Monday, January 5, 2015

Does compliance with the National Commission's Temporary Disability Compensation Recommendations matter?

In the last three posts to this blog I have recapped the National Commission on State Workmen’s Compensation Laws (1972) recommendations regarding short-term work-related disability (Temporary Total Disability).  The National Commission under its Chairman, John F. Burton, Jr. recommended compensation with a waiting period of not more than three days with a retroactive period of not more than 14 days, a compensation rate moving to at  least 80% of spendable earnings , and a maximum compensation amount equal to twice the state average weekly wage. 

The last three posts examine the progress towards meeting these recommendations.   Although the National Commission only examined US state laws, its recommendations are referenced internationally in the development of jurisdictional workers’ compensation provisions and the National Commission report remains the one document to make specific minimum recommendations for the equitable sharing of losses between workers and employers due to work-related injury and disease in the US.  The National Commission’s recommendations set the minimum standard for that distribution.  Sadly, only one US state and seven Canadian provinces come close to meeting the all of the provisions noted above.  The accompanying table combines the ratings against the National Commission's recommendations.  Jurisdictions with high compliance (assessed as meeting at least two of the recommendations) are highlighted in yellow; low-compliance states (assessed as meeting one or none of the recommendations) are not highlighted. 



While Iowa was the only US state to meet all the recommendations assessed in this comparison, it should be noted that another 10 came close, meeting or exceeding the recommendations of at least two of the assessed categories (high compliance, for the purposes of this discussion). 

Why does compliance with the National Commission recommendations matter?  Increasingly I am asked to compare the provisions of various workers’ compensation systems.  Sometimes this is part of a policy review but many contracts and trade agreements now stipulate the equivalency of protections for workers.   I can confidently say that workers in most Canadian provinces and Iowa have equivalent protection for work-related losses associated with temporary disability.  I can also say with confidence that workers in an additional 10 states and the remaining provinces have temporary disability compensation protections that meet at least two of the key National Commission recommendations on TD coverage.

I am also asked to compare specific jurisdictions and to comment on the comparisons done by others.  Compliance with the National Commission recommendations is a useful contextual lens in which to view comparisons.  For example, WCRI’s well known CompScope™ product is often used as a comparative and benchmarking tool.  Take the following table, for example. 



Now note the same table highlighting states with high compliance to the National Commission recommendations. This perspective provides a new way of interpreting this table. 

One would expect that compliance with the National Commission's recommendations on temporary total disability compensation would translate into higher costs for the insurers and that these costs might also be reflected in higher premiums.  Similarly, the worker self-insured portion of losses not covered by workers’ compensation will be lower (waiting periods not reimbursed, spendable income losses not compensated, uninsured earnings above maximum compensation).  Unfortunately, there is no comprehensive ranking from the worker perspective.  From the employer perspective, however, there is the Oregon Workers’ Compensation Premium Rate Ranking study.  While this study is based on Oregon industrial mix and costs, highlighting the states with high compliance with the National Commission  TD recommendations provides new insights into the ranking. 


Suddenly, Iowa in the middle of the list stands out.  It complies with all the recommendations as assessed in this review. High-compliance states are clustered in the top half of the ranking.  Suddenly,  ranking for high-cost  / low compliance states (meeting only one or none of the recommendations) like California look much worse while the costs for high compliance states like Washington look less severe.   Oregon’s ranking as a high-compliance, low-cost state looks even better.  In a listing of high compliance states, it is well below others.  Even if you add back the costs paid by workers and employers into the Oregon Worker Benefit Fund, Oregon is still the lowest of the high compliant states. 

Now, there may be lots of other reasons why some low compliance states have high costs.  They may pay much more for administration, provide larger payments for permanent disability, or have much higher medical and legal costs, for example.  Those comparisons are not possible with the data I have but would be clearly worthwhile. 

What this assessment does say is that the horizontal equity objective of the National Commission’s temporary disability recommendations has not been achieved.  Workers with work-related total temporary disability in 80% of US states are not getting the minimum temporary disability compensation coverage recommended by the National Commission.   Workers in low-compliance states are bearing a much greater share of the cost of work-related injury than those in high-compliance states.

Forty years on, the National Commission’s conclusion sadly remains little changed: 

… We also agree that the protection furnished by workmen's compensation to American workers presently is, in general, inadequate and inequitable. Significant improvements in workmen's compensation are necessary if the program is to fulfill its potential.
States and provinces in high compliance with the National Commission recommendations have proven that a more equitable sharing of the costs of work-related injury, illness and disease is possible.  Let's hope by the fiftieth anniversary of the National Commission report, all jurisdictions will achieve full compliance with its temporary disability recommendations.
 

1 comment:

Gerald Vonberger said...

While not every part of the regulations are necessary, it sounds like a good idea to comply with the recommendations to me. Worker's compensation insurance is a hard thing sometimes. As the owner of a business, I can tell you it's difficult to know how much insurance you should get sometimes. I think the recommendations are in place to make sure that businesses cover all their bases and then some. It seems like a smart business move to me. http://www.rhodeswardenins.com/business-insurance/workers-comp