The cost for employers' workers' compensation coverage increased at a greater pace than the benefits paid out to workers in 2003, continuing a hardening trend that began in 2000, according to a new study.
Total workers' comp payments for injured workers in 2003, the latest year for which data is available, rose to $54.9 billion, an increase of 3.2 percent, while employer costs rose by 9.6 percent to $80.8 billion, the National Academy of Social Insurance reported.
In comparison to aggregate wages for workers, the increases translate to an increase in payments of one cent per $100 of wages in 2003 and a 12 cent increase per $100 of wages in the costs to employers, according to the academy.
"The fact that employer costs rose faster than payments for benefits and medical care reflects broader developments in the insurance industry," according to John F. Burton Jr. of Rutgers University, who chairs the panel that oversees the report.
"Employer costs reflect rising premiums insurers charge to cover future benefit costs," Mr. Burton explained. "The recent rise in costs appears to be part of a longer cycle of ups and downs in the insurance market."
The year 2000 represented a low point in that cycle, according to the study. Benefits paid to workers have risen 12 cents per $100 of wages since then while costs for employers have risen 39 cents per $100 of wages.
The increases since 2000, however, still remain lower than the previous high point during the early 1990s. At their peak in 1992, total payments for cash benefits and medical care combined were at $1.69 per $100 of wages, 52 cents higher than in 2003. Costs to employers peaked a year later at $2.16 per $100 of wages, 45 cents higher than in 2003.
According to Mr. Burton, the costs were brought down during the 1990s as insurers experienced better investing results. "The decline in employer costs in the 1990s occurred as favorable investment returns led insurance companies to cut premiums in order to expand their market shares," he said.
"Since 2000, low interest rates and poor stock market returns led insurers to raise premiums in order to cover future benefit costs," Mr. Burton related.
The study is the eighth in a series conducted by the academy, which said in the report that it does so because there is no other national gauge of workers' comp programs, which are managed by the individual states.
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