Emerging Trends: Comp Outlook Sunnier Care of California Reforms
By JOSHUA CLIFTON,
editor of the LRP newsletter Workers' Compensation Report, where this story first appeared
Workers' compensation payments for medical care and cash benefits fell in 2006 for U.S. employees injured on the job, according to a recently issued study.
According to the report by the National Academy of Social Insurance, the drop in payments in 2006--the most recent data available--reflected the large declines in payments for workers' comp cash benefits in California after the 2003-2004 reforms took effect. Nationally, workers' comp payments for injured workers fell by 1.5 percent to $54.7 billion in 2006. The payments included $26.5 billion to providers of medical care and $28.2 billion in cash wage replacement benefits for injured workers.
California payments fell by 7.2 percent, which researchers said was due mainly to a 13.4 percent drop in payments for cash benefits. Medical spending, however, changed little in 2006--after recording a 16 percent drop in 2005.
"The reduced spending for cash benefits in 2006 and for both medical care and cash benefits in 2005 reflect the cost containment measures that were put in place in 2003 and 2004 reforms to the California workers' compensation system," said Christine Baker, the NASI member who directs the California Commission on Health and Safety and Workers' Compensation, a nonpartisan labor-management group that advises state policymakers.
Because California is such a large state--accounting for 18.6 percent of national benefit payments in 2006--researchers said it altered national trends. Outside California, total workers' comp payments were almost unchanged in 2006 ($44.5 billion) compared to the prior year ($44.6 billion).
The report, "Workers' Compensation: Benefits, Coverage and Costs, 2006," is the 11th in a series of studies by the NASI. The study provides estimates of workers' comp cash and medical payments for each state, the District of Columbia and federal programs.
According to researchers, the costs to employers for workers' comp are what they pay each year. For employers who buy insurance, costs are premiums they pay to insurance companies, plus benefits they pay under deductible arrangements in their insurance policies.
For employers who insure their own workers, costs are the benefits they pay plus administrative costs. In 2006, employers paid a total of $87.6 billion nationwide for workers' compensation.
The study also examined the following issues:
--Total payments for case and medical care, relative to wages. The report tracked trends since 1989 in workers' comp benefits and employer costs relative to total wages of workers covered by the program. Relative to wages, total payments for cash and medical care were the lowest in 18 years ($0.99 per $100 of wages). Employer costs also declined relative to wages in 2006--to $1.58 per $ 100 of covered wages.
Researchers said strong wage growth in 2006 helped account for the decline in benefits and costs as a share of wages. Covered wage growth was 6.3 percent in 2006, the highest since 2000.
--Workers' comp cash benefits and Social Security disability insurance benefits. The study also compared the trend in workers' comp cash benefits and Social Security disability insurance benefits, each as a share of payrolls covered by each program.
Researchers said trends in the two programs have moved in opposite directions since 1980. When workers' comp cash payments rose in the 1980s, Social Security disability benefits declined as a share of payroll.
After 1990, the study found that workers' comp cash payments to workers declined and Social Security disability insurance payments rose as a share of payroll.
"The difference in the trends in workers' compensation and Social Security disability insurance payments suggest that retrenchment in one program may cause injured workers to turn to the other program for benefits to replace their lost wages," said John F. Burton, Jr., chairman of the panel that oversees the study.
For more information or to download the study, visit the NASI Web site.
October 15, 2008
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