Casualty Loss Reserve Seminar Workers Compensation Selected States Issues Florida, California & New...

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])

mailto:[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


23

310236 227

337

823

485

307 272

539

343

0

150

300

450

600

750

900


Cos

t p

er C

ase

($ '0

00s)

Florida’s Permanent Total Medical Average Cost per Case isLower than Countrywide


24

6

26

5

9

31 1

8 7

3

0

5

10

15

20

25

30


Cla

im F

req

ue

nc

y


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


Co

st p

er C

ase

($ '0

00s)

Florida’s Permanent Partial Indemnity Average Cost per Case is

Comparable to Countrywide


27

24

43

21 24

10

2616

23

40

58

0

20

40

60

80

100


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


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


Co

st

pe

r C

as

e (

$ '0

00

s)

Florida’s Temporary Total Indemnity Average Cost per Case is

Slightly Higher than Countrywide


30

5

8

3

5

3 3 3

11

67

0

3

6

9

12

15


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


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.

Casualty Loss Reserve Seminar Workers Compensation Selected States Issues Florida, California & New...

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Transcript of Casualty Loss Reserve Seminar Workers Compensation Selected States Issues Florida, California & New...