Experts Say Comp Spike Continues In ?04

Experts Say Comp Spike Continues In ?04

By Daniel Hays

NU Online News Service, Aug. 27, 12:25 p.m. EDT?Payments for workers' compensation benefits that began rising faster than wages in 2001 will continue their upward surge through this year, experts told National Underwriter.

Their opinion was sought after the Washington research group reported that following 2001 comp payments rose for a second year in a row.

The National Academy of Social Insurance, a non-profit group that studies social insurance issues, said total workers comp benefits in 2002 increased by 7.4 percent--for a total of $53.4 billion.

NASI said spending for medical care contributed to the increase in total payments. Medical spending rose by 9.4 percent, while cash payments to workers rose by just 5.8 percent.

NASI has not accumulated data beyond 2002, but H. Allan Hunt, assistant executive director of the W.E. Upjohn Institute, one of the experts associated with NASI, said he was "very confident" that the trend has continued.

In order for the growth of comp benefits not to exceed wages "you would have to have a mighty increase in employment or wages--and there hasn't been one," said Mr. Hunt.

Robert McGarrah Jr., a senior policy analyst with the AFL-CIO agreed that wages have yet to catch up, commenting that "the reason for this is the worst recovery we've had since the depression."

Medical costs surges, have increased benefit payouts, he said adding that "employer insurance costs far more than benefits."

He said the comp increases came despite the fact that benefits have been "slashed" in most jurisdictions with 16 states paying an average temporary total disability benefit that is "below poverty level for a family of four--about $14,200 a year.

Mr. McGarrah said he thinks that in most states at this point total benefits are still rising faster than wages because, "wages are still rather low and when you factor in medical inflation it's likely that's the case."

Robert Steggert, Marriott International Inc. vice president for casualty claims, said he thought the trend found by NASI in 2002 "is likely to continue with some slight benefit increase coupled with double-digit medical costs and prescription drug costs both trending higher."

NASI in reporting its results noted that workers' compensation is second in size only to the sum of Social Security disability insurance and Medicare in payments.

NASI Study Panel Chair John F. Burton of Rutgers University, who chaired the NASI study panel for the report said that in both 2001 and 2002 workers' compensation benefits and costs grew faster than wages "in large part because wages grew hardly at all following the economic recession that began in March 2001."

NASI found that 2002 saw the slowest growth in wages in more than a decade (0.4 percent) and a decline in the number of covered workers for the second year in a row.

Benefits per $100 of wages grew by eight cents, to $1.16 in 2002 from $1.08 in 2001, but were still lower than their peak in 1992 when benefits were $1.68 per $100 of wages, the researchers said.

Total employer costs rose by 13 percent in 2002 to $72.9 billion. Costs to employers reflect premiums charged by insurers and benefits plus administrative expenses of employers who self-insure, NASI said.

The organization found that employer costs per $100 of wages rose to $1.58 in 2002 from $1.40 in 2001. This latest cost figure, NASI said is still well below a 1990 peak of $2.18 per $100 of wages.

Workers covered by the comp system between 2001 and 2002 declined by 1.1 percent, the study found, while average individual benefits rose 8.5 percent to $425. During the same period employer costs per covered worker increased 14.2 percent to $580.

"Because each state has its own rules for workers' compensation," noted Mr. Burton, "it is essential to have comprehensive and consistent national and state data to evaluate the impact of these programs on workers and employers."

The report, "Workers' Compensation: Benefits, Coverage, and Costs, 2002," is the seventh in a NASI series that provides the only comprehensive national data on the largely state-run comp programs. The study provides estimates of workers' compensation payments--cash and medical--for each state, the District of Columbia, and the federal programs providing workers' compensation benefits.

The full report and state-specific information is available on the Academy's Web site at www.nasi.org. Print copies are obtainable from Simona Tudose at (202) 452-8097 or by e-mail at studose@nasi.org.