A new study of the workers’ compensation benefits in Oregon and New Mexico has found that as the benefits have increased, so have claims durations.
The National Council on Compensation Insurance used a “difference in differences” methodology to analyze the impact of benefit changes in the two western states to find that for each $1.00 of direct benefit increase, there was an added $0.54 average cost due to increased claim durations.
In Oregon, the 33 percent increase in the maximum weekly temporary total disability (TTD) benefit resulted in a 17.5 percent impact on utilization. This implies a duration/benefit elasticity of 0.53 (17.5% / 33.0%).
The 7.6 percent increase in benefit duration in response to a 17.6 percent increase in the maximum weekly indemnity benefit in New Mexico translates into a duration/benefit elasticity of 0.43 (7.6% / 17.6%).
In terms of TTD indemnity costs, both the Oregon (38 percent) and New Mexico (33 percent) studies show that approximately 35 percent of the total cost impact can be attributed to a duration utilization effect. The focus of this research has been on two event studies where TTD benefits had increased. “Some might interpret our findings to also conclude that a decrease in TTD indemnity benefits would result in a utilization impact. However, no such analysis was performed with which to reach such a conclusion,” NCCI said.
NCCI also said its methodology was not suitable for measuring the impact on the frequency of claims that may arise from a statutory indemnity benefit change.
The Council said its estimate of the utilization impact on claim durations from a change in statutory indemnity benefits reasonably agrees with estimates of prior studies, and as such utilization impacts should be included in legislative cost analyses. “Producing more accurate and responsive cost impacts will enhance the legislative pricing and ratemaking services offered by NCCI, and it will provide valuable information to aid public policy decision making,” the Council said.
To view the full report, visit https://www.ncci.com/documents/BenefitIncreaseImpact.pdf.
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