54. Workers’ Compensation in Construction and Other Industries
Workers’ compensation programs were initiated to reduce litigation for work-related injuries, illnesses, and deaths; and were designed to cover employees if their incidents happened in the workplace as a result of and in the course of workplace activities.1 These programs vary among states. Thus, it is difficult to document costs of workers’ compensation at the national level.
Workers’ compensation data are an important source for evaluating costs associated with work-related injuries. The National Academy of Social Insurance (NASI) estimated that workers’ compensation programs paid $61.9 billion in worker benefits to about 135.6 million workers across all industries in 2015, an increase of 0.7% from 2011.2 In construction, 3.6% of employer compensation costs were spent on workers’ compensation, 71% higher than the percentage for the overall goods producing industries combined, and more than twice the average costs for employers in all industries (chart 54a).3
Workers’ compensation costs differ by construction subsector. In Ohio and Washington State, the median (see Glossary) compensation claim cost in the Heavy and Civil Engineering subsector (NAICS 237) was $1,050, and the mean or average claim cost was $13,540 in 2015, the highest among the three major construction subsectors (chart 54b). The substantial difference between the median and mean indicates that the costs of some claims could be exceptionally high.4
By injury type, nearly half of compensation claims among construction workers in Ohio and Washington were due to contact with objects or equipment (47%; chart 54c). Falls, slips, and trips were the next most common cause of compensation claims, comprising one quarter (25%) of all claims in 2015. However, transportation injury claims had the highest costs, with an average of $20,540 per claim, followed by falls, slips, and trips (chart 54d).
Workers’ compensation costs increase with age. In Ohio and Washington, the average cost of a workers’ compensation claim among construction workers under 21 years old was $3,130 in 2015, and jumped to $17,680 among those 61 years and older (chart 54e). As more construction workers remain employed later in life,5 the impact of an aging workforce on workers’ compensation costs could continue to grow for employers and providers.
Workers’ compensation insurance rates vary widely among states and job types. According to the Workers Compensation Shop, an online workers’ compensation insurance company, in 2016, the upper workers’ compensation rate per $100 of payroll for residential carpentry was as high as $99.99 in Georgia compared to just $7.69 in Indiana (chart 54f). In the same year, the upper insurance rate for electrical work ranged from $17.76 in California to $1.90 in West Virginia. Rates of workers’ compensation also vary considerably from one insurance carrier to the other in the same state. Additional factors, such as size of the employer’s payroll and company’s claims experience, are often used by insurance companies to determine their own premium rates.6
In attempts to control costs in all industries, the workers’ compensation system has been repeatedly revised over the past two decades. As a result, workers have experienced increased difficulty in receiving adequate benefits.7 In some states, disabled workers are required to prove that the workplace activity was the primary cause of the disability. This may discourage workers from pursuing these claims at all, or lead to more workers shifting care to private insurance,8,9 since the workers’ compensation process is costly and reimbursement is not guaranteed.
(Click on the image to enlarge or download PowerPoint or PDF versions below.)
Mean – The mean or arithmetic mean is the sum of all the numbers in the set divided by the amount of numbers in the set.
1. Insurance Information Institute. Workers’ Compensation, http://www.iii.org/media/hottopics/insurance/workerscomp/ (Accessed August 2017).
2. National Academy of Social Insurance. 2017. Workers’ Compensation: Benefits, Coverage, and Costs, https://www.nasi.org/sites/default/files/research/NASI_Workers%20Comp%20Report%202017_web.pdf (Accessed December 2017).
3. For insured and self-insured companies, employer compensation costs include workers’ compensation premiums; self-insured companies may make direct payments or set aside funds to cover potential losses or to meet self-insurance requirements.
4. Wurzelbacher SJ, Meyers AR, Bertke SJ, Lampl MP, Robins DR, Bushnell PT, Tarawneh A, Childress D, Turnes J. 2013. Comparison of cost valuation methods for workers’ compensation data. Published in Use of Workers’ compensation data for occupational safety and health: Proceedings from June 2012 workshop. DHHS (NIOSH) Publication No. 2013-147 (May 2013).
5. Dong XS, Wang X, Ringen K, Sokas R. 2017. Baby boomers in the United States: Factors associated with working longer and delaying retirement. American Journal of Industrial Medicine, Apr; 60(4):315-328.
6. PrimePay. https://primepay.com/blog/how-your-workers-comp-rate-calculated (Accessed January 2018).
7. Pro Publica. The Demolition of Workers’ Comp, https://www.propublica.org/article/the-demolition-of-workers-compensation (Accessed December 2017).
8. Sears J, Bowman S, Blanar L, Hogg-Johnson S. 2016. Industrial injury hospitalizations billed to payers other than workers’ compensation: Characteristics and trends by state. Health Services Research, 52(2): 763-85.
9. Lipscomb H, Schoenfisch A, Cameron W, Kucera K, Adams D, Silverstein B. 2015. Contrasting patterns of care for musculoskeletal disorders and injuries of the upper extremity and knee through workers’ compensation and private health care insurance among union carpenters in Washington State, 1989 to 2008. American Journal of Industrial Medicine, 58(9): 955-63.
Chart 54a – Employer costs are workers’ compensation premiums for firms that buy insurance; for self-insured employers, costs are administrative expenses plus payments to workers, their survivors, and health care providers.
Charts 54b, 54d, and 54e – Charts represent median claim costs and mean cost per claim.
Charts 54b-54e – Charts cover claims for state-insured employers only. Claims are those reported, adjudicated, allowed/accepted, and valued as of 30 months post January 1, 2015. Zero-dollar claims are excluded. Around 1% (177 of 17,687) of claims did not report age and event data. Paid costs valued at 30 months do not reflect the ultimate cost of claims. (More information can be found in reference #4.)
Chart 54f – Upper/high rates per $100 of payroll; effective as of March 1, 2017. Listings do not include Nevada, North Dakota, Ohio, or Washington. Job types are determined by “class codes” from the National Council on Compensation Insurance. (Note: The job categories are not available or are only available for certain pay levels in some states).
Chart 54a – U.S. Bureau of Labor Statistics. 2015 National Compensation Survey – Compensation Cost Trends, Tables 5 and 6. https://www.bls.gov/ncs/data.htm (Accessed July 2017).
Charts 54b-54e – Unpublished data. Ohio Bureau of Workers’ Compensation, Washington State Department of Labor and Industries, and NIOSH.
Chart 54f – Workers Compensation Insurance by State. https://www.workerscompensationshop.com/ (Accessed December 2017).