Notes and Brief Reports

Workmen's Compensation Payments and Costs, 1965*

The estimated number of workers covered by State and Federal workmen's compensation laws in an average week passed the 50-million mark in 1965. The 50.5-50.7 million workers covered represented a little more than 80 percent of the civilian employed wage and salary labor force in the country. During the past decade, this percentage has remained relatively stable, although the number of workers covered has increased by more than 9 million. In 1965 alone, a 2-million increase in coverage was recorded, the largest gain for any single year during the decade.

Payrolls covered by workmen's compensation also hit a new high in 1965 as wage levels advanced an average of 3.3 percent. The estimated covered payroll for 1965 was $290 billion, an increase of 6 percent from the preceding year's estimate of $273 billion.

Despite the growth in the number of covered workers and payrolls and the acceleration in economic activity in 1965, workmen's compensation payments increased at a slower rate in 1965 than in 1964. The total of $1,797 million paid out in medical and cash benefits under State and Federal work injury laws was 5.6 percent higher than the 1964 aggregate of $1,701 million. The 1964 rise had been 7.5 percent. In absolute numbers, the $96 million increase in workmen's compensation payments in 1965 was the fourth highest annual increase for the decade.

Two factors probably contributed to the slower rate of increase. The first was the slight rise in work accident rates in 1965. According to the Bureau of Labor Statistics, the factory workinjury frequency rate for 1965 was 12.9 per million man-hours worked, compared with 12.7 for 1964 and 11.9 for 1963. This increase is considered below normal for a period of expanding

* Prepared in the Office of Research and Statistics by Alfred M. Skolnik and Julius W. Hobson. Annual estimates of workmen's compensation payments in recent years have appeared in the January issues of the Bulletin. A summary article appeared in the Bulletin for October 1966.

production when hundreds of thousands of workers move into new and unfamiliar jobs and others engage in overtime work that may result in fatigue and relaxed vigilance.

The second factor was that, though 1965 was an active legislative year for changes and improvements in the work-injury laws, for many States the changes did not go fully into effect until 1966. These changes included increases in maximum benefits for temporary total disability-the most common type of disability-in 25 States; several States enacted similar increases in benefits for permanent total disability, for partial disability, and for death. Fifteen States, the District of Columbia, and the two Federal programs paid maximum benefits of $60 or more for temporary total disability at the end of 1965; seven other States paid maximums of $55 or more.

Of the total payments of $1,797 million in 1965, private carriers were responsible for 63 percent, State insurance funds (including the Federal workmen's compensation programs) for 24 percent, and self-insurers for 13 percent. Private carrier and self-insured payments increased at a somewhat faster pace (6-7 percent) than State fund disbursements (4 percent).

It is estimated that, in both 1965 and 1964, medical and hospitalization costs accounted for about one-third of total workmen's compensation payments. Of the nonmedical payments, some 88 percent was cash compensation for nonfatal injuries and the remaining 12 percent was paid in death cases. The estimated amounts for each year are as follows:

State Variations in Benefit Payments

Eleven jurisdictions reported a decline in aggregate benefit payments for 1965-the largest number since World War II days. These juris

dictions, however, accounted for only 7 perce of the covered labor force, as 80 percent of th workers were under laws that registered modera increases up to 10 percent. Eleven States, wit

1 Data for 1965 preliminary. Calendar-year figures, except that data for Montana and West Virginia, for Federal workmen's compensation, and for State fund disbursements in Maryland, Nevada, North Dakota, Oregon, and Utah represent fiscal years ended in 1964 and 1965. Includes benefit payments under the Longshoremen's and Harbor Workers' Compensation Act and the Defense Bases Compensation Act for the States in which such payments are made.

2 Net cash and medical benefits paid during the calendar year by private insurance carriers under standard workmen's compensation policies. Data obtained from published and unpublished reports of the State insurance commissions, except in a few States where estimates are based on percentage changes from preceding years in direct losses incurred as reported by the National Council on Compensation Insurance.

Net cash and medical benefits paid by State funds compiled from State

reports (published and unpublished); estimated for some States.

Cash and medical benefits paid by self-insurers, plus the value of med benefits paid by employers carrying workmen's compensation policies do not include the standard medical coverage. Estimated from avail State data.

