Attending the Workers’ Compensation Research Institute Annual Issues & Research Conference is a bit like drinking from a firehose when it comes to consuming data presented at the event. While much of it was pertinent to a variety of stakeholders in the industry, the timing of the conference to our upcoming Hot Seat webinar meant that Dr. John Ruser’s closing session was quite relevant for me. The Hot Seat on March 7th will tackle the adequacy of benefits within workers’ compensation today. Dr. Ruser’s session included some pretty interesting statistics that will be useful for that program.
While various factors in play mean that statistical realities do not directly equate to adequacy, the numbers presented were compelling nonetheless. According to data from the National Academy of Social Insurance (NASI), average combined workers’ compensation benefits across the nation are at their lowest point since 1980. In that year they were $1.65 per $100 in wages. In 2016 they were .83 cents per $100 in wages.
I’m no mathematician, but that sure looks like about a 50% drop to me (50.303030303030303% if you are a stickler for accuracy).
The biggest surprise for me from these numbers came when the indemnity and medical benefit costs were presented separately. The general consensus in the industry has been for years that spiraling medical costs continue to dominate comp, and the fact that in many jurisdictions they now account for 70% of an average claim’s cost supports that belief. But in reality, the medical benefits provided by workers’ compensation has dropped since the early 90’s as well. Medical benefit costs peaked at .69 cents per $100 of wages around 1992. In 2016 they cost .42 cents per $100. Indemnity benefits saw a bigger drop during a similar period, from .99 cents in 1991 to .41 cents in 2016.
While other factors like decreased injury rates can impact these numbers (reported lost time claims in 2016 were just 1/3rd of the number 20 years prior), there is little doubt that legislative efforts to control comp costs have impacted these numbers.
I hope during the Hot Seat that we can delve into that a bit more. WCRI’s Ramona Tanabe will be one of our guests, and while she will not be able to express opinions on what the statistics mean, she can likely bring some clarity to the numbers we discuss.
One thing that was not addressed at WCRI this year was a comparative of actual indemnity benefit dollars paid to an injured worker versus a comparable benefit of 20 years ago. After all, statistics tell a tale, but they often cannot relay a story. With all this discussion of lower overall costs per $100 of payroll, we really have not touched on actual benefits paid in comparison to the decline in purchasing power over the years.
According to the Bureau of Labor Statistics consumer price index, prices in 2017 were 197.48% higher than average prices in 1980. That simply means that $1 in 1980 was equivalent in actual purchasing power to $2.97 in 2017.
Have indemnity benefits kept pace with that nearly 200% increase over the same period? That will be an interesting question to present. And I suspect that is where we will really be able to determine if benefits are indeed adequate today.
You can register for the Hot Seat webinar here.