"The majority of Australians intend to retire between 65-69 years, but the results show that now over a quarter of males 45 years and over plan to work past 70 years.” [Australian Bureau of Statistics, Australians intend to work longer than ever before, Media Release 40/216, 29 March 2016]
Monday, October 24, 2016
If you knew your workforce was going to experience changing risks, increased exposure, longer recoveries from injury and greater effects associated with co-morbidities, you would act! The fact is, our workforce is changing and few organizations are even aware of the change let alone the consequences.
[This post contains slides and content arising from my presentation to the Occupational and Environmental Medicine Association of Canada (OEMAC) Scientific Conference September 2016].
The aging population is not just a North American problem. The median age of the population in most industrialized countries is projected to rise dramatically. I adapted the following Pew Institute graphic to include Canada and Australia but its message is clear: over the next few decades, the median population age of many of the most important economies in the world is going to rise.
For Canada, the US and Australia, this shift to an older population will not be limited to the median age. Populations of older people are growing while birth rates are low or falling and immigration levels stagnant. Because demographics drives the demand for goods and services and provides the supply of workers, changing demographic patterns are altering the character and needs of the population, the labour force, the economy and more.
Demographic change drives both the supply of potential workers and demand for goods and services. The Canadian population, for example, is growing at about 1% per year overall. The working age population (18-64) is growing at about the same rate but the oldest and youngest segments of the population have very different profiles. In the last decade, the population over the age of 65 has risen by more than a third and is nearly 50% larger than it was in 2001. On the other hand, the population ages 0 to 17 years of age has actually declined over the same time frame.
Canada’s population projections all point to a continuing trend toward an older population. The Canadian population will rise by a little more than 5 million in the next thirty years but the increase in the population over age 65 will account for nearly 90% of that growth.
Already we are seeing skill shortages in several sectors and regions related to this demographic change. I mentioned the population over the age of 65 has risen by about 50% since 2001 but the numbers continuing to work full time have risen by 350% over the same time. Part-time work for those over age 65 has also risen by about the same percentage. Full and part-time work for those over 70 has also risen by more than 250%.
This trend is also evident in Australia:
The trend toward more workers being engaged in full time work beyond age 65 is particularly evident in the US data. I recently extended published US data to capture more recent developments that show full time employment dominates among those working beyond age 65.
We are not only seeing an increasing number of older workers in the economy, but the distribution of even the category of older workers in some industries is trending toward the upper age limits of recorded data. For example, I used Canadian Institute for Health Information CIHI data on registered nurses and nurse practitioners (RNs and NPs) as an example and found that the distribution of those aged 70 and older has double in the last decade.
By about 2030 under most projections, the category of persons aged 80 and older will outnumber any other 5 year age group in our population. This has implications for the demand on care services, healthcare, housing, transportation and many other aspects. One example of this trend is the dramatic rise in Licensed Practical Nurses (LPNs), a profession highly associated with care for the elderly and disabled. In the last decade, the number of LPNs has risen with the older population while the supply of RNs and NPs has tracked closer to the growth rate of the population aged 18 to 64.
Of course, people who decide to go into nursing or healthcare of any sort are needed but that also means they are unavailable to become electricians, truck drivers, educators, researchers, programmers and construction workers—occupations that are also necessary to the growth and maintenance of our economy. The problem of limited supply of youth and a falling birth rate means these roles are going to have to be filled by others. We are already seeing a dramatic rise in the working population over age 65 but this, too, has its implications.
Working longer means greater exposure to hazards, greater risk of injury and complications due to comorbidities and conditions related to normal ageing. How prepared are employers and safety professionals to address these changes? Are workers adequately aware of the risks? Are safety professionals and employers aware of changing risk profiles of older workers? Are there appropriate ergonomic tables to provide guidance on strength and repletion limits for older workers? Do workers’ compensation laws adequately address work careers that may extend into their seventies, eighties and beyond? Are health and safety systems capable of addressing risks associated with older age groups not previously prevalent in your workplace?
There is a lot of evidence that work is good for your health and wellbeing. That applies to older individuals where work can provide income security, mental stimulation, exercise, socialization, and opportunities to “give back” or do something meaningful and productive with one’s time. Moreover, many workers approaching retirement age today have skills, knowledge and experience that are just not available in the labour market. These factors and the demographic changes noted above mean we are seeing more older workers in the workplace—a trend that will continue for more than another decade.
It is not too late to act. Understanding the changes is the first step… and perhaps a self-serving one: chances are, if you are working today, you will be working to an older age than your parents or grandparents.
Thursday, September 29, 2016
The following recent headlines demonstrate how important that weekly paycheque is to workers and their families:
- 50 percent of minimum wage workers say they have to work more than one job to make ends meet
- Three quarters of all employees feel they live paycheck-to-paycheck to make ends meet at least sometimes; nearly a quarter feel they always do
- Almost half (48%) report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week
- 46% [of working Australians] admit that they live ‘pay-cheque to pay-cheque’.
The financial impact of even a brief interruption in earnings due to a work-related injury or disease can be devastating. Despite the legislative intent of workers’ compensation laws, the simple reality is that many—perhaps the majority—of those who miss time from work due to a work-related temporary total disability never receive workers’ compensation for their lost wages.
Employers, family members, and even policy makers may assume workers’ compensation coverage is there for every case of work-related time-loss injury. The assumption may blind them to the serious gaps exist for many workers in the employed labour force. For some, understanding the gaps may provide the impetus to fill them. At a minimum, knowing that gaps in coverage exist will allow those with the resources to prepare for interruptions in earning due to workplace injury or occupational disease. Unfortunately, for many workers and their families, there are no resources to cover the gaps; using private savings or buying individual disability insurance coverage are not realistic options.
