The Wage Replacement Rate and Benefit Utilization in Workers' Compensation Insurance

Abstract

Both indemnity claims and costs are affected by the rate at which wages are replaced in the workers' compensation program. This article examines the magnitude of these effects in the state of Texas. The research indicates that there are sizeable increases in the relative frequency of indemnity claims and costs as the replacement rate increases. Failure to recognize these increases could lead to serious underestimates of the cost of benefit changes.