Workers’ Compensation Payments Decline

National Academy of Social Insurance Analysis Finds Benefits and Costs Continue to Decline in 1996

For Immediate Release: March 15, 1999
Contact: Jill Braunstein at (202) 452-8097

WASHINGTON, DC — After rising rapidly in the 1980s and early 1990s, workers’ compensation benefit payments and costs declined between 1995 and 1996, according to new data released by the National Academy of Social Insurance. This marked the fourth consecutive year of declining benefits.

Benefit payments — which include cash benefits that partially replace lost wages and medical care for workers with job-related injuries or illnesses — declined 2.4 percent, from $43.4 billion in 1995 to $42.4 billion in 1996. Employers’ costs — which include premiums they pay for insurance and the cost of administering benefits by self-insured employers — declined 3.3 percent, from $57.0 billion in 1995 to 55.2 billion in 1996.

Workers’ compensation benefit payments peaked in 1992 at $45.2 billion, while employer costs peaked in 1993 at $60.8 billion. When adjusted for the size of the covered workforce and the wage levels of covered workers, the declines in benefits and costs are more striking. As a share of covered payroll, benefits and costs in 1996 declined by about 23 percent from their all-time high. Benefits dropped from $1.66 to $1.28 per $100 of covered payroll since 1992, while costs to employers decreased from $2.17 to $1.67 per $100 of payroll since 1993.

The report, Workers’ Compensation: Benefits, Coverage, and Costs 1996, New Estimates, is the second in a series begun by the National Academy of Social Insurance to provide the only comprehensive national data on this state-run program. The new report provides detailed estimates of workers’ compensation payments — cash and medical — for all 50 states and the District of Columbia.

Each state has its own workers’ compensation program, and they differ in terms of benefits, financing, administration, and who is covered. Nationally, medical benefits were $16.8 billion, or about 41 percent of all payments. Cash benefits accounting for the other 59 percent, at $25.6 billion. The relative importance of medical benefits varies considerably among states.

Workers’ compensation is second only to Social Security disability insurance and the accompanying Medicare benefits for disabled workers. In 1996, Social Security paid $44.2 billion to disabled workers under age 65 and their dependents, while Medicare paid $24.6 billion for hospital and medical care for those disabled workers.

Workers’ compensation and Social Security disability insurance serve different groups, with very little overlap. Workers’ compensation pays benefits for work-related injuries and illness ranging from minor to severe. Social Security pays benefits for only severe, long-term disabilities, regardless of the cause.

The report was issued under the auspices of the Academy’s Study Panel on National Data on Workers’ Compensation, chaired by John F. Burton, Jr., Dean of the School of Management and Labor Relations at Rutgers University.

“Because workers’ compensation varies greatly from state to state,” Burton noted, “comprehensive and consistent national data are essential to evaluate the impact of these programs on workers and employers.”

Burton states that the reasons behind the recent decline in workers’ compensation benefits are multifaceted. “The decline probably stems from a variety of factors, including fewer accidents, improvements in the operation of workers’ compensation programs, and a reduction in the generosity of those programs.”

“Thanks to seed money from The Robert Wood Johnson Foundation, the Academy has been able to produce the series,” Burton said. The Academy plans to obtain on-going support from users of the data. This year additional support was obtained from the Workers Compensation Research Institute, the Labor Management Discussion Group, the Liberty Mutual Insurance Company, and the Health Care Financing Administration.

The National Academy of Social Insurance is a nonprofit research and education organization made up of 500 of the nation’s leading experts on social insurance, including Social Security, Medicare, workers’ compensation, and unemployment insurance.

ADDITIONAL CONTACTS

National Academy of Social Insurance
Steering Committee on Workers’ Compensation

Daniel Mont
202-452-8097
Senior Research Associate
National Academy of Social Insurance
Washington, D.C.

John F. Burton, Jr., Chair
732-445-5993
Dean, School of Management and Labor Relations
Rutgers University
New Brunswick, New Jersey

Jim Ellenberger
202-637-5206
Assistant Director
Department of Occupational Safety and Health
AFL-CIO
Washington, DC

Eric Oxfeld
202-682-1516
President
UWC — Strategic Services on Unemployment and Workers’ Compensation
Washington, DC

Robert Steggert
301-380-7499
President, National Council of Self-Insurers, and
Vice-President, Casualty Claims
Marriott International, Inc.
Bethesda, MD

(A statement on recent cost and benefit developments is available at www.workerscompresources.com)

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