WCRI studies show recessionary impacts on state comp systems

Injured workers have been staying out of work longer in many states recently. That's one of the findings of a new analysis series from the Workers Compensation Research Institute.

The Massachusetts-based organization's CompScope Benchmarks 12th edition compares the workers' comp performances of 16 large states using data from claims from injury years 2004 through 2009, evaluated as of March 31 of each year from 2005 through 2010. The states included are California, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Texas, Virginia, and Wisconsin.

Three-fourths of the states studied had an increase in temporary disability of about one week or more from 2007 to 2009, the researchers said, "likely reflecting some impact of the recession given high unemployment rates and fewer available jobs." In addition, some state-specific issues can be seen in the findings.

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Texas. Legislative reforms have impacted workers' comp costs in Texas over the last several years, the researchers reported. Specifically, recent medical fee schedule changes can be seen.

Medical payments per claim in Texas had been the highest among 16 states studied by WCRI prior to the adoption of reform legislation passed in 2001 and 2005. In 2009, "medical payments per claim were 16 percent lower than the typical state."

The overall cost per claim in Texas increased a modest 5 percent in 2009. But the authors say the drivers of the increase were different from 2006 to 2009.

Medical costs per claim comprised the majority portion of costs per claim every year from 2004 to 2009; however, as a share of total costs, they decreased over the period -- from about 50 percent of the total to around 45 percent. At the same time, the share of indemnity costs per claim increased by 2 percentage points.

Indemnity benefits grew 5 percent per claim from 2008 to 2009. "One factor in that growth was a 3 percent increase in the duration of temporary disability -- nearly one-half week," the report said. "This was the first increase in temporary disability duration in many years and may be related to the recession."

The researchers said there was a slight shift from shorter to longer duration cases -- of 30 weeks or more. Also, they reported a small increase in the percentage of cases with more than a week off work in 2009. "Both of these results would be consistent with what one might expect to see in a recession; that is slower return to work in a time of higher unemployment rates and fewer job opportunities."

Florida. While most states studied had increases in TD duration, Florida was among those that bucked that trend -- with only a slight change. Also changing little in the state was the average weekly wage of injured workers.

Overall, indemnity costs per claim with more than seven days of lost time in Florida grew 3 percent per year. That followed sizeable decreases of more than 20 percent "due to the reforms related to permanent disability benefits," the report says.

The growth in indemnity costs resulted primarily from the 1 percentage point increase in lump-sum frequency and the 12 percent growth in the average lump-sum payment per claim, according to the researchers. Coinciding with that was an increase in the frequency of defense attorney involvement in Florida, which was faster than the typical growth rate in the 16-state median.

Also increasing was the average defense attorney payment per claim, which grew 12 percent in 2009 -- "much faster than the typical growth rate of 4 percent among the 16 states in that year," the study said. "This indicates that the Florida system was more litigious and complex than many other state systems and led to higher benefit delivery expenses per claim in the state."

Medical costs for all paid claims in 2009 grew 7 percent and increased 10 percent for medical-only claims. The annual average growth rates for medical costs per claim were 5 percent to 6 percent per year since 2005.

California. Average indemnity costs per claim increased 8 percent in California in 2009, which was faster than in prior years. A contributing factor was the average duration of TD benefits, which increased by nearly one week per year, along with a 1 percentage point increase in the percentage of claims with more than a week off work.

Medical payments per claim with more than seven days of lost time grew 7 percent in 2009, continuing a trend that began in 2005. Prior to that period, there was a "large decrease of more than 30 percent due to the reforms in earlier years," the report says.

"Rapid growth in utilization, the predominant driver of the pre-reform medical cost growth and a target area of the reforms, did not resume after the reforms," the report says. According to previous WCRI research, the main drivers of medical costs in the post-reform period included:

An increase in the prices paid for office visits due to a fee schedule increase.
Growth in payments per service for facilities associated with surgical procedures.
More complex office visits with higher prices being billed more frequently.
Moderate increases in services per visit for physical medicine, in the percentage of claims that received major radiology and physical medicine, and in payments per claim for supplies and equipment.

Read more at the WorkersComp Forum homepage.

January 5, 2012

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