Comparing system features and worker outcomes in workers’
compensation is an attractive concept.
Theoretically, the existence of credible, authoritative analytics
measuring comparable data across jurisdictions can lead to improvements over
time. Knowing where your workers’
compensation ranks in terms of costs, benefits and outcomes is essential to any
benchmarking exercise. Comparative
studies provide stakeholders with context in assessing system performance and
policy makers with objective data for decision making.
Unfortunately, comparative studies of workers’ compensation
system features and outcomes are rare. As
with all forms of measurement, comparative analysis is costly and time
consuming. Beyond the challenges of
designing a rigorous methodology, getting jurisdictions to provide data for
comparison can be daunting. Not every jurisdiction is willing to invest the
time and effort to respond to data requests.
Others have restrictions on sharing data. Still others simply do not see the value (or
don’t really want to know the results) of comparative measures and
analytics.
A great example of a well-done interjurisdictional
comparison come from Oregon.
Oregon Workers’ Compensation Premium Rate Ranking Calendar
Year 2022
Link: https://www.oregon.gov/dcbs/reports/Documents/general/prem-rpt/22-2083.pdf
The latest in this biennial series carries on with a rigorous
methodology that produces a ranked list of employer premium costs across all US
states using Oregon’s “mix” of industries.
The time series of results provides policy makers and consumers with
objective data on a key factor of workers’ compensation.
The study’s ranking is valid for Oregon and relevant for any
state asking, “If we had Oregon’s mix of industries, what would our average
premium rate be?” Knowing Oregon ranks
in the lowest third in terms of premium index rate (normalized for Oregon’s mix
of industries) is important and relevant to Oregonian policy makers and
stakeholders.
The study’s headline findings are clear: Oregon’s index compensation rate is just $0.93
per $100 of payroll, well below the national average of $1.27. Oregon ranks 42 of 51—among the lowest cost
jurisdictions in the US.
States with a similar industrial mix might reasonably
interpret their state’s ranking directly from the study. The more relevant question for any other
state can only be answered from applying their own mix of industries in an
equivalent analysis. That is not
directly knowable from the study. I know
that a few jurisdictions have tried to do this (WorkSafeBC did so for a couple
of years). From personal experience, I
can attest to the challenges of getting even a small number of comparator
jurisdictions to contribute their data to similar analysis.
The study has applied a consistent methodology over time. The study is repeated ever two years. This
provides a further dimension to the ranking. Because the Oregon rate ranking
uses consistent measurements over time, its results allow decision makers and
stakeholders to see trends and ask important questions. Knowing how you compare answers one question;
deciding whether your ranking is where you want it to be or the underlying
drivers that result in the rank order observed raise many more questions.
Every study has limitations.
Oregon study provides cost data in terms of an index premium ranking but
does not contain “benefit” data—the compensation and medical expenses covered by
workers’ compensation insurance. The
Oregon study does not provide the benefit context or total costs—that is not the
study’s purpose. Its focus is narrow: premium
rates—not the underlying drivers. The
premium must cover benefits (and other costs including administration,
underwriting expenses, and profits). Few
states offer identical benefits; compensation rates vary; most states have
waiting periods but even these vary in length and conditions (if any) for
retroactively funding waiting periods; even the maximum earnings that are
insured by workers’ compensation vary widely.
Medical costs also vary widely. All
of these can influence benefit costs.
Jurisdictions with higher benefit costs may have higher premiums.
Great data, normalized to your jurisdiction is wonderful
information, but it is just a starting point.
The rigor and completeness of the study provides the basis for assessing
status and discussing future direction. Policy
makers can examine how changes in premium rates (perhaps to fund improvements
in benefits) might impact ranking.
Stakeholders can not only discuss where Oregon ranks but engage in
debate on the appropriateness of that ranking or the likely changes to Oregon’s
rank if certain policy changes were adopted.
The Oregon study tells Oregonians where their premium ranks; only
Oregonians can decide on where they want to rank or even if ranking should be
considered in their decision making.
Why don’t more jurisdictions do this sort of study? Over the years, I’ve heard a variety of
reasons and can infer a few of my own.
The top reasons for NOT doing comparative studies:
- Hard to do well and damaging if done poorly
- Costly in terms of time and resources
- Challenging in getting comparators to participate
- Difficult to standardize measures across jurisdictions
- Possible misinterpretation of results
- Results are almost always lag real time performance
- (Not really wanting to know or fearing the eventual results)
If you really do want to know how your workers’ compensation
system ranks in terms of premium costs (or any other measure), are willing to
invest the time and effort into designing the study; can get your comparators to
participate by providing their own measurements, then the H. James Harrington quote is still relevant:
Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it
[The Improvement Process: How America's Leading Companies
Improve Quality, 1987]
If understanding, control, and improvement are your goals,
then the Oregon approach is a great model to emulate.
