Michigan: Researchers say state's WC costs per claim remain low, stable
Employers in Michigan received good news in a recent report that found workers' compensation costs in the state remain low and stable compared to other areas of the country.
Despite rampant unemployment and rising labor costs, the study found that the Michigan workers' comp system is a competitive asset for the state. According to the Workers Compensation Research Institute in Cambridge, Mass., the average cost per claim in Michigan -- nearly $4,700 per claim -- was 35 percent lower than the median of 15 other states examined by the organization. In addition, researchers noted that when compared to the study states that often compete with Michigan for business, employers paid 20 percent less for workers' comp costs for an average case than the median of those states.
Good value proposition.
Researchers said the Michigan workers' comp system provided a better value proposition for both employers and injured workers. For example, the average medical cost per claim with more than seven days of lost time in Michigan was among the lowest of the 15 study states. This was the main driver of the much lower total cost per claim in Michigan. Despite the fact that employers paid less for medical services on an average case, injured workers reported typical outcomes. Compared with other states in that study, injured workers in Michigan reported typical physical recovery, typical access to and satisfaction with care, and fairly typical return-to-work rate and speed.
Among the highlights of the study, WCRI found that:
- Low prices and utilization are key. Researchers said lower medical costs per claim were the result of both lower prices paid and lower utilization of most medical services.
- Indemnity benefits remain low. The study found that indemnity benefits per claim with more than seven days of lost time were lower in Michigan than in many study states. Researchers said the key drivers of this result were system features and the statutory benefit structure in Michigan that led to shorter duration of temporary disability than the other wage-loss systems and a slightly lower average weekly temporary total disability benefit rate.
States with a wage-loss benefit structure typically have longer duration of temporary disability. However, among the four states in the study with wage-loss benefit systems, Michigan was an exception. At an average of 19 weeks, researchers said duration of temporary disability in Michigan was five to six weeks shorter than in Massachusetts and Pennsylvania, and 15 weeks shorter than in Louisiana.
- Benefit structure keeps indemnity benefits low. The study noted that another factor underlying relatively lower indemnity benefits per claim in Michigan was a slightly lower average weekly TTD benefit rate, which was related to the statutory benefit structure. Michigan's benefit structure is different from the benefit structure in most states in two ways. First, Michigan bases weekly benefits on 80 percent of after-tax (spendable) earnings, whereas most states pay two-thirds of the worker's pretax average weekly wage. Second, Michigan sets the maximum statutory weekly benefit at 90 percent of the statewide average weekly wage while most states set the maximum benefit at 100 percent or higher.
Under the Michigan benefit structure, researchers said about 16 percent of workers (those with lower wages) received higher weekly benefits than under the typical structure in other states, but more than a third of workers (those with higher wages) received at least 5 percent less.
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February 25, 2010
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