Calif. Workers' Comp Claim Costs High, Climbing

California workers' compensation claim costs have increased at a double-digit\r\nrate, according to a study by the Workers Compensation Research\r\nInstitute.

Workers'' compensation claim costs increased at a double-digit rate, according to a study by the Workers Compensation Research Institute (WCRI).

Claim costs grew by 11 percent between 1997 and 1998 (as of 1999 experience). Both medical costs and income benefit costs grew significantly.

A larger number of cost drivers were found in California than in any of the other.

seven large states studied. Among these cost drivers were:

  • High and lengthening time away from work
  • A high and growing share of claims receiving permanent disability payments or lump sum settlements
  • Benefit delivery expenses -- litigation, claim adjusting, medical cost containment expenses - are high and growing rapidly
  • Frequent use of relatively expensive vocational rehabilitation services
  • Growing litigation

More than 50 percent of claims in California from 1996 as of mid-1999 had lump sum payments or payment for permanent disabilities, tied with Texas as the highest percentage of all states in this eight-state study.

That percentage jumped six percentage points since 1994. The other states in the study, which represent 40 percent of the nation''s workers'' compensation benefits, are Connecticut, Florida, Georgia, Massachusetts, Pennsylvania, Texas and Wisconsin.

The average duration for a temporary disability claim in California is 14 weeks, a two-week increase since 1995, and nearly double the duration in Wisconsin and Connecticut, study states with the lowest per-claim income benefit costs. The percentage of claims with more than one week of lost time increased two percentage points from 1996 to 1998.

"California''s cost drivers are numerous and complex," said Dr. Richard Victor, executive director of the Cambridge, Mass.-based WCRI. "The growth in duration of disability and permanency benefit costs are central to the story."

Victor said that although the study does not determine what caused this growth, WCRI speculates that either growing injury severity or growing dysfunction in the way the system handles return to work, termination of benefits and award of permanent disability benefits are the leading explanations.

"Other evidence raises questions about whether growing injury severity is an important cause, suggesting that policymakers focus their inquiry on improving the functioning of the system in resolving issues about return to work and permanent partial disability benefits, said Victor.

by Virginia Foran

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