Cost Of Providing Workers Compensation Benefits Declining
Relative to wages, payments made by U.S. employers for medical care and cash benefits for workers disabled due to workplace injuries or diseases appear to be declining, according to a study of trends in workers compensation benefits released by the National Academy of Social Insurance (NASI), a nonprofit organization that conducts research on social insurance.
Based on an analysis of the most recent data available from state agencies, the study found that workers compensation payments in the U.S. amounted to $55.3 billion in 2005, down 1.4% from 2004. Of the total paid out in 2005, $26.2 billion went to medical care providers, while $29.1 billion took the form of cash wage replacement benefits. Compared with the previous year, medical payments in 2005 fell 0.5%, while cash benefits decreased 2.1%.
By contrast, researchers noted, Social Security paid $85.4 billion in cash benefits to disabled workers and their dependents in 2005, while Medicare paid $48.8 billion for health care for disabled persons under age 65 during the same year.
Even as benefits paid to workers and medical providers declined, the total amount spent by employers on workers compensation benefits plus administration rose by 2.3% in 2005 to $88.8 billion, the study found. Researchers attributed the rise in workers compensation costs in part to a combination of wage growth and an increase in the number of workers covered.
Yet, measured relative to the wages of covered workers, both employer costs and benefits for workers decreased in 2005, the study found, with the cost to employers for workers compensation benefits declining from $1.75 per $100 of covered wages in 2004 to $1.70 per $100 of covered wages in 2005. Results showed that, between 2004 and 2005, medical payments decreased from $0.53 to $0.50 per $100 of covered wages, and wage replacement benefits fell from $0.60 to $0.56 per $100 of covered wages.
According to researchers, an examination in trends in workers compensation between 1989 and 2005 reveals that both benefit payments and employer costs fell sharply from their peaks in the early 1990s, reaching a low point in 2000. The data indicates, however, that benefits rose only slightly after 2000, while employer costs climbed more markedly.
Researchers further noted that the 2005 decline in workers compensation payments is attributable in large part to steep drops in benefit payments in California, as cost containment measures enacted in 2003 and 2004 took effect in that populous state. The analysis showed that, if workers compensation payments in California were excluded from the national figures for 2005, total workers’ compensation payments would have risen by 1.7%, instead of declining by 1.4%, as is the case when California is included in the calculation.