Work-related injuries can occur to anyone engaged in employment in the labour force. Clearly, those institutionalized or in the military are not available for employment in the broader labour force; those who are incapable of work, retired or otherwise withdrawn from the labour force are not available for work. Those who are unemployed but looking for work are available for work but any injuries that occur to them don’t arise from work so are excluded from this discussion. That leaves the subset of individuals engaged in work for themselves or someone else; it is from this population that work-related injuries occur; only a subset of those are covered by workers’ compensation.
As may be noted in the figure below, work-related injuries that result in time away from work can arise from employment within the scope of workers’ compensation or outside it (self-employed, exclude small enterprises, and excluded occupations or sectors). Inclusion within the scope of workers’ compensation coverage, however, does not automatically lead to compensation.
- Injuries to workers outside of workers’ compensation coverage are excluded
First, let’s look at the intentional exclusions from workers’ compensation coverage. The actual coverage of the employed labour force ranges widely by jurisdiction. Many states and provinces define the industries and sectors that must carry workers’ compensation coverage; a few mandate blanket inclusion then identify specific exclusions. Common exclusions include agricultural workers, domestics, professional sports players and self-employed. In some jurisdictions, firms with fewer than four or five employers may also be excluded from mandatory workers’ compensation coverage.
NASI estimates workers’ compensation coverage in the “total workforce” is estimated by to be approximately 90% in the US [2013 data]; AWCBC puts the Canadian “employed labour force” coverage rate at about 84% [2013 weighted average] but the calculation method is somewhat different. Australia reports that 92% of its employed labour force is covered by workers’ compensation (often called “WorkCover”).
Both the US and Canada have wide variations in the coverage rate among the states and provinces. Texas, where employer “non-subscription” to workers’ compensation is an option, approximately 67 percent of private, year-round employers have workers' compensation; these employers account for about 80 percent of the private workforce in Texas. [Texas, Department of Insurance, Division of Workers Compensation, Biennial Report of the Texas Department of Insurance to the 84th Legislature , December 2014]. That is likely at or near the low end of coverage rates in the US but no standardized calculation is available to allow state-by-state comparisons.
In Canada, there is a standardized calculation methodology that allows province-to-province comparisons (including self-insured and federal employees in the covered percentage). The recent calculated “percentage coverage” rates for each province/territory and the Canadian average are shown in the following figure:
While the average is approaching 85% and has been rising since 2000, there is a clear divide above and below the national average.
As far as I can tell, there is no similar analysis on a state-by-state basis in the US. It is reasonable to assume, however, that there are states where more than 95% of the employed labour force is covered and others where the percentage may be as low as 75%.
“Self-insured” employers are typically included in the calculations as long as they are required to provide legislatively mandated workers’ compensation coverage. Firms outside the scope of coverage or not required to comply with workers’ compensation law are typically excluded from calculations. As a matter of practice, such firms may well purchase and offer disability insurance, although a few will carry the risk and manage their own liabilities.
As an aside, there are two main types of self-insured employers:
- those that are self-insured and self-administer their own claims (or contract a third party administrator to do so on their behalf), and
- those who are self-insured without self-administration.
In most Canadian provinces, self-insurance does not include self-administration. Self-insured employers are financially responsible for their own claims but the administration of the claim including initial adjudication is administered by the provincial exclusive workers’ compensation system.
Australian workers’ compensation coverage alone would be around 80% of the employed labour force; adding the “self-insured” employers, the figure rises to about 90% [based on 2013 data]. It should be noted that self-insured in Australia means self-insured with self-administration (including third party administration) in conformity with benefit levels mandated by the workers’ compensation legislation. Self-insured firms in Australia manage their own financial liabilities arising from their own claims.
The implication here is that intentional exclusions in Canada, the US and Australia result in 10% to 15% (on average) of employed members of the labor force outside of the scope of workers’ compensation coverage. If the rate of injury to this excluded group is similar to the rate experienced by those within the scope of coverage, then 10% of 15% of time-loss or wage-loss resulting from workplace injuries are excluded from the possibility of compensation.
As may be noted from the Canadian data, variation in percentage covered in some jurisdictions over time. This is rarely due to sudden changes in the scope of coverage. More often than not, the variation relates to changes in the distribution of the employed labour force among sectors of the economy (including sectors excluded from mandatory inclusion in the workers’ compensation system).
The “scope of coverage” decision is a public policy choice but it has important consequence for those outside the coverage umbrella. Clarity around who is excluded and why is important and necessary in order for workers to assess their own financial risk. Those who can afford it may choose to purchase private disability plans.
Intentional exclusions explain why one segment of work-related time-loss injuries that are not compensated. Being within the scope of workers’ compensation coverage, however, does not automatically result in payment of compensation for days lost due to a work-related injury and disability.
- Injuries Accepted and Compensated
This is the firmest statistic you can find at a state or provincial level. It is typically reported on the basis of a claim where “indemnity” or “wage-loss” compensation was paid for “temporary disability”. Some jurisdictions make a distinction between temporary total and temporary partial disability payments.
For the purposes of this analysis, any workers’ compensation claim that has even a partial day of wage-loss compensation paid would be considered in the count. Medical-aid claims (or “healthcare only” claims) are not considered as “accepted and compensated” for the purposes of this analysis.
Time-loss claims that are “accepted but not paid” are discussed later but introduced here to contrast with the compensated case. A worker who experiences a Monday injury (in a typical Monday to Friday work week) and is away from work the next three days (Tuesday, Wednesday and Thursday), then returns to work Friday may receive no wage-loss compensation if the jurisdiction has a three-day waiting period; doctor bills and medication may be paid but no compensation for time away from work would be payable because of the three day waiting period. Such a claim would be counted as accepted but not paid.
In some provinces, employers may pay the first week or two of wage loss in order to maintain income continuity for injured workers. The employer is re-imbursed by the workers’ compensation insurer thus maintaining the tax-free status of the compensation. In Australia, employers may be required to pay wage loss compensation for the first 5 or 10 working days before workers’ compensation payments for wage loss begin. This sort of “employer deductible” would be counted as an accepted claim with compensation paid.
