Pennsylvania's Workers' Compensation Costs Per Claim Showed Steady Growth, Finds New WCRI Study

Business Wire, March 31, 2008

Average Cost per Claim Still Typical Among Study States

CAMBRIDGE, Mass. -- Workers' compensation costs per claim in Pennsylvania grew rapidly in all study years, according to a new report by the Workers Compensation Research Institute (WCRI).

The study by the Cambridge, Mass.-based WCRI found that the average total cost per claim with more than seven days of lost time grew at a rate of 6-10 percent per year, including growth of nearly 6 percent for 2005/2006 claims (2005 claims evaluated in 2006).

Total costs per claim in Pennsylvania were fairly typical of the 14 study states. This result, however, masked several offsetting factors. On the one hand, medical payments per claim with more than seven days of lost time were lower than the 14-state median and more workers returned to work in a week or less than in many other study states. On the other hand, compared to the median study state, Pennsylvania had higher indemnity benefits per claim with more than seven days of lost time and higher litigation-related expenses.

The study reported that medical payments per claim with more than seven days of lost time in Pennsylvania were 12 percent lower than the median of the study states for 2003 claims evaluated in 2006.

Another WCRI study found that the main reasons for the lower medical costs per claim were lower-than-typical prices paid for some services, physician visits that were less resource intensive, and hospital inpatient and outpatient costs per claim that were much lower than typical.

However, the average indemnity benefit per claim with more than seven days of lost time in Pennsylvania was 19 percent higher than the median of the 14 study states in 2003/2006 claims. This result, in part, reflects some characteristics of the Pennsylvania wage-loss benefit system.

The average expense of delivering indemnity and medical benefits to injured workers in Pennsylvania rose 10 percent in 2005/2006. During the whole study period, benefit delivery expenses per claim grew rapidly (9-15 percent per year), driven primarily by increases in medical cost containment expenses per claim.

The average benefit delivery expense per claim in Pennsylvania was 22 percent higher than the typical study state for 2003/2006 claims with more than seven days of lost time and expenses, a result driven mainly by higher litigation-related expenses per claim.

The study noted that Pennsylvania was not among the most litigious states. However, defense attorney payments per claim were 34 percent higher than the 14-state median for 2003/2006 claims, suggesting a somewhat more expensive and perhaps more complex dispute resolution process.

The study also found there was little recent change in Pennsylvania in the speed of the first indemnity payment. The percentage of claims with more than seven days of lost time that were paid within 21 days of injury remained stable in 2005/2006.

The study, CompScope[TM] Benchmarks for Pennsylvania, 8(th) Edition, provides a meaningful comparison of the workers' compensation system in Pennsylvania 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 type.

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

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 report can be ordered from the WCRI web site; www.wcrinet.org.