Employers' costs for workers' compensation rose faster than payments for benefits and medical care in 2004, according to a study issued by the National Academy of Social Insurance. These findings reflect forward-looking by insurers.
"Employer costs reflect rising premiums insurers charge to cover future benefit costs," said John F. Burton Jr. of Rutgers University, chairman of the panel overseeing the report. "The recent rise in costs appears to be part of a longer cycle of ups and downs in the insurance market."
Cash benefits for injured workers and medical payments for their treatment rose by 2.3 percent to $56 billion. In comparison, employers' costs jumped 7 percent to $87.4 billion.
The cost increase in 2004 continues a trend that the National Academy of Social Insurance has reported for the previous three years. In 2000, workers' compensation costs and benefits relative to wages had hit a 15-year low. Workers' compensation costs rose by 3 cents per $100 of wages of covered workers in 2004, to $1.76.
As for the 3-cent decline in benefits payments per $100 of wages, to $1.13, developments in California appear to be responsible. Statewide changes caused medical benefits to drop by 10 cents per $100 of covered payroll.
Burton said the increase in employers' workers' comp costs in 2004 was the smallest annual increase since the current upward trend began in 2001.
"This development may signal a period of more modest increases in workers' compensation costs," he said.
Relative to wages, both costs and benefits in 2004 were far below their peak levels. In 1992, total benefits were at $1.68 per $100 of covered wages, 55 cents higher than the National Academy of Social Insurance's latest figures.
Employers' costs reached their peak of $2.18 per $100 of wages in 1990, 42 cents higher than the 2004 costs.
"The decline in employer costs in the 1990s occurred as favorable investment returns led insurance companies to cut premiums in order to expand their market shares," Burton said.
"After 2000, low interest rates and poor stock market returns led insurers to raise premiums in order to cover future benefit costs," Burton added.
Cash payments to workers relative to wages remained the same in 2004 as in 2000.
An increase in medical-treatment spending over that time, from 47 cents to 53 cents per $100 of wages, was the sole reason benefits payments increased.
"Workers' Compensation: Benefits, Coverage, and Costs, 2004" is the ninth such report by the National Academy of Social Insurance estimating state and federal workers' compensation payments.
The National Academy of Social Insurance is a nonprofit, nonpartisan organization made up of leading experts on social insurance.
November 1, 2006
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