Are Waiting Periods for TTD compensation universal in workers’ compensation?

Despite having addressed waiting and retroactive periods before, I continue to receive questions about the law and policy surrounding them.  The questions usually contain assumptions that waiting and retroactive periods are universal features of workers' compensation systems and their design is uniform.  Neither assumption is true.  Understanding the variation in waiting and retroactive periods is critical to interjurisdictional comparison, policy analysis and financial risk planning for employers and workers. It is also essential in any comparative exercise on the costs and benefits of workers' compensation systems.  

Waiting periods are not a universal feature of workers’ compensation for temporary total disability (TTD).  While common in US states, waiting periods for TTD compensation are absent from most Canadian workers’ comp and  Australian “WorkCover” jurisdictions.   Where waiting periods are part of the workers’ compensation legislation, they are far from uniform in design. 

A waiting period for TTD workers’ compensation is a specified time frame following a work-related injury for which TTD compensation is not payable.  A few jurisdictions provide exceptions to the waiting period rule in the case of hospitalization (California, Idaho for example) or for certain professions (firefighters in Maine and New Brunswick). 

Closely aligned with waiting periods are retroactive periods.  If there is a waiting period, legislation usually contains a retroactive provision allowing for TTD compensation to be extended to the waiting period if the duration of disability extends beyond a specified period (7 days in Delaware, 6 weeks in Louisiana, for example) .  Some jurisdictions (Rhode Island and Hawaii, for example) have no retroactive period regardless of the duration of TTD. Where there is no retroactive period or where the duration of disability is less than the retroactive period, the injured worker receives no TTD compensation to offset the lost wages.

An uncompensated waiting period is a worker-paid “deductible”.  From the perspective of the worker, the full value of earnings lost during the waiting period represents a financial cost to the worker in addition to the human cost associated with work-related injury.  A waiting period that is waived or paid retroactively  reduces the financial burden of lost earnings but does not make the workers “whole” with respect to lost earnings.  Earning replacement rates and maximum insurable earnings or maximum benefit payments still apply and virtually guarantee that a portion of lost earnings are never recovered through workers’ compensation insurance. 

There is no universal standard for what constitutes an equitable waiting period.  The 1972 report of the National Commission on State Workmen’s Compensation Laws headed by John F Burton, Jr., noted the pressures for reducing and maintaining waiting periods:

The advantage of reducing both the waiting and the qualifying period [for retroactive benefits] is that workers will have a higher proportion of their lost remuneration replaced by benefits. At the same time, the cost of the program increases, both in benefits paid and in administrative expenses. Proponents of the waiting period argue also that a waiting period is necessary to discourage malingering. (Chapter 3 page 59)

The National Commission’s mandate required an evaluation of various aspects of permanent and temporary compensation under state workers’ compensation laws with respect to adequacy and equity.  Its recommendation regarding waiting and retroactive periods provides guidance to policy makers in the US and beyond.  The National Commission summarized its recommendation this way: 

We recommend that the waiting period for benefits be no more than three days and that a period of no more than 14 days be required to qualify for retroactive benefits for days lost.(Ibid.)

The National Commission’s recommendation defines a reasonable “minimum standard”  or threshold  against which policy makers and stakeholders may examine workers’ compensation waiting and retroactive periods.  Using this “no more than” standard, each workers’ compensation jurisdiction may be assigned to one of  three distinct categories of compliance with National Commission’s  recommendation:   Exceeds, Meets, and Fails to meet the minimum recommended by the National Commission.

