N.C. Workers' Comp Costs Per Claim Lower Among 12 States

July 17, 2003
There's good news and bad news for North Carolina: Workers' compensation total costs per claim in the state are lower than most of the states in a national study. However, the costs are rising, according to the Workers Compensation Research Institute (WCRI).

The WCRI study of 12 states, representing 50 percent of the nation's workers' compensation benefits paid, reported that the average cost of a workers' compensation claim in North Carolina was $2,373, 9 percent below the median of the states in the study. The study reported that payments per claim for the medical care of injured workers, expenses to manage claims (benefit delivery expenses) and the share of claims with more than seven days of lost time were all lower in North Carolina.

At the same time, the average indemnity benefit per claim - wage replacement payments for lost time injuries - for claims with more than seven days of lost time was 20 percent higher in North Carolina than the 12-state median. The higher indemnity benefits per claim were driven by several factors:

  • A longer duration of disability in temporary disability claims than the median state studied
  • Higher (by 66 percent) permanent partial disability (PPD) payments per PPD claim (payments for the more serious injuries)
  • Higher lump-sum settlements per claim (17 percent higher). Lump-sum settlements are agreements that typically close out a workers' compensation claim and result in a single payment to the worker.

The other states included in the study are California, Connecticut, Florida, Georgia, Illinois, Indiana, Massachusetts, Pennsylvania, Tennessee, Texas and Wisconsin.

The study, "CompScope Benchmarks: Multistate Comparisons, 1994-2000," provides a comparison of the workers' compensation systems in 12 large states based 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 injury mix, industry mix, and wage levels.

The study found the average total cost per claim for all paid claims in North Carolina rose by 12.6 percent between 1999 and 2000 for claims with 12 months' experience. The major factors behind the increase in per-claim costs were an 8 percent rise in payments for medical care and a 13 percent growth in the duration of temporary disability. Less significant cost drivers included increases in PPD benefits per claim and lump-sum settlements, higher expenses to manage claims and growth in the share of claims with more than seven days of lost time.

"While North Carolina has lower average costs per claim than most of the other states studied, continued growth in costs per claim could change that position," said Dr. Richard Victor, executive director of the Cambridge, Mass.-based Workers' Compensation Research Institute. "Not only are medical costs rising, but so is the duration of temporary disability."

The study cautioned that since the 12.6 percent increase in total cost per claim was unusually large for North Carolina, this jump in costs may be an anomaly.

To purchase "CompScope Benchmarks: Multistate Comparisons, 1994-2000" ($95 - WCRI members, government agencies, non-profit organizations; $195 - all others), contact Jill McNamee at (617) 661-9274) or visit www.wcrinet.org.

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