Total cost per claim is now growing at about six percent per year across most study states. That shift matters because for years, workers’ comp was considered one of the more stable lines in property and casualty insurance. As was noted in the session, it has historically been “one of the strongest lines” in the industry. That stability is now being tested.
This Is Not a One-Driver Problem
One of the most important takeaways from this session is that rising costs are not being driven by a single factor.
Instead, three major components are all increasing at the same time:
- Medical payments
- Indemnity benefits
- Benefit delivery expenses
Together, these make up the total cost per claim. And right now, all three are trending upward. Before the pandemic, cost growth was relatively predictable. Most components increased at about two to three percent annually. That has now shifted to five to seven percent growth across multiple categories. That kind of synchronized increase is what makes this trend more concerning.
Medical Costs Are Leading the Story
Medical payments remain the largest component of total claim cost, and they are the primary driver of the current increase. Radeva pointed out that medical payments have been growing at about six percent per year in recent periods. But what is driving that growth is different from what we have seen in the past. Utilization has remained relatively stable. The number of services per claim is not increasing dramatically.
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Instead, the growth is coming from two main areas:
- Rising prices for medical services
- An increase in high-cost cases
That second point is especially important.
A Small Percentage of Claims Is Driving a Large Share of Costs
One of the most striking data points from the session was this. High-cost claims represent about six percent of claims in the median state. But they account for roughly forty percent of total medical payments. In some states, that number is even higher. That means even small increases in the number or severity of these claims can have a significant impact on overall system costs.
Radeva explained that certain factors dramatically increase the likelihood of a claim becoming high-cost. Injuries such as fractures between the ankle and hip are far more likely to escalate compared to something like carpal tunnel. Comorbidities also play a major role. About one in five injured workers has a degenerative condition, and those claims are at least thirty percent more likely to become high-cost. This ties directly into the Employer Panel discussion, where the same pattern emerged. Claims are not just becoming more expensive; they are becoming more complex.
Complexity Is Driving More Than Just Medical Costs
What makes high-cost claims particularly impactful is that their effects extend beyond medical payments.
They also drive:
- Longer disability durations
- More intensive care coordination
- Higher litigation and administrative costs
Radeva noted that claims receiving resource-intensive care beyond twelve months are up to thirty-five times more likely to become high-cost. Additionally, claims involving multiple providers early in the process are significantly more likely to escalate. This reinforces a pattern we are seeing more clearly across the system. Complexity early in a claim often leads to cost escalation later.
Indemnity Costs Are Being Driven by Duration, Not Just Wages
Indemnity benefits are also increasing, but the drivers have shifted. Historically, indemnity growth closely followed wage growth. If wages increased by two percent, indemnity benefits followed at roughly the same rate. That relationship still exists, but it is no longer the full story.
Wages increased significantly during the pandemic recovery period, reaching five to six percent growth annually before moderating back down to three to four percent. But even as wage growth has slowed, indemnity costs continue to rise. The reason is duration. Workers are staying on temporary disability longer.
The average duration has increased from about 12 weeks to 13.5 weeks. That may not seem significant at first glance, but across thousands of claims, it adds substantial cost to the system.
Why Disability Duration Is Increasing
Less experienced workers are one key driver. Employees with less than two years of tenure account for about half of claims and tend to have slower recovery patterns. Comorbidities are another factor. Workers with underlying health conditions often require more treatment and take longer to return to work. Behavioral health conditions also play a role. Issues like depression and anxiety can complicate recovery and extend time away from work.
And then there is a factor that often gets overlooked. Return-to-work availability.
In many cases, workers may be medically cleared to return with restrictions, but if no modified duty is available, disability benefits continue. That makes duration not just a medical issue, but an operational one.
The Cost of Managing Claims Is Also Rising
The third component of rising costs is benefit delivery expenses, which include litigation and medical cost containment. These costs have also been increasing steadily. Litigation expenses per claim are growing at about six percent annually, driven by higher payments to defense attorneys and increased use of medical-legal services. Medical cost-containment expenses are also rising, particularly as claims become more complex and require greater oversight.
Radeva made an important point here. This is not a result of inefficiency alone. It reflects the growing complexity of claims. More complex claims require more coordination, more evaluation, and more resources to manage effectively.
The Bigger Picture: A Shift in the Cost Structure
When you step back and look at the full picture, the trend becomes clear.
Since 2022, workers’ comp has entered a new phase where:
- Medical prices are rising
- High-cost claims are playing a larger role
- Disability durations are increasing
- Administrative and litigation costs are climbing
And all of this is happening at the same time. That combination is what is driving the six percent annual increase in total cost per claim.
What This Means for Employers
What stood out to me most from this session is that cost control in workers’ comp is becoming less about any single lever. It is no longer just about reducing utilization. It is no longer just about managing indemnity. And it is no longer just about negotiating medical costs. Instead, it is about managing complexity.
High-cost claims, comorbidities, delayed recovery, and operational gaps like a lack of transitional duty are all intersecting. That means employers need to think more holistically. This ties closely to what I covered in the other WCRI session on access to care and system complexity. The trends are connected. Rising costs are not happening in isolation. They are the result of multiple system pressures converging at once.
FREE DOWNLOAD: “5 Critical Metrics To Measure Workers’ Comp Success”
What to Watch Going Forward
The session ended with several open questions that are worth paying attention to.
Will medical price growth continue at the current pace?
Will the frequency of high-cost claims increase further?
Will disability duration continue to extend?
And how will labor market conditions influence these trends moving forward?
Those are not small questions. But they point to something important. The future of workers’ comp cost management is going to depend less on reacting to claims and more on understanding the drivers behind them. Because right now, those drivers are becoming more complex, more connected, and more impactful than ever.
Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.
Contact: mstack@reduceyourworkerscomp.com.
Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/
Injury Management Results (IMR) Software: https://imrsoftware.com/
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FREE DOWNLOAD: “5 Critical Metrics To Measure Workers’ Comp Success”
