What are the direct and indirect costs to workers of workers’ compensation?

For those of you who are involved in workers’ compensation policy development and  comparisons between systems, you probably have a copy of the National Academy of Social Insurance Workers’ Compensation: Benefit, Coverage, and Costs 2013 on your  virtual or physical bookshelf already.   If you don’t, you may want to bookmark it right now.  

Although this is the 18^th year of this document’s publication, it would be a mistake to think of it as simply an update.  Yes, the usual tables are there with the most up-to-date information you will find anywhere on US workers’ compensation system measures.  A closer look will reveal refinements and changes in the presentation that make this document an even more valuable resource. 

One change has been the inclusion of a section on the direct and indirect costs of workers’ compensation borne by workers.  The report has always acknowledged that its estimates can’t capture the full human cost of work-related injury, illness and disease.  This new section goes further and highlights recent research ( Leigh, J. Paul, and James P. Marcin. 2012. “Workers’ Compensation benefits and Shifting Costs for Occupational Injury and Illness,” Journal of Environmental Medicine 54(4): 445-450) that provides estimates of costs to workers and governments that go beyond the employer cost of workers’ compensation contained in the NASI report.

The section also acknowledges the implicit cost of waiting periods that workers must bear.  While no financial dollar amount is listed, this “worker deductible” is a significant direct cost to workers and their families.

The report has long noted that workers pay a portion of the premium in Washington State but this year also notes other direct worker costs in Oregon and New Mexico.  To expand on this, the following puts some hard numbers around these costs.

Washington State has about 2.8 million workers covered by workers’ compensation contributing $313 million in 2013 and $343 million in 2014 to the overall premium revenue.  (The NASI report notes that 25-27% of the workers’ compensation costs in Washington State are paid for by workers).

Oregon maintains a Worker Benefit Fund (WBF)  contributed to by workers and employers in equal amounts.  Oregon has about 1.65 million jobs covered by workers’ compensation.  The worker contributions to the WBF were $36,051,153 in 20113 and $43,668,118 in 2014.  Using premiums + WBF as the denominator, workers directly funded 3.8%  (2013) and 4.4% (2014) of the system costs.

New Mexico has a small covered workforce at about 718,000 covered jobs.  The State imposes a Workers’ Compensation Fee on workers and employers.  The fee is paid quarterly by workers ($2.00 per worker) and employers ($2.30 per employee).  The combined amount collected from workers and employers amounted to $12.3 million in 2013 and $12.8 million in 2014. The worker portion (based on 2/4.3 or 46.5%) was $5.72 million in 2013 and $5.95 million in 2014.

The services and benefits provided for by these direct worker-paid amounts are typically paid for in other states out of premiums collected from employers. 

The full cost of work-related injury, disease and death may never be completely quantified in financial terms.  Where direct explicit workers costs (such as the fees noted above) and the direct implicit costs (waiting periods) can be calculated, they need ought to be reported and considered in the overall calculation of workers’ compensation costs.