More and more, the nation’s health care crisis is bleeding into the workers’ compensation insurance arena where medical costs in a number of jurisdictions are rising dramatically.

Until now, many states had insulated themselves from escalating costs by creating and enforcing medical fee schedules, most often tied to Medicaid rates. While this strategy has mostly kept the lid on the pressure cooker of medical reimbursement, steam is beginning to escape as the medical community brings its considerable weight to bear on insurers. Around the country employers are feeling the heat intensify.

This week, Kelly Services, Inc., a large, international, publicly traded (KELYA) temporary staffing agency, saw its quarterly profit fall sharply due to an increase of $6.4 million in workers’ compensation medical costs.

The company, which places people in professional and industrial jobs, said that the third quarter workers’ compensation charge is the principle reason that its earnings have dropped from 18 cents a share a year ago to 4 cents a share this year.

In some states, medical costs now exceed the costs of indemnity, or wage replacement, costs. Nearly ten years ago, LynchRyan predicted that such a thing could happen (The LynchRyan Report, Spring, 1994, Managed Care – Who Manages, Who Cares?), but even we never thought things would get so bad so fast!