National spending on comp increases but slowed by California trends
According to the study by the National Academy of Social Insurance, comp payments in the U.S. totaled $55.4 billion in 2007, the most recent data available. The payments include $27.2 billion for medical care (an increase of 3.3 percent over the prior year) and $28.3 billion in wage replacement benefits for injured workers (an increase of 0.8 percent). The report, Workers' Compensation: Benefits, Coverage and Costs, 2007, is the 12th in a series by the NASI and presents new data on developments in workers' comp in 2007 and updates estimates of benefits, costs and coverage for the years 2003-06. In addition to including national data on workers' comp cash and medical payments for each state, the report also covers the District of Columbia and federal programs.
California's workers' comp system has changed significantly over the past few years since the Legislature enacted comprehensive reforms. Because it is a large state with 13.2 percent of national payroll and 17.8 percent of total benefits in 2007, researchers said California's shifts in benefits and employer costs have altered the national trends. For example, when California was excluded from the data, researchers found that total benefit payments in the rest of the nation increased by 3 percent in contrast with a 2 percent increase when the state was included.
In the latest report, the NASI found a 10 percent decline in California's cash payments to injured workers in 2007 followed declines in 2006 and 2005. Medical benefit payments in the state increased in 2007 after recording a 16 percent drop in 2005 and no change in 2006. Costs to California employers fell 14.3 percent in 2007 after showing a 16.6 percent drop in 2006.
"The reduced spending for cash benefits reflects the continuing effects of cost containment reforms that were put in place in 2003 and 2004," said Christine Baker, NASI member and director of the California Commission on Health and Safety and Workers' Compensation, a nonpartisan labor-management group that advises state policymakers.
In addition, employer costs -- premiums firms pay to insurance companies plus benefits they pay under deductible arrangements in their insurance policies -- increased slightly by 0.1 percent outside of California. However, a sharp drop in California employers' costs of 14.3 percent led to a small drop for the nation (2.7 percent) when the state was included in the overall U.S. data.
Comp and Social Security. The NASI report also compared trends in workers' comp cash benefits and Social Security disability insurance benefits, each as a share of payrolls covered by each program. Trends in the two programs have moved in opposite directions since 1980, experts said. 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 declined and Social Security disability insurance payments rose as a share of payroll.
"The different trends 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 and professor emeritus of labor studies and employment relations at Rutgers University.
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September 10, 2009
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