Benefit Delivery Expenses Absorb More Workers' Comp Cost

With workers'' compensation claim costs rising rapidly in California, policymakers look for opportunities to reduce costs without reducing benefits to injured workers.

Nearly one in every eight dollars paid for workers'' compensation claims is paid for benefit delivery expenses, the costs of litigation, claims adjusting or medical cost containment services -- like utilization management, networks of medical providers, case management services or bill review.

This is the highest among the eight large states (California, Connecticut, Florida, Georgia, Massachusetts, Pennsylvania, Texas and Wisconsin) studied by the Workers Compensation Research Institute (WCRI).

These states represent about 40 percent of the nation''s workers'' compensation benefits.

By contrast, benefit delivery expenses in Texas and Wisconsin absorb only 6 percent of claim costs -- half the rate in California.

"If the California system could improve its efficiency and reduce the share of costs absorbed by benefit delivery expenses, several billion dollars could be saved," said Dr. Richard Victor, executive director of WCRI and one of the report''s authors. "This savings could improve the competitiveness of California businesses or could be used to improve benefits to injured workers."

One of the expense drivers in California is the expenses of litigation and claims adjusting.

These account for 7 percent of total claim costs -- compared with 3 to 4 percent in the typical state of the states studied.

Since the costs of the California workers'' compensation system exceed 10 billion dollars, one or two percent of claim costs is a significant amount of money, said Victor.

by Virginia Foran