Benefit Delivery Expenses Absorb More Workers' Comp Cost

Aug. 9, 2001
Nearly one in every eight dollars paid for workers' compensation claims is paid for benefit delivery expenses, the costs of\r\nlitigation, claims adjusting or medical cost containment services.

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

About the Author

EHS Today Staff

EHS Today's editorial staff includes:

Dave Blanchard, Editor-in-Chief: During his career Dave has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeekEHS Today, Material Handling & LogisticsLogistics Today, Supply Chain Technology News, and Business Finance. In addition, he serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2021), which has been translated into several languages and is currently in its third edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

Adrienne Selko, Senior Editor: In addition to her roles with EHS Today and the Safety Leadership Conference, Adrienne is also a senior editor at IndustryWeek and has written about many topics, with her current focus on workforce development strategies. She is also a senior editor at Material Handling & Logistics. Previously she was in corporate communications at a medical manufacturing company as well as a large regional bank. She is the author of Do I Have to Wear Garlic Around My Neck?, which made the Cleveland Plain Dealer's best sellers list.

Nicole Stempak, Managing Editor:  Nicole Stempak is managing editor of EHS Today and conference content manager of the Safety Leadership Conference.

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