Current Workers’ Comp System Outdated, Contributes to Worker Poverty

The century old state workers’ compensation system is outdated, according to the U.S. Department of Labor. The system needs to be reset and reshaped to address the needs of today’s employees, according to David Michaels, the assistant secretary of labor for the Occupational Safety and Health Administration (OSHA). Stakeholders, including workers, employers, insurance carriers, unions and government agencies will all need to take part in the conversation.

The DOL and the National Academy of Social Insurance hosted a forum recently to discuss the release of two reports: the DOL’s “Does the Workers’ Compensation System Fulfill its Obligations to Injured Workers” and the Academy’s report on the latest data on workers comp benefits, coverage and costs.

Every day, 12 workers are killed in the workplace, according to OSHA. While that is down considerably from 1971 when 37 workers were killed per day, more than three million serious injuries a year are recorded by U.S. employers.

“Despite the sizeable financial cost of workers’ compensation, only a small portion of the overall costs of occupational injury and illness is borne by employers and carriers. Costs are instead shifted away from employers, often to workers, their families and communities, said Michaels.

He said there is evidence on the costs being transferred to other benefit programs, including social security disability programs.

According to the report, “As the costs of work injury and illness are shifted, high hazard employers have fewer incentives to eliminate workplace hazards and actually prevent injuries and illnesses from occurring. Under these conditions, injured workers, their families and other benefit programs effectively subsidize high hazard employers.”

Many states have adopted changes that have limited benefits and discouraged injured workers from filing for benefits. The report stated that “These include changes that have resulted in the denial of claims that were previously compensated, a decrease in the adequacy of cash benefits to those awarded compensation, imposition of restrictions regarding the medical care provided to injured workers, and the institution of new procedural and evidentiary rules that create barriers for injured workers who file claims. In addition, the elimination by several state legislatures of Second Injury Funds – that is, state-administered funds that provide compensation for injuries not otherwise covered – creates additional holes in the fabric of insurance and coverage.”

The report even cites invasive workers’ comp fraud investigations where workers are videotaped as a reason workers are discouraged to file claims.

Opt-out legislation passed in Oklahoma most recently was also highlighted as alarming because of the restriction of benefits and greater control given to employers over benefits and claims processing.

Programs meant to address medical costs such as fee schedules and utilization review, according to the report, instead deny or limit medical treatment to injured workers.

The report notes that the growing problem of misclassification of injured workers also contributes to a problematic workers’ comp system.

As a result of the changes to workers’ compensation which negatively impact workers, Michaels said best practices need to be developed in order to increase the likelihood that injured workers can access the wage replacement benefits they need.

An appointment of a new national commission and new national standards should be considered, he said. In addition, continued focus on safety must be a priority.

The DOL report offered research recommendations that could benefit the national conversation on improving the current system. These include research into:

• Workers’ compensation injury and illness benefits and the relationship of these benefits to the health and wellbeing of workers and their families, and to primary prevention.
• Access, adequacy and quality of medical care for injured workers.
• Identification of evidence-based approaches to improve the effectiveness of workers’ compensation systems.
• The impact of experience rating on injury and illness prevention.

Rita Nowak, vice president, policy development and research for the Property Casualty Insurers Association of America, responded to the report.

“While the Department of Labor report highlights some of the challenges state workers compensation systems are facing, in many sections it provides an inaccurate assessment of how the system really works for the vast majority of injured workers,” Nowak said. “Overall, today’s work environment is safer which means fewer workplace accidents. When workers are injured, on average they are receiving higher benefits than in the past, and health outcomes for injured workers have improved. This means workers are able to return to work sooner and resume productive employment. These improvements to the state workers compensation system have all been achieved without federal involvement.”

Nowak defended the state-based system, noting that it had and will continue to evolve as necessary.