We may have the wrong idea: that all workers’ compensation losses are remaining the same or even slightly improving. While that may be for small claims, that is not the case with catastrophic claims. In fact, Safety National’s recently published article uncovers a trend in catastrophic workers’ comp claims that should be on your radar.
Catastrophic claims involve a significant injury or illness that requires extensive medical treatment and long-term disability benefits. As a result, these claims can be very costly to insurance carriers and employers.
The reasons for the increase in catastrophic claims costs vary. Here are some of the cost drivers affecting this trend:
- Aging Workforce: In 2000, 32.4% of the U.S. (United States) population aged 55 or older worked. By 2020, that percentage increased to 39.2%. The workforce is aging. As workers age, they are more likely to experience serious injuries or illnesses. In addition, older workers tend to take longer to recover from injuries, which can lead to higher medical costs and longer periods of disability.
- Medical Costs: Medical costs are rising at an alarming rate, and workers’ compensation medical costs are no exception. Medical inflation has outpaced general inflation for several years, and this trend will likely continue. Medical inflation bumped up to 6.6% in 2021, from the prior three-year average of 6.4%. Catastrophic injury claims are often not covered by fee schedules including extended ICU hospitalizations and advanced care.
- Prescription Drug Costs: Prescription drug costs are another major contributor to rising catastrophic claims costs. Many injured workers require pain medications or other prescription drugs to manage their symptoms, and these drugs can be expensive.
- Mental Health Issues: Mental health issues are increasingly recognized as a major factor in workers’ compensation claims. Workers who experience a traumatic event or suffer from a mental health condition due to workplace stress may require extensive medical treatment and disability benefits.
- Inadequate Safety Measures: Despite advances in workplace safety, accidents still happen, and inadequate safety measures can lead to catastrophic injuries. Employers must be proactive in identifying potential hazards and taking steps to minimize the risk of severe injury.
- Litigation: Litigation can also contribute to rising workers’ compensation costs. The costs of legal representation add up quickly when disputes emerge over the extent of an injury, or the number of benefits owed.
Advances in medical care and technology prolong the life expectancy and increase injury survivability of severely injured workers. What used to be considered a fatal injury, is now treatable through extensive, high-level care. While we can be thankful for these advances in medical care and technology, employers should be aware of the increase in costs that comes with them.
Is This New News to You? Here’s Why
There is no single source for workers’ compensation data analysis; data is collected from 50 separate state systems. From there, you have various bureaus, including NCCI (National Council on Compensation Insurance), independent bureaus, and self-insured data, making for many disconnects when analyzing workers’ compensation nationally.
Bureaus also cap claims data to a certain development, some discontinuing data gathering 10 years after an accident has occurred. Loss information data from self-insured employers, which makes up about a third of the U.S. workforce, are not typically reported to NCCI or other bureaus.
Are catastrophic claims offset by other decreases in other claims? Unfortunately, not. Safety National points out that the costs of regular claims continue to increase, costs of catastrophic claims are increasing, and the frequency of claims is also increasing due to increased injury survivability.
Your Workers’ Comp Ally, Axiom Medical
Many factors contribute to the rise in catastrophic workers’ compensation claims costs. Employers need to take a proactive approach to manage these costs by focusing on workplace safety, injury prevention, and early intervention for injured workers. Need an ally? That’s where we come in!
Charli Pedersen is a published writer featured on Axiom Medical’s blog. She holds a bachelor’s degree in English, Professional and Technical Writing, and has experience creating content for businesses and non-profit organizations.