Report: Employers' Workers' Compensation Costs Rise Faster than Benefits

The cost increase in 2003, the most recent year for which data is available, continues a trend that began in 2000, when workers' compensation costs and benefits relative to wages were at their lowest point in the last 15 years.

Total workers compensation payments for injured workers rose by 3.2 percent to $54.9 billion, while employers' costs rose by 9.6 percent to $80.8 billion.

"The fact that employer costs rose faster than payments for benefits and medical care reflects broader developments in the insurance industry," explained John Burton of Rutgers University, who chairs the panel that oversees the report.

Burton believes the growing gap between worker benefits and employer costs is tied primarily to the performance of the financial markets.

"Employer costs reflect rising premiums insurers charge to cover future benefit costs," he said. Since 2000, low interest rates and poor stock market returns have led insurers to raise premiums in order to cover future benefit costs.

The payment-benefit difference relative to workers' wages is even larger. Payments to workers rose by just 1 cent to $1.16 for every $100 of wages in 2003, while costs to employers which include insurance premiums or administrative costs for the self-insured increased by 12 cents to $1.71 per $100 of wages.

Despite the recent rise in costs, both costs and benefits in 2003 remained far below the peak levels relative to wages reached in 1992. In that year total payments to workers, including cash benefits and medical combined, were $1.68. Costs to employers peaked in 1993 at $2.16 per $100 of wages, 45 cents higher than in 2003.

The report, titled Workers Compensation: Benefits, Coverage and Costs, 2003, is the eighth in a NASI series that provides the only comprehensive national data on this largely state run program. The full report is available online at http://www.nasi.org.