People are talking about workers' compensation, perhaps more today than ever. This is the eighth in an 11-post series (links to the first seven are at the end of this post), that attempts to overview various perspectives heard from system observers and participants. The point is that discussion is good, and if this series generates debate and interaction, all the better.
Workers’ compensation insurance is generally valued by calculating the financial risk associated with a particular employer in a particular employment. Riskier employment is more likely to result in accidents and thus workers’ compensation is generally a more expensive proposition in those employments. Because of this economic reality, workers’ compensation insurance is more expensive for riskier occupations.
Similarly, some employers are more safety-conscious than others. Those who are less safety conscious may experience a greater frequency of workplace accident or illness. In industry parlance, they are deemed to suffer greater “frequency.” As a result, many systems calculate insurance premiums allowing insurance carriers to charge additional premium based upon these “experience” factors.
Workers’ compensation systems generally affect employers and employees. The remainder of the systems is comprised of a vast assortment of vendors and service providers. Most systems require participation of both. A historic exception has been for non-employees, “independent contractors.” As this classification of labor is not included in “employee,” those who labor within it are not covered in most workers’ compensation systems. As such, the cost injury or illness suffered by contractors is not borne by employers. Some perceived this as another form of “cost shifting." Such contractors are not typically insured for workers’ compensation and therefore the cost of their care and treatment will be borne by themselves, health insurance, providers, or federal programming.
Alternatively, costs for these workers may be shifted to insurance companies otherwise engaged in the systems. A business may employee people and appropriately secure workers’ compensation payments through insurance. Concurrently, the business may engage the services of various independent contractors. When a contractor is injured, she or he may seek to retroactively evade the label of “contractor” and instead ask for the system protection afforded for an “employee.” There are instances in which business is deemed to have misclassified these workers, and they are deemed to be employees. This designation renders the employer’s insurance carrier financially responsible for the various impacts of such illness or injury, for which no premium may have been collected.
Misclassification may also occur more subtly. A business may misrepresent the nature of work performed by an employee in order to avoid premiums related to more hazardous employment. By labelling creatively, the employer appears safer and obtains employee coverage at a more modest price. There is an anecdotal example repeated of roofing company that classified all of its employees as "clerical" employees.
Either misclassification may weaken the insurance marketplace. Insurers contractually assume risk based upon employer representations. Premiums are collected and invested in anticipation of reasonably expect-able loss probabilities. If such contracts present more significant risks, hidden from the rate-making process by misrepresentation, then the probability and degree of risk assumed may be significantly greater than the risk for which premium was collected. As a result, losses may outstrip revenue and insurance carriers may be disinclined to writing coverage within a particular system or industry. Those who consistently practice misclassification or other inappropriate premium avoidance may also be accurately included in the population of “bad actors.”
Unrealistic expectation of full recovery and youth
Medical science has made miraculous advances in the last century. The success and progress has fueled expectations for miraculous results in all instances. However, evidence supports that medicine remains challenged regarding remediation of a great many conditions. Further, there is evidence that some medical “advances” have provided little in aid to patients. For example, surgical intervention for spine pain complaints, “fusions,” have demonstrated a documented history of increased frequency and unfortunate lack of efficacy. Patients have complained of minimal benefit, and often detriment, from these expensive procedures. Another tragic example has been the rapid growth in opioid prescriptions. Long-term use of such pain medications has proven spectacularly ineffective and has been accompanied by side-effects and addiction complications.
Science accepts that youth is often advantageous for injury recovery. The body’s ability to recover from injury or illness is considered compromised with time. Older bodies are more prone to injury and more likely to incur significant injury from a given insult. Older bodies may recover less rapidly and less extensively, thus effecting a greater “impairment” or loss of function.
However, most injured workers are not scientists and have limited information regarding injury or workers’ compensation prior to an accident. Injured workers are perceived as expecting favorable outcomes following work injuries. These may include “full recovery,” a return to “100%,” an absence of dysfunction or disability, and an absence of impairment. Such may be encouraged or caused by similar personal experiences when younger or the experiences of others known to the worker (friends and family) with similar complaints, but perhaps significantly different actual diagnoses.
Despite the foundation or source of expectations, workers are perceived as having high expectations of full recovery and return to full function following injury. Some believe that these expectations are partially responsible for the perceptions of vocational rehabilitation ineffectiveness. Age is potentially life-changing, as are accidents, injuries and illness. Unrealistic expectations regarding minimization of injury or illness effects impacts both workers and employers.
Participants in the 1972 Commissions suggested that state systems effect a number of changes in favor of injured workers. Its report suggested that if such “reforms” in favor of labor were not accomplished, that intervention through federal legislation might be the only method for rendering workers’ compensation systems acceptably uniform or consistent. In the decades following that report, the structure and findings of the commission have meet with criticism. Most perceive the state systems’ responses to the commission recommendations as inconsistent and incomplete.
In 2016 ten Democratic United State legislators (Senators Bernie Sanders, D-VT; Patty Murray, D-WA; Sens. Patty Murray, D-WA; Ron Wyden, D-OR; Al Franken, D-MN; Sherrod Brown, D-OH, and Representatives Bobby Scott, D-VA; Chris Van Hollen, D-MD; Sander Levin, D-MI; Frederica Wilson, D-FL; and Xavier Becerra, D-CA) signed a letter asking the U.S. Department of Labor to examine workers’ compensation. Lamenting recent news coverage and perceptions of disparate benefits and procedures, these officials advocated federal intervention in the various jurisdictional systems. Workers’ compensation has been a non-federal group of systems for over 100 years.
However, over the Twentieth Century, the general trend has been toward expansive interpretations of the U.S. Constitution’s Interstate Commerce Clause. The result has been greater federal involvement in subjects once deferred to the states in the American federalism construct. There is general consensus that federal intervention in workers’ compensation would be upheld as a valid exercise of federal authority. The United States Supreme Court decisions in Wickard v. Filburn, 317 U.S. 111 (1942) and National Federation of Independent Businesses v. Sebelius, 132 S. Ct. 2566 (2012) are seen as supportive of such intervention.
Some voice concerns with federalization of workers’ compensation, either through direct appropriation (nationalization) or through legislated standards or parameters for state systems. The concerns included doubt of the efficacy of a “one size fits all” solution, concern of costs associated with a federal bureaucracy, and federal interference with insurance markets. Potential benefits of federalization included consistency in benefit calculation, duration and extent, and elimination of competition between states.
Other posts in this series:
(3) System failures, Incentive is different in WC and group health, Systems are persistently adversarial
(4) Staffing and training of the workers’ compensation professions, Permanent partial compensation, Opt out movement
(5) Injured workers beliefs - not informed or uninformed assumption, Treatment protocols, a benefit or a burden, Perceptions and education
(8) Misclassification, Unrealistic expectation of full recovery and youth, Federalization
(9) A new national commission?, Employee participation in the conversation, Occupational disease
(10) Lawyers in the system, Competition between states, Roles and delineation
(11) Single payer, Outliers, Conclusions