Workers' Compensation Costs Per Claim in Maryland Accelerate, WCRI Study Reports; Average Cost per Claim Typical among 13 States Studied.

CAMBRIDGE, Mass. -- Workers' compensation costs per claim in Maryland grew very rapidly in the most recent year studied, according to a new study by the Workers Compensation Research Institute (WCRI). A major factor driving these costs higher was rising medical costs per claim.

The study by the Cambridge, Mass.-based WCRI found that workers' compensation costs per claim grew an average of nearly 14 percent per year for claims evaluated in 2004 with an average of 12 months' maturity, showing acceleration over the two previous years when the growth rate averaged 5 to11 percent per year.

The major cost drivers of growth in the most recent year were higher medical costs per claim and an increase in the proportion of claims with more than seven days of lost time.

Growth in indemnity payments--wage replacement payments for lost-time injuries--per claim with more than seven days of lost time rose in the latest year (6 percent), after little change in the previous year. The main driver of that increase was a rise in the average permanent partial disability (PPD)/lump-sum payment per claim of 17 percent, the study said.

The study, CompScope(TM) Benchmarks for Maryland, 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 injury mix, wage levels and injury types.

The 13 study states are Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin. These states represent more than 50 percent of the nation's workers' compensation benefit payments.

The study reported that average total costs per claim in Maryland were typical compared with other study states, reflecting the offsetting factors of lower medical payments per claim and lower average indemnity benefits per claim, and the fact that Maryland had a higher percentage of claims with more than seven days of lost time.

The average medical payment per claim with more than seven days of lost time was 41 percent lower than the 13-state median for the more mature claims (2001 claims evaluated in mid 2004). Only Massachusetts was lower.

The study also found that the average time it took for an injured worker to receive the first indemnity payment was among the slowest of the 13 study states. The main reason for this was that the speed of payments once payors received notice of injury was the slowest among the 13 states studied. Claims were reported to payors faster than in most study states, however.

The average benefit delivery expense per claim--costs associated with managing claims--with more than seven days of lost time rose just 3 percent in 2003 claims as of 2004, much slower than the annual growth of 8 to 15 percent in the four previous years. Medical cost containment expenses per claim continued to rise, and litigation expenses per claim were higher than typical.

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.