FL WC Medical Costs Per Claim Grew After 2004 But At Slower Rates

Cambridge, MA - Workers' compensation costs per claim for the medical care of injured workers in Florida stabilized in 2004 following the fee schedule reforms in 2003. Starting in 2005, the medical costs per claim grew again in Florida, but at rates that were slower than pre-reform, according to a new study by the Workers Compensation Research Institute (WCRI).

The 15-state study, Monitoring the Impact of 2003 Reforms on Florida's Workers' Compensation System: CompScope™ Benchmarks, 10^th Edition, by the Cambridge, Mass.-based WCRI found that for claims with more than seven days of lost time, the average medical cost per claim in Florida changed little in 2004, and then grew again starting in 2005, including an 8 percent increase in 2007 for claims with 12 months of experience.

According to a forthcoming WCRI study, prices paid to nonhospital providers remained stable in 2007. The increase in medical costs per claim in 2007 likely was driven by factors such as utilization of nonhospital services and hospital inpatient and outpatient payments, said WCRI.

The fee schedule changes were adopted in 2004 in part to reduce hospital prices, and average payments for many hospital outpatient services decreased correspondingly in that year. However, starting in 2005, the rapid growth in hospital outpatient payments per service resumed, including a 19 percent increase in 2006. This growth in hospital outpatient payments per service was the main driver behind the moderate growth in medical costs per claim that year.

The study pointed out that reforms related to permanent disability led to a sizable reduction of indemnity costs per claim with more than seven days of lost time since 2004. The average indemnity benefit per claim in Florida decreased 20 percent in 2004 from the reforms, then remained fairly stable in 2005 and 2006, and saw a moderate growth of 5.8 percent in 2007.

WCRI noted that pre-reform, indemnity costs per claim in Florida grew at a rate of eight percent per year.

Reforms led to a 21 percent decrease in the average permanent partial disability (PPD)/lump-sum payment per claim and a three percentage point reduction in the frequency of those claims in 2004.

These decreases were mainly driven by less frequent and smaller lump-sum settlements, according to WCRI.

The study also found that reforms led to continuous decreases of nearly five weeks in the average duration of temporary disability in Florida since 2003.

These decreases may be related to earlier PPD payments or lump-sum settlements for some cases relative to the practice used in previous years, if the reforms simplified the decision-making process of determining PPD or the calculation PPD benefits. The decreases may also reflect faster return to work.

The new study reported that the Florida legislature reinstated the contingent fee schedule for workers' attorney fees that had been struck down by a 2008 decision of the Florida Supreme Court.

An earlier WCRI study that examined whether the reforms reduced the ability of the average worker in Florida to retain an attorney found that there were only small decreases in the frequency of workers' attorney involvement post-reform.

Injured workers in Florida received their first indemnity payment – payments for lost wages – faster than in many other study states, mainly driven by much faster injury reporting, said the study.

The speed of payment once the payor received notice in Florida was typical of the other states in the study, WCRI said.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers' compensation, health care, and disability issues. Its members include employers, insurers, governmental entities, insurance regulators and state administrative agencies in the U.S., Canada, Australia and New Zealand, as well as several state labor organizations.

Source: Workers Compensation Research Institute    

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