Rates, Claim Frequency Still Declining in Workers’ Comp; Medical Costs Rise

States Are Not Equal in Handling Worker Injuries

Prices for workers’ compensation insurance in the United States declined in 2008 and, in general, that trend is likely to continue in throughout 2009, according to the National Council on Compensation Insurance (NCCI).

Dr. Robert Hartwig, president of the Insurance Information Institute, remarked in a presentation in Austin, Texas, in June that workers’ compensation insurance is “probably the softest of all commercial lines as of today. And it being the second largest of commercial lines it has a very significant effect” on overall growth numbers in the property casualty insurance industry. Hartwig noted, too, that the exposure base for workers’ comp has declined due to the large numbers of jobs that have been lost in the economic downturn.

Even so, workers’ compensation payments for medical care and cash benefits for workers injured on the job increased nationally by 2.0 percent to $55.4 billion in 2007, according to a study by the National Academy of Social Insurance (NASI).

However, Dennis Mealy, NCCI’s chief actuary, pointed out in his 2009 State of the Line Report released earlier this year that the pattern of decreasing rates may be coming to an end in some states. Mealy indicated that both Florida and California, which have experienced substantial rate decreases since reforms were enacted in 2003, may see a leveling off. Additionally, NCCI has filed for a 2.3 percent increase in workers’ comp rates in Iowa.

California in particular experienced large declines in benefit payments following reforms enacted in 2003 and 2004, the NASI found. A 10 percent decline in California’s cash payments to injured workers in 2007 followed declines in 2006 and 2005, as well.

While claim frequency is down, consistent with long-term trends indemnity and medical severities continue to rise. Mealy acknowledged that the line has its challenges, the biggest being increases in medical costs. And some states apparently do a better job of handling of workers’ compensation issues and getting injured employees back to work.

State Report Cards

The California-based Work Loss Data Institute (WLDI) in early August issued its 2009 State Report Cards for Workers’ Comp, which aims to help employers, insurers, third party administrators, state governments and consultants understand which states are doing a good job handling workers comp’ injuries and why.

WLDI’s State Report Cards are based on data from OSHA that covers recordable injuries and illnesses. Data is available for 43 states, plus Puerto Rico, Guam and the Virgin Islands. The 2009 release, available online at www.worklossdata.com/, adds four more years’ worth of data (2003-2006), which makes for a total of seven years of data because it includes statistics collected in the last publication, which was released in 2004. WLDI tracked trends and gave states a grade based on most current performance, but it also gave them a “tier ranking” based on how they performed on average over the seven years, and whether they have an upward, downward or stable trend.

Similar to previous years, the 2009 State Report Cards compare states on five different outcome measures for each year: incidence rates; cases missing work; median disability durations; delayed recovery rate; and key conditions: low back strain. The accompanying maps show state by state performance by tier and by grade.

According to WLDI, Iowa, Kansas, Minnesota, Utah and Virginia are doing the best job, while Louisiana, New Jersey, New York, Oklahoma, Rhode Island, Texas and Wyoming perform the worst.

Iowa rated the best of all the states for 2006 and Minnesota came in a close second. Both states received a grade of “A+” based on an average of their 2006 scores in the five categories above.

Illinois came in last, with Wyoming, Rhode Island and New York very close to the bottom. In total, nine of the 43 states received a grade of “F” in 2006.

In terms of the tier ranking system, the Tier I states are Iowa, Kansas, Minnesota, Utah and Virginia. Tier I means that the state had an average grade of “B+” or better, and a trend going up or level. Those five states were doing great and continue to improve. Eight states fell into the opposite category (Tier VI), which means they had an average grade of “D-” or worse, and a trend going down or level. The worst performers for the years 2000-2006 were: Illinois, Louisiana, New Jersey, New York, Oklahoma, Rhode Island, Texas and Wyoming.

Topics California Trends Texas New York Workers' Compensation Pricing Trends Iowa Minnesota