In February 2017, I retrieved statutes and/or policy documents regarding waiting and retroactive periods for all North American jurisdictions.  I then categorized each according to its compliance with  the National Commission recommendation. [As an aside, most statutes contain no reference to a “waiting period”.  The provisions that give rise to waiting periods are often framed as prohibitions against payment for losses in the initial days following injury or prescribed timeframes for the “commencement” of temporary total disability compensation payments.]   The preliminary results of my analysis are as follows:

• Exceeds Minimum recommendation:
• No waiting period or
• Waiting period of three days and/or retroactive period of less than 14 days or
• Waiting period less than three days and retroactive period of 14 days or less
• Wyoming, Wisconsin, West Virginia, Minnesota, Vermont, Connecticut, Delaware, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island, Newfoundland & Labrador, Northwest Territories, Nunavut, Yukon

• Meets Minimum: 
• Waiting period of 3 days and retroactive period of 14 days
• Washington, Oregon, Utah, Colorado, Iowa, Montana, Illinois, Kentucky, District of Columbia, Maryland,  New Hampshire

• Fails to meet recommendation: 
• Waiting period of more than 3 days or
• Waiting period of any length and no retroactive period or
• Waiting period of any length and retroactive period of greater than 14 days
• California, Nevada, Idaho, Montana, Arizona, New Mexico, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Arkansas, Texas,  Louisiana, Mississippi, Alabama, Georgia, Florida, Tennessee, North Carolina, South Carolina, Virginia, Indiana, Ohio, Pennsylvania, Indiana, Ohio, Michigan, New Jersey, New York, Rhode Island, Massachusetts, Maine, New Brunswick, Nova Scotia

More than half of the North American workers’ compensation systems examined in this analysis fail to meet the minimum waiting period and retroactive period recommendation of the National Commission. 

This wide disparity across systems creates inequalities in the financial burden for workers.  It also complicates comparisons of employer costs for workers’ compensation.   Rate comparisons rarely take into account the financial impact of the variation due to system features such as waiting and retroactive periods.  Clearly, the value provided by  workers’ compensation coverage  with no waiting periods (or a short waiting and retroactive periods) should be taken into account when comparing rates and costs to jurisdictions with lengthy waiting periods (and particularly if they  have lengthy or absent retroactive periods).   That said, I can find no published figures or estimates of the uncompensated wage loss due to waiting periods in any state with a waiting period.  There are estimates of the value of “employer deductibles” but worker deductibles in either dollar amounts or uncompensated time (days or weeks) are not reported.

The laws and policies around the commencement of TTD compensation impact every workers' compensation time-loss claim.  More than any other comparative feature, the policies regarding waiting periods and retroactive periods influence the balance of who bears the cost of the most common workplace injuries.  Workers bear the physical and financial costs of those injuries; the portion uncompensated by workers' compensation systems can vary widely with devastating consequences on families and the potential externalization of costs to other insurers, workers, and the community at large.  These externalizations obscure the full cost of work-related injuries--and amount to a subsidy to the cost of production that removes or dilutes incentives toward prevention of injury and disability.  

Where waiting periods have been eliminated, the uncompensated portion of lost earnings is reduced and may be inferred by the reported value of compensation for TTD paid.  Where waiting periods exist, the uncompensated portion of lost earnings will be significantly higher than for otherwise similar injuries and system features. Quantifying the impact may influence safety and outcomes for millions of workers.  

How does workers' comp compare among TPP countries?

Interjurisdictional comparison of compensation for work-related injury is difficult.  Among the Trans Pacific Partnership (TPP) countries, there is wide variation in laws covering work injuries.  The “context” of each jurisdiction is critical to any comparative study.  To complicate matters for comparison in workers’ compensation and OH&S, three TPP member states (Canada, the US and Australia) have laws that vary by state or province.   Some TPP countries integrate work-injury compensation with other aspects of social insurance.  Just to get an adequate baseline on what would seem to be a simple measure can be overwhelming.  

Comparisons of employer cost for work-injury “social insurance” (whether workers’ compensation or some other social security provision) are even more problematic.  Employer costs for work-injuries typically include workers’ compensation insurance costs but these are driven by wage rates, injury rates, compensation or benefit rates, medical costs and, of course, injury frequency and severity.  With a wide variety of mechanisms from individual employer liability to integrated accident compensation in TPP countries, there is no simple approach to a common comparison on the employer cost side. 

