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Workers Compensation: An Introduction

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Title: Workers Compensation: An Introduction


1
Workers Compensation An Introduction
  • Tee L. Guidotti
  • George Washington University Medical Center

2
Workers Compensation
  • is
  • nations 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

3
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

4
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

5
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

6
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

7
Services provided by WC
  • Universal
  • Medical services for injured workers
  • Income replacement
  • Temporary disability
  • Permanent disability
  • Survivor benefits (if fatality)
  • Variable
  • Rehabilitation
  • Retraining

8
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

9
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

10
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

11
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

12
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

13
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, Firemans Fund, The
    Hartford, Travelers are the biggest

14
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

15
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

16
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

17
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

18
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

19
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

20
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

21
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
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