July 25, 2005--Since 2003, employers' costs for workers' compensation have increased at a faster rate than those for employee benefits and medical care, according to a report released Thursday by the National Academy of Social Insurance.

"Insurance is a cyclical business," said Eric Nordman, director of research at the National Association of Insurance Commissioners, who predicted workers' compensation costs would peak in 2005 before starting to turn downward. "This pricing instability is a big problem for small and medium-sized businesses," said David Stephenson, legislative analyst for the National Federation of Independent Businesses.

While several experts expressed concern that business owners might feel the need to lay off employees if prices rose too high, Nordman said he did not believe costs are rising fast enough to cause such a scenario. He also said the workplace was becoming safer as the U.S. economy shifted from manufacturing to services sectors and organizations like Occupational Safety and Health Administration introduced more stringent safety standards. With safer workplaces, business would have less of a need to spend money on workers' compensation in general.

Eric J. Oxfeld, president of UWC-Strategic Services on Unemployment and Workers' Compensation, added that rising workers' compensation costs may encourage businesses to provide even safer work environments. "Businesses can aggressively maintain a safe workplace," he said. "Being a good employer is good business."