Boca Raton, Fla. — Although workers’ compensation claim frequency continued to decline during 2007, albeit at a slower rate than during the previous two years, indemnity costs and medical severity continue to rise, according to a new report.

Boca Raton-based NCCI Holdings Inc., a provider of workers’ compensation and employee injury data and statistics, noted in its latest review that average indemnity costs per claim rose 4.0% in 2007, up slightly from the average of 3.3% since 2001.

And although frequency is on the decline, that decline is waning. The NCCI report notes the 2.5% decrease in 2007 claim frequency continues a trend that started during the 1990s, yet it is “more modest” than the 7.0% drops during each of the previous two years, and was the smallest decrease in eight years. Medical costs per claim increased an estimated 6.0% during 2007, the lowest increase since 1995.

Those medical costs may include a growing number of unusual and/or ancillary circumstances, according to news reports. In Oregon, one such indemnity/medical severity classification recently added to the list of statistics is gastric bypass surgery, which an appeals court ruled was compensable under the state’s workers’ compensation law because the procedure was necessary to treat a job-related knee injury.

The verdict in SAIF Corp. and Jerry's Specialized Sales vs. Edward G. Sprague affirms a finding by the state Workers' Compensation Board that state-chartered workers’ compensation insurer. Salem-based SAIF Corp., must pay for the weight-loss surgery Edward Sprague underwent in 2001.

The ruling against SAIF and Jerry's Specialized Sales stems from a knee injury Sprague first suffered in 1976 and reinjured in 1999. Doctors told Sprague his weight of 350 pounds would prevent successful treatment of the knee condition, so he sought workers’ comp medical benefits for the gastric procedure. SAIF countered the claim was not compensable because the obesity was not caused by his 1976 accident. But the appeals court agreed with the comp board, which found the injury was more than a minor cause of the claimant's need for gastric surgery and was therefore compensable.

NCCI, which updated its annual study to reflect claim frequency changes for permanent total claims, the costliest 1% of lost-time claims, notes that over the last three years, those claims are increased significantly. The rise in permanent total claims is evident across industries, regions, and payroll sizes. And from 2004 to 2006, the increase in permanent total claims may have increased lost-time indemnity severities by approximately 1.5% per year, and lost-time medical severities by approximately 2.5% to 3% per year.

Sources: NCCI Holdings Inc., Workforce Management

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