The most recent NASI report on Workers’
Compensation Costs, Coverage and Benefits 2013 acknowledges
that “waiting periods” served by injured workers are an “implicit”
and “indirect” cost of workers’ compensation. The report also notes the
difficulties in estimating those costs. Whether measured in terms of days
away from work or lost wages, waiting periods in the
jurisdictions that have them are real costs borne by workers and their
families.
A waiting period is a period of time or proportion of weekly-earnings
loss that must be incurred by the worker before workers’ compensation for
temporary disability begins. Lost wages during the waiting period are uncompensated. Waiting periods are present in every US
workers’ compensation system but relatively rare in Canada (only three provinces have waiting periods: 3/5ths of a work
week in New Brunswick and 2/5ths of a work week in Nova Scotia and Prince
Edward Island) and absent in all Australian schemes.
In the US, waiting periods range from three to seven days(excluding the day of injury in most cases). A
waiting period is typically served when a worker is absent from work for the
specified number of days due to work-related injury, illness or disease.
In all but two states (Hawaii and Rhode Island) waiting periods are waived or
retroactively compensated for longer duration claims. The length of this
“retroactive period” varies from as little as five days (Nevada, North Dakota)
to as long as six weeks (Nebraska). While the insurer may pay medical
costs during the waiting period, the worker bears the cost of lost wages during
the waiting period.
Gunderson
and Hyatt (Waiting Periods and Direct Payments in Workers’ Compensation Prepared
for the Royal Commission on Workers’ Compensation in British Columbia, June
1998) provide five policy rationales/objectives for waiting periods:
· Reduce moral hazard
· “Self-insuring” as a financial incentive for promoting safety
· Reduce administrative costs
· Reduce benefit costs
· Cost sharing between injured workers and employers
Note that three of the above relate directly to shifting the financial
cost of work-related injury, illness and disease from the employer to the
worker in jurisdictions with waiting periods.
It follows that those with the longest waiting periods and long or
non-existent retroactive periods shift more of the cost to workers and their
families.
A waiting period is a worker “deductible”. Employer deductibles
are quantified in the NASI report. The waiting period and retroactive
periods for each US jurisdiction are summarized in Table C (pages 66 – 72) of the report. To the
best of my knowledge, no state or public agency reports annual data on the
waiting period cost in either dollar terms or days away from work.
This lack of workers’ compensation data on the worker
waiting-period deductible has thus far made accounting for this workers’
compensation system “cost” too big a challenge for NASI and other
investigators.
A conservative estimate, however, may be gained by using other
sources. Given that all waiting periods in the US are of three or more
days and given that no state has a retroactive period of less than five
days, a minimum estimate of this cost may be achieved by examining the
number of cases of work absences due to work-related injury that range from 1
to 3 days.
The US Bureau of Labor Statistics (BLS) reports that the median days
away from work for occupational injuries in 2013 was 8 days, down one day from previous
years. In a state with a three day waiting period, the worker has no
entitlement to compensation for the loss of 3/8ths or 37.5% of an 8 day
loss. If the days away from work are less than or equal to the waiting
period, there is no entitlement to compensation; wages lost during the waiting period are uncompensated. The worker and his or
her family must bear the full cost of wages lost.
2013 Cases of nonfatal occupational injuries resulting in days
away from work.
1 day
2 days
3-5 days 6-10 days
11-20 days
Male 90600
70550
118280
87330 82220
Female 67740
53540
80220
56450 49550
Not
Specified 430
190
550
440
540
( Data extracted on: September 2015
Nonfatal cases involving days away from work: selected
characteristics
Series
Id: CSUDAX0XXXXX6G000
Area: All
U.S.
Ownership: All ownerships
Data Type: Injury and illness Cases
Case Type: Industry division or selected characteristic
by gender)
If you multiply the cases in each of the first three categories by
1, 2 and 3 days respectively, these cases of work absences of very
short duration (1-5 days) represent more than a million days served by workers in waiting periods.
Now, think about the cases with more than three days away from work
but less than the specified absence for the retroactive period to apply.
These cases are not subject to a retroactive period because their duration is
too short. The most common retroactive period is 21 days. If days
away from work extend beyond 21 days, the waiting period is typically
compensated (except in RI and HI, where the waiting period is not
compensated). Cases involving work absence categories of 6-10 or 11-20
days away from work will have typically served a three day waiting period. So, multiplying the number of cases in these
categories by three will yield the number of days away from work that result in waiting period days (most of which represent days of wage loss that are uncompensated by workers' compensation).
Based on BLS nonfatal injury data for cases involving 1-20 days away
from work, workers served more than 1.8 million days of waiting period "deductible" in 2013.
There are, of course, limitations to this method. BLS data may
include cases that are not covered by workers’ compensation and may exclude
certain cases that result in compensation but are outside the definition of
reportable work-injury absences used by BLS sources. On the other hand,
this method underestimates the impact waiting periods of longer than three days
and retroactive periods greater than 21 days would have on the total of
uncompensated days due to the waiting period. BLS definitions of days away from work are
based on calendar days so it is possible that some workers who work five days
or less per week and are absent over a weekend would be captured within some of
the counts.
Based on data from private industry, just over 70% of work-injury
cases involve 30 or fewer days away from work. More than 42% of cases
involve 1-5 days away from work. That means for the majority of
work-injury cases, the waiting periods reduce the
effective workers’ compensation benefit substantially.
Workers with good sick leave or access to other short-term funding
sources including savings may be able to cope with the financial loss
associated with uncompensated days better than those without savings or access
to other benefit programs Waiting periods
externalizes the cost of work-injury and essentially constitute a premium rate subsidy—something
that should be taken into account when comparing premium rates between
jurisdictions or estimating the full cost of workers’ compensation system
Waiting period costs may not be easy to calculate but every state and province that has a waiting period and a retroactive period has the data to quantify the number of cases that serve a waiting period, report the uncompensated work-absence days and estimate the financial cost workers bear for losses during the waiting period. Quantifying the waiting period “deductible” will go a long way to creating a more complete picture of workers’ compensation costs, coverage and benefits.
