Workers’ Comp Costs per Claim in Minnesota Lower than Most States
Workers’ compensation costs per claim for injured workers in Minnesota are among the lowest of 15 states, according to a new study by the Workers Compensation Research Institute (WCRI).
The study by the Cambridge, Mass.-based WCRI found that total costs per all paid claims were 30 percent lower in Minnesota and, in claims with more than seven days of lost time, 14 percent lower than the typical or median study state.
Payments per claim for lost wages, known as indemnity benefits, in Minnesota were 27 percent lower than the median study state and a major factor in the lower costs per claim.
WCRI reported that the lower indemnity benefits per claim in Minnesota were not the result of lower statutory benefits, but because Minnesota workers returned to work faster and fewer cases received permanent partial disability (PPD) benefits or lump-sum settlements.
Workers in Minnesota returned to work faster than in most other study states. Fewer workers were off work for at least one week – 17 percent in Minnesota compared to 19.5 percent in the 15-state median.
The average duration of temporary disability was also shorter than typical – 14 weeks on average in Minnesota for 2005 claims at an average 36 months of experience, nearly three weeks shorter than in the median study state.
Statutory benefits were not lower in Minnesota, even though the state uses a different approach for setting the maximum weekly benefit than in most study states, according to WCRI. The maximum weekly benefit is established by statute and increased periodically.
In 2007, about 10 percent of workers had their benefits constrained by the statutory maximum weekly benefit which was $750. The maximum was increased to $850 effective October 1, 2008.
WCRI estimates that if the $850 maximum had been in effect in 2007, about 6 percent of workers would have had their benefits limited by the maximum.
Another major factor contributing to the lower indemnity costs per claim is the frequency and average cost of PPD/lump-sum claims.
The average PPD/lump-sum payment per claim in Minnesota was typical of many study states, but the percentage of PPD/lump-sum claims was the lowest (10 percentage points lower than typical) among the study states.
The study also found that medical payments per claim with more than seven days of lost time in Minnesota were fairly similar to the median of the study states.
Other WCRI studies found that prices paid for nonhospital services were higher than typical, in part because the fee schedule was higher than typical, except for surgery.
Defense attorney payments per claim in Minnesota were among the highest of the 15 study states, although defense attorneys were involved in significantly fewer cases than typical.
WCRI also found that expenses per claim for delivering medical and income benefits to injured workers were 18 percent lower in Minnesota than in the median study state. However, this result masked offsetting factors.
Minnesota had lower medical cost containment expenses per claim and lower defense attorney involvement compared to the typical study state, but higher defense attorney payments and higher medical-legal expenses per claim.
The higher defense attorney payments per claim likely reflect the complex informal dispute resolution system in Minnesota, which features a variety of informal activities and specialized issue-oriented forums. Attorneys may not be involved in cases at some stages but, when involved, the complex, multi-level informal dispute resolution system likely requires more defense attorney hours, resulting in higher-than-typical defense attorney payments per claim.
The study, “Benchmarks for Minnesota, CompScope, 10th Edition,” compares workers’ compensation systems in 15 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.
Another key finding for Minnesota was that the use of vocational rehabilitation was more frequent and more costly. Nearly 17 percent of claims with more than seven days of lost time had vocational rehabilitation services in Minnesota, compared to 3 percent in the typical study state.
The average cost of vocational rehabilitation provider services was highest in Minnesota – at an average of about $6,100 per claim with these services. WCRI cautioned that the vocational rehabilitation measures it reports reflect the payor portion of the costs for these services as reported in insurance data, not the portion provided through state agencies, which could be significant in some states.
The study also found that total costs per claim in Minnesota for claims with more than seven days of lost time at an average of 12 months of experience increased 8 percent in 2007 after several years of more moderate growth.
Rising medical costs were the key driver of that growth, increasing 9 percent from 2006 to 2007, evaluated as of March 2008, according to WCRI.
Injured workers in Minnesota also received their first indemnity payments faster compared to most other study states. There was a slight steady improvement in the time to first indemnity payment from 2002 to 2007.
Source: WCRI, www.wcrinet.org.