Massachusetts Workers' Compensation Costs Per Claim Typical but Grew Rapidly, WCRI Study Reports

Business Wire, March 12, 2008

CAMBRIDGE, Mass. -- Workers' compensation costs per claim in Massachusetts were typical among 14 study states, but grew rapidly in four out of five study years, including a nearly 10 percent increase in 2005 claims evaluated in 2006.

The study by Cambridge, Mass.-based Workers Compensation Research Institute (WCRI) found that the rapid growth in total costs per claim in Massachusetts in 2005/2006 was driven by rapid increases in medical costs per claim, as well as two new cost drivers in the most recent study year: indemnity benefits per claim with more than seven days of lost time and benefit delivery expenses per claim.

Over the five-year study period, the average medical cost per claim with more than seven days of lost time increased, on average, nearly 11 percent annually, including a 12 percent increase in the latest year.

Indemnity benefits per claim with more than seven days of lost time in Massachusetts increased 10 percent in 2005/2006, after little change in the prior two years. In addition to wage growth of 3 percent, a nearly one week increase in the average duration of temporary disability was the main contributor to the increase.

The average benefit delivery expense per claim with more than seven days of lost time and such expenses increased 9 percent in 2005/2006, following little change in the previous two years. A major factor contributing to this increase was rapid growth in the average medical cost containment expense per claim.

These were among the findings of a study by the Workers Compensation Research Institute. The WCRI study, "CompScope[TM] Benchmarks for Massachusetts, 8th Edition," provides a meaningful comparison of the workers' compensation systems in Massachusetts and 13 other important states on key performance measures such as benefit payments and costs per claim, timeliness of payments, and defense attorney involvement, by analyzing a similar group of claims and adjusting for interstate differences in industry mix, wage levels, and injury types.

The other states in the study were Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Michigan, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin.

Despite the increase in the average medical cost per claim with more than seven days of lost time, Massachusetts had the lowest average medical payment per claim with more than seven days of lost time among the 14 study states, some 48 percent below the 14-state median for 2003 claims evaluated in mid 2006.

According to another WCRI study, "The Anatomy of Workers' Compensation Medical Costs and Utilization in Massachusetts, 6th Edition," prices and utilization for most medical services in Massachusetts were lower than typical of the states studied. The medical (more) fee schedule in Massachusetts, among the lowest in the country, was a contributing factor in the lower prices.

WCRI also found that injured workers received their first indemnity payments faster in Massachusetts than in other study states. Some 53 percent of injured workers in Massachusetts received their first indemnity payments within 21 days of injury, 12 percentage points above the 14-state median for 2005/2006 claims.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers' compensation, healthcare, and disability issues. Its members include employers, insurers, insurance regulators, and state administrative agencies in the U.S., Canada, Australia, and New Zealand as well as several state labor organizations.

The study can be purchased from the WCRI web site: www.wcrinet.org.