A news round up reveals a number of states trying to fix problems in workers compensation. Not surprisingly, two of the highest cost states are trying to take action: Texas and Alaska. In any reform effort, the fault lines in the comp system are exposed. Reform always entails an attempt to control costs. When you control costs, some one loses: it might be doctors; it might be insurers; it may well be attorneys, but it is almost always injured employees. We think that reform can make winners of everyone, but first let's have a look at the news.
In Texas, second only to California for costs, half of the employers opt out of the workers compensation system. This means they prefer the “frontier justice” of the pre-workers compensation world: injured employees sue employers for benefits. Meanwhile, Texas is looking into the establishment of managed care networks as a means of attracting doctors into the workers compensation system. That’s all well and good, but until and unless Texas creates a relentless focus on the importance of returning injured employees to their jobs, costs there will remain out of control.
In Alaska, costs have been increasing, especially in the medical area. Greg O'Claray, commissioner of the Alaska Department of Labor and Workforce Development, wants to change the law to establish rate setting for medical treatment. He would also like to see faster resolution of disputed claims. I imagine that the vast distances in Alaska create a unique set of problems for the workers compensation system.
In Missouri, (Kansas City Star, registration required) reform efforts are focusing on a number of interesting issues. They want to raise the standard for injuries that qualify for compensation from the current “substantial factor” to “prevailing factor.” In other words, work must be the predominant cause of the injury. (This reminds me of the frequently debated standards for stress claims. At one point, California required that only 10% of stress had to be work related for an employee to collect workers comp!)
In addition, the current law enables employees who are in company cars to collect comp for injuries going to and coming from work. This needs to be changed. Compensability should not hinge on a fringe benefit – in this case, operating a company vehicle.
Finally, Missouri would cut benefits anywhere from 25 to 50% if an employee’s injury stems from a failure to use company-provided safety equipment. This would be a mistake. Comp is and needs to remain “no fault.” If, on the other hand, the injury reaches the standard of “willful intent” on the part of the employee, the benefits should be terminated.
The Missouri Chamber of Commerce is happy about the reforms, which includes attempts to curtail attorney involvement and the power of administrative law judges. Given the Chamber's backing, it's safe to assume that the legislation is focused on narrowing compensibility and benefits.
Over in another part of the world, we read that the usually innovative Work Cover Authority in New South Wales, Australia, wants to set a new and rather frightening standard for workplace deaths: under proposed changes in the law, the employer is presumed to be negligent for any workplace fatality and is subject to fines of up to $1.5m and up to 5 years in jail. While I am all for holding employers accountable, a presumption of guilt – if that in fact is what this is – creates a very punitive standard which might have a chilling effect on hiring. There must be a better way to establish employer accountability. (It’s worth noting that the criminal standard for employer accountability may well be reached in Rhode Island’s Station Nightclub fire, where 100 people died.)
The LynchRyan Perspective on Reform
Workers compensation legislation is a process. It tends to follow the swing of a pendulum. Over the past decade, the pendulum has swung pretty much in the employer’s favor, with the goal of reducing the overall costs of the program. In states where costs are still out of control, legislative tinkering usually focuses on cutting benefits and tightening controls. At LynchRyan, we counsel states to keep their eyes on the fundamental goal: provide incentives for employers to establish safe workplaces and return injured employees to productive employment as soon as possible. We discourage states from cutting benefits, because that is not usually where the true problems lie. Costs run out of control not because too many benefits are paid to injured workers, but because the entire system is too slow in returning these injured workers to productive employment.