Minnesota workers’ comp costs among lowest in 15-state study

Minnesota’s workers’ compensation costs were 30 percent below the median total cost per claim among a 15-state sample and injured Minnesota workers received their first payment more quickly, according to a recent study by the non-profit Workers Compensation Research Institute (WCRI).

While average benefits were in-line with other states, injured workers in Minnesota returned to the job more quickly and the state had the lowest percentage of claimants awarded permanent partial disability or lump sum payments in the study, resulting in lower overall cost per claim. The average total cost per claim in Minnesota was $5,031 compared with $7,195 median total cost across the 15 state samples of claims from 2005 to 2008.

In addition, 52 percent of Minnesotan’s injured on the job received their first payment within 21 days of the reported injury, the second best performance in the study sample.

Rate of first indemnity payment at 21 days higher in Minnesota than most states

Claims with first indemnity payment within 21 days of injury, 2007/08 claims with more than seven days of lost time
Source: WCRI
Claims with first indemnity payment within 21 days of injury, 2007/08 claims with more than seven days of lost time

Steve Sviggum, commissioner at the Minnesota Department of Labor and Industry, said he was pleased that the study showed Minnesota’s workers’ compensation system  “is not out of control” but he added that it could be improved.

Sviggum credited Minnesotans’ work ethic as well as the informal dispute-resolution process, which is “less litigous” than systems in other states, with contributing to Minnesota’s lower overall costs.

Sviggum cited his top priorities for improving the system as controlling the growth of both health care and rehabilitation costs and simplifying the “cumbersome dispute resolution system.” He noted that the Workers Compensation Advisory Committee is making recommendations to state Legislature to improve Minnesota’s workers’ compensation dispute resolution system. The recommendations are modeled on the process used by the unionized construction trades workers compensation system, which is separate from the state administered system, Sviggum said.

Workers’ compensation cost comparisons can be one important factor, not just for current employers but as a selling point for the state to encourage location or expansion decisions within Minnesota. Total costs include wage replacement, medical and rehabilitation expenses and administrative costs. Wage replacement is defined by state statute and ranges from a minimum of $130 to a maximum of $850 per week in Minnesota.

Other study findings about Minnesota’s workers’ compensation experience include:

  • The average length of time off – 14 weeks — was nearly three weeks shorter than in the median.
  • Claims with more than seven days of lost time were 14 percent lower than the median.
  • Fewer workers were off work for at least one week – 17 percent compared to 19.5 percent median.
  • More Minnesota claimants, nearly 17 percent, used vocational rehabilitation services, compared to 3 percent of claimants with more than seven days of lost time in the typical study state. Minnesota also paid out the highest amount for these services, but that may be due to how these expenses are recorded in other states, according to the study authors.
  • Defense attorney payments in Minnesota were among the highest of the 15 study states, although defense attorneys were involved in significantly fewer cases than typical. The higher defense attorney payments per claim “likely reflect the complex informal dispute resolution system in Minnesota…which likely requires more defense attorney hours,” the study authors observed.

The authors said the 15 states were chosen for the study because of they present a wide range of industries and variety of benefit and cost structures which are representative of the entire country. They also comprise a significant portion of the U.S. population, he said. The study, “Benchmarks for Minnesota, CompScope10th Edition,” drew on over 27 million claims across 15 states and includes 56 percent of claims filed in Minnesota in 2007-2008.

WCRI describes itself as a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, health care and disability issues. According WCRI executive director Richard Victor, the insurance industry makes up the largest portion of its membership which also includes employers, governmental entities and insurance regulators in the United States, Canada, Australia and New Zealand, as well as several state labor organizations.

Cost per claim in Minnesota 30% lower than 15-state median

Cost per claim in Minnesota 30% lower than 15-state median
Source: WCRI
2005/08 all paid claims, adjusted for injury/industry mix and wages

The study provides a meaningful comparison of the workers’ compensation systems in 15 states on key performance measures such as benefit payments and costs per claim, timeliness of payments and defense attorney involvement by analyzing a similar group of claims and adjusting for interstate differences in injury mix, wage levels and industry type.

The average cost of vocational rehabilitation provider services was highest in Minnesota – at an average of about $6,100 per claim with these services. WCRI cautioned that the vocational rehabilitation measures it reports reflect the payor portion of the costs for these services as reported in insurance data, not the portion provided through state agencies, which could be significant in some states.

The study also found that total costs per claim in Minnesota for claims with more than seven days of lost time at an average of 12 months of experience increased 8 percent in 2007 after several years of more moderate growth.

Rising medical costs were the key driver of that growth, increasing 9 percent from 2006 to 2007, evaluated as of March 2008, according to WCRI.

There was a slight steady improvement in the time to first indemnity payment from 2002 to 2007.

To order this report, visit the WCRI website.

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Comments (1)

  1. Submitted by dan buechler on 02/11/2010 - 06:03 pm.

    Very Good this should have gotten more coverage i.e. by including it it the headline non business section. Almost more a regional or political issue.

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