The statistic for “work-related time-loss injuries with temporary disability compensation” may be reported as or along with an “injury rate”. This may be misleading depending on the denominator used. As indicated in the figure and explanation above, this fraction of work-related injuries relates only to covered employment and only to claims that received payment. Unless coverage is near 100% and wage-loss compensation is paid for all time away from work (that is, no waiting period), this is more aptly entitled “paid claim for covered injuries rate”.
These first two categories – workers’ compensation “excluded” and “accepted and compensated” might be assumed to tell the whole story but research evidence suggests otherwise. Some studies of fatalities and cases involving hospitalization show medium to high correlation between hospitalization records and workers’ compensation [for example, see Koehoorn M, Tamburic L, Xu F, Alamgir H, Demers PA, McLeod CB, “Characteristics of work-related fatal and hospitalised injuries not captured in workers’ compensation data”, Occup Environ Med doi:10.1136/oemed-2014-102543]; however, most research studies reveal large discrepancies between cases reflected in workers’ compensation data and other sources such as hospital records [see Boden LI, Ozonoff AL . Capture-recapture estimates of nonfatal workplace injuries and illnesses. Ann Epidemiol 2008;18:500–6. doi:10.1016/j.annepidem.2007.11.003].
Next we examine four main categories of work injuries that are not compensated.
- Time-loss Work-injuries Accepted but Not Paid
Workers with otherwise acceptable work-related time-loss injuries may be “disentitled” from receiving compensation.
- Waiting period non-payment
As noted above, waiting periods can result in non-compensation for wages lost due to absences caused by work-related injuries for cases within the scope of employment. Waiting periods are “worker deductibles” and have been eliminated from all but two Canadian jurisdictions and all Australian jurisdictions. In the US, waiting periods range from three to seven days. Most states have a “retroactive period” that waives the waiting period for work absences that extend beyond a given duration (two to four weeks, typically). Time-loss claims with no wage-loss compensation are considered “accepted but not paid” for this discussion.
- Concurrent employment or other earnings disentitlement
Otherwise acceptable claims may also fail to qualify for compensation. In the case of concurrent employment, for example, an injured worker may be disabled from one job but able to work in a second, concurrent job. Wages from a second or other multiple employment(s) may negate any earnings loss from the injury employment. Such a claim would be counted as accepted but not paid.
- Process issues resulting in non-payment
Still other claims are accepted but no payment is made to the worker because of lack of contact with the worker. The transient or tenuous nature of the injury employment may be one reason for this phenomenon. For example, a migrant farm worker may suffer an injury, get immediate treatment then return to his or her home country to convalesce. Assuming farm work and migrant agricultural workers are covered and the injury properly reported, the immediate medical bills may be paid (often directly to the physician, hospital or other provider) but any payment to the worker may be impossible due to lack of contact information. Such a claim would be counted as accepted but not paid.
As noted at the beginning of this article, many workers have little or no financial reserves. The lack of financial resilience means all aspects of their lives are put in jeopardy as the result of even a short work absence due to work-related injury. Workers move to lower-priced accommodation, live with relatives in an unknown address in or out of state (in the case of temporary foreign workers this may be out of country) to have assistance and support in recovery, leave the city to reduce costs, etc. Such cases may still have “technical entitlement” to wage-loss compensation but the insurer may “suspend payment” the claim processing due to lack of contact with the injured worker. Medical bills and hospital bills might be paid if they were directly submitted to the insurer.
- “Denied” (or “not decided”) claims
Employers may properly report injuries and workers may fill out all the appropriate claim forms for injuries they and even their physicians believe arose in the course of and out of the duties associated with their work but the claim may be “denied”. This term may or may not have a specific meaning for a particular jurisdiction. If an injured employee applies for benefits but his employer is not properly insured, the claim could be denied or “rejected”. Many jurisdictions have laws that will allow coverage of injuries where the employer should have been registered or insured but this is not universally true.
A more common category of denied claims involves those where the insurer accepts that the employer is covered and that the employee is a worker but does not accept that the particular injury occurred as a result of work or that the consequences of the injury are sufficient to warrant time away from work. Back pain may have a sudden onset at or after work but linking work to the injury may be complicated and contestable. Stress, repetitive strain, and cumulative damage from repeated incidents are frequently contested by the insurer. In these cases, the worker and even the employer may well believe in the “work-relatedness” of the injury but the insurer may rule the injury did not arise from work.
Statistics on denied claims (which may be reported as “rejected”, “disqualified”, or “disallowed”) are rarely reported. When they are, it is difficult to assess what portion of the claims could be considered work related. Few claims that are initially denied are subsequently appealed or reviewed for the accuracy of the denial decision. To workers and many others, these claims are often the genesis of mistrust of the system. That said, workers’ compensation has a limited mandate and the work-relatedness or causation decision is critical to the integrity of the system.
Workers may “over-report” injuries (including those adequately treated with on-site first aid; disinfect and bandage an abrasion, for example) to record an exposure, build evidence of poor or unsafe working conditions, or because of misinformation on the nature of workers’ compensation. These cases are often turned down for any compensation.
Some quite serious injuries that occur at work may be denied because of “horseplay” or other actions that essentially take the worker out of the course of employment.
An injury may well arise from work activities and be documented by both the worker and the employer as being work related; the insurer may also agree and accept the claim to pay doctor bills and medication but rule that wage-loss compensation is unwarranted. Despite a valid work-injury claims, no compensation is payable because the worker is deemed able to work (not totally disabled).
Despite the potential negative connotation of the terms “rejected, disallowed, disentitled, and denied”, these decisions are essential components of adjudication in workers’ compensation. Legislation and policy define the limits of the coverage; acceptance of cases beyond that scope undermines the will of the legislature and the financial integrity of the system. The consequences of not properly adjudicating claims include losses due to fraud and abuse that would increase costs for employers and threaten benefits for legitimate claims.
