Workers’ comp benefits for employees decline, but employer costs rise

A new report from the National Academy of Social Insurance reports employer’s costs for workers’ compensation continue to rise despite the fact that workers’ comp benefits as a share of payroll were lower in 2013 than any other period in the last three decades. Benefits per $100 of covered payroll declined to 98 cents in 2013, a 5% drop from 2009. But a growing, post-recession workforce has resulted in rising employer costs of $1.37 per $100 of covered payroll, a 5% increase from 2009, according to the report. In 2013, total workers’ comp benefits were $63.6 billion, while employer costs were $88.5 billion, the report found.

The decline in employee benefits is attributed to a drop in injuries and tighter regulations. Due to rising health care costs during the last 30 years, medical benefits account for a greater share of total workers’ comp benefits reaching a 50% share in 2013 compared to 29% in 1980. The greatest increases in employer costs in the 2009 to 2013 period occurred in New York and California. About 33 states currently spend more than half of their workers’ compensation spending on medical care for injured workers. California pays 54.7% of costs as medical benefits.

State trends vary from national trends due to their industrial mix, workers’ compensation policies, and their economic health. The Academy report details state-by-state changes in coverage, benefits, and employer costs over the last five years. Some state-level results show that between 2009 and 2013:

  • The number of covered workers and the amount of covered wages increased in every state except Arkansas and New Mexico
  • Benefits per $100 of covered wages decreased in 39 states
  • In 2013, the jurisdictions with the lowest workers’ compensation benefits as a share of payroll were the District of Columbia ($0.26 per $100 of covered payroll), Texas ($0.40 per $100 of covered payroll), and Arkansas ($0.49 per $100 of covered payroll)
  • Employer costs per $100 of covered wages increased in 27 states
  • In 2013, the states with the highest employer costs for workers’ compensation were Alaska ($2.58 per $100 of covered payroll), Montana ($2.24 per $100 of covered payroll), and Oklahoma ($2.24 per $100 of covered payroll).

 

Employer takeaway: While state laws vary regarding the control that employers can exercise over medical care, all employers need to look at ways to control costs. Top of the list is a return-to-work program and knowledge of the treating physician. Today, many doctors are seeking to treat workers’ compensation injuries because it is more lucrative than fee scheduled healthcare treatment and some do not know or follow the best practices guidelines of the American College of Occupational and Environmental Medicine (ACOEM). Red flags for employers are physicians who lack occupation injury treatment experience, do not support a return-to-work philosophy, have not taken the time to understand the business and its return-to-work program, rely upon emergency room treatment for certain procedures, or have ownership in secondary facilities such as physical therapy, surgery, imaging, etc.

 For Cutting-Edge Strategies on slashing Workers’ Compensation Costs visit www.PremiumReductionCenter.com

David Leng, CPCU, CIC, CBWA, CWCA, CRM

Author | Speaker | Certified Risk Manager | Certified Work Comp Advisor

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