To illustrate this challenge for the worker-side comparisons, consider what would be required to compare the most common work-injury compensation cases.  For argument’s sake, consider the effort to compare the compensation a worker with a typical work-related time-loss injury might be entitled to in each TPP member country.  Sounds simple enough but let's make the consideration even simpler; let's look at only the most common work-related injury cases that result in time away from work.  The median days-away-from-work in the US is 8 calendar days, so keep that in mind when you think about employer responsibilities and worker compensation when you consider each jurisdiction. 

A full review of each TPP member state and the individual state/provincial workers’ compensation provisions in Canada, Australia and the US is beyond the scope of this blog post but here are some notes on each member state that focus on coverage for short duration absences and wage-loss due to work injury.   

United States

As a starting point, consider how work-injury compensation cases are handled in the US.  Every US state has some sort of waiting period; in this discussion, a waiting period is a worker deductible in the form of days (3 to 7 calendar or work days, depending on the jurisdiction) without earnings or benefits before compensation for temporary total disability begins.  All but two states have retroactive periods so claims for work absences of greater than a specified number of days or weeks (typically 14 calendar days to four weeks)  are compensated  retroactively for the waiting period.  Benefit rates are typically 66.67% of average earnings but may be capped by other provisions such as statutory maximums. 

Japan

The compensation or benefit rate is 60% of the basic daily benefit plus a temporary disability special supplement of 20% of the basic daily benefit ; it is paid after a three-day waiting period until recovery (but the employer pays 60% of the average daily wage for the first three days).

Malaysia

The compensation or benefit rate is 80% of the worker’s average daily wage in the six months before the disability began.  The Employment Injury Insurance part of the social security program pays beginning on the fourth day following certified disability from work. 

Mexico

The rate is 100% of the insured's covered monthly earnings is paid from the first day of disability until certification of permanent disability.

Peru

100% of the insured's covered earnings is paid after a 20-day waiting period for up to 11 months and 10 days. (The employer pays the insured's full earnings for the first 20 days.)

Vietnam

The employer pays 100% of the insured's earnings from the first day of treatment until the insured is recovered, discharged from the hospital, or assessed with a permanent disability.

Chile

For public-sector employees, the monthly benefit is 100% of net earnings. For private-sector employees, the monthly benefit is the average monthly net earnings in the three months before the disability began. The benefit is paid from the day of injury for up to 52 weeks (may be extended up to an additional 52 weeks).

Brunei

Benefits are 66.7% of the employee's average monthly earnings in the six months before the disability began is paid monthly after a four-day waiting period for up to five years. If the disability lasts more than 14 days, the benefit is paid retroactively for the first four days.  The maximum monthly benefit is B$130.

Singapore

For work-related injury, 100% of the insured's average monthly earnings in the 12 months before the disability began is paid for up to 14 days if not hospitalized (up to 60 days if hospitalized). Thereafter, 66.7% of the insured's average monthly earnings in the 12 months before the disability began is paid.  The benefit is paid from the first day of incapacity for the duration of incapacity, up to one year.

New Zealand

The workers’ compensation idea is integrated into a personal-injury “accident compensation” scheme covering both work and non-work related injuries resulting in incapacity for work.  The system is administered by the ACC.  The benefit is 80% of the worker's average weekly earnings in the period before the incapacity began is paid until he or she is able to return to work. For work-related personal injuries, the employer pays for the first week of incapacity after which the ACC insurer takes over the payments.

Canada 

Provincial schemes with temporary benefits ranging from 75% (Nova Scotia) to 90% (BC, Alberta) of Net  wages.  No waiting period in most provinces (except NS and NB which also have retroactive periods and some waiting period exemptions).

Australia

The benefit varies depending on the state or territory in which the award is made. Generally, the benefit rate is 85-100% of earnings for a minimum of 26 weeks. Benefits may be payable for an extended period at reduced levels. Employers responsible for the first 5 or 10 days (Victoria) of wage compensation. No worker waiting period.

Injured workers with work absences of eight days or less in most TPP jurisdictions are likely to suffer a significantly smaller loss of income  in most TPP member states than most US (and some Canadian) injured workers.  Will increased trade motivate improvements in benefits and safer workplaces?  How will we know?