An injury that is attributable to work may carry secondary benefits that motivate the filing of a claim that will or should be ultimately and properly denied. In the US, the lack of universal health care may be a motivator to opt for an attribution to work of an injury of uncertain origin. In the absence of a clear etiology, the attribution of a back injury to work activity, for example, may afford access to medical care and even improved social status or family support.
Few jurisdictions release any information on denial rates of initial claims. Even where data are available, it is hard to tell how many denied claims might eventually have involved wage-loss compensation.
There is also little data on claims that have incomplete information required to make a decision. Similar to claims that are decided but payment suspended due to lack of contact with the injured worker, those with work-related time-loss injuries who move, return to their home country, or otherwise lose touch with the insurer may lose possible entitlement because of the lack of continuing contact or supply of additional information needed to complete the claim process. In some states, there are legislated timelines for deciding claims. Claims that are otherwise acceptable may be denied in order to meet time limits imposed by the regulator. Provisions for reconsideration or “unsuspending” claims may exist but data are hard to come by.
- Worker under-reporting (including non-reporting)
Assuming an employee works within covered employment and suffers a time-loss injury, there are several reasons why the injury might never be reported to the workers’ compensation insurer even if the employer is otherwise supportive of workers’ compensation reporting and claiming.
- Third-party action (considered, initiated or in process)
Injured employees are not permitted to sue their employers or other workers for work-related injuries that arise in the course of their employment. This “statute bar” is an essential component of the workers’ compensation “exclusive remedy” that is at the core of the grand bargain or historic compromise that is workers’ compensation. Where a third party is involved, and that third party is not an employer or worker under the workers’ compensation legislation, the worker may have an option of pursuing an action. The choice to pursue such action may prevent a workers’ compensation claim. In some cases, a worker may claim workers’ compensation benefits and subrogate the right of action against the third party to the workers’ compensation insurer. This, however, removes the decision-making from the injured worker.
- Gradual-onset and Out-of-time
Work injuries and occupational disease may not become apparent immediately. Most jurisdictions have time limits within which a work injury or occupational disease must be reported or workers’ compensation claimed. With few exceptions, former workers—those no longer in the workforce or those who are unemployed at the time of a claim—are unlikely to have a successful workers’ compensation claim. Exceptions may be made for cases where the diagnosis was delayed or other barrier prohibited the timely report and claim.
The connection between work and the development of disease or an injury may not be immediately obvious. Unlike injuries that have a single, sudden traumatic origin, some mental injuries such as Post Traumatic Stress Disorder (PTSD) may develop over time with disability occurring as a result of one or several events that happened over time. First responders, for example, may be exposed to horrific scenes of death and violence. The psychological toll may result in non-disabling or disabling conditions (including sleeplessness, depression, anxiety, anger) but may also result in more serious issues not immediately proximal to a specific definable event.
Bullying in the work environment (from customers, bosses, or co-workers) is a recognized workplace health and safety issue. By definition, bullying or harassment (including sexual harassment) is a pattern of behaviour, not a single event. Some jurisdictions have specific occupational health and safety regulations or standards that require employers to act to prevent bullying or harassment; workers’ compensation systems may cover injury as a result of bullying or harassment but the lack of consistency may contribute to under-reporting. Workers who suffer illness or injury as a result of bullying in the workplace may be unaware of compensability. Worse yet, workers may fear further bullying or harassment if a claim is made or the pattern of incidents is reported.
Why wouldn’t a worker claim workers’ compensation for a work-related time-loss injury? Leaving aside employer inducements and active claim suppression (which we will get to shortly), there are several reasons including:
- Lack of knowledge of rights
- Misconceptions about benefits
- Substitution of other income supplement
- Barriers of language, culture
- Fear of collateral consequences (undocumented worker fearing detection and deportation)
- The “hassle” factor (forms completion, retelling injury story, meetings)
- Social or work-group pressure
This last item can be quite significant. In my career as a vocational rehabilitation consultant I never saw a roofer or faller with a minor injury. Unless they were taken from the worksite on a stretcher, workers in these occupations seemed to view a workers’ compensation claim as a sign of weakness. Even among nurses and caregivers, there was a sense that some injuries are “just part of the job”. The social stigma in these occupations may be changing but is still present but no one should have to accept work injury as a consequence of work.
As noted earlier, many workers have little or no financial reserves. For these individuals, the financial impact of a waiting period that may be as long as a week coupled with the delay between date of injury and first payment can be an overwhelming concern. For workers that have access to paid sick leave, the decision to opt to use paid sick leave that ensures no loss of earnings and no delay in payment over workers’ compensation is an obvious choice. Unfortunately, this externalizes costs to others. Sick leave is a taxable benefit often factored into the wage cost in collective agreements. Using sick leave for work injuries removes the focused financial incentive workers’ compensation provides in promoting workplace health and safety.
The hassle factor refers to the effort cost of filing a claim relative to the expected benefit. If I think I will get little or no benefit from making a claim, why should I bother? A few jurisdictions have “dial a claim” services or establish a claim on the basis of any report of injury from a physician, employer or worker. Some jurisdictions require claims to be submitted in specific manual forms through specific channels with the employer. The hassle factor of the latter may make filing for short time-loss not worth it to the individual.
Under-reporting by workers not only deprives the worker of entitlements or externalizes costs to others, it dampens an important safety feedback loop and distorts the risk profile of the workplace. Those distortions may result in underestimation of hazards and risks creating an information vacuum or asymmetry to the potential detriment of workers and others in the workplace.
- Injuries under-reported by employers
Under-reporting by employers have similar consequences to under-reporting by workers but the underlying consequences and motivations are different. The categories here include the following:
- Benign Non-reporting or Misreporting (no active intent)
Benign “non-reporting” is not direct claim suppression but may relate to a misunderstanding of requirements or administrative barriers related to poor training or administrative systems. Training deficits and lack of experience are often at the route of the issue. Employers, particularly smaller ones, may rationally and properly focused on production issues and the challenges related to meeting staffing demands that arise following an injury; reporting may not be seen as a priority particularly if the procedures are not well known or systems lacking.
