Wisconsin Workers’ Compensation Costs Per Claim Are Rising Rapidly After Several Years of Modest Growth, Finds New WCRI Study; Overall Workers’ Comp Costs per Claim Remain Low

Wisconsin Workers’ Compensation Costs Per Claim Are Rising Rapidly After Several Years of Modest Growth, Finds New WCRI Study; Overall Workers’ Comp Costs per Claim Remain Low

Business Editors

CAMBRIDGE, Mass.–(BUSINESS WIRE)–May 7, 2004

Workers’ compensation costs per claim in Wisconsin are growing at a double-digit rate, largely driven by rising medical costs per claim, according to a new study by the Workers Compensation Research Institute (WCRI).

The study of 12 states representing over 50 percent of the nation’s workers’ compensation benefits paid found that after several years of moderate growth, costs per workers’ compensation claim in Wisconsin grew at an average annual rate of 12 percent from 1999 to 2001, as of 2002 (for claims with an average 12 months of experience).

A double-digit rise in medical costs per claim for injured workers was the major driver of the growth in costs per claim during the recent two-year period.

In addition, indemnity benefits per claim – wage replacement payments for lost-time injuries – rose an average of eight percent per year, driven by an increase in the proportion of claims with permanent partial disability (PPD) or lump-sum settlement payments. Lump-sum settlements are agreements that typically close out a workers’ compensation claim and result in a single payment to the worker.

Growth in wages of injured workers also contributed to the rise in indemnity benefits per claim, according to the study.

At an average of $2,438, the cost per workers’ compensation claim in Wisconsin was among the lowest of the 12 major states in the study, 23 percent below the 12-state median.

Lower indemnity benefits per claim contributed to lower costs per claim in Wisconsin, driven by a shorter duration of temporary disability, a lower percentage of claims with PPD payments and lump-sum settlements, and lower PPD and lump-sum payments per claim.

Medical payments per claim were generally typical, but higher than expected, given Wisconsin’s overall lower costs per claim. Higher prices for medical services, rather than greater utilization of those services, drove medical payments per claim upward.

The study, CompScope(TM) Benchmarks: Multistate Comparisons, 4th Edition, provides a meaningful comparison of the workers’ compensation systems in 12 large states on key performance measures. 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.

“Public policymakers in Wisconsin should keep a close eye on rising workers’ compensation costs per claim,” said Dr. Richard Victor, executive director of WCRI.

“In particular, they might want to pay attention to the higher medical costs per claim. Had this not been the case, Wisconsin’s overall costs per claim would have been even lower.”

Victor noted that Wisconsin appears to use medical cost containment services less intensively than many other study states.

For example, the study reported that expenses per claim for medical cost containment services in Wisconsin are one-half those of the 12-state median. In addition, expenses per claim to manage claims in Wisconsin were the lowest among the 12 states studied. Lower medical cost containment expenses per claim contributed to that result.

The study also reported that benefit delivery expenses per claim and medical cost containment expenses per claim both grew at double-digit rates between 2000 and 2001 as of 2002.

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.

To purchase CompScope(TM) Benchmarks: Multistate Comparisons, 4th Edition (PDF file — $45 for WCRI members; $95 for all others; book — $95 for WCRI members; $195 for all others) contact Karen Holt at wcri@wcrinet.org (617-661-9274) or visit WCRI’s web site at www.wcrinet.org.

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