Workers' Compensation Claim Costs See Rapid Rise in Massachusetts

After a period of relative stability, workers' compensation claim costs in Massachusetts surged recently according to a new study by WCRI.

After a period of relative stability, workers' compensation claim costs in Massachusetts surged recently according to a new study by the Workers Compensation Research Institute (WCRI).

The study by the Cambridge, Mass.-based WCRI reported that claim costs increased 10.5 percent from 1997 to 1998, based on experience through mid-1999. By contrast, claim costs in the state grew less than one percent per year from 1994 to 1997.

The WCRI study said that major factors behind the rise were growing duration of disability and rising medical costs per claim.

The study of eight states, which represent 40 percent of the nation's workers' compensation benefits, also reported that injured workers in Massachusetts are more likely to lose more than seven days from work than any other state reviewed.

In Massachusetts, 29 percent of injured workers incurred a workplace disability that kept them off the job for more than seven days, compared to 22 percent for the median of the eight states studied, according to WCRI.

As a result, indemnity payments - wage replacement payments for lost-time injuries - are among the highest in the study for all paid claims. Injured workers in Massachusetts with more than seven days of lost time received temporary disability benefits for a typical length of time of about 12 weeks on average, although this figure is growing.

In addition to Massachusetts, states included in the WCRI study were California, Connecticut, Florida, Georgia, Pennsylvania, Texas and Wisconsin.

"The rapid rise in claim costs is cause for concern," said Dr. Richard Victor, executive director of WCRI. "In particular, the high percentage of injured workers in Massachusetts with a disability duration of more than seven days bears watching."

The study, "CompScope Benchmarks: Multistate Comparisons, 1994-1999," provides a comparison of the workers' compensation systems in eight large states on key performance measures over time, such as benefit payments and claim costs, timeliness of payments and attorney involvement by analyzing a similar group of claims and adjusting for injury mix, wage levels and injury type.

The study also found that medical payments in Massachusetts are the lowest of the states studied. For example, medical payments for claims with more than seven days of lost time average about $3,000, about 61 percent lower than medical payments in Texas, the study state with the highest medical payments per claim.

One factor contributing to the lower medical costs in Massachusetts is the low reimbursement rates under the medical fee schedule. The fee schedule was increased in 1995 and again in 2000. Other factors that may contribute to lower medical costs in the state are the extensive use of treatment guidelines and utilization review which were fully implemented in 1995.

The study also found that the speed of first payment to injured workers in Massachusetts is faster than in most other study states. About 58 percent of injured workers in Massachusetts receive their first check within 21 days of injury.

"The time to first payment has shown steady improvement in Massachusetts, unlike most study states where the time to first payment has lengthened," Victor said.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers' compensation, health care and disability issues. Its members include employers, insurers, insurance regulators and state regulatory agencies as well as several state labor organizations.

To purchase "CompScope Benchmarks: Multistate Comparisons, 1994-1999" ($95 for WCRI members, government agencies, non-profit organizations; $195 for all others) contact Jill Lawson at e-mail [email protected] or telephone number 617-661-9274 or visit WCRI's Web site at www.wcrinet.org.

edited by Sandy Smith

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