Benefits are Too Low

Benefits to injured workers too often fail to meet a reasonable person's test for access, adequacy and simple decency.

By Peter Rousmaniere

The failure comes in gaps, caps, exclusions and mazes. With labor's reduced clout in state legislatures, how can even the most obvious benefit problems be fixed? It is no surprise that statutory systems are held in low esteem by workers, possibly lower than voters rate the U.S. Congress.

With one important exception I note below, work injury benefit design has remained for 100 years the thwarted ward of state legislators. Had work injury benefits been conceived later, say at the time when modern health and private disability benefits arose, work injury benefits would be much less captive to legislators. The dispute-resolution process would be short. Serious disputes would effect closer to 2 percent of lost-time claims than 25 percent, as is the case today.

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The Georgia legislature is considering a bill to cap medical benefits. The Missouri legislature, told that its exclusion of occupational disease from workers' compensation exposes employers to tort suits, would bring these conditions back into the statutory system. The statuatory system nationwide is designed, in fact if not in explicit intent, to impede claims. Thus, Missouri may cripple the chances of sick workers to get benefits.

Waiting periods for indemnity benefits impose hardships on workers, as do caps on indemnity benefits at the state's annual weekly wage. Access to benefits is so complicated, not to say infuriating and belittling, that probably as many as 40 percent of all injured workers do not file a claim.

Benefit failures and a path to correcting them, move into sharp relief when one compares statutory systems with an opt-out system.

I devoted much of 2012 to documenting the workers' comp opt-out concept, including the nonsubscriber system in place in Texas. An in-depth report can be freely obtained at www.newstreetgroup.net.

Shaking off statutory constraints, many Texas nonsubscribers require workers to report an acute injury and submit a separate safety assessment within 24 hours. These workers must adhere to company doctor's instructions, and cannot challenge the doctor's return-to-work release unless they can convince a company-picked appeals committee that the release was arbitrary and capricious.

These employers normally pay indemnity from the first day at 80 percent or 90 percent of wages. They might even pay 100 percent of wages. They might transfer a worker to nonoccupational disability and to health insurance when they decide the injury is not strictly caused by work. To many, this degree of employer discretion is very disturbing.

These employers liberalize benefits because, deep down, they see that moral hazards, which they fear more than they do high workers' comp costs, no longer really influence the employee's and the doctor's conduct.

Benefit failure has worsened over time, according to workers' compensation researcher John Burton. This trend is hard to halt, much less reverse. The business community is convinced that the statutory system is so open to moral hazards that liberalizing benefits will open the floodgates to more claims. Do they need an opt-out option to loosen their purse strings?

Actuaries want hard benefit limits to make premium setting more of a plan than a guess. But that does not justify deprival.

Strange as it may seem, labor advocates may find opt-out systems relatively more attractive.

PETER ROUSMANIERE is an expert on the workers' compensation industry. He can be reached at riskletters@lrp.com.

February 19, 2013

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