WCRI: North Carolina Workers’ Comp Indemnity Payments Still High, But Stable

The average indemnity payment per workers’ compensation claim in North Carolina remains among the highest of 18 states studied by the Workers Compensation Rating Institute (WCRI), according to a new report from the firm.

WCRI’s 17th edition CompScope Benchmarks study, “Monitoring the North Carolina System,” continues to look at the effects of major workers’ comp reform (House Bill 709) passed in 2011. The most recent report, released in April, also looks at how new fee schedule rules that became effective in 2015, with reimbursement based on a percentage of Medicare, have impacted the state’s system.

According to the report’s findings, North Carolina’s medical and indemnity payments per claim stayed fairly stable since 2009, following growth of both of six percent a year or more between 2004-2009. As a result, the report said, total payments per claim showed little change since 2009 at all claim maturities.

Indemnity benefits, driven by longer duration of temporary disability and larger settlements, remained high.

Provisions of the reforms passed with HB 709 addressed those two issues by establishing caps on duration of temporary disability (500 weeks), specifying a more precise and narrower definition of suitable employment, and improving worker access to vocational rehabilitation services.

WCRI said 51 months after the reforms were passed, most of the metrics to measure those issues were “fairly stable,” with a decrease in total disability duration and earlier settlements.

WCRI said the effects of the changes will likely develop as multi-year experience on claims is observed.

“Given the nature of the changes and the maturity of the data in this report, some effects may be observable,” the report said. “However, it is important to be aware that the Great Recession and slow recovery may also have influenced the changes in system performance metrics we observed.”

The average indemnity payment per claim with more than seven days of lost time in North Carolina was $28,279, among the highest of the 18 states in the study, with the median being $18,269.

WCRI said system features, including longer duration of temporary disability (aspects of a wage-loss system) contributed to higher indemnity benefits per claim in the state.

The more costly benefits per claim were also influenced by a higher percentage of claims with lump-sum settlements and higher lump-sum settlements than many states (aspects of a wage-loss permanent partial disability benefit system), WCRI said.

The average duration of temporary disability in North Carolina, the measure of how long before the claimant returns to work, is 20 weeks compared with 14 weeks in the median PPD benefit system. The focus of the 2011 reform was to directly address this issue.

WCRI looked at the outcomes for injured workers in North Carolina in a 2016 study and found that North Carolina workers reported similar return to work outcomes as other states with the same systems.

The report also found that medical payments per claim were somewhat higher than typical in North Carolina for hospital outpatient care, but fairly typical for hospital payments per inpatient visit, WCRI said.

Hospital payments per claim had already decreased from 9 percent for outpatient services and 8 percent for inpatient from 2012/2013 to 2014/2015. WCRI said those those decreases were likely a reflection of the interim fee schedule changes in 2013 that froze the charges based on rates for each hospital and then further reduced the frozen rates by 15 percent for hospital outpatient services and ambulatory surgery centers (ASCs), and by 10 percent for inpatient care.

The state’s new fee schedule for nonhospital (professional) services, which became effective July 1, 2015, is expected to increase nonhospital reimbursement costs but decrease those of hospital and ASCs. WCRI said it will monitor the effects of the changes in hospital and nonhospital reimbursement in future studies.

In summary, WCRI said taken together, the income benefit provisions in HB 709 and the hospital fee schedule reductions targeted the key cost drivers in North Carolina – slower return to work, larger lump-sum settlements, and higher payments for hospital outpatient care as compared with the typical study state.

WCRI’s annual study benchmarks the performance of state workers’ compensation systems in 18 states, focusing on income benefits, overall medical payments, costs, use of benefits, duration of disability, litigiousness, benefit delivery expenses, timeliness of payment, and other metrics. It also examines how these system performance metrics have changed primarily from 2010 through 2015.

WCRI analyzed claims with experience through 2016 for injuries up to and including 2015. The full study is available through WCRI.