Pennsylvania’s Workers’ Compensation Costs Per Claim Grew, Finds New WCRI Study

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Workers’ compensation costs per claim in Pennsylvania showed steady growth in costs and expenses per claim, according to a new report by the Workers Compensation Research Institute (WCRI).

The study by the Cambridge, Mass.-based WCRI found that total costs per claim with 12 months of experience with more than seven days of lost time in Pennsylvania grew 6 percent in 2007, driven by growth in medical, indemnity, and benefit delivery costs per claim.

The study also found that payments per claim for lost wages, known as indemnity benefits, with more than seven days of lost time in Pennsylvania increased by 7 percent in 2007 as a result of a 4 percent growth in the average weekly wage.

Other components of indemnity costs either had flat growth or minimal contribution, however. The duration of temporary disability had a flat trend and did not contribute to the indemnity costs per claim increases.

The average permanent partial disability (PPD)/lump-sum settlement per claim with such benefits grew 5 percent in 2007.

The study reported that medical payments per claim with more than seven days of lost time in Pennsylvania grew 5 percent in 2007/2008, similar to the 15-state median.

According to another WCRI study, prices paid for nonhospital services grew 2 percent and were a small contributor to total growth in medical payments per claim.

Changes in hospital payments per claim and/or changes in utilization among hospital and nonhospital providers most likely contributed to the most recent growth in overall medical payments per claim, according to WCRI.

Benefit delivery expenses per claim in Pennsylvania grew 5 percent in 2007, consistent with the 15-state median. In prior years benefit delivery expenses also followed the median study state. Medical cost containment expenses per claim, a large contributor to benefit delivery expenses per claim, grew slowly at 2 percent – slower than prior years.

WCRI also reported that Pennsylvania was typical among study states for total costs per claim based on all paid claims. The average cost per claim was approximately $7,000 for claims with 36 months of experience (2005/2008).

However, the total cost per claim with more than seven days of lost time in Pennsylvania was somewhat higher than the median study state, which masks several offsetting factors.

On the one hand, indemnity payments per claim were higher than a typical study state. This includes higher than typical PPD/lump-sum payments per claim in comparison to other wage-loss benefit states and higher benefit delivery expenses per claim.

On the other hand, medical payments per claim with more than seven days of lost time were typical compared to the 15-state median. This was due to multiple factors such as lower payments per claim to physicians with typical utilization, higher payments per claim to physical/occupational therapists and chiropractors with higher utilization and typical prices paid.

Additional contributing factors were lower payments per claim for hospital outpatient services with more frequent use of these services but lower payments per service, and higher overall payment per hospital inpatient episode.

The study, CompScope™ Benchmarks for Pennsylvania, 10^th Edition, provides a meaningful comparison of the workers’ compensation systems in Pennsylvania and 14 other important states 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, wage levels, and industry type.

WCRI also reported that Pennsylvania had higher defense attorney payments per claim in 2007 compared to the median study state. Pennsylvania had the highest medical-legal expenses per claim of the 15 study states. However, use of these services was typical. Medical cost containment expenses per claim were also typical of the 15 study states.

Pennsylvania was also a typical state for time to first indemnity payment in 2007, consistent with the prior year. The percent of claims paid within 21 days of injury saw a slight and steady improvement since 2004.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, health care, and disability issues. Its members include employers, insurers, governmental entities, insurance regulators and state administrative agencies in the U.S., Canada, Australia and New Zealand, as well as several state labor organizations.

To order this report, visit the WCRI website: www.wcrinet.org.