Additional factors behind rising claims costs

A number of economic, demographic, behavioral, and legislative trends are combining to drive up workers’ compensation claims frequency and severity for employers.

Chief among these are:

Rising medical inflation

Medical inflation has been rising steadily across the U.S., and its influence on workers’ compensation claim severity is clear and unavoidable. As treatment costs climb — spanning diagnostics, specialist visits, surgery, and pharmaceuticals — so too do the total incurred values of claims.

Attorney involvement

Injured employees are increasingly hiring attorneys to advise them on the workers’ compensation claims process and to pursue potential litigation. Jurisdictions such as California, Illinois, and New York are experiencing particularly high litigation rates. When an injured worker hires an attorney, claim severity often increases for several reasons, including:

Longer claim durations due to formalized communication, slower decision cycles, and procedural complications.
Higher indemnity exposure, as attorney-managed claims are more likely to remain open, extending disability periods for claimants.
Reduced direct communication with injured workers, which can impede return‑to‑work planning and resolution efforts.

A central trigger for attorney involvement is injured worker uncertainty. When employees do not understand how their claim works, how they will be paid, or what to expect in recovery, they often turn to legal counsel for clarity.

The aging workforce

Demographic shifts are reshaping the American workforce, with more employees working well into their 60s and 70s. After bottoming out at 10.8% in 1985, the labor force participation rate for Americans age 65 and up has increased in the decades since, peaking at 20.2% in 2019 and holding at 19.5% in 2024, according to the BLS. (See Figure 3.)

This trend has a measurable impact on workers’ compensation outcomes, as older claimants:

Typically require more time to recover from injuries and may require longer transitional periods before returning to full capacity.

Are more prone to impacts from comorbidities, increasing the complexity of medical treatment and rehabilitation.

Are more likely to require claim escalation, as some workers approaching retirement may be less motivated to return to work, viewing workers’ compensation benefits as a financial bridge.