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FOR MORE INFORMATION CONTACT: Tammy Cavender (573)
751-7500
FOR IMMEDIATE RELEASE: August 1, 2007
PricewaterhouseCoopers Study on Second Injury Fund Delivered to the Governor
New Study Examines Needed Revenues & Dramatic Increase in the Fund’s Expenditures
Jefferson City – The Missouri Division of Workers’ Compensation today delivered Governor Matt Blunt an actuarial study of the second injury fund conducted by the internationally recognized and renowned PricewaterhouseCoopers.
The study was requested by Governor Blunt after he received a report in April by the State Auditor which did not include a thorough analysis of the impact of a Missouri Supreme Court decision that could further threaten the solvency of the Fund and did not provide an analysis of the history of expenditures which has grown from $10.5 million in 1993 to $68 million in 2006.
“We are pleased with the final study presented by the highly respected PricewaterhouseCoopers,” said Jeff Buker, director of the Missouri Division of Workers’ Compensation. “They presented us with a thorough and complete actuarial report that addressed all the requirements of the contract, including an assessment of the increase in expenditures. The State Auditor’s report released in late April failed to provide a thorough analysis of the expenditures from the fund. With this study the necessary information is now available to policy makers to help them evaluate what is needed to protect the solvency of the Fund.”
PricewaterhouseCoopers’ actuarial study provided detailed information regarding expenditure history since 1994, while the State Auditor’s report did not address expenditures in depth. PricewaterhouseCoopers’ report also included a comprehensive analysis of the impact of the Missouri Supreme Court’s decision in Schoemehl v. Treasurer of the State of Missouri. While the State Auditor’s report indicated the impact of the Schoemehl decision was not known, PricewaterhouseCoopers was able to give a short and long term impact by evaluating claimant’s age, gender and life expectancy.
In the actuarial study, PricewaterhouseCoopers identified the number of claims filed, the size of the claims and the dynamics between claim reporting and claim resolution as the key drivers to the increases in expenditures since 1994. The study specifically mentions the increase in payments for claims that are resolved. Permanent Total Disability (PTD) and Permanent Partial Disability (PPD) claims account for over 98 percent of claim payments. There are relatively few PTD claims filed, however they tend to be costly. The largest type of payment is PPD claims, which almost without exception are payments made immediately to claimants (also known as lump sum payments). According to the report, the average lump sum payment increased significantly beginning in 2001, which is the time the Attorney General and State Treasurer increased the lump sum payments from $40,000 to $60,000. The study shows that from 1994 to 2006, the second injury fund experienced a 206 percent increase in the amount of lump sum payments.
The study also included information concerning the workers’ compensation administrative fund as a possible source of funding to pay second injury fund benefits, identification of strengths and weaknesses in the current funding structure and recommendations to ensure solvency.
Additionally, PricewaterhouseCoopers’ report projects the second injury fund will become insolvent in 2009, rather than 2008 as indicated in the State Auditor’s report.
The Second Injury Fund compensates injured employees when a current work-related injury combines with a prior disability to create an increased combined disability.
For a complete copy of the actuarial study, visit www.dolir.mo.gov or call (573) 751-7500.
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