Workers’ Compensation Benefits Decline as a Percent of Payroll for Six Years in a Row

National Academy of Social Insurance Study Shows
Benefit and Cost Trends through 1998

For Immediate Release: May 4, 2000

Contact: Jill Braunstein or Daniel Mont, Ph.D. at (202) 452-8097

WASHINGTON, DC – Workers, compensation benefit payments and costs declined relative to wages in 1997 and 1998, according to a new report released today by the National Academy of Social Insurance. This marked the sixth consecutive year of declining benefits relative to wages.

In 1998, total workers’ compensation benefit payments were $41.7 billion. These payments were for medical care and cash benefits for workers with injuries or illnesses caused on the job. Total costs to employers in 1998 were $52.1 billion. Costs to employers are the premiums they pay to buy workers’ compensation insurance. When employers self-insure, costs are benefits plus administrative expenses.

The benefits and costs (not adjusted for inflation) were slightly higher in 1998 than their 1997 levels of $40.6 billion in benefits and $52.0 billion in costs. When adjusted for the growing size of the work force and the rising wages of covered workers, however, benefits and costs continued to decline from their all-time highs in 1992 and 1993.

As a share of payroll, benefits declined by 35 percent between 1992 and 1998, from 1.66 to 1.08 percent of payroll, while employer costs declined by 38 percent between 1993 and 1998, or from 2.17 to 1.35 percent of payroll (See Figure 1).

John F. Burton, Jr., of Rutgers University and chair of the Academy Study Panel that oversees the project, explained, “The declining costs reflect a variety of changes, many of which were no doubt prompted by reactions to rapidly rising costs in the 1980s and early 1990s.” According to Burton, “Causes of the decline in benefits and costs probably include: fewer accidents, improvements in the operation of workers’ compensation programs, the active management of medical care, more effective return-to-work programs, and tightening of eligibility for workers’ compensation benefits.”

The report, Workers’ Compensation: Benefits, Coverage, and Costs, 1997-1998, New Estimates, is the third in a series begun by the National Academy of Social Insurance to provide the only comprehensive national data on this state-run program. The study provides estimates of workers’ compensation payments – cash and medical – for all 50 states, the District of Columbia, and the few federal programs providing workers’ compensation benefits.

“Because workers’ compensation statutes are enacted and administered at the state level and each state has its own program in terms of benefits, financing, administration, and who is covered,” Burton noted, “it is essential to have comprehensive and consistent national data to evaluate the impact of these programs on workers and employers.”

In providing health care and cash benefits to disabled workers and their families, workers’ compensation is second in size only to Social Security disability insurance and Medicare. In 1998, Social Security paid $48.2 billion to disabled workers under 65 and their dependents, and Medicare paid $27.6 billion for hospital and medical care for those disabled workers. The federal programs provide protection to workers regardless of the source of the disability, unlike the workers’ compensation programs, which deal only with the consequences of work-related injuries and diseases.

ADDITIONAL CONTACTS:

Daniel Mont
202-452-8097
Senior Research Associate
National Academy of Social Insurance
Washington, D.C.
e-mail: danmont@nasi.org

John F. Burton, Jr.
732-445-5993
Dean, School of Management and Labor Relations
Rutgers University
New Brunswick, New Jersey
e-mail: JFBurton@rci.rutgers.edu
For written comments see Professor Burton’s website at www.workerscompresources.com

Jim Ellenberger
202-637-5206
Assistant Director
Department of Occupational Safety and Health
AFL-CIO
Washington, DC
e-mail: jellenbe@aflcio.org

Robert Steggert
301-380-7499
President, National Council of Self-Insurers, and
Vice President, Casualty Claims
Marriott International, Inc.
Bethesda, MD
e-mail: bob.steggert@marriott.com

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The National Academy of Social Insurance (NASI) is a nonprofit, nonpartisan organization comprised of the nation’s leading experts on social insurance. Its mission is to conduct research and enhance public understanding of social insurance, develop new leaders, and provide a nonpartisan forum for the exchange of ideas in the field. For more information on the National Academy of Social Insurance call (202) 452-8097.