Monday, March 18, 2019
By Elaine Goodman

Benefit delivery costs account for about 15% of the total cost of workers’ compensation claims involving lost time and are divided nearly equally between medical cost containment and litigation expenses, according to new data from the Workers Compensation Research Institute.

But benefit delivery costs varied among 18 states examined, ranging from 11% of total claim costs in Wisconsin to 23% in California, Evelina Radeva said during the WCRI annual conference in Phoenix this month.

The figures were from claims arising in 2015 with more than seven days of lost time, evaluated as of 2018. The data haven’t been published yet; they will be included in the upcoming 19th edition of WCRI’s CompScope benchmark reports.

The average cost of a lost-time claim was $42,000 in a typical state from the WCRI study. Medical payments accounted for 41% of the costs, and indemnity benefits accounted for 44% of the total. A small sliver, 0.3%, was spent on vocational rehab.

Benefit delivery expenses made up the remaining 15%, with 8% going toward medical cost containment services such as bill review, utilization review, case management and provider networks. Another 7% of the benefit delivery expenses were for litigation.

In most of the 18 states, medical cost containment was 15% to 20% of total medical-related costs. But in some states, the figure was higher: roughly 25% in New Jersey and California, for example.

“That’s a mind-boggling number,” said David Donn, chief executive officer of San Francisco-based consultancy Donn & Co.

Opioids have contributed to the cost of workers’ comp claims, Donn said, with implications beyond the expense of the prescriptions. But opioids alone don’t explain the rise in medical cost containment expenses, he said.

“Everyone has to get paid and make money. I get that,” Donn said. “But there is a big spread between making money and making egregious money, and that’s where we are right now in comp.”

Donn said it’s up to employers to rein in cost-containment spending, as vendors are unlikely to do so.

Louisiana led the 18 states in many measures in the study. The state had the highest medical-related payments per claim, at $31,082, with medical cost containment accounting for roughly 17% of that, at around $5,500.

Overall benefit delivery costs — the combination of litigation and medical cost containment expenses — were also the highest in Louisiana, at $11,769 compared to the 18-state median of $6,266. California was second-highest in benefit delivery costs, at $10,000 per claim, while Wisconsin was lowest among the study states, at $4,208 per claim.

Louisiana also spent the most per claim on litigation expenses, at $9,580 compared to the 18-state median of $5,095. Defense attorney costs made up almost $7,000 of the total litigation expense in Louisiana, a figure that was also the highest among the 18 states examined.

Texas had the lowest litigation expenses, at $2,817 per claim. In addition to defense attorney costs, other components of litigation expenses are medical-legal costs such as independent medical exams, medical testimony and depositions, and “other” expenses such as copying, translation and interpreter fees.

WCRI policy analyst Radeva said system features in each state influence the litigation costs per claim, including whether there is a formal or informal dispute resolution process and how difficult it is for injured workers to navigate the system. Whether a state agency monitors dispute resolution and the timeliness of the first disability payment is another factor that can influence litigation costs, she said.

The process for determining permanent partial disability benefits is another factor, according to Radeva.

Across all the study states, WCRI found that the percentage of claims with defense attorney involvement has increased, from about 25% for 2005 claims to about 35% for 2015 claims, each at 36 months of experience. Worker attorney involvement has hovered between 25% and 30% over that time.

Defense attorney expenses have increased, from about $3,500 per claim in 2005 to about $5,200 per claim in 2015, according to the WCRI data. Medical-legal expenses per claim increased, from roughly $1,200 to $2,000 from 2005 to 2015.