Workers' comp payouts dip 9.6%

By Glenn Scott
Advertiser Staff Writer

Hawai'i businesses paid less in workers' compensation benefits in 1999 for the fifth year in a row, according to a national survey.

By recording a 9.6 percent drop in medical and cash payments in 1999, the latest year for which figures are available, Hawai'i posted the fourth-largest reduction among all states, the National Academy of Social Insurance said in an annual report released yesterday.

The downward trend may not last much longer. Some insurers already have announced that they will raise premiums.

And Gary Hamada, who administers the state Department of Labor and Industrial Relations' compensation division, said costs are likely to stabilize after the rapid declines that followed reforms in 1994 when the state cut its schedule of medical fees and prodded employers to improve safety measures.

The deep reductions in both the claims and benefits payments, he said, reflect the changes in the workers' comp landscape since alarming cost increases made front-page news and dominated the legislative agenda in 1994.

In the five years after the reforms, he said, the number of claims plummeted from 42,500 in 1994 to 30,300 in 1999, he said, and workers' comp premiums dropped as well from a total of $362 million to $160 million.

"We're very pleased with the results in Hawai'i," he said.

The results have followed national trends, reflecting what the academy's report describes as complex adjustments within the insurance industry, spurred in part by the growing national economy of the late 1990s.

Rutgers University Professor John Burton Jr., one of four authors of the academy study, said the strong economy led to a decline in workers' compensation costs and benefits, relative to wages. He said other important reasons for declines include fewer accidents, more active management of medical care, more efficient return-to-work programs and tighter eligibility for workers.

In Hawai'i, Hamada said, the state has tried to team with insurers to promote job-site safetyand to reduce adversarial posturing between employers and workers.

"We try to convince all parties the most cost-effective way to hold down costs is to thoroughly investigate claims up front," he said.

The more stringent rules governing medical fees, while welcomed by most businesses, have not been popular among health-care providers or, in some cases, injured workers seeking specialized medical care. In any case, benefits payments have dropped significantly in the Islands. In 1999, workers' comp benefits fell from $233.5 million a year earlier to $211.1 million.

That 9.6 percent decrease was the fourth largest nationally behind Montana, at 14.9 percent; Delaware, at 11 percent; and Oklahoma, 10.6 percent.

The 1999 decline occurred even as Hawai'i's work force grew by 0.8 percent and wages rose by 3.4 percent, the academy said. As a result, the formula for benefits paid as a percentage of payroll also fell from 1.64 percent in 1998 to 1.43 percent in 1999.

On the national level, benefits payments have begun to rise after several years of declines. In 1999, costs rose for the second straight year. The 43.4 billion in benefits was a 2.5 percent increase from $42.3 billion in 1998.

Total costs to employers nationally reached $54.6 percent in 1999, from $52.8 billion a year earlier.

However, researchers noted that workers' comp benefits payments fell relative to wages nationwide for the seventh year in a row. They said benefits have dropped by a cumulative 38 percent since peaking in 1992.