33 Percent Increase in Maximum Weekly TTD Benefit Results in 17.5 Percent Impact on Utilization

NCCI Study Looks at Benefit Increase Impact

In a new study, NCCI uses a “difference in differences” methodology to analyze the impact of benefit changes Oregon and New Mexico. They found for each $1 of direct benefit increase, there is an added $0.54 average cost due to increased claim durations. The results of this analysis provide support for the utilization effects of statutory changes in indemnity benefits.

For Oregon, the 33% increase in the maximum weekly TTD benefit resulted in a 17.5% impact on utilization. This implies a duration/benefit elasticity of 0.53 (17.5%/33.%).

In New Mexico the 7.6% increase in benefit duration in response to a 17.6% increase in the maximum weekly indemnity benefit translates into a duration/benefit elasticity of 0.43 (7.6%/17.6%).

In terms of TTD indemnity costs, both the Oregon (38%) and New Mexico (33%) studies show approximately 35% of the total cost impact can be attributed to a duration utilization effect.

The focus of this research has been on two event studies where TTD benefits had increased. Some might interpret the findings to also conclude that a decrease in TTD indemnity benefits would result in a utilization impact. However, no such analysis was performed to reach such a conclusion.

Note the difference in differences approach used here captures the portion of the utilization effect attributable to changes in duration only. In other words, this method is not suitable for measuring the impact on the frequency of claims that may arise from a statutory indemnity benefit change. However, there are studies indicating that statutory indemnity benefit changes may affect frequency. (workersxzcompxzkit)

NCCI’s estimate of the utilization impact on claim durations from a change in statutory indemnity benefits reasonably agrees with estimates of prior studies, thereby providing additional support for the inclusion of such utilization impacts in legislative cost analyses. Producing more accurate and responsive cost impacts will reportedly enhance the legislative pricing and ratemaking services offered by NCCI, and it will provide valuable information to aid public policy decision making.

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

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By: Anthony Van Gorp, private investigator with 25 years experience.

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