Wisconsin Workers' Compensation Costs Per Claim Continued Upward Trend, New WCRI Study Reports; Average Total Cost per Claim Still Lower among 13 Study States.

CAMBRIDGE, Mass. -- Workers' compensation average costs per claim in Wisconsin grew 13 percent for claims evaluated in mid 2004 with 12 months' maturity. This followed an 8 percent growth in the prior year and two years of double-digit increases before that, outpacing growth in other study states, says a new study by the Workers Compensation Research Institute (WCRI).

The major factor behind the double-digit increase was rapid growth in medical costs per claim for the treatment of workplace injuries that resulted in more than seven days of lost time.

These costs have been rising 12 percent per year on average in Wisconsin since 1998, according to the study. By contrast, the growth of medical costs per claim appears to have slowed in many other study states after a period of very rapid growth.

Increasing prices for medical care of injured workers were the primary reason for the rapid growth in medical costs per claim in Wisconsin as utilization of services changed little, according to other WCRI research.

Other cost drivers behind the growth in average costs per claim included rapid growth in medical cost containment expenses per claim. Average indemnity benefits--wage replacement payments for lost-time injuries--per claim with more than seven days of lost time grew at a moderate rate in the latest year, largely tracking wage growth.

Notwithstanding these rising costs, the average cost per workers' compensation claim in Wisconsin was among the lowest of the 13 states in the study, 38 percent lower than the median study state.

The study attributed the lower cost per claim in the state to several factors, including: a slightly lower percentage of claims with more than seven days of lost time than the other study states; much lower indemnity payments per claim with more than seven days of lost time, largely because injured workers returned to work more quickly and fewer received permanent partial disability (PPD) and lump sum payments; lower medical costs per claim as a result of less frequent utilization despite Wisconsin's higher prices; and lower benefit delivery expenses per claim, in part due to less frequent litigation.

The study reported that the average medical payment per claim with more than seven days of lost time in Wisconsin was 16 percent lower than the 13-state median for claims with an average 36 months' experience. According to another WCRI study, Wisconsin had higher prices for medical services, consistent with setting maximum reimbursement rates based on amounts that providers charge for their services, but lower utilization of these services.

The study, CompScope(TM) Benchmarks for Wisconsin, 6th Edition, provides a meaningful comparison of the workers' compensation systems in 13 large 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 industry mix, wage levels and injury type.

In addition to Wisconsin, the other states in the study conducted by the Cambridge, Mass.-based WCRI were Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, North Carolina, Pennsylvania, Tennessee and Texas.

The study also reported that the average indemnity payment per claim with more than seven days of lost time in Wisconsin was among the lowest of the 13 study states--38 to 48 percent lower than the 13-state median, depending on claim maturity.

Contributing to these lower indemnity costs per claim were shorter duration of temporary disability per claim, a smaller percentage of claims with PPD/lump-sum payments and lower average PPD/lump-sum payments per claim.

Wisconsin was among the fastest of the states studied in getting indemnity payments to injured workers. The study reported that 53 percent of injured workers were issued their first indemnity checks within 21 days of injury. Once the payor received notice of injury, the speed of payments in Wisconsin was among the fastest of the states studied. This may have been partly a result of the state agency's efforts to monitor timely payments and provide payors with feedback about their performance.

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

The report can be purchased at www.wcrinet.org.