The Effects of Provider Choice Policies on Workers' Compensation Costs

To examine the effects of provider choice policies on workers' compensation medical and indemnity costs.

Pooled cross-sectional analysis of administrative claims records for workers with work-related injuries primarily in 2007-2010 across 25 states (n = 4,489,729).

We used linear and quantile regression analyses to evaluate differences in claim costs (medical and indemnity) based on whether policies give employers or injured workers control over the choice of provider.

We find no difference in average medical costs by provider choice policies, although a distributional analysis indicates higher developed medical costs for the costliest back injury cases in states where workers control provider choice. The evidence for indemnity costs is similar, although the point estimates also indicate (statistically insignificantly) higher average costs when policies give workers more control of the choice of provider.

Our nuanced evidence suggests that policymakers seeking to reduce workers' compensation costs may need to focus on the highest cost cases in states where policy gives workers more control over the choice of provider, rather than the simpler and broader issue of whether policy gives workers or employers more control.