As the TPP agreement is ratified by the current dozen member states (and perhaps others in the future), questions regarding the cost and comparability of work-injury coverage are likely to grow.  I doubt the backers of the TPP would want to see the agreement result in diminished coverage for work-related injuries but workers’ compensation (whether on its own or integrated into a broader social security system) are real costs with real consequences for employers, workers and their families.  Research is needed now to establish a baseline that will help future studies determine how the TPP impacts worker health, safety and compensation for work-related injury. 

What will elimination of the waiting period mean?

Workers’ compensation “reform” often means changes that effectively reduce costs and/or benefits.  That is not the case with the recently announced changes to one workers’ compensation system.  If the legislature approves the proposed amendment, the Workers’ Compensation Board of PrinceEdward Island will eliminate the waiting period effective January 1, 2016.  That will leave New Brunswick and Nova Scotia as the only two Canadian provinces with waiting periods.  (All US jurisdictions continue to have waiting periods of 3 to 7 days.)

A three-day waiting period was introduced in PEI as a cost-cutting measure in 2002.  In 2014 this “worker-deductible” was reduced to 2 days.  Stuart Affleck, Chair of the WCB, notes in a news release:

Eliminating the wait period will provide wage loss benefits to all workers from the day following an accident.  This measure will have a direct impact on our most vulnerable injured workers who might not have access to sick leave benefits during this timeframe.

The emphasis on the “most vulnerable” injured workers is important.  Day labourers, minimum wage earners,  new entrants to the workforces, or migrant workers must often rely on personal savings (or credit), welfare or the charity of neighbours to cover uncompensated wage loss due to work-related injury.  For these workers, the elimination of the waiting period for work-related injuries can provide 85% of net earnings (maximum annual earnings for 2015 are $52,100) tax free, substantially reducing the financial burden they must otherwise bear. 

Mr. Affleck’s focus on those “who might not have access to sick leave benefits during this timeframe” should not be read narrowly.  I am certain he doesn’t mean to imply that sick leave is a suitable alternative to workers’ compensation—it’s not. Even where sick leave is available, it is not intended to cover absences for work-related injury. 

Sick leave pay is typically available in medium to large firms and government entities.  In unionized organizations, sick leave is a negotiated benefit; in other words, the amount and structure of sick leave provisions (as well as short and long term benefit plans) are wage or salary cost items arrived at in the collective bargaining process; changes to wages, hours of work and even working conditions may well have been bargained to achieve sick leave provisions in collective agreements.  In non-unionized environments, sick leave provisions generally reflect industry standards—to be competitive in order to attract and retain talent. Whether or not the specific sick leave plan was the product of negotiations or market conditions, the value of sick leave is part of the financial compensation for the job.  Unlike workers’ compensation, sick leave pay is taxable and its benefits typically not intended to cover work-related injury, illness or disease.   

A key fact facilitating PEI’s policy shift has been the decreased frequency of work injuries.  The rate of workplace injuries and illnesses has fallen dramatically over the last three decades.  Recent “reforms” in Canada and the US have generally reduced employer costs; yet, rarely have reforms increased the worker access to or compensation for work-related injuries.  Waiting periods, long (or no) retroactive periods, low insured earnings (or weekly benefit) maximums, low benefit rates, and limits on benefit adjustments for cost of living  continue to shift a significant portion of the cost of work-related injury and disease to workers, their families and other systems. 

Work-related injuries that have durations shorter than the waiting period are essentially costless to workers’ compensation insurers.  Aside from some medical costs that may be payable, there is little financial incentive from workers’ compensation premiums to eliminate these short duration claims.  Uncompensated days of waiting period in longer duration claims also shift costs to workers and reduce the potential incentive workers’ compensation costs can have on improving workplace health and safety. 

For workers in PEI (particularly the most vulnerable), the elimination of the waiting period will mean improved access to compensation and less externalization of the cost of work injury to workers, families and communities.  It is also likely to increase the number of reported work-place injuries—not because of a decline in safety but because of increased workplace injury reporting. If improved reporting and cost incentives increase the focus on workplace health and safety, then this policy change is not only good for PEI workers, it is good for everyone. 

