Michigan Workers’ Compensation Claim Costs Among Lowest, Most Stable
Workers’ compensation total costs per claim in Michigan are among the lowest of 15 states, and the growth of these costs in Michigan over time has been more stable than in most other study states, according to a new study.
The study by the Cambridge, Mass.-based Workers Compensation Research Institute (WCRI) found that the Michigan workers’ compensation system is a competitive asset for the state.
The average cost per claim in Michigan was 35 percent lower than the median of the 15 study states, at nearly $4,700 per claim, according to WCRI. Compared to the study states that Michigan often competes with for business, employers in Michigan paid 20 percent less for workers’ compensation costs for an average case than the median of those states.
The Michigan workers’ compensation system provided a “better value proposition for both employers and injured workers,” according to the institute. The average medical cost per claim with more than seven days of lost time in Michigan was among the lowest of the 15 study states. This was the main driver of the much lower total cost per claim in Michigan.
The states in addition to Michigan included in the study are California, Florida, Illinois, Indiana, Iowa Louisiana, Maryland, Massachusetts, Minnesota, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin.
According to another WCRI study of 11 states, the lower medical costs per claim in Michigan were the result of both lower prices paid and lower utilization of most medical services.
Injured workers in Michigan reported typical outcomes despite the fact that employers paid less for medical services on an average case, according to the WCRI study Comparing Outcomes for Injured Workers in Michigan. Compared with other states in that study, injured workers in Michigan reported typical physical recovery, typical access to and satisfaction with care, and fairly typical return-to-work rate and speed.
WCRI found that indemnity benefits per claim with more than seven days of lost time in Michigan were lower than in many study states, including several of the study states that Michigan often competes with for business.
The key drivers of this result were system features and the statutory benefit structure in Michigan that led to shorter duration of temporary disability than the other wage-loss systems and a slightly lower average weekly temporary total disability (TTD) benefit rate.
States with a wage-loss benefit structure typically have longer duration of temporary disability, but among the four states in the WCRI study with wage-loss benefit systems, Michigan was an exception. At an average of 19 weeks, duration of temporary disability in Michigan was five to six weeks shorter than in Massachusetts and Pennsylvania, and 15 weeks shorter than in Louisiana.
Several system features and processes in Michigan, including processes for terminating TTD benefits, might contribute to the shorter duration of temporary disability, according to WCRI.
Another factor underlying relatively lower indemnity benefits per claim in Michigan was a slightly lower average weekly TTD benefit rate, which was related to the statutory benefit structure in the state.
Michigan’s benefit structure is different from the benefit structure in most states in two ways. First, Michigan bases weekly benefits on 80 percent of after-tax (spendable) earnings, whereas most states pay two-thirds of the worker’s pre-tax average weekly wage. Second, Michigan sets the maximum statutory weekly benefit at 90 percent of the statewide average weekly wage, while most states set the maximum benefit at 100 percent or higher.
Under the Michigan benefit structure, about 16 percent of workers (those with lower wages) received higher weekly benefits than under the typical structure in other states, but more than a third of workers (those with higher wages) received at least 5 percent less.
The WCRI study, CompScope Benchmarks for Michigan Workers’ Compensation System Performance, 10th Edition, compares the workers’ compensation systems in Michigan and 14 other important 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 injury mix, wage levels, and industry type.
WCRI also reports that injured workers in Michigan receive their first indemnity payment slower than in the typical study state, mainly due to longer injury reporting time than in all other study states. The speed of payment once payors received notice of injury in the state is faster than typical.
However, over the study period, the injury reporting time improved steadily in Michigan – the percentage of claims reported to payors within three days of injury increased about six percentage points from 2002 to 2007.
WCRI is a nonpartisan, not-for-profit research organization. Its members include employers, insurers, governmental entities, insurance regulators and state administrative agencies in the U.S., Canada, Australia and New Zealand, as well as several state labor organizations.