Workers' Compensation Costs Per Claim in Maryland Grew Rapidly in Most Study Years, WCRI Study Reports

Business Wire, March 20, 2008

Average Cost Per Claim Still Typical Among 14 States Studied

CAMBRIDGE, Mass. -- Workers' compensation costs per claim in Maryland grew rapidly in four out of five study years, according to a new study by the Workers Compensation Research Institute (WCRI). The major driver was rapid growth in average medical payments per claim.

The study by the Cambridge, Mass.-based WCRI found that workers' compensation average costs per claim grew 5 percent in 2005/2006 claims (2005 claims, evaluated in mid 2006), close to the growth rate in the 14-state median.

The study reported that average costs per claim in Maryland were typical of the 14 study states for a similar set of 2003/2006 claims. This result masked the offsetting effects of medical payments per claim that were among the lowest of the 14 study states and the fact that Maryland had a higher percentage of claims with more than seven days of lost time.

Medical costs per claim with more than seven days of lost time in Maryland were among the lowest of the study states - 33 percent lower than the 14-state median. According to another WCRI study, Baselines for Evaluating the Impact of the 2004 Fee Schedule Changes in Maryland: The Anatomy of Workers' Compensation Medical Costs and Utilization, 6(th) Edition, this lower payment per claim was primarily the result of lower prices paid, which was consistent with the relatively lower nonhospital fee schedule in Maryland.

Offsetting the lower medical costs per claim, the proportion of claims with more than seven days of lost time in Maryland was 8 percentage points higher than the 14-state median of 21 percent.

The study also found the average benefit delivery expenses per claim in Maryland were typical of the study states, masking offsetting factors. Medical cost containment expenses per claim were lower than typical, usually the case in a state with low medical fee schedule and low utilization.

On the other hand, the Maryland dispute/claim resolution process is both an attorney-intensive and routinized process, with well-defined steps and norms for adjudication and settlement. As a result, defense attorneys were involved in Maryland much more often than typical. However, payments per claim to defense attorneys were the lowest of the 14 study states.

The study also found that the average time it took for an injured worker to receive the first indemnity payment was longer in Maryland than in most other states. Despite the faster-than-typical speed of injury reporting, the average time from notice to first payment was the longest of the 14 states studied.

This may be related to the requirement that injured workers in Maryland need to file claims for benefits if they lose time from work, with the first indemnity payment required within 21 days of the date the Workers' Compensation Commission mails the notice of receiving the filing of a claim from workers. In most other study states, filing the first report of injury begins the claim process, and workers usually start to receive income loss benefits without having to take additional action.

The study, CompScope[TM] Benchmarks for Maryland, 8(th) Edition, provides a meaningful comparison of the workers' compensation systems in 14 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 injury mix, wage levels, and injury types.

The 14 study states are Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin. These states represent nearly 60 percent of the nation's workers' compensation benefit payments.

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.