A new report released by the National Academy of Social Insurance (the Academy) revealed that even as employers take on more of the costs, workers' compensation benefits as a share of payroll are reaching historically low levels.
Data shows that, despite strong employment growth during the post recession recovery, workers' comp benefits have reached their lowest level since 1980. Benefits per $100 of payroll fell from $0.97 in 2013 to $0.91 in 2014, and benefits as a percentage of payroll declined in 46 states between 2010 and 2014, according to the report, Workers' Compensation: Benefits, Coverage, and Costs.
Despite dropping benefits levels, employers’ costs continue to rise. Between 2010 and 2014, employers’ workers’ compensation costs ballooned close to five times faster than benefits. In 2014, employer costs exceeded total benefits by $29.5 billion, and costs per $100 of payroll reached $1.35. “What we are seeing in these data are still the effects of the economy gradually coming out of the recession of 2008-10,” said Marjorie Baldwin, Chair of the Academy’s Study Panel on Workers’ Compensation Data and Professor of Economics in the W. P. Carey School of Business at Arizona State University. “As more workers are hired, employers immediately incur higher costs for workers’ compensation insurance – the increase in benefits paid comes with a lag, especially for the most costly long-term injuries.”
Over the past two decades, the ratio of benefits paid per $1 of employer cost has varied from a high of $0.82 in 1999 to a low of $0.63 in 2006. Between 2010 and 2014, the ratio declined from $0.81 to $0.68, but it is still greater than in the five years leading up to the recession of 2008.
"Declining levels of workers' compensation benefits could mean that workers are getting injured less frequently and/or that they are returning to work sooner when they do get injured," said Christopher McLaren, Workers' Compensation Senior Research Associate at the Academy. "But there have been a number of changes in state laws in recent years limiting access to workers' compensation benefits, which may also be a factor."