Calif. Drives U.S. Comp Payment Decrease, Study Says

Impacted by California results, U.S. workers' compensation payments for medical care and cash benefits for workplace injuries or diseases declined in 2006, a research group reported today.

The data was contained in a study by the National Academy of Social Insurance in Washington of the nation's covered workforce of 130 million.

NASI said the drop in payments in 2006 (the most recent year with complete data) reflects large declines in California payments for workers' comp lost time indemnity cash benefits as reforms enacted in 2003 and 2004 took effect.

Nationally, workers' compensation payments for injured workers fell by 1.5 percent to $54.7 billion in 2006. The payments include $26.5 billion to providers of medical care and $28.2 billion in cash wage replacement benefits for injured workers, according to the NASI report.

California payments fell by 7.2 percent, due mainly to a 13.4 percent drop in payments for cash benefits, the study found.

NASI said California medical spending changed little in 2006, after recording a 16 percent drop in 2005.

Christine Baker, a NASI member who directs the nonpartisan California Commission on Health and Safety and Workers' Compensation labor-management group advising state policymakers, commented, "The reduced spending for cash benefits in 2006 and for both medical care and cash benefits in 2005 reflect the cost containment measures that were put in place in 2003 and 2004 reforms to the California workers' compensation system."

More on the California reforms is contained in the NASI brief, "Workers' Compensation in California and in the Nation: Benefit and Employer Cost Trends, 1989-2005" online at http://www.nasi.org/publications2763/publications_show.htm?doc_id=691524.

Because it is a large state--accounting for 18.6 percent of national benefit payments in 2006--California altered national trends, NASI said.

It noted that outside California, total workers' comp payments were almost unchanged in 2006 ($44.5) compared to the prior year ($44.6).

The costs to employers for workers' comp are what they pay yearly. For employers who buy insurance, costs are premiums they pay to insurance companies plus benefits they pay under deductible arrangements in their insurance policies.

Costs for businesses' that insure their own workers are the benefits they pay plus administrative costs.

In 2006 NASI found employers paid a total of $87.6 billion nationwide for workers' comp, and a sharp drop in California employers' costs (16.6 percent) led to a small drop for the nation (1.5 percent). Outside California, employer costs for workers' comp rose by 3 percent.

Relative to wages, total payments for cash and medical care were the lowest in 18 years (99 cents per $100 of wages). Employer costs also declined relative to wages in 2006--to $1.58 per 100 of covered wages.

Strong wage growth in 2006 helped account for the decline in benefits and costs as a share of wages, the report said, and covered wage growth was 6.3 percent in 2006, the highest since 2000.

The study found the trends in workers' comp cash benefits and Social Security disability insurance benefits, as a share of payrolls, have moved in opposite directions since 1980.

When workers' comp cash payments rose in the 1980s, Social Security disability benefits declined as a share of payroll. After 1990, workers' comp cash payments to workers declined and Social Security disability insurance payments rose as a share of payroll.

John F. Burton Jr., chair of the panel that oversaw the NASI study, said that "the difference in the trends in workers' compensation and Social Security disability insurance payments suggest that retrenchment in one program may cause injured workers to turn to the other program for benefits to replace their lost wages."

The 88-page report titled "Workers' Compensation: Benefits, Coverage and Costs, 2006" is online at http://www.nasi.org/publications2763/publications_show.htm?doc_id=702308 and tracks workers' comp trends since 1989.

NASI said its study is the 11th in a series that provides the only comprehensive national data covering all types of employers. The study provides estimates of workers' comp cash and medical payments for each state, the District of Colombia and federal programs.