Can we quantify the size of the worker deductible (waiting period) in workers' compensation?

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.  

Who insures short-duration work-injury caused absences?

Most people would say, “work-related injuries that result in workers losing time and earnings are covered by workers’ compensation”.  In most Canadian provinces, that statement would be true.  In three Canadian provinces (PEI, NB and NS) and all US states, short-duration time-loss claims may receive no compensation under workers’ compensation statutes currently in force.  In all but seventeen states, most injured workers with less than two weeks of missed work due to their injuries will never receive compensation for an initial waiting period of three to seven days.

For these shorter-duration work-injury or illness caused absences, the worker is essentially self-insured for the waiting period.  From a workers’ compensation insurer perspective, these claims may have minor costs for health care but are essentially costless in terms of compensation for temporary disability resulting in lost wages.  I can find no jurisdiction with a waiting period that publicly quantifies either the number of cases where a waiting period was served or the value of uncompensated lost wages being borne by injured workers who miss more than the day of injury.

Without data, it is hard to estimate the number of work-related absence cases that are going uncompensated because of waiting periods.   Without measurement, it is hard to see if this burden is shrinking or growing.  Without a financial implication, the case for prevention may be less than it might otherwise be. 

Jurisdictions such as British Columbia that compensate for time lost beyond the day of injury may provide an indirect indication of what is not being compensated in jurisdictions with waiting periods.   Using WorkSafeBC claims originating with injuries in 2010 and considering all the days paid through to October 2014, approximately 23% of work injury claims were compensated for 1 to 3 days.  Using a one-week measure, about 36.5% of claims received compensation for one week or less. Almost half the claims show a worker with temporary disability of two weeks or less; nearly 60% of these 2010 injured workers  have three weeks or less  lost due to work-related injury.   If a similar distribution of work-related injury absences applies in the US, then about half of work-related injuries involving time-loss are at least partly insured by injured workers themselves. 

These shorter duration time-loss claims provide critical data on the causes and nature of injuries (data that are not typically collected if no wage-loss compensation is paid).  These data can inform prevention activities and public policy that will reduce future incidents.  More importantly, the compensation for wages lost not only lessen the burden the injury imposes on the worker but also creates an incentive toward prevention of all injuries and not just the most costly ones.  This is critically important because the difference between a multi-million dollar claim and one involving just a day or two of wage loss is often a matter of millimeters. 

From the perspective of the insurer, the shorter duration claims are the least costly; from the perspective of the injured worker, three days or a week of lost wages is a significant cost.   Collectively, workers with short-duration, unreimbursed time-loss claims may well be self-insuring a material portion of the cost of workplace injuries.  That burden should be quantified and included in the calculation of the cost and consequences of work-related injury, illness and disease.

Why is there a waiting period for workers' compensation?

Many workers’ compensation jurisdictions have a “waiting period” for workers’ compensation.  This is a form of “deductible” whereby the worker absorbs the initial financial impact of wages lost due to a work-related injury.  Most jurisdictions with a waiting period also have a “retroactive period”; if a claim extends to or beyond the retroactive period, workers’ compensation for temporary disability during the waiting period is compensated.  There are also a number of jurisdictions that “waive” or “exempt” certain injuries or occupations from waiting periods. 

Waiting periods are not universal.  They are absent from most workers’ compensation systems in Australia and Canada.  In the US, waiting periods are common.  When John Burton wrote the National Commission on State Workers’ Compensation Laws (Washington, DC July 1972), he summarized the rationale for waiting periods and recommended the upper limits for waiting periods and retroactive provisions.  Specifically, the report’s Introduction and Summary notes on page 18:

Waiting period [Section 27(d)( 1 )(H) ] . Recommendations published by the Department of Labor propose a 3 day waiting period and a 14 day retroactive period. In contrast, the Model Act of the Council of State Governments specifies a 7 day waiting period and a 28 day retroactive period. Most States meet the standard of the Model Act, but do not meet the Department of Labor recommendation. Although the Model Act would provide benefits for 83 percent of lost time, the U.S. Department of Labor standard would compensate for 93 percent. The purpose of the waiting and retroactive provisions are to reduce payments for truly minor incidents and to assure benefits for even moderately serious injuries.

