Workers Comp Zone


Even though the Obama administration is on the last lap, it has now waded into the debate about whether workers’ comp systems are failing employees and employers.

The October 2016 report of the U.S. Department of Labor  (see link at the bottom of this post) is titled “Does the Workers’ Compensation System Fulfill its Obligations to Injured Workers?”.  Speaking at a conference introducing the report, U.S. Secretary of Labor Thomas Perez noted that the federal government had abdicated responsibility over what was termed a critical safety net program.

Workers’ comp systems are not federal programs, though, which is part of the problem. So the federal government has not abdicated anything because it had no authority in the first place.

The problems are real, though. In various states benefits have been cut and system access trimmed, leading to a “race to the bottom” rightfully criticized in last year’s NPR/Pro Publica series.

The DOL report sounds an alarm about a number of workers’ comp trends across the states:

  • “Exclusionary standards result in increased denial of claims”
  • “Adequacy of cash benefits is decreasing”
  • “Growth of programs and policies that may discourage reporting of injuries”
  • “Restrictions have been instituted regarding medical care for injured workers”
  • “New procedural and evidentiary rules create barriers of injured workers who file claims”
  • “Elimination of Second Injury and other special funds adds to additional holes in the fabric of insurance and coverage”
  • “Opting out: new efforts to restrict benefits and increase employer control over benefits and claim processing”
  • “Changing work organizations result in added barriers to workers’ compensation for workers”

As you can imagine, the DOL report (and the NPR report on the DOL report) has caused robust discussion within the industry.Could we be on the verge of federal intervention?

There is much to like in the DOL report, which does a good broad-brush summary of key problems as various states step back from a system which protects workers.

But federal oversight would be politically unpalatable to most states. The federalism versus states rights clash necessary to move on this would be monumental. The majority of state houses are under GOP control, and the public mood is somewhat hostile to Washington-dictated solutions.

We are starting to see some interest in state-based single payer healthcare (i.e. the “Colorado care” initiative, though that particular initiative will fail). Spiking premiums for Obamacare exchanges in some states could spark some experimentation at the state level that would affect workers comp.

Possibly outside of a very small handful of think tanks, I’m not sure there is even a consensus among worker advocates that a federal oversight response would be welcome. True, at some recent conferences there were calls by a handful of former workers’ comp judges and worker attorneys for the comp systems to be blown up and reassembled.

But this is not a likely path.

Yet, one of the more striking things about the DOL report and the accompanying conference was the focus on cost shifting. To the extent that the feds can document cost shifting from workers’ comp onto Medicare, SSD/SSI and other federal programs, this is where the traction will come.

It is easy to imagine that as part of future budget negotiations language will be inserted in budget bills that blocks use of federal coverage for certain work-injury related related treatments and services. That is a loophole apparently never explored as part of the Obamacare legislation, and could be an obvious fix, as could toughening coverage criteria for those who use federal disability programs after settling their cases.

The problem with some of this, however, is that toughening up on cost shifting at the federal level will not necessarily cause states to fill in the gaps. So an emphasis only on preventing cost shifting could protect federal coffers but leave workers in bad shape in states that have really cut back on benefits.

It should also be noted that the DOL report fails to analyze the California system in any detail (except as to apportionment, where the DOL report criticizes the shift in apportionment paradigm adopted by the legislature) and refers to a number of issues that are not applicable to California at all.

But putting the multi-state bully pulpit aspect of the DOL report aside, where I think it is most helpful is in suggesting increased data collection on the performance of state systems, which is something that the feds could probably do.

Also promising is the suggested research agenda.

The DOL report notes that:

“Much of the current research on workers’ compensation focuses on limiting and reducing employer costs rather than analyzing coverage, health care quality, or benefit adequacy.”

Some of the research topics identified by the DOL have been explored by California’s CHSWC, but many either have not or deserve re-exploration. Here is the DOL-suggested research agenda:

  • Workers’ compensation injury and illness benefits and the relationship of these benefits to the health and wellbeing of workers and their families, and to primary prevention.
  • Access, adequacy and quality of medical care for injured workers.
  • Identification of evidence-based approaches to improve the effectiveness of workers’ compensation systems.
  • The impact of experience rating on injury and illness prevention.
  • The impact of the success or failure of workers’ compensation on inequality and other social problems, including poverty, opioid abuse, homelessness and suicide.
  • The labor market experience of injured workers, including both subsequent work and earnings.
  • The impact of the injury and compensation claim on other aspects of injured workers’ lives, including the psycho-social effects.
  • The full economic impact on employers, workers, families, state economies and other benefit programs of reducing employers’ workers’ compensation costs through benefit reduction and eligibility restrictions.
  • The characteristics of workers with work-related disabilities who are applying for SSDI, and exploration of potential interventions that would assist them to remain in the labor market.
  • The relationship between medical impairments and the impacts on workers’ lives, including exploration of the development of evidence-based mechanisms for conversion of impairment ratings to work disability and economic losses among different groups of workers

The take-away for me is that the DOL report is the opening shot in what could become an long, ongoing conversation between the feds and the states over workers’ comp. Changes will not come easy, but if future administrations make this a priority, it may have a positive effect.

Here is the DOL report:


Julius Young