TheU.S. Department of Labor is aiming for a possible federal role in the stateworkers' compensation system,considering new minimum national standards that would trigger federalinvolvement if states fall short of the program standards.
Thedepartment also is exploring the creation of a new national commission onworkers' compensation.
Theagency wants to explore a federal role in facilitating data sharing among statecompensation systems, insurers, federal and state health and safety agencies,and state health departments.
Inresponse to continued concerns about injured workers flailing in the statesystem, the Labor Department on Oct. 5 released a report that Labor Secretary Thomas Perezsaid in a press conference "soundsthe alarm" on thefailure of state workers'comp systems to provide workers with adequate benefits, even forcing vulnerableworkers out of the middle class by shifting costs to employees, their familiesand their communities.
Onlya fraction of the costs are borne by insurance carriers and employers, Perezsaid. The report states that this assertion is backed up with research.
Perez,joined by other officials and labor policy experts, said the current system isa state-to-state "raceto the bottom" in termsof providing benefits to workers, and lamented the "shrinkage" of the workers'comp safety net.
Workers' compensation is now mandated at some level in eachstate, although Texas has an opt-out provision for employers, and is covered byprivate insurers, but federal officials are wary of uneven insurance coverageand legal and administrative barriers to coverage in some states, where theycontend workers must prove their injury came from the workplace.
Statelegislatures attempt to reduce workers'comp costs, by proposing opt-out statutes, for example, in Tennessee and SouthCarolina, the report noted.
Employers' workers' comp costs were $91.8 billion in 2014, but the fullcost of occupational injuries was estimated to be $206 billion, the reportsaid, citing 2013 figures from the National Safety Council.
"The current situation warrants a significant change inapproach in order to address the inadequacies of the systems. We need to identifybest practices in order to provide better benefits to injured workers, increasethe likelihood that workers with occupational injuries or illnesses can accessthe wage replacement benefits they need until they can go back to work, andreduce costs to employers,"stated the report, titled "Does the Workers' Compensation System Fulfill Its Obligations to Injured Workers?"
Thereport expressed concern for a decline in benefit payouts since the 1990s thatmight not have come just from increased workplace safety, but also fromstatutory changes that have reduced benefits.
Thesteps the Labor Department has taken have been foreshadowed by growing concernsfrom the Federal Insurance Office at the U.S. Treasury Department.
Ininterviews and reports, FIO Director Michael McRaith has expressed worry aboutunequal benefit systems across the states, and state arbitrage pushing benefitlimits lower.
Underthis system, "theaverage maximum compensation for the loss of a leg nationwide is $153,221, withAlabama compensating an injured worker the least amount of all states, at$44,000, and Nevada compensating the most, at $457,418," stated a 2015 FIO annualreport.
"As in other areas … these state-by-state differences raiseimportant questions regarding the propriety of local standards. … FIO willcontinue to monitor the workers' compensation market, statetrends, and the results of recent reforms to determine whether further actionis warranted," the FIOreport said.
Morefederal attention is expected on the issue, even while insurance trade groupssaid it is not necessary or welcome.
TheAmerican Insurance Association responded to the report, stating through AIAVice President Bruce Wood that it opposesfederal interference in state workers' comp systems. Wood said changesand improvements to the system should be debated at the state level, allowingfor better fine-tuning of workers' needs.
"The state-based workers' compensationsystem is our nation's oldest social insurance program, predating SocialSecurity by a generation. It is grounded in the economies of the individualstates and therefore reflects each state's economy,"Wood said in a press release.
RitaNowak, vice president for policy development and research for the PropertyCasualty Insurers Association of America, called the report inaccurate, inplaces, in its assessment of the system. She said the system works for the vastmajority of injured workers. "Overall, today'swork environment is safer, which means fewer workplace accidents,"Nowak said.
The NAIC said that, given that much of workers' compensationis "by and large not overseen byinsurance departments, but are state programs,"it would expect a limited impact on state insurance department regulatoryauthority.