Casualty Loss Reserve Seminar
Workers Compensation
Selected States Issues
Florida, California & New York
2
Selected State WC Issues
• Florida: Frank T. White([email protected])
• California: Don Rainey ([email protected])
• New York: Robert Meyer ([email protected])
3
Florida Workers Compensation
• Attempt to Compare Statutory Benefits to Other States
• Attempt to Compare Actual Claim Patterns to Statutory Provisions– Identify Inconsistencies– Identify Cost Drivers
4
Data Acknowledgement
• NCCI– State Advisory Forum– Various Legislative/Study Commission
Presentations
• Workers Compensation Research Institute – Various Special Legislative Studies– CompScope Product
5
Florida Workers Compensation
• Statutory Benefit Provisions– Last major benefit/administrative change to WC
implemented 1/1/94– Last major Medical Fee Schedule Change implemented
in 1982 – Strict reading would leave one to believe benefits/costs
among lowest in nation
• Actual State Data Inconsistent with above– High average medical costs per case– High average indemnity costs per case– ALAE/Litigation rate among highest in nation
6
Statutory Benefit Provisions(WCRI Studies Serve as Data Source)
• Medical Fee Schedule
• Statutory Impairment Benefits
• Temporary Total Duration
• Definition of Permanent Total Disability
7
According to WCRI, Florida’s Fee Schedule Lowest Overall
0%
25%
50%
75%
100%
125%
150%
175%
200%
225%
% o
f M
edia
n W
C F
S
FL
8
WCRI: Florida’s WC Fee Schedule Below Medicare (-10%
on Average)
-25%
0%
25%
50%
75%
100%
125%
% D
iffere
nt
from
Medic
are
168%226%
FL
9
Fees Lower than Medicare for All But Surgery
-40%
-30%
-20%
-10%
0%
10%
20%
30%
E&M Phys Med Gen Med Radiology Surgery% H
igher/
Low
er
than M
edic
are
10
Basics of Permanent Impairment Benefits
• Paid when worker attains maximum medical improvement– In Florida, also paid when worker reaches 104 weeks of
temporary disability benefits (maximum TT duration)
– Benefit rate is one-half TT benefit rate or 33 1/3% wage
• Paid in accordance with degree of disability: 3 weeks for each % of impairment to the body as a whole plus supplemental benefits if impairment rating equals 20% or more
• Florida at low end on each of the above
11
Florida Statutory Impairment Benefits Lower Than Large
States
$0
$20,000
$40,000
$60,000
$80,000
$100,000
2% 4% 8% 12% 16% 20% 40% 50%
% Impairment, Back Injury, Worker Earning $400/ Wk
Sta
tuto
ry B
enefit
CO
WA
IL
IN
NJ
CT
TX
GA
NC
FL
12
Florida Statutory Impairment Benefit: 25-50% of Large States
Note: Florida benefit expressed as % of each state
0%
10%
20%
30%
40%
50%
60%
2% 4% 8% 12% 16% 20% 40% 50%
Impairment Rating, Back Injury, Worker Earns $400/ Wk
FL S
tatu
tory
Im
pair
ment
Benefit
as
% o
f O
ther
Sta
te
CO
WA
IL
IN
NJ
CT
TX
GA
NC
13
Florida Statutory Benefits for Total Disability
• Temporary Total Disability– Benefit rate and maximum is comparable– Duration of TT benefits limited to 104 weeks,
regardless of whether maximum medical improvement has been reached
• Permanent Total Disability– Benefit rate and maximum is comparable– Definition intended to restrict to “Catastrophic
Injuries”, however contains proviso related to social security disability qualification
14
Summary of Statutory Benefit Provisions
• Lowest Medical Fee Schedule and Below Medicare
• Lowest Permanent Impairment Benefits for “typical” partial disability cases
• Limited Duration for Temporary Total Benefits
• Definition of Permanent Total Intended to be Restricted to only Catastrophic Cases
15
Actual Costs Inconsistent With Statutory Provisions
• The Data for the Following Slides were taken from NCCI Findings Presented to the Florida Governor’s Workers Compensation Study Commission in June, 2002
• Shows Actual Costs For Claims in Florida Higher than Countrywide even though Statutory Benefit Provisions Among Lowest in Country
16
After Adjusting to Florida’s Payroll Distribution, Florida’s Average Loss Costs
Remain the Highest in the Region
Current Average Voluntary Pure Loss Costs UsingFlorida’s Payroll Distribution
All Office/ Goods/State Classes Manuf. Contracting Clerical Services Misc.
Florida 2.44 4.34 10.06 0.54 3.73 6.02Alabama 1.80 3.13 8.81 0.47 2.32 4.34Georgia 1.30 2.49 5.40 0.26 2.01 3.36
North Carolina 1.19 2.16 5.18 0.28 1.71 3.01South Carolina 0.80 1.38 3.63 0.19 1.20 1.97
Tennessee 1.43 2.71 6.10 0.34 2.07 3.53Region 1.30 2.34 5.64 0.30 1.88 3.33
Countrywide 1.36 2.47 5.70 0.30 2.06 3.63
Based on the latest NCCI published rates and loss costs in the various states.
17
FloridaWorkers Compensation System
Overview
Three cost drivers have been identified:
(1) High frequency of permanent total claims - four times higher than countrywide
(2) High medical costs for permanent partial claims - nearly two times higher than countrywide
.
(3) High medical costs for temporary total claims - 50% higher than countrywide
18
FloridaWorkers Compensation System
Overview Hospital costs are relatively high in Florida according to WCRI studies. Since they generally represent nearly half of the Medical dollar, this is a significant reason for the high Medical costs. Also there is high utilization of non-surgical outpatient hospital services which do not fall under fee schedule.