- Intentional Under-reporting (active intent)
Intentional under-reporting or misreporting (showing an injury as no time-loss when, in fact, the injury does involve time away from work or otherwise meets reporting criteria) may be as large as 9% of the reported time-loss workers’ compensation volume. [Prism Economics and Analysis, “Workplace Injury Claim Suppression: Final Report” prepared for WSIB, Ontario, April 2013]. Motivation for this behaviour may arise from perceived consequences of reporting claims as a result of the “experience rating” or rate modification systems that exist in most jurisdictions. Critics claim:
...Experience rating causes the under-reporting to a WCB of occupational disabilities, it creates false statistics that tend to diminish OH&S… Experience rating also creates an incentive for employers not to report to a WCB disabilities sustained by a worker that employers have a statutory duty to report.” [Terence Ison, “Reflections on Workers' Compensation and Occupational Health & Safety" (2013) 26 C.J.A.L.P. 1-22] .
In some jurisdictions, it is the responsibility of the employer to report the workplace injury to the workers’ compensation insurer or authority. This requirement is over and above requirements by the occupational health and safety authority unless, of course, the insurer and the OH&S agency are one in the same (WorkSafeBC, for example).
To encourage reporting, legislators often set time deadlines and impose penalties for non-reporting or delayed reporting. However, there is no centralized source of information on the prevalence of non-reporting or delayed reporting by employers.
- Employer claim suppression (intentional indirect or passive)
Whereas benign and intentional under-reporting relate to direct action (or inaction) by employers, subtle and overt claim suppression by employers induce actions (or inactions) of workers with regard to claiming workers’ compensation for time-loss injuries. One study summarized the issue this way:
Employer inducement can be either overt or subtle. Overt inducement consists of threats and sanctions. Subtle inducement can take four forms:(1) appeals to loyalty,(2) willingness to pay wages and medical benefits in lieu of a workers’ compensation claim,(3) group-based incentive programs that foster peer pressure to suppress reports of injuries, and(4) perceptions that an injury will diminish prospects for promotion or increase the risk of lay-off. [Prism Economics and Analysis, 2013].
By the way, “injury free” group performance incentive programs fall into this category of claim suppression. That is why most occupational safety and health authorities discourage or prohibit incentive programs that could be an inducement to under-report work injuries. [For example, OSHA, “Memorandum: Employer Safety Incentive and Disincentive Policies and Practices”, March 12, 2012]
These inducements are more difficult for regulators to detect. They are most effective on employees who are most vulnerable. These include workers with limited knowledge of their rights, few alternative employment prospects, and precarious employment situations. That said, large firms as well as small have been found to engage in these activities.
The likely fraction of work-related time-loss claims that receive compensation is a function of these factors. Studies in the US and Canada along with published statistics can help fill in the values for a given jurisdiction.
This is critical information for policy makers as well as workers and employers. If the fraction of accepted and compensated work-related time-loss injuries is unacceptably low in a given jurisdiction, then administrative and policy actions can be taken to improve the percentage. Actions include:
- Expanding the scope of coverage to include currently excluded occupations and sectors
- Promoting coverage to those with option of coverage
- Educating workers and employers on their rights and obligations
- Streamlining application and benefit payment systems
- Specific programs for those in precarious and contingent employment
- Identifying administrative and policy barriers that result in denied claims
Tuesday, August 9, 2016
Everyone has some idea of what an economic “market” is and how it works. Terms like “supply and demand” are well known. For most goods and services competitive private markets work well; outcomes for all parties concerned are optimized. When private markets fail to provide expected or intended outcomes, the consequences can be severe for the parties involved and others (including you and me as citizens and taxpayers).
The limitations and failings of markets are precisely the rationale behind government intervention in the form of legislation, regulation and the introduction of social insurance including workers’ compensation. As one commentator put it:
The goal of government intervention is to ameliorate these potential market failures by protecting workers against work-related risks and by inducing employers to invest more resources in safety.(Krallj, Boris, “Occupational Health and Safety: Effectiveness of Economic and Regulatory Mechanisms”, Workers’ Compensation Foundations for Reform , Edited by Morley Gunderson and Douglas Hyatt, University of Toronto Press, 2000)
Government intervention may be motivated by the failure of market to provide optimal economic and/or desired socio-political outcomes. Governments may intervene to regulate a market to counter the effects of market failures. Such interventions typically change the information balance, lower information and transaction costs, or alter the incentives of participants in the market. One economist researcher put it this way:
In theory, regulation is designed to address market failures that would otherwise impair economic performance and reduce social welfare. The purpose of regulation is to correct market failures, or at least minimize their negative effects, and improve allocative efficiency. …Insurance markets, including workers' compensation, are subject to several types of market failures that insurance regulators seek to counteract.(Hunt, H. Allan, and Robert W. Klein. "Workers' Compensation Insurance in North America: Lessons for Victoria?" Upjohn Institute Technical Report No. 96-10. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, 1996.).
Market failures in the insurance sector (and workers’ compensation in particular) can lead to financial failures such as insurer insolvencies. The reasons for financial failures are many but here are a few examples:
- excess risk-taking,
- pricing decisions to lower premiums to gain market share without regard to the actuarially required funding level
- insufficient reserving
- Excessive costs (administration, monitoring, marketing, etc.)
Even in markets that are subject to some regulation, financial failures can occur and may bring uncertainty or delay to compensation recipients, employers and taxpayers. The collapse of HIH in Australia is illustrative of these consequences (see Kehl, David, “HIH Insurance Group collapse”, E-Brief, Parliament of Australia, 29 November 2001). .
