Celebrating the centenary of workers’ compensation in the U.S. was the major theme at IAIABC Convention. The opening session was a specially commissioned play depicting the events running up to the establishment of the first workers’ compensation system in the U.S. In Wisconsin, as elsewhere, the need for greater certainty for workers and employers was high on the list of features both sides wanted. Just as important was the idea that workers’ compensation would act as a major driver of safety changes.
It is also important to recognize the context of the times. By 1911, modern workers’ compensation law was already part of the landscape in Germany, so it had a track record that was beneficial to understanding the value proposition of the proposed new legislation. It was also a time of great tension between labour and capital.
As depicted by the play, the new legislation was not universally praised. As with most compromises, there were those who wanted more out of the deal. That tension has always been present, and there are few signs that the future will see that tension disappear. Retiring Executive Director, Greg Krohm, of the IAIABC made this point in his opening remarks. While generally positive about workers’ compensation, Greg believes some workers still fall through the cracks. He also points to broader changes in society that are forcing workers’ compensation systems to adapt. As he put it in his opening remarks, it would be odd if workers’ compensation did not change to adapt to trends such as a declining unionized workforce, aging population, and growing medical costs. On this point, Greg quoted NCCI as saying the “Medical/Indemnity pie” that describes workers’ compensation expenditures now registers more than 60 percent on the medical side.
Greg’s remarks highlighted a belief that recent changes in workers’ compensation law do not really change anything for the large central population of injured workers. He noted a troubling trend in some states where claims are made that lack any likely work-relatedness, yet are pursued to try and reach a settlement. This drives up costs, and creates an impetus for restrictive legislation for these marginal cases.
While Greg could see no definite pattern of “take-aways” from labour in recent workers’ compensation reform, Professor John F. Burton had a very different view. He noted that workers’ compensation premium costs are often raised as an issue, and pointed out that in the workers’ compensation context declining premiums may or may not be a good thing. In a bid to drive down premium rates, benefits have been cut in his view. He noted that replacement rates on permanent partial disability claims in several states are well below the 50 percent level in states such as California, Oregon, Washington, and even the host state of Wisconsin (among others). He also pointed to the issue of apportionment [apportioning causation in part to work and in part to other causes] in California, and the rise in large deductible policies as being further changes that undermine the system.
Apportionment of permanent disability on the basis of causation in California terms, accepts the principle that an injured worker has a right to be compensated for a disability that is work-related, but limits the employer’s obligation to compensate an injured worker for a disability that is not work-related.
[Under California Labor Code Section 4663, “(a) Apportionment of permanent disability shall be based on causation. (b) Any physician who prepares a report addressing the issue of permanent disability due to a claimed industrial injury shall in that report address the issue of causation of the permanent disability.”]
Professor Burton felt strongly that the apportionment issue was a significant shift from the dictum of “taking the worker as you find him.” Greg felt the shift was less pronounced, and noted the “as the employer finds him” position was more related to Arthur Larson’s influence, which he characterized as “very liberal”, than any fundamental principle of workers’ compensation itself.
The debate over large deductibles included one point of view that suggested firms with such large deductible policies are really self-insured for part of their loss. Some argued that this provides greater incentives to invest in safety. On the other hand, many administrators pointed out that such policies may result in unintended consequences including under-reporting of injuries [why report if there is no insurance to be paid?].
Others suggested greater numbers of large deductible policies make funding of oversight, appeal, inspection and prevention initiatives more difficult. These functions are typically funded through assessments on the premiums paid (large deductibles mean lower premiums paid, therefore, lower assessment income to fund other programs).
There were many more issues discussed at this event and I will raise some of these in future posts to this blog.