Michigan Sees Nation’s Largest Decline in Workers’ Compensation Benefits as a Share of Covered Payroll

State Spotlight: Michigan 

Michigan experienced the largest percentage decline in the nation in workers’ compensation benefits as a share of covered payroll in 2016, according to a new report from the National Academy of Social Insurance (the Academy). Michigan also experienced one of the largest percentage declines in workers’ compensation costs as a share of payroll.

Between 2015 and 2016, Michigan experienced a 14.8 percent decline in workers’ compensation benefits as a share of covered payroll, the largest decline of any state. Benefits paid to injured workers and their health care providers in Michigan decreased by $0.08 per $100 of payroll, from $0.54 per $100 in 2015 to $0.46 in 2016. In contrast, benefits as a share of payroll decreased by an average of just 3.6 percent, or $0.03 per $100 of payroll, in the rest of the U.S.

The Academy’s report, Workers’ Compensation: Benefits, Costs, and Coverage, also highlights five-year changes in workers’ compensation benefits from 2012 to 2016. Over this period, the decline in workers’ compensation benefits as a share of payroll in Michigan far outpaced the national average. In Michigan, benefits declined from $0.68 per $100 of covered payroll in 2012 to $0.46 in 2016, a decrease of 32.4 percent compared to the 15.6 percent national decline (Figure 1).

“Michigan enacted changes to its workers’ compensation laws in 2011 which likely played a role in the recent declines in benefit paid,” said Marjorie Baldwin, Professor at Arizona State University and co-author of the report. “The new laws made it more difficult for workers to qualify for long-term wage loss benefits by redefining disability and post-injury work capacity, and strengthening the criteria required to establish disability and/or wage loss.”

The decline in workers’ compensation benefits in Michigan between 2012 and 2016 is entirely due to a decline in cash benefits. Total cash benefits paid to injured workers in compensation for lost wages decreased by 36.2 percent over the five-year period, while total medical benefits paid to health care providers actually increased by 10.3 percent.

“Michigan experienced a large shift in relative cash and medical benefit payments during our study period and after the new laws were implemented,” said Christopher McLaren, Senior Researcher at the National Academy of Social Insurance and co-author of the report. “In 2012, medical benefits accounted for only 35.5 percent of total benefits paid in Michigan, whereas in 2016 that ratio increased to 48.8 percent, much closer to the national average of 50.3 percent.”

Workers’ compensation costs to Michigan employers decreased from $0.92 per $100 of covered payroll in 2015 to $0.81 in 2016, a 12.0 percent drop and the fifth largest decline in the country. Nationally, costs decreased by only 2.3 percent, from $1.29 to $1.26 per $100 of payroll, on average. In 2016, workers’ compensation employer costs in Michigan were $0.45 lower per $100 of payroll than the national average.

Over the five-year period from 2012 to 2016, workers’ compensation costs to Michigan employers as a share of payroll generally followed national trends but were well below the national average (Figure 2). Prior to 2016, the gap ranged from 23 to 29 percent. The large decline in costs as a share of payroll in 2016, however, widened the gap between Michigan and the rest of the U.S. to 36 percent.

Figure 1. Workers’ Compensation Benefits per $100 of Covered Payroll, 2012-2016: Michigan vs. U.S. Average (non-federal)

Figure 2. Workers’ Compensation Costs per $100 of Covered Payroll, 2012-2016: Michigan vs. U.S. Average (non-federal)

Workers’ Compensation: Benefits, Costs, and Coverage (2016 data) is the 21^st in an annual series. The report provides the only comprehensive data on workers’ compensation benefits, costs, and coverage, for the nation, the states, the District of Columbia, and federal programs.

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