A new report from Milliman and Keenan Healthcare found that workers’ compensation claim severity continues to increase, even while the actual frequency of claims decreases.
The report, in its second year, provides details such as claim frequency and severity, impact of reforms, medical and indemnity costs, and allocated loss adjustment expense over the past decade.
According to the report, the overall losses per $100 of payroll stayed relatively unchanged from 2004 to 2014, while the severity of claims increased by 5.5% annually between 2005 and 2014, and claim frequency dropped.
In addition, the report noted that the estimated cost per indemnity claim for accidents that occurred during 2014 decreased by about 10% from 2013.
“[Workers’ comp] is complex and always changing, and there are many challenges that employers and hospitals must contend with,” said Milliman principal and consulting actuary Richard Lord. Lord added that the information contained in the report could help both employers and hospitals make better decisions when it comes to workers’ compensation issues.
Workers aged 36 to 55 accounted for more than half of the paid indemnity claims, the report noted. The report also found that the share of overall losses for workers in the 36-55 age bracket is less than the share of overall claims for those 30 years old or younger – an indication of lesser average severity of indemnity claims for younger workers. Also, the data suggested that as workers age, any workers’ compensation incident becomes more likely to result in an indemnity payment.
“Younger workers ... generally spend more in medical care relative to total costs,” the report states, “whereas older workers tend to have larger relative indemnity losses between 20% and 25% of claims with paid indemnity are litigated.”
Milliman and Keenan’s data summary also detailed that although litigated claims only made up 20% of the total claims with indemnity payment, they account for nearly 54% of total incurred losses because litigated claims have considerably higher average claim severity.
