NC Reforms Lowering Comp Costs

Major reforms passed by the General Assembly in 2011 and new medical-fee schedules imposed in 2015 are moderating indemnity and medical costs in North Carolina, according to a recent study from the nonprofit Workers Compensation Research Institute (WCRI).

The study, CompScope™ Benchmarks for North Carolina, 19th Edition, is free for WCRI members and available to non-members for a small fee. To learn more about it or to download a copy, visit WCRI’s website at https://www.wcrinet.org/reports/compscope-benchmarks-19th-edition.

WCRI reports medical payments per claim between 2012 and 2017 decreased nearly 5% per year, in sharp contrast to the period between 2004 and 2012 when medical payments increased about 4% per year. Indemnity payments, which increased 5% per year between 2004 and 2012, have increased only 3% per year since reforms passed in 2011.

The net effect is that total payments per claim with more than seven days of lost time at 12 months of experience have remained about the same since 2012, whereas between 2004 and 2012 they were increasing nearly 5% per year. Unlike many of the 18 states monitored by WCRI, where total costs increased 3% per year between 2012 and 2017, total costs per claim changed little in North Carolina.

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Under reform legislation passed in 2011, North Carolina capped temporary total disability benefits at 500 weeks (in most instances) and that addressed larger lump-sum settlements and slower return to work (hence longer duration of temporary disability). These were the main drivers of higher indemnity benefits per claim in the state. The 2015 medical fee schedules targeted higher-than-average hospital outpatient costs in North Carolina.

But, despite reforms and despite recent improvements, total costs per claim in North Carolina were 23% higher than the median of the 18 states monitored by WCRI. Specifically, total costs per claim in North Carolina averaged about $52,000 for 2015 claims with more than seven days of lost time at an average of 36 months of experience. Other states studied by WCRI include Arkansas, California, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, Pennsylvania, Tennessee, Texas, Virginia, and Wisconsin.

In North Carolina, indemnity benefits per claim with more than seven days of lost time were among the highest and, indeed, would have substantially increased total costs per claim were it not for the decrease in medical costs. WCRI reports indemnity benefits in North Carolina were nearly 70% higher compared to the median for the 18 states (for 2015 claims at an average of 36 months of experience).

Key factors responsible for this disparity are some specific features of North Carolina’s workers’ compensation system. WCRI notes that unlike most states, North Carolina has aspects of both a wage-loss and permanent partial disability (PPD) system. An injured worker who has not returned to work at the end of the healing period either continues to receive temporary total disability (TTD) benefits (as in a wage-benefit system), or elects to receive PPD benefits based on an impairment rating. A worker who has returned to work at full wages can receive PPD benefits (as in a PPD system).

Thus, settlements in North Carolina may include payments for ongoing TTD benfits, for PPD benefits, and for future medical care. In addition, settlements in North Carolina were more frequent and occurred earlier than in most states.

Carol Telles, a senior analyst at WCRI, authored the recent study on North Carolina’s workers’ compensation system. Ms. Telles will present and discuss her findings at the North Carolina Association of Self-Insurers’ 2020 conference, scheduled for March 25-27 at the Holiday Inn Resort in Wrightsville Beach.