Report Shows Employers Workers Comp Costs at Lowest Level Since 1980

Drop-in Medical Benefits Contributed to Decrease

According to a newly released report from the National Academy of Social Insurance (NASI), a drop in medical benefits for injured workers has contributed to a decrease in workers’ compensation expenses for U.S. employers,.

The report, “Workers Compensation : Benefits , Coverage and Costs , 2010,” notes that workers comp benefits nationwide fell .07 percent to $57.5 in 2010 compared to 2009. Employers’ costs for workers comp benefits, meanwhile, decreased 2.7 percent in 2010 and were the lowest (as a share of covered wages) dating back to 1980. According to the report, the decrease can be attributed to a sluggish economic recovery and a 2.1 percent fall in medical benefits for injured workers. [WCx]

Slow Recovery and High Unemployment Additional Factors

“Employers’ costs as a percent of payroll declined in 43 jurisdictions,” according to John Burton, Jr., chair of the study panel that oversees the report. “This decline is probably due to the slow pace of the recovery, with many jurisdictions still experiencing relatively high unemployment rates.”

The majority of the country noted a decline in the number of workers covered but an gain in covered wages between 2009 and 2010. During the same period, the total amount of benefits paid to injured workers fell in 26 jurisdictions and grew in 25. As a share of payroll, benefits paid to injured workers dipped by three cents to $0.99 per $100 of payroll in the nation.

Highlights from Report:

Nationwide, medical payments decreased by 2.1 percent in 2010, to $28.1 billion, but cash benefits to injured workers increased by 0.7 percent, to $29.5 billion.
Costs to U.S. employers fell by 2.7 percent in 2010 to $71.3 billion. As a share of covered wages, employers’ costs were lower than in any year since 1980.
Measured as a percentage of the wages of covered workers, benefits paid to workers also fell in 2010.
In 2010, workers comp covered an estimated 124.5 million workers, a decrease of 0.3 percent from the previous year. Aggregate wages of covered workers increased by 2.6 percent.
Most individual states reported a decrease in numbers of workers covered and an increase in covered wages between 2009 and 2010.
In 2010, the share of benefits paid for medical care exceeded 50 percent in 32 states.
In recent years, the importance of state funds as a source of workers comp benefits has been declining.
Between 2009 and 2010, the employers’ costs of workers comp as a percent of payroll increased in 8 states and declined in 43 jurisdictions.

Medical Benefits Share of Costs Trend Expected to Continue

The share of medical benefits for workers’ comp has grown substantially over the last 40 years, the report authors explained. [WCx]

During the 1970s, medical benefits nationally accounted for 30 percent of total benefits, whereas in 2010 the share of benefits paid for medical care was almost 50 percent.

Experts attribute this trend to the increasing expense for health care.

Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.