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Workers’ comp fast facts

Over the last few years I’ve had quite a few calls and meetings with folks in the investment community  looking to get up to speed on the workers’ comp industry and various aspects thereof.

While the volume of calls ebbs and flows, of late there’s been increasing interest, likely due to the credit market’s interest in OneCall Care Management and other transactions.

So, here are some key datapoints for anyone looking for basic information.

  1. Total workers’ comp premium and equivalents is about $85 billion.  That includes insurance premiums from private carriers and state funds, claims, administrative, and excess insurance costs for self-insureds, governmental programs e.g. FECA, and claims costs for minimum-premium or other “deductible” type insurance plans.
  2. Workers’ comp medical costs will be about $33 billion this year.
  3. That’s about 1.25% of total US medical spend.
  4. Medical costs account for about 60% of claims expense, with indemnity expense accounting for the remainder. (adding administrative costs to claim costs gets you close to total WC premium and equivalents)
  5. Claim frequency has been dropping by about 2-3% per year for more than two decades.  That will almost certainly continue.
  6. Drug costs will account for around 15-17% of that spend, with physical medicine in the same ballpark.
  7. Most states have some sort of medical fee schedule (FS) in place, however there’s MUCH variation among and between the states.  Some only have provider FS, others have provider, drug, facility, DME and other services covered by fee schedules.
  8. Almost all provider fee schedules are based on Medicare.  However, few states directly link their FS to Medicare, so when Medicare’s FS changes, it may – or more likely may not – change that state’s reimbursement.

There’s a lot more here; if you are looking for more information, try the search box on this page – it’s up there to the right.  With about 3000 posts on MCM, chances are pretty good there’s some discussion of pretty much every comp-related topic.

btw, good sources are: – see the workers compensation tab – everything workers’ comp – California-specific – their Annual State of the Line is really good.

8 thoughts on “Workers’ comp fast facts”

  1. WCRI and IAIABC have published a good comparison of state system laws as of Jan 2016. And, for those total WC geeks, the NCCI Annual Statistical Bulletin provides great information on individual system benefit levels and claim costs.

  2. Great list. Also, thanks for providing the sources at the bottom of the article. I’ve used NASI and NCCI but wasn’t aware of the other two. :)

  3. Question on the pharmacy range of 15-17% – are you saying that the Rx cost to total medical for this year ($33 Billion) is 15-17%? What is the source for this?

    1. Hi Randy
      Thanks for the question.
      Yes, Rx costs are about 15-17% of total WC medical costs. There are several sources for this including HSA payer data, NCCI, and investor research. That said the range is just that due to the lack of consistent data capture and categorization by payers, as well as methodological differences among researchers.

  4. Thanks for sharing Joe…facinating how Rx is taking larger chunk of WC dollar. If only that was because rest of medical $$ was shrinking…

  5. Thanks Joe,

    I looked at the NCCI stat – per NCCI, this is based on “Accident Year 2014” and is an estimate for what should happen in 2016, 3 years out – 2014, 2015, and 2016.

    Sounds like you are applying an Accident Year stat to the total spend in the Calendar Year 2016, $33 Billion. Isn’t there a difference between Calendar Year and Accident Year? Is there a way to reconcile the two?

    3 year old claims of course have a higher percent of pharmacy than year 1. When you look at the NCCI graph, for year 1 in Calendar Year, looks like Rx is only between 5-7% of total? Year 5 Accident Year Rx looks to be about 30%.


    1. Hi Randy – I’m using a different methodology altogether – I just ask payers for the percent of total medical spend that is for Rx, or get the dollar figures for total and Rx and do the math.

      NCCI has a different methodology altogether which tends to report a higher spend overall.

      Accident year is the spend for the claims incurred in a particular year.

      Calendar year is the spend in that year for all claims incurred in any year.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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