Increased Spending on Workers’ Comp Due to Increased Employment, Not Higher Benefits for Injured Workers

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The National Academy of Social Insurance (NASI), which studies workers’ compensation and other benefits systems, last August reported that in 2012:

  • workers’ compensation benefits rose by 1.3 percent to $61.9 billion
  • employer costs rose by 6.9 percent to $83.2 billion.

The uptick, NASI said, was due to increased employment. “This growth in workers’ compensation spending reflects rising employment and earnings as the economic recovery continues,” said Marjorie Baldwin, chair of the Academy’s Workers’ Compensation Data Panel and Professor of Economics in the W. P. Carey School of Business at Arizona State University, at the time.

But despite the uptick in total benefits and costs in 2012, workers’ compensation benefits and costs per $100 of covered payroll have been lower for the years 2007 to 2012 than at any time over the last three decades, according to NASI.

In 2012, benefits were $0.98 per $100 of covered payroll while employer costs were $1.32 per $100 of covered payroll.

According to Virginia workers’ compensation attorney Doug Landau, it is a race to the bottom for insurers and self-insured employers. “Benefits and the cost to insure are both falling to their lowest numbers in 30 years, despite increases in the costs of medications and medical care,” notes Landau. “This should tell you that the folks getting squeezed are the disabled workers and their families.”

In an earlier report, NASI found that the number of workers covered by workers’ compensation dropped by 4.4 percent in 2009, the biggest decrease in two decades, and employer costs for benefits fell by 7.6 percent, reflecting the overall decline in employment during the recession.

A NASI report in 2009 compared trends in workers’ compensation cash benefits and Social Security disability insurance benefits and found that trends in the two programs had been moving in opposite directions since 1980. When workers’ compensation cash payments rose in the 1980s, Social Security disability benefits declined as a share of payroll. After 1990, workers’ compensation cash payments declined and Social Security disability insurance payments rose as a share of payroll.

“The different trends suggest that retrenchment in one program may cause injured workers to turn to the other program for benefits to replace their lost wages,” said John F. Burton Jr., chair of the panel that oversaw that study, at that time.

If you or someone you know has been injured at work and there are questions about workers comp and/or federal disability benefits, email or call Abrams Landau, Ltd. at once (703-796-9555).