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Decrease Reported in Cost of Workers' Compensation

A recent report by the nonprofit National Academy of Social Insurance (NASI) revealed some surprising changes in the overall cost of workers’ compensation. The annual report, “Workers' Compensation: Benefits, Coverage, and Costs” is a comprehensive examination of workers’ compensation expenses on a national and state level for each individual fiscal year. The most recent publication, released in August 2011 for the fiscal year 2009, showed a number of shifts in costs and coverage that in many cases may be attributed to the ongoing financial troubles of the nation.

In 2009, perhaps the most key change occurred in the overall cost to employers for providing workers’ compensation coverage. This number fell 7.6% from the previous year, the largest drop recorded in over twenty years. The report goes on to state that this decline in employer costs is largely due to the recession’s overall effect on employment. With many employers laying-off workers, the cost of providing insurance fell. As such, the number of employees covered by workers’ compensation fell in 2009 by 4.4% from the preceding year, and by 5.2% when compared to 2007. The construction industry, which makes up a large percentage of workers’ compensation claims, had a large effect on this decline due to its enormous 19% drop in employment.

Despite the drop in overall employer costs, the amount paid in benefits to injured workers increased .4% to $28.9 billion. Part of this amount, however, can be attributed to ongoing claims from previous years. Benefits paid are broken down into two types: medical payments and cash payments. Cash payments were entirely responsible for the increase in overall benefits paid, with a year-to-year increase of 1.9% to $29.4 billion for 2009. Medical payments for injuries, however, dropped 1.1% to $28.9 billion.

At the state level, year-to-year changes were relatively balanced. For total benefits paid to injured workers, 27 states saw a decline, while 24 reported increases. Medical benefits paid-out declined in 27 states, while 28 states showed increases in cash-benefit payments. Some individual states, however, reported large shifts in costs. The District of Columbia had a 14% increase in benefit payments, the largest reported of all 51 jurisdictions, despite showing a 2% decrease in number of workers covered. Virginia showed the largest drop, 21.5%, in benefit payments. Reflecting the national difference in medical versus cash payments, Illinois showed an increase of just .9% in medical payments, while reporting a 3% increase in cash benefit payments.

The next few years’ reports on workers’ compensation benefits could reveal further surprises as ongoing high unemployment combines with a growing trend among states to cut workers’ compensation rights to combat fiscal deficits. For employees, labor rights organizations and Chicago workers compensation lawyer’s, this trend is troubling as it increases the likelihood that future reports will ultimately show a lowered cost to employers, but now at the expense of lowered benefits paid to injured workers.

About the Author: Brooke Haley marketing associate at Millon & Peskin, Chicago workers compensation attorney that practice in the areas of Civil Litigation, Workers’ Compensation, and Personal Injury. Millon & Peskin is a General Civil Litigation Practice with the goal of representing the interests of injured workers, throughout all applicable Courts within the State of Illinois. For more information, please visit http://www.millonpeskin.com.

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