Focus

Workers' compensation insurance always has been a significant cost of doing business, but according to a recent study by the National Academy of Social Insurance (NASI), you're paying more now than ever before.

NASI studied workers' compensation data from 2003 (the most recent data available) and discovered employers' costs for the insurance grew faster than the combined cash benefits for injured workers and medical treatment. The trend began in 2000, when workers' compensation costs and benefits relative to wages were at their lowest point during the past 15 years.

"The fact that employer costs rose faster than payments for benefits and medical care reflects broader developments in the insurance industry," says John Burton Jr., study panel chairman and professor at Rutgers University, New Brunswick, N.J. "Employer costs reflect rising premiums insurers charge to cover future benefit costs. The recent rise in costs appears to be part of a longer cycle of ups and downs in the insurance market."

According to NASI, total workers' compensation payments to injured workers rose 3.2 percent, but employers' costs for workers' compensation rose 9.6 percent. When compared with aggregate wages of workers, payments rose just 1 cent for every $100 of wages in 2003. However, costs to employers (which include premiums and administrative costs) rose 12 cents per $100 of wages.

"The decline in employer costs in the 1990s occurred as favorable investment returns led insurance companies to cut premiums to expand their market shares," Burton says. "Since 2000, low interest rates and poor stock market returns led insurers to raise premiums to cover future benefit costs."

But the stock market isn't the only factor to blame for the rising costs. Medical costs have been growing rapidly, and NASI says of the 12-cent increase employers are paying for workers' compensation insurance, 9 cents are to offset increased medical costs.

For a copy of the report and state-specific information, access NASI's Web site, www.nasi.org, or call (202) 452-8097.

Ambika Puniani Bailey is editor of Professional Roofing magazine and NRCA's director of communications.