2011 was an active year in the Risk Management arena. Some states, such as California, continue to make legislation changes that affect the way claims are handled and how employers are assessed. We have also seen some industry institutions provide some very significant insights on what are the driving costs behind a workers’ compensation claim.
Workers’ Compensation Pharmacy Costs
In a report issued by NCCI report August of 2011, it noted that up through 2009, the average medical cost on a medical only claim was $6000. For a lost time claim, it averaged around $25,000 with about 19% of those costs being tied to prescriptions drugs. While 19% is significant, it does appear that an employer can potentially manage these costs by aggressively handling and resolving their workers’ compensation claims in a proactive manner. We say this since the study showed that prescription costs within the first 1-2 years of the claim comprised only 3% of the total medical costs, but when the claim remained opened for more than 11 years, the costs tied to prescriptions jumped to 40%! You can view the full report here – Workers’ Compensation Prescription Drug Study: 2011 Update (PDF)
The Cost of Medical Services
NCCI also issued a report in November of 2011 which highlighted the cost-drivers of certain medical services on a workers’ compensation program. Nine areas were evaluated in their report and found that that the two highest categories were:
1. Surgery and Anesthesia
These two categories, on lost time claims, accounted for almost 40% of medical costs. Many more significant details are noted in the report (PDF), and knowing what these cost-drivers are may help you re-evaluate what your focus will be for your 2012 managed care program.
2011 WCIRB Report
In a very detailed report issued by the WCIRB, it was noted that claim frequency appears to be fairly consistent with the reporting levels of 2010 for the first 9 months of 2011. It also anticipates that the average cost of a 2010 indemnity claim will be approximately $65,000, which is about 40% more since the full implementation of the 2005 California workers’ compensation reforms. Of this $65,000, approximately $42,250 or 65% represents medical costs. Click HERE to view the summary reports provided by the WCIRB.
Legislative Review for 2011 – California
- AB 221 – Vetoed by the Governor and would have established a $6,000 voucher to cover retraining of an injured worker
- AB 378 – Signed on October 7th and helps lower costs by establishing guidelines for dispensing compound drugs and removes the incentives for physicians to refer patients to pharmacies where the physician has a financial interest for the referral
- AB 397 – Requires a contractor claiming workers’ compensation exemptions to recertify their status or supply proof of insurance whenever they renew their licenses.
- AB 584 – Also vetoed by the Governor and required Utilization Review physicians to be licensed in California.
- AB 947 – Vetoed by the Governor in October, this will would have increased the exposure for TTD benefits for California employers from 104 weeks to 240 weeks.
Other Changes for 2012
- California Office of Self Insurance Plans changes the methodology for audits
- California Temporary Disability Weekly Rate – Maximum TTD rate increases to $1010.50 and the minimum rate to $151.57
- The mileage rate for travel on or after 1/1/12 will continue to be $.55 per mile.
- Pure premium rate increase will be just over 30%.