 We recommend that the waiting period be no more than 3 days and that the retroactive period be no more than 14 days. (See R3.5)

 

Using the National Commission recommendation as a basis for judgement, only 17 of 51 US jurisdictions would meet or exceed the recommendation regarding the length of the waiting period and retroactive period; all twelve Canadian jurisdictions would meet the waiting period recommendation but three would fail to meet the recommended retroactive upper limit.  The accompanying table reports the waiting period and retroactive period provisions in the US and Canada and assesses these against the National Commission’s recommendation. 

Interestingly, back in 1916 when British Columbia was considering its entry into workers’ compensation, the committee of the legislature (under Avard Pineo), the waiting period was avidly discussed.  The BC committee opted for a 3 day waiting period based on the following reasoning: 

We think that a waiting period of three days applicable in all cases will be adequate to accomplish any proper purpose sought by those who advocate the necessity of a waiting period, but will not be found to seriously inconvenience the injured workman, especially as he is during this period provided with full and adequate medical aid.http://www.worksafebc.com/publications/reports/historical_reports/pineo_report/default.asp

While the trade-off in 1916 was a three-day waiting period for the best medical aid provision in workers’ compensation at the time, many critics felt the burden of the waiting period was still considerable. The three day waiting period would be supported by three Royal Commissions in BC (Sloan 1942, Sloan 1952, and Tysoe 1966).  In the 1966 Royal Commission in British Columbia, Justice Tysoe sided with the business community and recommended continuation of the three day waiting period because of a fear of the financial impact on business if it were eliminated.  The government adopted that recommendation but in 1972, in the lead up to an election, the government of the day eliminated the waiting period.  

The most recent Royal Commission in British Columbia (1999) closely examined waiting periods.  It heard a number of reasons why a waiting period might be considered.  Reducing employer costs was one but concerns over “moral hazard” and high administrative costs were also noted.  The Royal Commission concluded:

Waiting periods do not reduce the costs of workplace injuries unless legislation and policies promote conduct by employers and workers that results in a real reduction in the number of injuries and illnesses, or a reduction in frivolous claims which would otherwise have occupied adjudicators’ time. If real costs are not being reduced, then waiting periods are simply a means for shifting costs away from the workers’ compensation system and onto individual workers, employers, or both.

The commission does not consider the latter an appropriate objective or result. The commission’s examination of the limited empirical evidence on waiting periods leads to the conclusion that any cost savings associated with waiting periods due to reductions in claims volume may well be more than offset by increases in the average costs of the remaining compensation claims, due to the extension of work absences beyond the waiting period (or beyond the retroactive period if one is introduced). 

Therefore, the commission sees no compelling reason to extend the current waiting period [the day following the day of injury], and in fact is of the view that injured workers should not be unfairly or unnecessarily denied compensation for losses caused by work-related injury.

Royal Commission on Workers’ Compensation in British Columbia Volume II Chapter 1 http://www.wcat.bc.ca/research/WorkSafeBC/WSBC_Hist_Rpt/1999-rc-report-2.pdf

There may be reasons why a state or province has a waiting period (and retroactive period) in its legislation.  The reasons, however, should be explicit and supported by research.  If the reasons are economic, then the economic magnitude of the policy should be measured.  I can find no current estimate of the “co-pay” or “deductible” portion of workers’ compensation born by workers who must serve an unrecompensed waiting period. 

If the reason for a waiting period provision is to discourage “frivolous claims”, then the central premise behind the argument is questionable.  Is any work-related injury “frivolous”?  Frivolous is a subjective judgement and hard to test from a research perspective.  All work injuries are serious and important in revealing failures in the barriers, safeguards and defenses that would protect workers from harm. 

