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Compared with rising medical costs, cash benefits paid to injured workers are continuing to decline, which experts peg to safer workplaces curbing injury severity and time away and legislative changes that make it tougher to claim workers compensation among the reasons.
“We’ve been doing an outstanding job in modernizing workers compensation and taking a lot of waste and abuse out of the system,” said Gary Anderberg, New Hope, Pennsylvania-based senior vice president of claims analytics at Gallagher Bassett Services Inc.
“We’re not leaving claims unnecessarily open” in the hopes that the employee will “miraculously” improve, and fewer catastrophic injuries as well as regulatory schedules that are “more consistent and fair overall” has resulted in a decline in indemnity costs, he said.
The overall picture was captured in a recent study that found that average workers comp payments in the United States in 2017 dropped to $1.25 per $100 of covered wages from $1.74 per $100 of covered wages in 2004, according to a study released Oct. 31 by the National Academy of Social Insurance.
Some of this change is a result of workplaces safety initiatives, according to Les Boden, professor at Boston University School of Public Health and chair of NASI’s study panel on workers compensation data.
“On the other hand … a number of states have introduced legislation that has made it more difficult for workers to access workers comp benefits,” he said. “That has obviously had a negative impact on injured workers.”
The trend has been seen across the country, according to the report.
In Florida, the state had the seventh-largest decline in standardized cash benefits between 2013 and 2017 compared with all the other states — a reduction of more than 25% — along with substantial declines in total benefits per $100 of covered payroll. This shift, however, was largely driven by reforms in the wake of two 2016 Florida Supreme Court decisions.
The changes impacted workers’ ability to obtain representation in the state because of the cap on attorney’s fees and also made it more difficult for workers with repetitive stress injuries to access worker compensation benefits, said Mr. Boden.
In Ohio, another state that NASI noted as an outlier, worker indemnity benefits declined from $1.20 per $100 in covered wages in 2007 to $0.68 per $100 in 2017, which was the second largest decrease of any state during the study period. Part of this may be attributed to legislative changes, including a more stringent standard of proof of an injury, according to the report. But the Ohio Bureau of Workers Compensation has also put into place incentives for employers to make the workplace safer, noted Mr. Boden. Other states that incentivize workers to implement safety measures include Washington and Oregon.
Ohio has been ramping up its investment in safety programs for about a decade and seen a reduction in rates from about 143,000 in 2008 to 85,000 in 2018, said a spokesman for the BWC. The Ohio BWC spends about $20 million a year on safety initiatives, which includes a safety grant program to support private and public employers who want to invest in equipment to make their workplaces safer, he said.
However, Ohio’s low indemnity payments may also reflect the lack of funding for its second injury fund, which means injured workers seeking coverage from that fund were unable to access the money to which they were entitled, said Mr. Boden.
In Tennessee, the state reported the largest percentage decrease in benefits paid, with a decline of 38.2% between 2013 and 2017 due to 2014 changes that limited benefits eligibility, according to the report.
“It’s interesting from a policy standpoint that when states take the time to look at (workers comp reforms),” said Carin Burford, shareholder at Ogletree, Deakins, Nash, Smoak & Stewart P.C. in Birmingham, Alabama, who also teaches workers compensation law in universities. “Like Tennessee … they do see a significant decline in costs.”
The industry’s focus on return to work has also likely had an impact on indemnity costs, said Mr. Anderberg.
“I don’t think any of these trends represent taking anything away from the injured worker,” said Mr. Anderberg. “We’ve done a much better job in the last decade or so helping people get back into their work environment in a productive way. This, to me, is a very positive development.”
Aon Corp. Australia said that increasing professional indemnity-related claims and large settlements are hampering insurers' profitability while professional services firms are facing higher rates during renewals, Asia Insurance Review reported. The insurance broker said that the losses have forced several Lloyd’s syndicates to stop writing Australian professional indemnity business and insurers are reassessing their risk appetite for certain segments such as construction and technology.