Why Are Ohio Employers Paying A Greater Share Of Indemnity Compensation Than The Rest Of The County?

According to a study just published by the National Academy of Social Insurance, when compared to the rest of the country, indemnity compensation makes up a much greater proportion of Ohio workers’ compensation claims in relationship to medical benefits paid.  In 2016, Ohio cash benefits accounted for 61 percent of workers’ compensation benefits paid, while medical benefits accounted for only 39 percent.  Nationwide, medical benefits and cash benefits accounted for approximately equal shares of total benefits paid during the same period.

The good news for Ohio employers is that workers’ compensation costs dropped dramatically in Ohio compared to the rest of the country.  Workers’ compensation costs to employers as a share of covered payroll declined 13.8 percent in 2016.  Altogether, workers’ compensation costs to Ohio employers fell 29.9 percent from 2014 to 2016, the largest two-year decrease in the U.S.  Here’s the link to the NASI study

What accounts for the discrepancy between indemnity and medical benefits in Ohio?  Although the National Academy of Social Insurance report provides some insight, comparison figures with other states were not available.  However, according to a 2007 study from the Social Security Administration SSA study, multiple factors can influence workers’ compensation costs from state to state, including:

  • different levels of earnings replacement provided by cash benefits, which mean that, all else being equal, states with more generous cash benefits have a lower share of benefits used for medical care;
  • differences in medical costs, medical practices, and the role of workers’ compensation programs in regulating allowable medical costs;
  • differences in waiting periods for cash benefits and in statutes determining permanent disability awards; and
  • the industry mix in each state, which influences the types of illnesses, and injuries that occur and thus the level of medical costs.

Here are my thoughts regarding possible factors that might influence the differences in Ohio, broken down by indemnity costs and medical costs.

Increased Indemnity Costs in Ohio

Permanent Partial Disability

-Not all states provide for permanent partial disability benefits.

-Permanent partial disability compensation is paid at different rates in other states.

-Some states that offer permanent partial disability compensation provide it in different ways than Ohio.  For example, some states only award PPD in event that the injured worker has sustained an actual wage loss.  In Ohio, injured workers are entitled to both wage loss compensation and a permanent partial disability award.

Temporary total disability

-Some states provide specific caps on the amount of temporary total disability that can be paid in a claim, regardless of an injured worker’s return to work or maximum medical improvement status.  That is not the case in Ohio.

Loss of use awards

-Different states award loss of use at different rates.  According to a 2015 NPR article, the award for the loss of an arm, for example, was worth up to $48,840 in Alabama, as compared to $193,950 in Ohio (per the Ohio BWC rate chart effective 1-1-2108 that number has raised to $209,700).

Decreased medical costs in Ohio

As noted by the Social Security Administration’s study, part of the difference may simply be attributable to a difference in overall medical costs in Ohio.  One other possible explanation for Ohio’s decreased share of medical costs versus indemnity is the concerted effort by the Ohio BWC to drive down the use of opioid pain medications.  Here are some prior posts which might offer more insight: How the Ohio BWC is Getting Tough on Opioid Pain Medications and Lumbar Fusion SurgeryNew Rules for Self-Insured Employers to Unilaterally Terminate Payment for Medications.

In summary, the BWC made a series of targeted changes which resulted in significant decreases in the number of injured workers receiving opioids. Some of those changes include a closed drug formulary adopted in 2011, which has required prior authorization for some opioids; and the opioid prescribing rules adopted in 2016.

So, in conclusion, the NASI study is good news for Ohio.  From my vantage point as an employers’ representative however, it raises questions about why Ohio’s indemnity numbers are what they are.  I’ve offered my best guesses.  If you have any thoughts, please leave them in the comments below, or e-mail me here.

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