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Iowa Approves 7.9% Rate Increase in a Down Economy

By James J. Moore

Wednesday, November 21, 2012 | 0

The National Council on Compensation Insurance (NCCI) recommended that Iowa increase its workers' compensation rates by 7.9%. Iowa subsequently approved the rate increase, but staggered the hike to increase rates by 3.9% on Jan. 1 and another 4% on July 1. This was rather surprising in such a down economy. Iowa for many years bucked the trend that a medical fee schedule is needed to keep workers' comp costs in check.

The trend-bucking may be coming to an end very soon. I have always said states that do not have a WC fee schedule end up costing employers more than other comparable states. For some reason, Iowa stood alone in not having a medical fee schedule while keeping medical costs in check.

The bell may be tolling for Workers Comp medical costs in Iowa. Up until 6 months ago, Iowa was still defying the medical fee schedule equals lower workers' comp costs scenario.   

The effect of no fee schedule seems to have taken hold in Iowa. According to NCCI:

  • 58% of total benefits in Iowa are now medical. 
  • The percentage of medical benefits is increasing faster than other states.
  • Overall costs are quickly catching the regional and national averages.
  • The change in medical benefits greatly exceeded changes in indemnity benefits.
  • No other reasons such as medical inflation, etc. were found as root causes of the increase.

This is the normal time a state starts looking into a medical fee schedule. Many states that have considered WC fee schedules usually wait until the situation is dire then switch to one. 

Iowa should definitely consider having a medical fee schedule. It is very easy to copy another state and institute that fee schedule with follow-up adjustments. 

The old warning concerning medical providers refusing to treat workers' comp patients is very minor. I have not seen that situation occur very often after a state enacts a workers' comp medical fee schedule.

James J. Moore is owner of J&L Risk Management Consultants in Raleigh, N.C. This column was reprinted with his permission from his Cut Comp Costs blog.

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