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Workers compensation total costs per claim in Michigan increased at a slower rate than in other study states that did not have major reforms of the workers comp system during the study period, according to a report by the Workers Compensation Research Institute (WCRI).
WCRI discovered that total costs per claim in Michigan increased 28 percent between 2003 and 2008, or 5 percent per year on average. While this growth rate was only a bit more modest than the growth in the median of 16 study states, the overall growth rate in Michigan was slowest among the non-reform states. (WCxKit)
In the early years covered by this study, this result was likely due to modest growth in indemnity costs per claim. Indemnity costs in Michigan grew by 1.5 percent between 2003 and 2007, slower than the median rate of growth of 3.6 percent.
The study, CompScope™ Benchmarks for Michigan, 11th Edition, reported that the moderate growth in indemnity benefits between 2003 and 2008 was the result of small increases in the average weekly wage and slight gains in the duration of temporary disability.
The total costs per claim in Michigan were among the lowest of the study states. At close to $4,900 per case, the average cost per claim was 36 percent less than the median study state.
This result may be driven by lower medical costs per claim in Michigan. The average medical cost per claim of just under $9,200 among claims with more than seven days of lost time was one of the lowest of the study states – 28 percent lower than the 16-state median.
Indemnity costs per claim with more than seven days of lost time were 7 percent lower than in the median study state. This result was driven by shorter duration of temporary disability than the other wage-loss systems and a lower average weekly temporary total disability (TTD) benefit rate. States with a wage-loss benefit structure generally have a longer duration of temporary disability, due to the fact most indemnity benefits are paid as temporary disability benefits.
At an average of 18 weeks, duration of temporary disability in Michigan was shorter than in other wage-loss study states – 6 to 8 weeks shorter than Massachusetts and Pennsylvania, 15 weeks shorter than Louisiana.
Several system features and processes in Michigan, including processes for terminating TTD benefits, might contribute to the shorter duration.
Another factor underlying relatively lower indemnity benefits per claim in Michigan was a slightly lower average weekly TTD benefit rate. This was related to the statutory benefit structure in Michigan.
The Michigan benefit structure is different from the benefit structure in most states in two ways. First, Michigan bases weekly benefits on 80 percent of after-tax (spendable) earnings, whereas most states pay two-thirds of the worker's pre-tax average weekly wage. Second, Michigan sets the maximum statutory weekly benefit at 90 percent of the statewide average weekly wage, while most states set the maximum benefit at 100 percent, or higher.
Under the Michigan benefit structure, 18 percent of workers (those with lower wages) received higher weekly benefits than under the typical structure, but more than one third of workers (those with higher wages) received at least 5 percent less.
The study also notes that injury reporting time in Michigan improved steadily over the study period. The percentage of claims reported to payers within 3 days of injury grew by approximately 8 percentage points from 2003 to 2008. (WCxKit)
This factor contributed to steady improvements in the speed to the first indemnity payment. However, the study notes Michigan still has potential for improvement, due to the fact injured workers obtained their first indemnity payment slower than in the typical study state.
Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers Compensation costs, including airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. See www.LowerWC.com for more information. Contact:Info@ReduceYourWorkersComp.com or 860-553-6604.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
©2011 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com.
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