It takes seven years to close 90% of workers compensation claims in California compared with three years for the median state, according to a study released Tuesday by the Workers’ Compensation Insurance Rating Bureau.
WCIRB attributes the longer time it takes to close California claims to several “duration drivers.” These include a higher share of permanent partial disability claims and cumulative trauma claims in the state, greater utilization of medical-legal services and regional differences within the state.
The study also found that 13% of indemnity claims are open at 60 months — more than twice the median of 5% in states across the country, and the proportion open at 36 months in California is more than three times the median.
It also takes longer to report and recognize indemnity claims in California. After one year, 22% of California indemnity claims are unreported, which is double the median across the country. Late-reported claims typically close more slowly, and many involve cumulative trauma injury, WCRIB found.
Cumulative trauma claims involve longer-term, multiple medical issues. At first report level, the settlement rate for cumulative indemnity claims averaged below 15% between 2006 to 2011, compared with around 40% for non-cumulative trauma claims.
Although claim settlement rates have been shortening since 2011, the gap between cumulative trauma claims and others remains, with about 20% of cumulative trauma claims on average settled at first report level since 2017 compared with around 50% for all other claims.
Another key factor in the higher costs, permanent partial disability claims in California were found to be more complex, more frequently litigated and typically to have longer duration than claims with only temporary disability benefits. The frequency of PPD claims per 100,000 employees in California is 2.5 times the nationwide median, the study found.
Claim duration improved “significantly” following the implementation of S.B. 863, which made significant changes to the state’s comp system starting in 2013, with indemnity claims closing 50% faster in 2019 than in 2012. Claim duration declined significantly in 2020 during the pandemic and economic slowdown but has since plateaued.
This article was first published in Business Insurance.