Other market failures may occur if the price of insurance is too high or availability of coverage to some or all employers too low. This is often a consequence of “adverse selection”. In the case of work-injury insurance, firms will only purchase insurance if they believe there is a cost advantage to doing so. Firms who perceive the expected cost of insurance to be less than the expected cost of injuries (administration, legal costs, settlements, etc.) will opt out. Over repeated insurance cycles, the pool of insured will contain firms with the most risks; the cost of insurance rises, the pool of insured shrinks. To counter this type of market failure, governments intervene and almost universally require all firms to carry workers’ compensation coverage for their employees.
If there are too few insurers willing to insure all employers, competitive pressures prevalent in well-functioning markets may decline; remaining insurers may refuse to cover all risks and premiums may rise (among other consequences). If work-injury insurance is mandated but unavailable, new businesses may not be able to open. The state of Maine experienced some of these market failures in the early 1990s:
The new year—1992—was only hours old when five insurance companies representing 40 percent of the private insurance market in Maine surrendered their licenses to sell workers’ compensation insurance in the state. The companies included three well established insurers: Hartford, Travelers, and American Fidelity. In making their announcements, the companies cited the high cost of paying compensation claims in Maine compared to revenues collected from premiums.Later that year, another seven smaller companies filed plans to leave the workers’ compensation market in Maine. The state’s remaining insurers demanded that Maine provide protection from the potential liability of millions of dollars in workers’ compensation claims from employees covered by the residual pool.(Gold, Susan Dudley, MEMIC: A Maine Miracle, Custom Communications: Saco, Maine, 2013)
Government interventions to deal with market failures may be limited to regulation or reporting requirements but may include creating a workers’ compensation entity ( State Fund in the US, Workers’ Compensation Board in Canada, WorkCover authority in Australia). Such entities may act as competitors in under-served markets or exclusive “monopoly” providers. In some cases, the State Fund may be the designated insurer for certain classes of industry (government operations, for example) or assigned the role of the “insurer of last resort” (providing coverage when private markets decline the risk).
Market failures may arise from “information asymmetries” and non-aligned incentives of parties involved in insurance markets. Workers, for example, may have insufficient information to fully assess the inherent and latent risks they face in the workplace. Employers struggling to fill jobs may have little incentive to fully assess or communicate those risks to either workers or insurers. Insurers may have changing priorities motivated by financial market opportunities, market share or state of their balance sheet. In a totally transparent environment, each party would be fully informed. The cost to overcome these informational barriers so all parties concerned are fully informed can be impossibly high.
Market failures in work-injury insurance markets include “externalities” –the imposition of costs on third parties (typically taxpayers or other insurance or benefit programs). Prior to workers’ compensation, the courts were the arbiters of many contested work injury cases. Decisions favourable to an injured worker would depend on proving fault and overcoming systemic and traditional defenses. Occasional large wins by injured workers could bankrupt an employer with consequences for many parties outside the injured worker-employer relationship. Society had to bear the financial (and “congestion") costs of the courts to oversee disputes, the welfare of those displaced by the disruption in the workplace and the lost productivity of other suppliers, providers, and eventual customers of the enterprise concerned.
Markets also fail when transaction costs are disproportionately high relative to the other costs associated with a claim. Note the following comment regarding workers’ compensation:
Is there a strong economic rationale for workers' compensation? We believe there is. Absent some form of no-fault insurance for workplace injuries, a large number of accidents would be handled by the courts using a negligence standard. The joint costs of determining liability under these circumstances would be large, substantially larger than the indemnity and medical costs of most accidents. Only a minority of workers would be compensated for injuries if it were necessary to prove company (or co-worker) negligence, and payment would be received long after most medical expenses occurred and wages were foregone.(Addison, John T. and Barry T. Hirsch, “The Economic Effects of Employment Regulation: What are the Limits?” Government Regulation of the Employment Relationship Bruce E. Kaufman, ed. IRRA 50th Anniversary Volume, Madison, WI: Industrial Relations Research Association, 1997).
Medical costs currently comprise 50% or more of the benefits (combined medical and indemnity costs) of workers’ compensation in the US (See NASI Workers’ Compensation Research for the latest report) . In an unregulated free market, the potential for externalization of medical costs is high:
Absent workers' compensation, much of the medical costs and some of the indemnity costs from workplace injuries will be shifted to others. Indeed, an advantage of having workers' compensation rather than other forms of health insurance pay for the medical cost of workplace injuries is that it shifts costs to parties whose behavior can affect safety.(Addison and Hirsch, ibid.)
“Cost shifting” of medical and indemnity costs is an externality (an unintended effect that amounts to a subsidy). Note, intentional cost shifting through waiting periods or employer deductibles may also be seen as subsidization of work-injury costs but are not externalities or market failures because they are intentional.
There are other market failures including those due to “moral hazard” and also government failures, failures related to the regulation imposed by government (topics of other blog posts).
The success of interventions to overcome market failures varies by jurisdiction. Each intervention has the same intent (ameliorating the effects of market failures, making all parties better off and eliminating the externalization of costs of work injuries to others). There is no one “right” intervention but each intervention has its own advantages and consequences. Only active and continuous performance measurement against the intended social policy objectives of the jurisdiction will confirm the effectiveness of a particular intervention.
The failure of private, competitive, unregulated markets to deliver desired outcomes continues to be the motivation behind workers’ compensation. The “historic compromise” or “grand bargain” that spawned workers’ compensation was a collective decision by labour, employers and the state (acting on behalf of all of us) to overcome market failures and support a specific social policy objective: to protect workers from work-related injury, disability, illness and death in a compassionate and sustainable way that still allows the economic activity and innovation necessary for societies to operate and thrive.
Tuesday, July 26, 2016
Those who make laws and policy do so to achieve certain outcomes. Unfortunately, meaningful measurement of outcomes in workers’ compensation is sadly lacking.
