PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

666 ESTIMATING THE WORKERS COMPENSATION TAILTABLE C.4.1Comparison of SAIF’s Historical Rate of Medical CostEscalation with Average Changes in the MedicalComponent of the Consumer Price IndexAverage Rate of Average Rate ofMedical CostChange inEscalationMedicalAccident for Time Component AverageYears Loss Claims of the CPI Difference1966—1973 10.5% 5.7% 4.8%1973—1983 12.2% 10.0% 2.2%1983—1993 7.2% 7.2% 0.0%1993—2003 7.3% 4.0% 3.3%1966—2003 9.2% 6.8% 2.4%age rate of change in the medical component of the CPI. Thelatter measures changes in household expenditures for healthinsurance premiums, as well as for out-of-pocket medical expenses,whereas the workers compensation medical costs includeall medical expenses.SAIF’s rate of medical cost escalation measures the rate ofchange in all occupational medical costs. The medical cost ofworkers compensation claims is more difficult for an insurerto control because there are no patient co-pays or deductibles.Workers compensation insurers find it difficult to deny medicalbenefits when the attending physician deems the servicenecessary.As Table C.4.1 shows, the average difference between therate of change in occupational medical costs and that for consumermedical expenses measured by the medical component ofthe CPI has been 2.4% per year. That differential for SAIF increasedduring the most recent years to 7.4%, as documented inTable C.4.2.