Transcript Workers’ Compensation: An Introduction Tee L. Guidotti George Washington University

Workers’ Compensation:
An Introduction
Tee L. Guidotti
George Washington University
Medical Center
Workers’ Compensation
is
• nation’s first social
insurance scheme
• a state responsibility,
organized by state
• a compromise
• mostly for industrial
workers
• funded by employers
through premiums
is not
• a welfare scheme or
entitlement program
• a federal
government
responsibility
• a single plan
• required for very
small employers
• tax supported
What existed before WC?
• Crisis during the Industrial Revolution
• Injured workers had to sue employer
• Courts deliberately tried to protect employers in
interest of increasing employment, wages
• Legal defenses for employers insurmountable:
– “assumption of risk” = worker voluntarily
accepts risk of a dangerous job
– “fellow servant doctrine” = employer is not
responsible if injury due to action of another
employee
– “contributory negligence” = if any action by
injured worker can be construed to have
contributed to risk
What forced the change?
• Skyrocketing injury rates created social,
political problems
• Labor unions started using this as an
organizing issue
• As economy settled down, courts became
more open to worker-initiated lawsuits
• Muckraking (e.g. The Jungle)
• Political climate changed: Progressive
movement
• Model available: Germany, UK
The WC “Compromise”
• Workers would reliably receive care and
benefits
– Medical care
– Lost wages
• Employers would be shielded from litigation
– No fault
– No additional liability, even for negligence
• Administration would be fair and efficient
– Insurance model (actuarial rating, costs passed to
consumers/employers)
– Intended to allow employers to anticipate costs
– Rapid, no-fault processing of claims
– Exclusive remedy: no appeal outside system, no
alternative system
Early days of EC
• Huge wave of state legislation from
1911 to 1915
• States set up Industrial Accident
Commissions
• Coverage mandatory (except TX)
• Early attention to injury prevention
• Few permitted enhanced benefits
• However, every state different
Services provided by WC
Universal:
• Medical services for injured workers
• Income replacement
– Temporary disability
– Permanent disability
• Survivor benefits (if fatality)
Variable:
• Rehabilitation
• Retraining
Who is covered?
Usual coverage
• Employees of firms
with more than a
few employees
Covered under special
systems:
• Maritime workers
• Railroad workers
• Federal employees
Usually not covered
• Agricultural workers
• Self-employed
• Business owners
• Domestic workers
• Volunteers
Permanent disability benefits
• Two-thirds of WC disability benefits
• Wide variation in adjudication, criteria
• Ratings are based on:
– Impairment assessment (medically
discernable injury)
– Actual wage loss
– Permanent loss of earnings potential
(considering job market)
• Scheduled awards for specific
impairments are trend (since NJ 1911)
– Covers future wage loss
– Unjust for injured workers to forgo
benefits even if little wage loss at the time
How permanent disability is rated
Three basic approaches
• Impairment model
– Based on schedules
– Based on guidelines (e.g. AMA Guides)
• Wage-loss formula
Calculates actual loss of wages due to injury
• Loss of earnings capacity
Loss of future wages based on actuarial
model
The AMA Guides to the Evaluation
of Permanent Impairment
•
•
•
•
Like any tool, needs to be used properly
Not a cookbook: often gives a range
Achieves some consistency
Face validity in terms of relative
impairment within functional systems
• Expert consensus
Downside to the AMA Guides
• No objective validation
• Often used indiscriminately as a formula for
disability
• Avoids many important types of disability:
–
–
–
–
–
Chronic pain
Mental changes, depression
Reversible conditions, such as airways reactivity
Dermatitis
Stress-related disorders (e.g. irritable colon)
• Has become a self-perpetuating industry
involving complicated revisions, guides to
the Guides, training programs and even a
certification scheme
Financial realities of WC
• Carriers go into but mostly out of business
– Six states have exclusive funds
• Employers pay insurance premiums
• Premiums are based on:
– Industry group
– Size of enterprise
– Historical claims experience (“rating”)
• Administrative expenses are very high
(up to 30 to 40% of premiums)
• Industry concentrated in a few big carriers
– Liberty Mutual, CAN, Fireman’s Fund, The
Hartford, Travelers are the biggest
Financial realities:
Special cases
• Single payer: ND, OH, WA, WV, WY and
Canadian provinces
• State insurance pools (24 states)
– intended for “residual market” at high risk
– expensive for employers
• Self insurance (
– allowed in 47 states, not ND, WY
– company pays out, usually sets up fund
– only an option for big companies
Financial realities of WC: benefits
• Benefits from WC tend to be low
– Some states cap as a % of average wage in state,
typically 2/3
– Some states index to wages
– Only considers wages, not additional direct costs or
social costs
• Costs are shifted from WC to supplemental Social
Security and other programs
• Limbo between denied WC claims and rejected
LTD claims – injured worker caught in middle
• Market forces reductions in benefits to reduce
costs:
– Reduced dollar benefits
– Reduced acceptance rate for claims
– Reduced impairment ratings
• Choice of rating system
• Choice of medical examiner
Occupational disease
• Underreported
• Underrepresented in claims
• Latency period
– Often arises during retirement
– Difficult to attribute to responsible employer
• May be multi-factoral
• Requirement for “objective finding”
• Bad or lacking information
–
–
–
–
Missing data
Incomplete differential diagnosis
Inadequate exposure history
Irrelevant data
Sociology of WC
• Deeply rooted distrust
– Of workers
– Of employers
– Of carriers
• Abuse of system
– By injured workers
– By malingering workers
– By employers
– By carriers
• Fear of consequences of filing a claim
• Emphasis on “moral hazard”
Sociology of injured workers
• Filing claim may bring stimatizaiton
– Esp. if injury is not obvious
– Esp. if embarrassing to employer
– Esp. if highly visible to other workers
• PD or prolonged rehabilitation
– Wearing on family
– Coworkers often turn unsympathetic, even hostile
– Neighbors, friends get tired, even suspicious of
abuse
• Injured worker gets depressed
– Depressed people are difficult to be around
– Intimations of fraud, exaggeration, abuse
– Involutional cycle
Role of physician
• Who picks: the right of choice of
physician:
– Worker (half of states and DC)
• Usually family physician
– Employer or insurer (half of states, inc. VA)
• Often on list of approved providers
• Has given rise to PPO, other managed care
models
• Control over medical records is lost by
worker
Federal and Special Programs
• Federal workers
– Federal Employees Compensation Act
– DoE Office of Compensation Programs
• nuclear workers (radiation exposed)
• nuclear workers (chemical exposure)
• Federally administered
– Longshore and Harbor Workers’
Compensation Act
– Federal Black Lung Program
Occupations not covered by
workers’ compensation
These workers have programs that cover
disability whether work-related or not; worker
retains access to tort litigation
• US Merchant Marine
• Railroad workers in interstate commerce