How Do Workers’ Compensation Claims Develop Over Time?

EXECUTIVE SUMMARY

To provide employers and their supplier partners with evidence-based expectations about how long claims will continue to generate costs, and the distribution of costs over time, IBI analyzed the four-year development of WC claims that resulted in temporary total disability (TTD) absences from work.

Main Findings

• At 48 months, the average claim costs about $43,500—about half of which are medical costs. Another 25% of costs are for TTD and the remainder are for TPD, legal, prescription pharmacy and other expenses.
• The largest share of costs occurred in the first six months after a TTD injury—an average of 30% ($13,000) of the 48-month value. At the month 24, the average TTD claim had paid about 73% ($31,600) of its 48-month value—but this only added an average of $4,500 in new costs since month 18.
• Development patterns differed for industries within the manufacturing and health services sectors. Substantial minorities of claims fully developed within six months, and a majority fully developed within two years for most industries. At the same time, it is not uncommon to see as many as one-fifth of claims still generating costs four years after injury.

Implications for Employers

The advantage of the long time horizon in the benchmarking data is that employers can assess their loss development prospectively. This can facilitate the early implementation of implement case management strategies designed to bend the cost curve. To make these assessments relevant to a large number of employers, in the coming months, IBI will supplement its current WC benchmarking reports with more detailed tables and charts for a greater number of industries.