WCRI report offers glimpse on impact of North Carolina reforms

A combination of high income benefits, slow return to work, longer temporary disability, and large lump-sump settlements have plagued the North Carolina workers' comp system, according to a new study. Legislative reforms enacted last summer should have a positive impact on at least some of those factors.

The Boston-based Workers Compensation Research Institute has released the 12th in a series of annual analyses that benchmark the performance of states' workers' comp systems. The report looks at trends in North Carolina's system performance metrics and compares the state's workers' comp system with 15 other jurisdictions.

The reforms enacted in 2011 in North Carolina were aimed at helping injured employees return to work faster and lowering employers' costs. Those that addressed income benefits included a cap on temporary total benefits at 500 weeks. Previously, there was no cap. The cap on temporary partial disability benefits was extended from 300 to 500 weeks.

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Additionally, the reforms clearly defined suitable employment in the statue for cases both before and after maximum medical improvement is established, increased workers' access to vocational rehabilitation services, and increased benefits for fatality claims.

The full impact of the reforms won't be known for several years, the researchers said.

The report provides a pre-reform baseline against which the post-reform experience reported in future editions can be compared. Indemnity costs per claim in North Carolina were highest among the 16 states studied, and 71 percent higher than the 16-state median. The report cites the following reasons:

Hybrid benefit system. Injured workers in North Carolina who don't return to work at the end of the healing period either continue to receive temporary disability benefits, as in a wage-loss benefit system, or receive permanent partial disability benefits based on an impairment rating. Workers who have returned to work at full wages may receive PPD benefits, as in a PPD system. "These system features contributed to longer duration of temporary disability, higher PPD/lump-sum payments, and a higher frequency of PPD/lump-sum payments," the report says.
Slower return to work, resulting in longer duration of temporary disability benefits. The benefits averaged nearly 30 weeks compared to 19 weeks in the median state. "The 2011 reforms directly addressed this through imposition of the 500-week cap on benefits, along with the definition of suitable employment and greater worker access to vocational rehab services," WCRI said.
Lump-sum settlements were higher than in many states. North Carolina had a higher proportion of lump sums greater than $50,000 compared with the typical state.

Reduced hospital fee schedule. North Carolina also had higher medical payments per claim than the 16-state median. The report cites higher payments to hospitals for both inpatient and outpatient services. That may change due to legislation enacted two years earlier.

In July 2009, North Carolina adopted reductions in maximum hospital reimbursement rates. For example, the reimbursement for hospital outpatient services was reduced to 79 percent from 95 percent for most hospitals.

The researchers looked at data on cases through March 2010, meaning only eight months of experience are reflected. "Overall medical costs per claim in North Carolina were 6 percent higher than the 16 state median for 2009 cases evaluated in 2010 (12 months of experience) and 11 percent higher for 2007 cases evaluated in 2010 (36 months of experience)," the report says. "From 2008 to 2009 (evaluated in 2010) growth in overall medical costs per claim was more moderate -- 3 percent -- compared with 8 percent per year from 2004 to 2008."

Read more at the WorkersComp Forum homepage.

March 15, 2012

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