Variations in worker compensation claims by company: the potential for achieving a significant reduction in claims

Abstract

Background: The objective of our study was to examine the potential reduction in paid worker compensation claims if the rate of claims were as low as the rates of the top companies in that industry category.

Methods: Using Michigan data for the years 1999-2001, we first excluded companies who had no paid worker compensation claims for wage replacement and then calculated the top 10th, 25th, and 50th percentile rates of paid worker compensation claims for wage replacement of all the remaining companies combined and by 2 digit SIC. The percent reduction was calculated separately for small (<20 employees) and large companies based on the differences in observed minus expected if all companies did as well as the top companies in their industry grouping.

Results: Fifty-nine percent of large companies and 90% of small companies had no paid worker compensation claims for wage replacement over the 3-year period. Controlling for industry type there would have been 91,504 fewer paid workers' compensation claims if all companies with at least one claim did as well as the 10th percentile or better as the companies in their industry grouping. Reductions were found across all industries and for both small and large companies.

Conclusion: Variations in worker compensation claims between states are highlighted when legislators consider "reforms" to reduce workers' compensation costs. These reforms overlook the larger variation between companies within the same type of industry in the same state. Possible reasons for this variation between companies and its implication on reducing morbidity and health care costs are discussed.