Skip to main content

Workers’ Compensation Trends

By September 16, 2014Commentary

Workers’ compensation pays employees for lost wages and for medical costs related to workplace injuries.  Medical expenses have grown rapidly to become the largest category of workers’ comp spending.  The National Academy of Social Insurance does regular reports on workers’ compensation and the latest explores trends with data through 2012.  (NASI Report)   Workers’ compensation is paid through employers who self-fund; employers who buy private insurance and employers who pay into state funds.  The percent of the market held by state funds has declined in recent years.  Total benefits paid in 2012 were $61.9 billion, with $30.8 billion being paid as medical expenses.  Over the five-year period ending in 2012, medical benefits increased by 6.1% and wage replacement by 3.9%.  Employers costs were $83.2 billion in 2012, quite a bit more than benefits paid, which reflects grow in premiums as the market tightened and insurers sought to increase reserves and profits.  The amount paid for medical care was over 50% of total payments in 33 states.  Medical costs were growing very rapidly in the 2000s, but employers and insurers brought many managed care techniques into play, including utilization management, more limited physician networks and aggressive pharmacy benefit management, so that health spending has moderated, but still tends to grow faster than wage replacement payments.  Medical-only workers’ comp cases account for about 75% of all claims, but only 6% of total benefit spending.  As you might imagine, workers’ comp benefits tends to be highly political in each state, with unions and providers attempting to increase benefits and loosen medical restrictions, and employers working to keep costs under control.  The political nature of workers’ comp leads to great variation across states and workers’ compensation costs have become an area of competition among states to attract business. Because a few medical conditions account for most of the workers’ comp medical spending, there tend to also be providers who specialize in this area and who get paid very well for doing so.  Suspicions of fraud are common.  While medical spending growth has been constrained, companies are obviously anxious about any re-emergence of faster growth.

Leave a comment