Physician costs also contribute to the high Medical costs. Although Florida’s Physician Fee schedule is relatively low, there is high utilization of physician services/evaluations & a relatively expensive mix of services being provided. Florida does NOT have unusual types of injuries that would explain the higher costs.
Attorney involvement is significant in Florida and also helps explain the cost drivers. When attorneys are not involved, the difference in claim costs between Florida and countrywide is minimal. When attorneys are involved, the difference in claim size between Florida and countrywide is nearly 40%. Attorneys may contribute to the frequency of PT claims and to increased Medical services.
(Continued …)
19
60.8%
39.2%
Medical Costs Constitute the Majority of Total Losses in Florida
Based on the latest available year of NCCI’s WCSP data. Includes Lost Time and Medical-Only claims.
Florida
Indemnity Medical
54.6%
45.4%
Countrywide Average
20
Hospital Prices Are Much Higher Than Non-Hospital
Providers for Similar Services
0.0
1.0
2.0
3.0
4.0
5.0
6.0
MA CA CT GA PA TX WI FL
1998 Claims with > 7 Days Lost Time Evaluated as of June, 1999
(Injury/ Industry Mix Adjusted)
Hosp
ital Pri
ce /
Non-
Hosp
ital Pri
ce
An Example: Physical Medicine
21
4%
23%
52%
20%
1%
24%
59%
3% 6%8%
Permanent Total Costs in Florida Are a Larger Percentage of Total Costs Than
Countrywide
Florida Countrywide
Fatal
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
Temporary Total Permanent Partial Permanent Total Medical Only
22
214 179232 216
497
854
399
108
371
214
0
150
300
450
600
750
900
C/W FL AL CA GA MA MN NY TX VA
Cos
t p
er C
ase
($ '0
00s)
Florida’s Permanent Total Indemnity Average Cost per Case is
Comparable to Countrywide
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
23
310236 227
337
823
485
307 272
539
343
0
150
300
450
600
750
900
C/W FL AL CA GA MA MN NY TX VA
Cos
t p
er C
ase
($ '0
00s)
Florida’s Permanent Total Medical Average Cost per Case isLower than Countrywide
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
24
6
26
5
9
31 1
8 7
3
0
5
10
15
20
25
30
C/W FL AL CA GA MA MN NY TX VA
Cla
im F
req
ue
nc
y
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
Florida’s Frequency of Permanent Total Claims is
Four Times Greater than Countrywide
Permanent Total Frequency per 100,000 Workers
25
As a Result of a Higher Frequency, Florida’s Total Cost for
Permanent Total Claims is More than 3 Times Greater than Countrywide
Permanent Total Costs per 100,000 Workers
3
11
0
2
4
6
8
10
12
C/W FL
To
tal
Co
st
($
mil
lio
ns)
Based on the latest available year of NCCI’s WCSP data
26
2529 32 34
30 30
53
18
3431
0
20
40
60
80
100
C/W FL AL CA GA MA MN NY TX VA
Co
st p
er C
ase
($ '0
00s)
Florida’s Permanent Partial Indemnity Average Cost per Case is
Comparable to Countrywide
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
27
24
43
21 24
10
2616
23
40
58
0
20
40
60
80
100
C/W FL AL CA GA MA MN NY TX VA
Co
st
pe
r C
as
e (
$ '0
00
s)
Florida’s Permanent Partial Medical Average Cost per Case is Nearly
Two Times Greater than Countrywide
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
28
22
28
0
10
20
30
40
C/W FL
To
tal C
os
t (
$ m
illi
on
s)
Based on the latest available year of NCCI’s WCSP data
As a Result of Higher Medical Costs, Florida’s Total Cost for
Permanent Partial Claims is More than25% Higher than Countrywide
Permanent Partial Costs per 100,000 Workers
29
4.0
5.2
1.8
4.5
6.3
1.9
3.6
5.6
3.23.7
01
234
5678
910
C/W FL AL CA GA MA MN NY TX VA
Co
st
pe
r C
as
e (
$ '0
00
s)
Florida’s Temporary Total Indemnity Average Cost per Case is
Slightly Higher than Countrywide
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
30
5
8
3
5
3 3 3
11
67
0
3
6
9
12
15
C/W FL AL CA GA MA MN NY TX VA
Co
st
pe
r C
as
e (
$ '0
00
s)
Florida’s Temporary Total Medical Average Cost per Case is More than
50% Higher than Countrywide
Based on the latest available year of NCCI’s WCSP data (or equivalent in non-NCCI states)
31
9
13
0
5
10
15
20
C/W FL
To
tal C
os
t (
$ m
illi
on
s)As a Result of Higher Medical Costs,
Florida’s Total Cost for Temporary Total Claims is
40% Higher than Countrywide
Temporary Total Costs per 100,000 Workers
Based on the latest available year of NCCI’s WCSP data.
32
9,753
30,227
41,584
10,424
0
10,000
20,000
30,000
40,000
50,000
No Attorney With Attorney
Co
st
pe
r C
as
e (
$)
CountrywideFlorida
Attorney Involvement Has a Bigger Impact in Florida Than Countrywide -
Driving Up Indemnity & Medical Costs
Based on NCCI’s Detailed Claim Information database for 1998.
Avg Cost per Case -Indemnity & Medical Combined
FLCW FLCW
33
Attorney Involvement Helps Explain Florida’s Higher Costs
Attorney involvement is significant in Florida (40% of lost time claims) and begins early in claim life-cycle which explains the cost drivers shown on the prior slides.
When attorneys are not involved, the difference in claim costs between Florida and countrywide is minimal.
When attorneys are involved, the difference in claim size between Florida and countrywide is nearly 40%. Both Medical and Indemnity costs are impacted.
This helps explain the high Medical costs in the prior slides.