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North Carolina Workers' Compensation Total Costs Per Claim Were Highest of States Included in WCRI Study

In North Carolina, total costs per claim of just over $42,000 for 2006 claims evaluated in 2009 were 41 percent higher than the median study state.

Indemnity benefits per claim - payments for lost wages - were 64 percent higher than the 16-state median and the highest among study states at an average of just over $23,600. These benefits represented the largest component of total costs per claim.

The higher indemnity costs were driven by system features that contributed to a longer duration of temporary disability as well as more frequent and higher permanent partial disability/lump sum payments.

Medical payments per claim that were slightly higher than in the typical study state also contributed to the higher total costs per claim. A previous WCRI study reported that in North Carolina payments to hospitals for inpatient and outpatient services were 42 percent and 53 percent higher, respectively, than typical. That study also reported payments to nonhospital providers were typical of study states, in part due to lower prices tied to the lower nonhospital fee schedule.

WCRI reported that benefit delivery expenses were typical of the study states at an average of $3,934 per claim. All major components of benefit delivery expenses, such as medical cost containment expenses and defense attorney expenses, were similar to or lower than the median study state.

The study also found that total costs per claim grew 47 percent between 2003/2004 and 2008/2009, an average rate of 8 percent per year, higher than the median growth rate of 30 percent among the study states over the same period.

The growth in total costs per claim was driven by several factors, including growth in medical payments and indemnity benefits per claim and an increase in benefit delivery expenses per claim.

Indemnity benefits per claim grew nearly 11 percent in 2008, the most recent study year, and 37 percent over the study period, faster than the median growth rate of the study states of 7 percent and 22 percent, respectively. The main drivers of this growth included increases in temporary disability duration, the average weekly wage, and permanent partial disability/lump sum payments.

Medical payments per claim grew 9 percent in the most recent study year and 51 percent over the study period. WCRI pointed out that the data in this report did not encompass the fee schedule changes for hospitals and ambulatory surgery centers that occurred in July 2009.

Medical cost containment expenses per claim increased by 10 percent in 2008 and were the main driver of the 13 percent increase in benefit delivery expenses. This growth was similar to the median growth rate of the study states.

North Carolina injured workers received their first indemnity payment more slowly than in other study states. Thirty-nine percent of injured workers received their first indemnity payment within 21 days of injury, compared to 44 percent in the typical state.

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

To order this report, visit the WCRI web site: www.wcrinet.org.

Workers Compensation Research Institute
Richard A. Victor, 617-661-9274