Darryl L. DePriest is the seventh presidentially appointed and Senate-confirmed Chief Counsel for the Office of Advocacy.
Prior to joining the Small Business Administration Office of...
United States Small Business Administration
Office of Advocacy
Worker's Compensation by State:
Assessing the Burden of Workers' Compensation
by Business Size
by Joel Popkin and Company
1995, 117p. Joel Popkin and Co., 1101 Vermont Ave. NW, Washington, DC 20005,
under award no. SBA8026OA93.
The objective of this study was twofold: (1) to assess the burden of workers' compensation by business size with an emphasis on how the medical costs may have affected that burden, and (2) to estimate workers' compensation premiums and claims payments by business size and state. A secondary purpose of this study was to summarize state laws and workers' compensation claims.
Workers' compensation costs have been increasing, often putting small businesses at a disadvantage because they pay a larger fraction of their payroll dollars for workers' compensation than do large businesses. Increases in insurance costs for small businesses relative to large businesses also could burden small business severely and reduce their viability and competitiveness visàvis large businesses. One reason small business may pay more is the way premium rates are set: the socalled "manual rates" are tied to the experience of firms in a comparable industry-not to a firm's own experience.
The results of the study indicate that the burden of workers' compensation on small versus large firms varies by the measure of burden used. Several states appear to have an especially heavy burden across all measures, although it is difficult to link workers' compensation burden to the laws and rules in states governing workers' compensation. Future analysis should focus on workers' compensation burden by firm size within industries because rates are determined on an industry basis.
Scope and Methodology
The study measured workers' compensation burden by firm size for the nation and for all states, during the period 1990 to 1992. Although there can be several measures of burden, this study defines and uses three: (1) premiums relative to earnings, (2) claims relative to earnings, and (3) premiums relative to claims.
Currently, no private or federal organization in the United States collects workers' compensation data by firm size or by state. In addition, data for state medical claims paid by workers' compensation are nonexistent. This lack of data complicated the estimation of workers' compensation premiums and claims by business size by state, and required the researchers to use a variety of complex steps and assumptions.
The estimates presented in this study are derived from a variety of data sources, including the National Council on Compensation Insurance's Detailed Claim Information data base; the Current Population Survey, March supplements for 1989 through 1993; A.M. Best data; and state data from the Social Security Administration and the Health Care Financing Review.
While the level of burden in specific states is identified, the study indicates the tentative nature of the state estimates given the possibility of substantial error in the disaggregated data. A major conclusion of the study is that improvement is needed in data gathering on workers' compensation at both the national and state levels.
This report presents, for the first time, an assessment of workers' compensation burden by business size and by state. Results indicate the following:
The complete report is available from:
National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4639 (TDD)
Order Number: PB95256012
Cost: A06; A02 Microf.
*Last Modified 6-11-01