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Investigation finds workers losing ground with changes to workers' comp insurance

Mar 5, 2015

Credit D.Clow / flickr

A recent NPR/ProPublica investigation calls the nation's worker's compensation laws a "grand bargain" between workers and their employers. It's supposed to work like this: if a worker gets injured on the job, workers agree not to sue, and employers agree to help care for those workers.

Reporters looked at all the changes made to workers compensation laws around country and they concluded:

Over the past decade, states across the country have been unwinding a century-old compact with America’s workers: A guarantee that if you are injured on the job, your employer will pay your medical bills and enough of your wages to help you get by. In all, 33 states have passed laws that reduce benefits, create hurdles to getting medical care or make it more difficult to qualify for workers’ comp.

The stories told by the reporters detail cases where workers have lost out.

  • John Coffell hurt his back at an Oklahoma tire plant last year, his wages dropped so dramatically that he and his family were evicted from their home.
  • Joel Ramirez, who was paralyzed in a warehouse accident, had his home health aide taken away, leaving him to sit in his own feces for up to eight hours.
  • Two-and-a-half years after he lost his arm, [Dennis] Whedbee is still fighting with North Dakota’s insurance agency for the prosthesis that his doctor says would give him a semblance of his former life.

Who picks up the bill when these workers are no longer covered by the insurance designed to help them? 

The costs fall mostly on the workers themselves and taxpayers.

From an OSHA report released just after the NPR/ProPublica story was published:

In reality, the costs of workplace injury and illness are borne primarily by injured workers, their families, and taxpayer-supported safety-net programs. State legislatures and courts have made it increasingly difficult for injured workers to receive the payments for lost wages and medical expenses that they deserve.

Chart from OSHA report - information sourced to the Journal of Occupational and Environmental Medicine 2012;54:445-450.
Credit OSHA

What's happening in Michigan?

In some states like California and Oklahoma, there have been big cuts to workers' comp benefits.

In Michigan, cuts to benefits have been more modest. The biggest change in Michigan came in 2011. That's when Governor Snyder signed a law that made changes to the state's workers compensation.

At the time, Snyder said "modernizing our unemployment insurance and workers' compensation systems will ensure their solvency and integrity."

There were some changes that allowed the state to rid itself of debt owed to the federal Unemployment Trust Fund, making the program more solvent.

But one of the more controversial changes had to do with the amount a worker can be compensated. Workers are now compensated at a rate based on "wage earning capacity."

Insurance adjusters can now calculate an injured worker's wage compensation by taking into account potential wages the person could make at another job "whether or not wages are actually earned."

Supporters say the changes are an incentive for an injured worker to get back on a job - any job. Critics say injured workers can lose income if an adjustor determines they could get another job - whether that job is available to them or not.

"Injured" workers collecting workers compensation payments have been great fodder for television reports, but reports trying to classify how much this type of fraud costs show it's often overstated.

And the NPR/ProPublica report says cuts to workers' comp benefits have not been driven by concern over fraud:

Few of the cuts were driven by concerns about fraud, which is estimated to account for only a small percentage of the $60 billion spent on workers’ comp each year. And studies show most of the money lost to fraud results not from workers making false claims but from employers misclassifying workers and underreporting payroll to get cheaper insurance rates.

Instead, cuts to benefits are driven by reducing costs to businesses that say workers' compensation insurance payments are too high. But as the report's analysis shows, workers' compensation costs to businesses have been going down for a long time.

In Michigan, their analysis shows a 58% drop in costs to Michigan employers since 1988. See the trend below.

Chart showing how workers compensation costs to employers have been declining.
Credit ProPublica/NPR

So for employers, insurance and retirement costs have been going up, but that's not true of workers' comp costs.

Listen to NPR's story below:

And if you have a workers' comp story to share, you can do so here