Workers’ compensation outcomes seem straightforward enough. Safe workplaces. Fair compensation for work injuries. Effective treatment and rehabilitation. Safe, timely and durable return to work. There are others, but even these basic worker outcomes (or indicators related to them) are rarely reported.
The most obvious barrier to reporting worker outcomes is that they are hard to measure. Unlike “dollars spent” or “new claims received”, which are very objective input and process measures, worker outcome measures require a great deal of time and effort to develop, track, and report.
Measuring “safe, timely and durable return to work” , “impact of disability on future earnings”, or “worker satisfaction with claim process” for example, require specific definitions for these important terms and a mechanism for consistently assessing cases and reporting outcome on a timely basis.
Often, the only way to get the data is through interviews well after the last temporary disability payment has been sent and the claim closed. Many organizations are just not willing to put the time, staff resources and money into getting the data needed to produce a credible outcome measure on a timely basis.
One way to overcome this barrier is to be selective in the population under study. Focusing on a few injury types, industries, and occupations can make the process easier. Sampling techniques can reduce the number of cases (and related time, effort, resources and costs) needed to get a representative result. Often, the lower precision of the outcome measure is an acceptable price to pay for increased timeliness of the analysis.
The second barrier is a little less obvious but vitally important. Worker outcome measures are meaningless without an appropriate basis on which to assess the reported result. Even if you put the money, time and effort into developing and reporting on a given worker outcome, how is a policy maker or other stakeholder to know if the reported outcome is good or bad? Without a credible parallel measure to compare with, an outcome measure may only provide year-over-year change data. Comparator data is notoriously hard to come by.
No matter what population you decide to focus your outcome measure on, you are going to need something to compare your result against. Where are you going to find that data? You can’t just use another jurisdiction’s data without first adjusting for factors that might otherwise impact the outcome—factors like age, gender, industry, and occupation. Not only that, privacy rules are likely to add to the data acquisition challenge.
Consider “duration of temporary disability”—arguably an important outcome for injured workers (who suffer the financial and physical losses while away from work) and employers (who pay the claim costs and consequences of worker absence including backfilling costs, lost productivity, etc.). One would expect cases of similar work-related injury in similar occupations and industries would have similar outcomes assuming other factors are also similar. Differences in outcomes across jurisdictions selected for comparison can be a fabulous starting point for exploring policy and practice impacts on worker outcomes. But I can tell you from experience, getting timely comparable data from jurisdictions outside your own is a herculean task.
This example raises a third barrier, the “Do I really want to know?” challenge. Outcome measurements that are rigorously developed and reported with appropriate comparator start discussions and raise questions that some may not want to consider. Fear that the result of outcome measurement will make a jurisdiction “look bad” may be the biggest unspoken reason for avoiding the whole process or the real reason behind stated objections against involvement (funding, providing data) in worker outcome research. This barrier applies both to the jurisdiction developing the measure and any other jurisdictions approached to participate as a comparator.
At this point, you can understand why outcome measures are rarely reported in workers’ compensation. Yet, if you are interested in improving workers’ compensation systems, outcome data across jurisdictions is essential. When you come across well developed outcome measures from multiple jurisdictions it is like finding a vein of pure policy gold in the mountains of workers’ comp statistics, reports and data out there.
A couple of recent studies demonstrate how the commitment of participating jurisdictions and the dedication of researchers have overcome these barriers. These research products provide credible, useful outcome measures and analysis that policy makers and stakeholders can use to evaluate system performance and improve workers’ compensation. Each study involves very large sample sizes and matched data sets that control for variations in many factors ( such as injury type, industry mix, age, gender, etc.).
Alex Collie, Tyler J Lane, Behrooz Hassani-Mahmooei, Jason Thompson , and Chris McLeod, “Does time off work after injury vary by jurisdiction? A comparative study of eight Australian workers' compensation systems”, BMJ Open 2016;6:e010910 doi:10.1136/bmjopen-2015-010910
This study examines more than 90,000 claims and controls for demographic, worker and employer factors; it shows conclusively that jurisdiction in which an injured worker makes a compensation claim has a significant and independent impact on duration of time loss. (Free on-line article).
Bogdan Savych and Vennela Thumula. “Comparing Outcomes for Injured Workers in …” WCRI, May 2016
This study (or, more accurately, a series of parallel studies) examines worker outcomes for each of the 15 states: (Arkansas, Connecticut, Florida, Georgia, Indiana, Iowa, Kentucky, Michigan, Massachusetts, Minnesota, North Carolina, Pennsylvania, Tennessee, Virginia, Wisconsin) using claim and interview data from very large samples in each jurisdiction. Each study controls for “mix” of industry and financial severity of the claim. In the “Data Book” supplements for each jurisdiction, the authors provide worker outcome data for the unadjusted for case mix and additional detail on return-to-work accommodations provided in both successful and unsuccessful cases. (Limited free viewing and free policy-maker registration for webinar; low cost for others).
Neither of these examples identifies the specific policy features that may account for the outcome differences—that was never their purpose. System features such as the presence (and length of the waiting period), rate of compensation, mandatory reinstatement laws, specific vocation rehabilitation programs, and insurance arrangements (exclusive state fund, competitive state fund, or private provision) are a few candidates for stakeholders and policy makers to consider.
Another series of studies that do attempt to evaluate the impact of legislative changes on the specific worker outcome of post injury earnings and the adequacy of compensation are highlighted in a recent research summary:
Emile Tompa, R Saunders , C Mustard, and QLiao “ Measuring the adequacy of workers’ compensation benefits in Ontario: An update” IWH Issues Briefing, March 2016.
This summary updates the analysis of benefits adequacy in Ontario by looking at more recent cohorts of permanently impaired workers’ compensation beneficiaries following the 1998 changes to Ontario’s workers’ compensation legislation. This update does not directly compare any other jurisdictions although the methods and prior research but the study demonstrates the complexity of analysis necessary in outcome analysis. Prior research in this series used data from British Columbia and Ontario as well as comparable data from taxation data sets. Previous work by RAND and other research groups on data from California, New Mexico and Washington state, among others. (Issue briefings and previous IWH research available for free online viewing).
