Insurers Face Challenges as Injured Veterans Return from War

February 15, 2006

Employers and their insurers need to be prepared for the tens of thousands of physically injured veterans returning from conflicts in Iraq and Afghanistan, according to the Insurance Information Institute (I.I.I.).

“Workplace injuries that are primarily the result of injuries originally sustained during military service will generally be covered by the employer’s workers compensation program or, in some states, a second injury fund,” said Robert Hartwig, chief economist of the I.I.I. “In addition, employers will need to adhere to the law pursuant to the Americans with Disabilities Act (ADA).”

By the time “major operations” are complete in Afghanistan and Iraq, more than two million United States military personnel, including National Guard and Reservists, will have been deployed in those theaters, many more than once. Of these, most have reportedly endured significant physical, emotional and psychological hardships. More than 2,200 have died and well over 16,000 have been injured in Iraq alone.

Hartwig observed that, relevant from an insurance perspective, and a workers compensation perspective in particular, are the challenges that tens of thousands of injured service men and women and their employers will face when they rejoin the civilian workforce. Reintegration of the physically and psychologically impaired will likely present unexpected challenges to a generation of employers with no experience in dealing with such large numbers of returning veterans.

Large numbers of military personnel are physically wounded each month in Iraq. From the beginning of Operation Iraqi Freedom in March 2003 through Jan. 31, 2006, a total of 16,598 military personnel had been physically wounded in action, an average of 474 per month.

The issue of reintegrating veterans back into the social and economic fabric of America is not new. After World War II, despite programs like the “GI Bill” and government assistance with employment, home mortgages and health care, hundreds of thousands of physically injured veterans faced special challenges and even discrimination in the workplace.

In response, many states established “second injury funds” (SIFs). SIFs allowed employers (and their insurers) to cede costs of injuries that were principally the result of a worker’s prior injury to a statewide plan that would redistribute those losses across all employers (insurers) in the state, according to Hartwig. Effectively, SIFs functioned as reinsurers of second injury claims.

However, Hartwig noted, the number of second injury funds has declined in recent years, with states reasoning that they are no longer needed since the enactment of the Americans with Disability Act in 1990, which not only prohibits discrimination against disabled employees but also requires employers to make reasonable accommodations for them in the workplace.

In preparing for returning veterans, employers and their insurers need to be aware of the following:

* Workplace injuries that are primarily the result of injuries originally sustained during military service will generally be covered by the employer’s workers’ compensation program or, in some states, a second injury fund. In certain states, workers’ comp benefits may be apportioned or partially offset by other disability payments received.

* Veterans are also entitled to lifetime medical benefits from the Veterans Administration for service-related injuries. The VA also operates a Readjustment and Counseling Service (www.va.gov/rcs) to ease the transition of veterans returning to civilian life.

* Employers must also be alert to signs of possible mental health issues. Monitoring is probably wise for a period of time, especially if the returning worker’s job is stressful, involves the operation of heavy machinery or equipment and/or driving. Few employers or insurance claims staffs, however, are trained to recognize the telltale signs of mental illness.

* Employers will need to adhere to the law pursuant to the Americans with Disabilities Act (ADA). The ADA prohibits discrimination and ensures equal opportunity for persons with disabilities in employment, state and local government services, public accommodations, commercial facilities and transportation. In other words, discrimination based on physical handicap is not permitted in the hiring or promotion process, and reasonable accommodations must be made to meet the needs of disabled workers.

* Failure to comply with the terms of the ADA could result in legal action and fines by the Equal Employment Opportunity Commission. Since 1992, the EEOC has awarded $529 million to people found to have been discriminated against in violation of the ADA. Employers could also be subject to tort actions under their Employment Practices Liability coverage or Directors’ and Officers’ policies.

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