump-sum settlements are agreements that typically close out a workers’ comp claim and result in a single payment to the worker.

In addition, the study found Wisconsin’s benefit delivery expenses per claim – the costs of delivering medical and indemnity benefits to injured workers – were among the lowest of the 12 states studied, about 50 percent lower than the study median. Key reasons included lower than typical medical cost containment expenses per claim and less frequent involvement of defense attorneys.

The study, CompScope Benchmarks for Wisconsin, 5th Edition, provides a comparison of the workers’ comp systems in 12 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 industry mix, wage levels and injury type.

In addition to Wisconsin, the other states in the study conducted by the Cambridge, Mass.-based WCRI were California, Connecticut, Florida, Illinois, Indiana, Louisiana, Massachusetts, North Carolina, Pennsylvania, Tennessee and Texas.

“Overall costs per claim in Wisconsin were low, but the rapid rise in medical costs per claim continued,” said Dr. Richard Victor, executive director of WCRI. “The lack of a traditional fee schedule and the apparently lower use of medical cost containment mechanisms may have contributed to the increasing medical costs.”

Wisconsin was among the fastest of the states studied in getting indemnity payments to injured workers. The study reported that 53 percent of injured workers were issued their first indemnity checks within 21 days of injury. Once the payor received notice of injury, the speed of payments in Wisconsin was among the fastest of the 12 states studied.

The percentage of claims with more than seven days of lost time that were paid within 21 days of injury increased by one percentage point after a period of decline. Injury reporting improved over the study period, as seen in most of the study states.

The study also reported that average indemnity benefits per claim with more than seven days of lost time were lowest in Wisconsin -55 percent lower than the 12-state median.

Contributing to these lower indemnity costs per claim were shorter duration of temporary disability payments per claim, a smaller percentage of claims with PPD/lump-sum payments and among the lowest average PPD/lump-sum payments per claim among the nine non-wage loss states – 43 percent lower than the 9-state median.

The study pointed out that the average indemnity benefit per claim increased at a rate of about six percent each year from 1998 to 2002 with the exception of an 11 percent rise between 2000 and 2001, driven by a one year increase in the duration of temporary disability and an increase in the percentage of lump-sum claims with no periodic PPD payments.

The average benefit delivery expenses per claim in Wisconsin grew rapidly for the fourth consecutive year, mainly driven by an annual 9 to 16 percent growth in medical cost containment expenses per claim.