By the way, although the results of these high-quality, peer-reviewed research efforts may be “free” to stakeholders and policy makers everywhere, the research itself has significant costs. Not all workers’ compensation jurisdictions financially support workers’ compensation research, but thanks to those that do, every system can benefit from research findings.
Getting those findings takes qualified researchers familiar with the data, jurisdictions committed to providing data and data definitions, and hours of work by analysts not to mention the infrastructure necessary to secure and maintain the integrity of the data, review research, publish and other activities transfer that knowledge to those who can act on it. Understanding workers’ compensation is not a trivial undertaking for anyone including skilled and capable researchers. It is doubtful that any of this research could have been undertaken without the knowledge base and experience with workers’ comp data evident among the researchers leading these studies.
Bottom line: Worker outcome measures are challenging but essential to assessing and improving workers’ compensation systems. A few jurisdictions have invested their time and resources demonstrating just how valuable this sort of research can be. Every jurisdiction should actively pursue worker outcome research by contributing their data to comparative efforts, funding workers’ compensation research, and developing the research talent in workers’ compensation.
Wednesday, June 22, 2016
Nearly three quarters of US workers’ compensation jurisdictions now incur more healthcare cost than “indemnity” costs (wage replacement for temporary disability workers’ compensation claims) for the most common workplace injury claims.
For many years, NCCI has published charts like this one that was presented at the 2016 Annual Issues Symposium (Kathy Antonello, State of the Line 2016):
The total “ benefits pie” in this case is made up of specific incurred costs of claims from the injury year taken to “full development” (essentially the full lifetime of the claim). The indemnity side of the pie represents the cost of wage-loss or replacement compensation incurred for temporary claims. It also apparently includes certain vocational rehabilitation costs such as retraining allowances and tuition. The medical slice of the pie includes hospital, physician, physiotherapy, medications, appliances, diagnostics (including x-rays, MRIs, CT Scans) and other healthcare expenses. Excluded from this pie are permanent disability, administrations and other costs (such as underwriting expenses, advertising, etc.) not directly associated with the main benefit costs associated with claims.The NCCI chart reflects data from NCCI states and State Fund states.
NASI publishes a similar analysis covering all US states and the District of Columbia using NCCI data and other data from non-NCCI states (see Workers’ Compensation: Benefits, Coverage and Costs, 2013 Figure 3). The result is similar:
The NASI study contains individual state-level data [see Table 8] . For the following chart I have extracted the percent of the combined medical and indemnity pie and ordered the data by percentage medical.
This depiction is useful in showing the range. Note the median value using NASI’s 2013 injury year data is 54.7% medical. This is statistically very close to NCCI’s estimate of 58%. Based on this ranking, three-quarters of US workers’ compensation jurisdiction pay more than 50% of the benefit pie on medical expenses.
What accounts for the variation in the share of medical costs? Medical costs do vary from state to state. Some jurisdictions have medical fee schedules; others have requirements regarding the use of certain medical networks. The proportion of more serious injuries may also contribute to greater expense on the medical side. A jurisdiction with large, high-risk industrial sectors such as primary resource extraction (logging, mining) is likely to have more serious injuries that involve greater medical costs than a jurisdiction dominated by low-risk industries such as financial institutions or tourism.
A more significant factor, however, relates to the non-medical side of the pie that covers the level of compensation. The so called "indemnity" or "cash benefit" side of the pie is determined by the percentage of wage replacement provided, maximum insurable earnings covered (or maximum weekly benefit payable), the duration of a waiting period, the length (or absence of) a retroactive period, and the overall duration of temporary disability claims (sometimes capped). States with low compensation rates and long waiting periods (and correspondingly long or absent retroactive periods) are likely to have higher percentages of the pie going to medical.
To make this point clearer, I used the current “Maximum Weekly Workers’ Compensation Amounts” [as reported by the SSA, Program Operations Manual System (POMS), DI 52150.045 Chart of States’ Maximum Workers’ Compensation (WC) Benefits] as a handy proxy indicator for the overall “comprehensiveness” of the wage-replacement compensation side of the equation. Seven of the ten states with the highest weekly maximums ($1211 to $1628: Washington, Massachusetts, District of Columbia, Illinois, Connecticut, Vermont, Iowa) have lower-than-median percentage shares on the medical side; eight of the ten states with the lowest weekly maximums ($468.63 – $778.83: Kansas, Delaware, Mississippi, Montana, Idaho, Arkansas, Arizona, South Dakota) have medical percentage shares above the median. Of course, this is a very rough indicator; most injured workers are unlikely to be paid at the maximum rate and this indicator fails to account for financial losses the worker must bear in terms of uncompensated waiting periods and low compensation rates that fail to approximate usual spendable income.
The most common claims in workers’ compensation are for healthcare expenses and temporary wage replacement. The medical-indemnity split analysis underscores the magnitude of healthcare costs and also provides evidence regarding the wage replacement costs. A very high percentage of medical costs may indicate temporary disability compensation rates are exceptionally low.
Workers’ compensation systems may not have started out to be medical insurance systems but medical costs now dominate the claim expense for temporary disability in many states. This warrants close attention to both the medical cost drivers and the levels of compensation.
Workers will always bear all the physical, psychological and social consequences of workplace injury. Workers’ compensation should minimize any externalization of medical or financial losses to workers and their families or the communities (including the community of tax payers) in which they live. Severing medical costs from workers’ compensation effectively removes half the premium incentive for greater investment in workplace health and safety. Transferring medical costs to other payments would likely amount to a subsidy to industry overall and increased costs for healthcare funders.
The financial costs of workplace injuries, illnesses and deaths should be covered by the industries that give rise to them. That was the basis of the "grand bargain", the "historic compromise" and should continue as the foundation for workers' compensation.