Payments to civilian Federal employees (including emergency r workers) and their dependents under the Federal Employees' Compe tion Act.

Primarily payments made to dependents of reservists who died w on active duty in the Armed Forces, to individuals under the War Haz Act, War Claims Act, and Civilian War Benefits Act, and to cases invol Civil Air Patrol and Reserve Officers Training Corps personnel and m time war risks.

13 percent of the coverage, had increases of 10 percent or more.

During 1964, in contrast, only 3 percent of the insured labor force was in jurisdictions that reported declines in benefit payments. Seventytwo percent of the covered workers were under programs in which benefit payments had risen by 0.1-9.9 percent, and 25 percent were located in States with increases of 10 percent or more.

The 11 jurisdictions reporting 1965 declines in benefit payments were concentrated along the Eastern seaboard and in the Rocky Mountain. region. Declines of more than 10 percent were registered in Delaware and Maryland. Five of the 11 areas-District of Columbia, Idaho, New Hampshire, Oregon, and Wyoming-also experienced drops in 1964 or rises of less than the national average in that year.

The 11 States reporting increases of 10 percent or more in 1965 were scattered geographically. In three of these States (Rhode Island, North Dakota, and Louisiana) the increases were higher than 20 percent. For four of the 11 States (Alabama, Florida, Louisiana, and Nevada) the growth was a continuation of a rise that had exceeded the national average during the preceding year.

Of the 30 jurisdictions in 1965 that reported increases ranging from 0.1 to 9.9 percent, 14 showed increases up to 5 percent and 16 (including the program for Federal civilian employees) rose 5.0-9.9 percent. The 14 States accounted for 43 percent of covered employment and the 16 jurisdictions for 37 percent. In the previous year, only 19 percent of the covered workers were in the States with increases of 0.1-4.9 percent and 53 percent were under State or Federal programs reporting rises of 5.0-9.9 percent.

In short, more workers in 1965 than in 1964 were under programs that experienced moderate increases in total benefit payments. Only 19 jurisdictions had benefit increases in 1965 that were greater than those of the preceding year.

Cost Relationships

For the sixth successive year, the cost of workmen's compensation to employers rose in 1965 as a percentage of covered payroll. From a low of 89 cents per $100 of payroll in 1959, costs edged

BULLETIN, JANUARY 1967

up to 93 cents in 1960, 96 cents in 1962, $1.00 in 1964, and finally, $1.01 in 1965. The latter figure is a new high for the years since World War II. In absolute dollars, employers spent almost $200 million more in 1965 than in 1964 to insure or selfinsure their work-injury risks. The estimated $2,925 million spent in 1965 consists of (a) $2,100 million in premiums paid to private insurance companies; (b) $570 million in premiums paid to State insurance funds (for the Federal programs financed through congressional appropriations, these "premiums" are the sum of benefit payments and the costs of the administrative agency); and (c) about $255 million as the cost of self-insurance (benefits paid by self-insurers, with the total increased 5-10 percent to allow for administrative costs).

Total benefit outlays as percent of payroll have shown no change for the past 4 years, continuing to equal 62 cents for every $100 of covered payroll. Before 1962, a lower ratio had prevailed (58 cents in 1958, 55 cents in 1955, and 54 cents in 1950). Because costs showed a greater relative increase in 1965 than benefit outlays, the proportion of the premium dollar that reached the injured worker dropped from 62 percent in 1964 to 61 percent in 1965. This is the lowest ratio recorded since 1957.

For private carriers alone, the ratio of direct losses paid to direct premiums written (the loss ratio) was also one percentage point lower in 1965 than in 1964. The loss ratio of 54 percent in 1965 was the lowest reported since 1957. A loss ratio based on losses incurred (which include amounts set aside to cover liabilities for future claims payments) would be higher. According to data from the National Council on Compensation Insurance, losses incurred by private carriers represented 63 percent of net premiums earned in both 1964 and 1965.

The State funds (with the Federal program excluded) likewise experienced a drop of one percentage point in the ratio of benefits paid to premiums from 73 percent in 1964 to 72 percent in 1965. A ratio as high as 78 percent had been registered in 1962.

The loss ratio for private carriers and, to some extent, for State funds, do not take into account the premium income that is returned to employers in the form of dividends. Data secured from State insurance commissions revealed that dividends (Continued on page 36)