CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Workers’ compensation costs per claim for medical care of injured workers in California grew rapidly in 2006 and 2007 after several years of significant decreases due to reforms, according to a new study by the Workers Compensation Research Institute (WCRI).
The study by the Cambridge, Mass.-based WCRI found that for claims with more than seven days of lost time, medical costs per claim saw a nearly 9 percent increase in 2007 for claims with 12 months of experience.
According to another forthcoming WCRI study, prices paid for services rendered by nonhospital providers remained stable in 2007, so the increase in medical costs per claim in 2007 was likely driven by other factors, such as utilization of nonhospital services and hospital inpatient and outpatient payments, said WCRI.
Medical cost containment expenses per claim increased steadily in California over the study period, even during the period from 2003 to 2005 when medical costs per claim had double-digit decreases due to the reforms.
As a result of reforms enacted from 2002 to 2004, California medical costs per claim changed radically from being the highest of 15 study states pre-reform to being lower than typical post-reform.
This shift was due to the significant change in utilization of nonhospital services – from 33 percent higher than typical of the study states pre-reform to 9 percent lower than typical post-reform. Several reform provisions had a direct impact on utilization of medical services, such as a 24-visit cap on physical medicine treatments, requiring use of the American College of Occupational and Environmental Medicine (ACOEM) treatment guidelines, mandating utilization review programs, and adopting medical provider networks.
Indemnity benefits per claim with more than seven days of lost time grew mainly with wages after 2005 as large decreases from the reforms ended. From 2004 to 2005, the reforms led to fewer claims with permanent partial disability (PPD) benefits and/or lump-sum settlements and smaller PPD/lump-sum payments per claim.
For claims with 36 months of experience, the frequency of PPD/lump-sum claims in California fell 5 percentage points, and the average PPD/lump-sum payments per claim decreased 18 percent. After 2005, the average PPD/lump-sum payments per claim had moderate growth, including a nearly 6 percent increase in 2007, and the frequency of PPD/lump-sum claims remained fairly stable.
Furthermore, the average duration of temporary disability per claim in California remained stable in 2006 and 2007 after continuous rapid decreases post-reform.
The study, Monitoring the Impact of 2002-2004 Reforms on California Workers’ Compensation System:CompScope™ Benchmarks, 10th Edition, monitors the impact of reforms on medical costs, indemnity benefits, and other benchmarks of system performance, using data with experience through the first quarter of 2008.
WCRI reported that the reforms led to significant change in the interstate rankings of indemnity benefits per claim in California. The average indemnity benefit per claim in California with 36 months of experience went from being among the highest of the study states pre-reform to being typical post-reform.
Timeliness of the first indemnity payment to injured workers in California was typical of the 15 states, despite slightly slower injury reporting speed. The speed of payment once payors received notice of injury in the state was fairly typical.
Over the study period, the injury reporting time improved continuously. From 2002 to 2007, the percentage of claims reported to payors within three days of injury increased by about 8 percentage points.
The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, health care, and disability issues. Its members include employers, insurers, governmental entities, insurance regulators and state administrative agencies in the U.S., Canada, Australia, and New Zealand, as well as several state labor organizations.
To order this report, visit the WCRI website: www.wcrinet.org.
Workers Compensation Research Institute
Richard A. Victor, 617-661-9274
Source: Workers Compensation Research Institute (WCRI)