Injury Hotspots From Coast to Coast

Workplaces are getting safer each year; but that doesn’t mean the cost of workers’ comp coverage will decline

Ongoing efforts to curb workplace injuries have made substantial progress in most parts of the country. That’s good news for employees, of course, and for employers, whose workers’ compensation insurance premiums are based at least partially on the number of injury claims that insurers pay.

But the injury numbers don’t tell the whole story about workplace safety or workers’ compensation costs. They also show that the progress on safety has been uneven.

Thirteen of the 42 states from which data are available had worker injury and illness rates that were better than the national average, according to 2006 data — the most recent — from the Bureau of Labor Statistics. Nationwide, in 2006, the average injury and illness rate was 4.4 per 100 workers in 2006.

That’s down significantly since 2001 when the average rate of injury was 5.6 per 100 workers. The numbers also show drastic individual improvements in almost every state. The number of injuries per 100 workers has fallen by double digits in most regions during that five-year span.

Of course, there was not universal progress on every front: Sixteen states — instead of 13 — were better than the national average in 2001. But by and large nearly every state made strides in lowering the percentage of its workforce that gets injured each year. West Virginia was the lone trouble spot: This state’s injury rate actually worsened between 2001 and 2006, and now stands slightly worse than average when compared with other states.

Falling injury rates don’t necessarily translate into falling premiums for a number of reasons.

The Bureau of Labor Statistics tracks this information based on the number of incidents reported to the Occupational Safety and Health Administration (OSHA). Not every incident that gets reported to OSHA results in a workers’ compensation claim, although every workers’ compensation claim would stem from an incident that should have been reported to OSHA.

Another, much more significant reason is severity of claims — that is, the amount a claim costs an insurer — has grown significantly over that same time period, meaning premium growth is less influenced by falling injury rates.

Consider the case of Louisiana. The Bayou State had the fewest injuries per worker in 2006 out of any state in the nation. It also had the biggest percentage drop in injuries per worker between 2001 and 2006 — a decline of roughly 35 percent.

Yet during that same period, workers’ compensation costs per claim were 28 percent higher than the median of 14 other similar states — Arkansas, California, Florida, Illinois, Indiana, Louisiana, Maryland, Michigan, North Carolina, Pennsylvania, Tennessee, Texas and Wisconsin — according to a study released earlier this month by the Cambridge, Mass.-based Workers Compensation Research Institute (WCRI).

All components of overall costs per claim were higher in Louisiana: medical payments per claim, indemnity benefits per claim with more than seven days of lost time and benefit delivery expenses per claim. In all, the average medical claim in Louisiana cost 44 percent more than the 14-state median, a trend WCRI said was largely due to higher-than typical prices for nonsurgical physician services and for hospital outpatient services, as well as more-frequent physician office visits and diagnostic tests.

As a result, Louisiana does not have the cheapest workers’ compensation insurance simply because it has the lowest injury rates. However, the relatively low incidence of injury in Louisiana has helped to mitigate some of the other trends, according to WCRI.

Even in states where claims frequency is high, such as Alaska, the cost of claims is a far bigger driver when it comes to insurance prices, said Commissioner Linda S. Hall, in a recent interview with Insurance Journal.

“The cost driver for Alaska’s workers’ compensation is the cost of medical care,” Hall said. “We are at a point where 70 percent of the system cost is in medical care. So it’s that medical care (that) is expensive in Alaska — that’s our primary cost driver,” she said.

The X-Factors

Falling frequency and rising severity are always at the forefront of workers’ compensation insurers’ minds, but there are a couple of external economic factors that are poised to play a bigger role in keeping premiums down than efforts to improve safety on the job.

One of the biggest, said Joseph Paduda of Health Strategy Associates, a consultancy in Madison, Conn., is the country is seeing a large-scale shift away from manufacturing jobs, which typically have more frequent workers’ compensation claims. Conpounding this trend: the types of jobs ex-manufacturing workers take tend to pay lower wages, as well, meaning claims for lost time are paid at a lower rate.

“The overall economy has a significant impact on workers’ compensation numbers,” he said. “Average weekly wages are not really going up, and that’s keeping down the cost of claims.”

But there is an even bigger factor linked to the overall economy that has drawn the attention of safety advocates and labor activists: The increasing move toward the use of self-employed independent contractors and others who are ineligible or at least unlikely to carry workers’ compensation insurance.

“The thing about the injury rate is that the data is incomplete and problematic,” said Peg Seminario, of the AFL-CIO, which last month released a report on the frequency of on the job fatalities and injuries.

Studies have pointed to an increasing trend where companies hire independent contractors — many of whom are improperly classified as such — which takes some exposure off the company’s workers’ compensation policy, Seminario said. In many cases, those contractors — many of whom are self-employed, or hire workers under the table — then fail to buy workers’ compensation insurance. In cases where those workers are injured, it can often go unreported since the OSHA system relies on employers to self-report incidents.

That can also cause problems, particularly in construction, where a company doesn’t want to be viewed as an unsafe employer, or one that has frequent claims, Seminario said.

Often, injuries go unreported as work-related; health insurance ends up footing the bill for any medical costs, even though it could be a work-related claim.

In the end, the declining numbers may be a delusion about what’s really going on in the nation’s workplaces — the result of numerous market and regulatory forces that all want to see falling injury rates.

“To some degree, I don’t think it’s really possible to say what is going on with injuries,” Seminario said.

Topics Claims Workers' Compensation Louisiana Alaska