There are other important questions that need to be examined.  Does the presence of a waiting period influence reporting of work-related injuries?  Is the duration of work-related injury disability influenced by the presence or absence of a waiting period?  What impact, if any, does the length of a waiting period and retroactive period have on recovery outcomes, worker satisfaction, or appeal activity?

Workers already must bear the human cost of work-related injury.  Quantifying the additional economic burden and other impacts of waiting periods and retroactive provisions should be on the research agenda.  

Does the basis of calculating WC benefits influence reporting of claims?

If you miss time from work due to a temporary total disability, the amount you receive from an insurer will determine if you can put bread on the table and pay the rent. The quantum of compensation varies with the type of insurance.

Although we do not think of ‘sick leave’ as a form of insurance, in many ways it is like an insurance plan. Sick leave credits or allocations are often earned and may or may not have any residual value upon termination or retirement. In most cases, sick leave provides 100% of wages and is taxable. Sick leave plans are generally free of ‘deductibles’.

For those without sick leave plans as described above, Employment Insurance generally offers some sick leave benefits. In Canada, these amount to 55% of gross up to an insured maximum and all benefits are taxable. There is generally a two week waiting period before benefits may be paid under an EI claim.

Workers’ compensation is a form of insurance. The benefit rate for short term disability varies by jurisdiction. WorkSafeBC provides 90% of net earnings (where net equals gross earnings minus appropriate [mostly mandatory] deductions for employment insurance premiums and Canada Pension Plan contributions as well as applicable federal and provincial income tax) and compensation is tax free. BC does not have any waiting periods so benefits are payable from the day following the day of injury.

Not all workers’ compensation systems compensate at the same level. Most US states set the basis for compensation at 66 2/3% of gross earnings. A sampling of other jurisdictions reveal a range of alternatives—generally higher than the 67%:
• Maine uses 80% of worker’s ‘spendable’ earnings (or net wage after tax)
• Connecticut and Rhode Island uses 75% of worker’s spendable earnings
• Texas uses 70% of the worker’s pre-injury weekly in most cases
• Washington State’s compensation varies by marital status and number of dependents so the range is from 60% for a single to 75% (spouse adds 5% and each dependent 2%).

Most states have a waiting period of 3 to 7 days although most systems offer a ‘retroactive period’ such that the worker will be reimbursed for the waiting period if the wage-loss extends beyond (typically) 14 to 28 days.

Canadian jurisdictions generally compensate temporary total benefits at a higher level than their US counterparts. WorkSafeBC’s 90% compares well with other Canadian jurisdictions:

• Ontario, Prince Edward Island and New Brunswick use 85% of net
• Nova Scotia uses 75% of net for the first 26 weeks and 85% after that

Waiting periods are not common in Canada but do exist in New Brunswick (3 days), Nova Scotia (2 days) and PEI (3/5ths of weekly wage loss benefits to the worker.

While workers have an incentive to claim workers’ compensation benefits over EI for work-related claims, the same may not be true for work-related injuries.

Beyond the fact that waiting periods and departures from 100% of net earnings shift some of the costs of injury to injured workers, the level of compensation may influence reported injury rates. Take the case of a worker who suffers an injury that will result in two weeks away from work and a loss of $1000 net earnings (2 weeks at $500 per week). If the worker has access to a sick leave plan, the worker will likely receive 100% of usual net earnings or $1000. If the worker claims workers’ compensation benefits in a jurisdiction with a 3 day waiting period and an 85% of net benefit rate, the benefit will be $595. In a jurisdiction with no waiting period and a 90% of net benefit rate, the benefit will be $900. If the worker has the option of claiming either sick leave or a workers’ compensation benefit, it is clear that the sick leave route will minimize the burden of the injury the worker must bear. The propensity to not claim under workers’ compensation will increase (at least for shorter duration claims) the greater the financial cost the worker must bear.

This is another example where reported injury rates must be interpreted in context. As a general rule, one would expect jurisdictions with waiting periods and lower replacement of net earnings levels to experience lower injury rates for at least shorter duration injuries.