Credible Workers’ Comp System Is More Important Now Than Ever: WCRI Conference

By | March 20, 2017

After decades of managing costs for employers, it’s time for workers’ compensation professionals and public policymakers to turn their attention to the needs of injured workers and think of themselves as players in a broader safety net, workers’ comp experts were told at the Workers’ Compensation Research Institute (WCRI) conference in Boston.

Panelists and audience members at the conference stressed the need for a credible system for injured workers, especially as other social safety nets including job security, employer-funded pensions and health insurance are being weakened. They also challenged the professionals and public policymakers to more clearly define what responsibilities they have to those that fall outside the workers’ comp system. This population includes older workers with chronic illnesses and long-term disabilities; workers including undocumented immigrant laborers who are injured on the job but afraid to file claims; and sharing or gig economy workers now classified as independent contractors not eligible for workers’ compensation.

WCRI participants acknowledged that the industry is still smarting from past years’ Department of Labor, Occupational Safety and Health Administration (OSHA) and ProPublica reports. These reports alleged that the workers’ comp system is not living up to the “grand bargain” promised: that workers would be taken care of in the event of a workplace injury in exchange for giving up their right to sue their employer over the injury.

The reports accused the industry of failing too many injured workers. A 2015 Labor Department-OSHA report concluded that the costs of workplace injuries are borne primarily by injured workers, their families and taxpayers’ support of the social safety net.

Many workers who are either in the system or should be in the system are not doing well at all. That is the reason we're having this discussion.

How Workers’ Comp Got Here

Bruce Wood, long-time general counsel for the American Insurance Association (AIA) who recently retired, said stakeholders spent the past few decades trying to recover from a financial crisis in the 1980s and 1990s when costs were exploding and the system was in danger. “You had rates that were not politically supportable, so you had what became suppressed rates. You had an absolute crisis. You had a flight from voluntary markets to residual markets, and many states had to come to grips with that,” Wood said.

They approved the use of measures of impairment as proxies for disability, mandating the use of fee schedules, and imposing caps on disability benefits.

States also raised the bar on compensability, requiring work to be a major or predominant contributing cause of an injury.

This was “because mostly through case law, what was considered a workers’ compensation claim was constantly being expanded, it was thought to be inequitable and it was more costly. So the policy objective here was to call for a stronger nexus between the injury and the workplace. We can debate how effective that’s been. But, you know, it wasn’t a crazy notion. There was a policy justification for doing that,” Wood said.

Employers gained greater authority to direct medical treatment. This led to panels and networks, and eventually utilization review protocols, treatment protocols, evidence-based medicine, and more.

“All of these issues continue to animate the debate today,” Wood said.

Today’s intense scrutiny of workers’ comp may be related to the uncertainty over the traditional safety net tied to job security, health insurance and retirement benefits, he said.

The workers’ comp system could also see even more scrutiny if changes to the Affordable Care Act leave more people uninsured, WCRI speakers said.

Wood is troubled that some employers and states are championing an “opt-out” movement, which he said is not in keeping with the grand bargain. “They think we can just abandon the system, we’re gonna’ set up our own system.”

Worker Perspective

The problem with the focus of the past few decades has been the absence of the worker perspective, says Dr. David Michaels, a George Washington University professor of occupational health and formerly assistant secretary for labor with OSHA.

“A lot of how you see the world depends on where you’re coming from,” Michaels said. “Many workers who are either in the system or should be in the system are not doing well at all. That is the reason we’re having this discussion.”

There are “aging people who are invisible to everybody who works in workers’ comp,” Michaels said, adding that the number of people who get chronic, work-related illnesses from occupational exposure but never make workers’ comp claims is significant. “Almost none of those people actually ever seek medical compensation for some good reasons and some bad reasons. But they’re not covered at all, and none of those costs go into the system.”

He also identified “vulnerable workers” including non-documented immigrants, temporary workers, workers in trades, and others that have contingent work relations as outsiders to the system. “Even if they know they have the right to get workers’ compensation, they never apply for comp.”

Some gig workers are misclassified employees who should be covered by compensation while others are getting coverage through temporary agencies. But there is a subset who are legitimately classified as independent contractors and do not qualify for coverage.

Studies show that $12 billion in costs in Social Security disability insurance (SSDI) are from workers who worked but are no longer getting workers’ comp benefits and are in disability at least to some extent because of their work-related conditions, according to Michaels.

“We think the workers’ comp system covers all the costs, but it only covers the costs that we see and not this really huge world of costs that are really not compensated,” he said.

Michaels said that in addition to lost wages, injured workers face costs that are not covered such as those related to household maintenance. “A worker who’s injured can’t do all sorts of things, and someone else has to do those things. His or her wife or husband has to do those things.”

“What claims or what costs should be encompassed by a comp system and aren’t because of some impediment in the comp system?” Wood asked.

Who Pays for That?

Dr. Emily Spieler, professor at Northeastern University School of Law and former West Virginia workers’ comp commissioner, says approaching the issue only from the perspective of costs to employers fails to consider the bigger picture — the “social insurance umbrella” of which workers’ comp is supposed to be a part.

“Every economist I know, irrespective of their political proclivities, thinks that workers ultimately pay the costs of the compensation system, and not employers,” she said, noting workers never actually catch up on lost wages and they’re not getting benefits while they are out of work.

According to Spieler, the intent of workers’ comp was for the employer to “take the worker as he found him.” But now states say a worker must show that the workplace is the predominant cause of the disability. An older worker working in a hard job who may have some history of back pain may be excluded from workers’ comp if he or she is off work as a result of an event. “How do we pay for that and who pays for that?” she asks.

It’s not enough to think about the employer; it’s important to also think about where the costs are being distributed, said Dr. David Deitz, a former medical director with Liberty Mutual who consults on medical systems design and strategies.

“We spend a lot of heat and light around some of these causation or proportionate kinds of decisions when the reality is, people need care and we ought to figure out what’s the most efficient way of delivering that causation to them.”

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Insurance Journal West March 20, 2017
March 20, 2017
Insurance Journal West Magazine

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