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Recent trends affecting workers' compensation – including health care reform and the recession – may provide unexpected resultsBy Kyle W. Morrison, associate editor
The United States has recently undergone a great deal of change in a short period of time. The continuing global recession has sent unemployment numbers skyrocketing and driven large and small companies out of business. Financial reform initiatives appear to have slowed the recession’s effects, but how long before the nation emerges from the worst downturn in a generation remains to be seen.
Health care reform legislation also has garnered a great deal of media attention. Months after being signed into law, it continues to be fiercely debated, and its effects on the economy and nation as a whole may not be seen for many years because of the delayed implementation of its provisions. What emerges from the combination of these events and other long-established trends may have a significant impact on workers’ compensation.
Recently signed health care reform laws – the Patient Protection and Affordable Care Act (H.R. 3590) and the Health Care and Education Reconciliation Act (H.R. 4872) – sharply divided the United States over various provisions, but it is not clear how exactly they will impact workers’ comp.
“It’s very uncertain,” said Harry Shuford, chief economist at the National Council on Compensation Insurance Inc., a Boca Raton, FL-based provider of workers’ compensation and employee injury data. In a recently issued white paper, NCCI attempted to anticipate how the various provisions in the health care reform laws may change the administrative systems and costs for workers’ comp. The uncertainty is due to several factors, including a lack of details and length of time in implementing reform; potentially offsetting impacts; and the various actions taken by claimants, health care providers, insurers and regulators, the paper said.
NCCI pointed to some possible effects – both direct and indirect – on the workers’ comp insurance market. Provisions of the reform law expand Federal Coal Mine Health and Safety Act benefit provisions regarding “black lung” – defined by NIOSH as a serious yet preventable occupational lung disease that stems from inhaling coal mine dust. The provisions also eliminate requirements to prove a miner’s death was the result of an occupational disease to receive survivor benefits, and reinstate a 15-year rebuttable presumption of total disability for FCMHSA benefits.
These provisions make it easier to approve federal “black lung” benefits and will increase the benefits payable, according to NCCI. As a result, future insurance premium costs will increase, as will retroactive costs for people filing claims that had previously been denied. NCCI believes other provisions also may have long-term effects:
- Because the law requires insurance providers to cover people with pre-existing conditions, workers’ comp funding of treatment for pre-existing, non-work-related conditions could decline.
- Wellness initiatives in the law may help reduce incidence and the duration of workers’ comp claims.
- Provisions facilitate early entry of generic drugs into the market, which could produce cost savings in workers’ comp if the generic drugs are made available sooner.
- The law’s fraud and abuse enforcement and penalty provisions may help raise compliance.
The great recession
According to the Cambridge, MA-based National Bureau of Economic Research, the organization that provides the national designation of “recession,” the current recession began in December 2007 and continues as of this article’s deadline. And although much of the workers’ comp data from the recent recession was not fully available at press time, some of the emerging figures indicate the recession has had a substantial effect on workers’ compensation.
“The biggest impact is the dramatic decline in workers’ compensation premiums,” Shuford said. Premiums have dropped more than 20 percent in the past two years, he said, and about one-third of that drop is attributed to declining payrolls – particularly in construction and manufacturing. On average, those two industries account for approximately 20 percent of all workers’ comp payroll, but about 40 percent in workers’ comp premiums, Shuford added.
Evidence exists indicating more workers’ comp claims are filed during a recession because workers consider it a source of revenue when laid off, but that uptick of case filings may be outweighed by a far larger trend: fewer people are being injured. As Safety+Health magazine has previously reported (see “2010 State of Safety,” January 2010, p. 32), injury rates have historically declined during recessions due to fewer new, inexperienced workers on the job. These new workers, who are most likely to be injured, are most likely to be laid off. The result is fewer injuries, and that trend – fewer new hires of inexperienced workers – overshadows the impact from previously injured workers filing claims once they have been laid off, according to Shuford.
Returning to work
According to a report from the Cambridge, MA-based Workers Compensation Research Institute, injured employees may speed up their return-to-work efforts because of concerns about job security. The report’s findings go against what might be expected. Typically in a recession, fewer jobs are available and more workers are competing for those open positions, which leads to fewer opportunities for an injured person to return to the workforce. Because this recession has been longer and more severe than past downturns, the percentage of workers in the United States who fear being laid off doubled to 31 percent in 2009 from 15 percent the previous year, the report said, citing a Gallup poll. The report linked injured workers’ fear of job loss with their local unemployment rate.
For instance, 35 percent of employees who had more than seven days of lost work time feared losing their job when the unemployment rate was at the national average of 5.3 percent. When local unemployment rises to 10 percent, the percentage of workers who fear losing their job while injured increases to 51, according to the report. As a result, the report estimated that for every 10 percent of workers fearing job loss while injured, the longer-term unemployment rate of injured workers falls 1.1 percent.
A growing problem
Another trend related to workers’ comp is the growing obesity epidemic in the United States. According to a recent study published in the Journal of the American Medical Association, one-third of adults in the United States were obese between 2007 and 2008. Studies have shown that medical costs for obese and overweight individuals injured on the job are higher and time away from work is longer.
According to Shuford, although the effects of obesity are becoming more well known because of increased discussion in mainstream media, the problem likely will not abate anytime soon for one reason: It is a hard thing to change. Unlike smoking, which has serious health consequences that can be avoided by taking clear steps such as quitting, obesity is more complicated. It can lead to heart disease, diabetes and high blood pressure, among other ailments. These effects, although serious, can be avoided through treatment of the symptoms with pills and other control methods.
“I do think people are getting more sensitive to the issue, but I just think the mental and physical challenges of dealing with [obesity] are huge, and the environment in which we’re in … it’s just too easy,” Shuford said. “People take a pill because it’s easier than changing their lifestyle.”