In workers’ compensation, a small group of claims cost in excess of $1 billion each year. These “mega claims” represent less than 0.1% of total workers’ comp claims but account for over 2% of total loss dollars. And according to the National Council on Compensation Insurance (NCCI), these high-dollar claims are increasing in frequency across all industries.1
This increase may be due to a variety of factors that contribute to claim severity, from extended recovery times to new medical advances. Let’s look at the genesis of mega claims, what causes them, and how we can use technology to help contain them.
Workers’ compensation organizations generally classify mega claims as those with incurred losses between $2 million and $10 million or more. In a 2024 study of countrywide mega claims from accident years 2001-2021, NCCI defines mega claims as those with incurred losses of at least $2 million (at 2022 cost levels).2
That study, which included data from 43 states and the District of Columbia, found that since 2013, the estimated ultimate frequency of mega claims per 100,000 indemnity claims has been steadily increasing. A total of 11,330 mega claims from accident years 2001-2021 were reported as of Dec. 31, 2022 – which is approximately one out of every 1,295 reported indemnity claims. Of those, 53% were between $2 million and $3 million, 27% were between $3 million and $5 million, 15% were between $5 million and $10 million, and 4% were in excess of $10 million.3
Data from workers’ compensation carrier Safety National also shows an increase in mega claims. Over the last six years, claims with $2 million incurred increased by 91% and claims with $10 million incurred increased by 183%.4
While many factors influence claim costs, mega claims commonly have some or all of these characteristics:
According to the countrywide NCCI study, certain industries, injury types, and causes of injury incurred greater losses. For instance, construction, head and brain, and motor vehicle claims generated a disproportionate share of the most severe claims. A Travelers analysis of workers’ comp claims submitted from 2015 to 2024 confirms that construction claims were the most expensive – almost double the all-industries average.5
The construction industry has also experienced the largest increase in mega claim frequency – roughly twice that of manufacturing, stores and dealers, transportation, and all other industries.6
Additional findings from the NCCI study include:
Source: NCCI Countrywide Mega Claims Report 2011-20218
Beyond injury-specific factors, the NCCI study posited that mega claim costs could be influenced by the following9:
Medical advances: Innovative rehabilitation technologies, such as robotics and virtual reality (VR), are improving recovery outcomes for injured workers. However, these also tend to be expensive. One of the more expensive innovations is exoskeleton technology – wearable mobile machines that allow for limb movement in individuals who have restricted or diminished mobility, including paralysis. As of 2017, ReWalk, one of the foremost exoskeleton brands, averaged $65,000.10
Home healthcare costs: Home healthcare can be particularly important to recovery for injured workers. And along with hospital inpatient services, home healthcare services account for more than half of mega claim medical costs.11 What’s more, the cost of home healthcare is increasing due to inflation and higher demand. According to one estimate, some home healthcare rates have more than doubled in the last 10 years.12
In addition to the costs directly associated with these services, Healthesystems data estimates four of five claims incorporating home health services utilize at least several additional ancillary medical services, as well as prescription drug therapy – compounding costs and complexity of care.
Extended recovery time: Complex cases – whether due to nature of injury or comorbidities – often require extended recovery time, increasing both claim costs and the duration of temporary disability. Data shows that high-cost workers’ comp claims had longer disability durations than non-high-cost claims (64 versus 18 weeks).13 And a separate analysis shows the average recovery time for workers has increased in recent years, jumping from an average of 75 to 80 workdays from 2015 to 2019.14
One culprit for longer recovery times is comorbidities such as hypertension and diabetes, which are common in workers’ comp claims.15 In fact, 58% of high-cost claims include at least one comorbidity.16 Another culprit is prolonged use of opioids. According to one study examining low back injuries, longer-term opioid prescriptions in claims were associated with temporary disabilities more than three times longer than claims without any opioid prescriptions.17
Fee schedules and inflation: Some services associated with catastrophic injury claims are not covered by state medical fee schedules, leading to unexpected cost increases. These may include Durable Medical Equipment (DME), transportation, and prosthetics – all costs that are increasing at rates far greater than average medical inflation.18 Prosthetics costs alone can range from a few thousand dollars to well over $50,000.19
Resource-intensive care and lack of care coordination are also factors for high costs, as concluded by the Workers Compensation Research Institute in their study of high-cost claims.20 However, note that the study did not consider mega claims. For more information on this study, see Common Exceptions: The Rising Incidence of Complex Claims in Workers’ Compensation.
Mega claims can have a tremendous impact on workers’ compensation costs, and slightly more than half of workers’ comp stakeholders see complex/high-dollar claims as a major challenge.21
So how can we mitigate mega claims? One strategy is earlier identification, as mega claims are often not recognized for some time. For example, the NCCI study concluded that at 18 months from policy inception, less than 50% of mega claims reached $2 million or more in total incurred losses, and by 126 months from policy inception, only about 80% of mega claims reached $2 million.22
Sometimes these claims are easily identified due to obvious characteristics such as catastrophic injuries. But others are less obvious because the seriousness of the injury is not known immediately. In fact, according to one study, approximately two-thirds of all claims defined as large losses started out as “fairly routine,” with the most common reason for escalating costs being multiple failed surgeries.23
Predictive modeling can help by quickly identifying those claims with the potential to “creep up” and develop adversely. According to one source, using an early severity predictive model can double the identification of high-risk claims.24
Armed with insights, payers and/or their medical benefit management partners can also apply strategies that include:
Sometimes, such as when a catastrophic injury occurs, mega claims may be unavoidable. However, in other instances there is an opportunity to mitigate costs. By applying the above strategies early – before these claims reach a critical point – we can help contain mega claims and save the workers’ compensation system a whole lot of money.
