Drop in Workers’ Compensation Costs Reflects Recession

August 16, 2011

The number of workers covered by workers’ compensation dropped by 4.4 percent in 2009, the biggest decrease in two decades.

Also, according to a report by the nonprofit National Academy of Social Insurance, employer costs for benefits fell by 7.6 percent to $73.9 billion in 2009, reflecting the overall decline in employment.

“As one might expect, when the Great Recession hit, employers paid less in workers’ compensation costs because there were fewer workers to cover,” said John F. Burton, Jr., chair of the panel that oversees the report.

Burton said that although the drop in employer costs represents the biggest decrease in the last two decades, benefits increased slightly by 0.4 percent to $58.3 billion, reflecting in part benefits provided in 2009 to workers injured in prior years.

Workers’ Compensation Benefits, Coverage, and Costs 2009

Aggregate Amounts 2009 Change In Percent
Covered workers (in thousands) 124,856 -4.4
Covered wages (in billions) $5,675 -4.7
Workers’ compensation benefits paid (in billions) $58.3 0.4
Medical benefits 28.9 -1.1
Cash benefits 29.4 1.9
Share of medical benefits in total 50% -1.5
Employer costs $73.9 -7.6
Source: NASI, Workers’ Compensation: Benefits, Coverage and Costs, 2009.

 

The total benefits paid to injured workers in 2009 increased in 23 states and the District of Columbia while declining in the remaining 27 states, compared to the previous year.

Payments for medical care declined for the first time in a decade by 1.1 percent to $28.9 billion, although they continue to make up roughly half of total workers’ compensation benefits.

Employers paid a total of $73.9 billion nationwide for workers’ compensation with a cost of $1.30 per $100 of payroll, the lowest in the last 30 years.

A total of 4,551 fatal work injuries occurred in 2009, which is a 12.7 percent decrease from the number reported in 2008, and the lowest since 1992.

The report, Workers’ Compensation: Benefits, Coverage and Costs, 2009, provides data on workers’ compensation benefits for the nation, the states, the District of Columbia, and federal programs. The report has been produced annually by the National Academy of Social Insurance since 1998. NASI is based in Washington, D.C.

Key Trends

Key trends identified by the report include:

National Trends

  • Workers’ compensation programs in the 50 states, the District of Columbia, and federal programs paid $58.3 billion in benefits in 2009, an increase of 0.4 percent from $58.1 billion in 2008.
  • Medical payments decreased by 1.1 percent, to $28.9 billion, in 2009 but cash benefits to injured workers increased by 1.9 percent to $29.4 billion.
  • Costs to employers fell by 7.6 percent in 2009 to $73.9 billion. This is the largest percentage decline in employer costs since 1987.
  • Workers’ compensation covered an estimated 124.9 million workers in 2009, a decrease of 4.4 percent from the previous year due to the recession, which began in 2007. Aggregate wages of covered workers fell by 4.7 percent in 2009.
  • Measured as a percentage of the wages of covered workers, benefits paid to workers increased whereas employer costs fell in 2009. As a share of covered wages, employers’ costs in 2009 were lower than in any year since 1980.

State Trends

  • Between 2008 and 2009, the total amount of benefits paid to injured workers declined in 27 jurisdictions while the remaining 24 jurisdictions experienced an increase in benefit payments.
  • Among the 51 jurisdictions (including the District of Columbia), on average from 2008 to 2009, medical benefits declined in 27 states and cash benefits increased in 28 states.

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