The Demolition of Workers’ Compensation

Once upon a time, American workers could expect workers’ compensation insurance to pay their medical bills and lost wages if they were hurt on the job. But that’s less and less the case, according to a report by NPR and ProPublica, a non-profit that produces investigative journalism in the public interest. After a year-long investigation, the two news organizations found that all around the country, state legislatures are whittling away at workers’ comp systems, with terrible consequences for hundreds of thousands of workers who suffer serious injuries on the job each year.

According to the report:

  • At least 33 states have reduced benefits or made it harder to qualify for benefits.
  • Some states now cut off benefits after an arbitrary time limit, even if workers haven’t recovered.
  • Employers and insurers increasingly control medical decisions, such as whether an injured worker needs surgery.
  • Workers in 37 states can’t pick their own doctor, or must choose from a list provided by their employers.
  • Compensation for lost body parts varies greatly from one state to another. For example, maximum compensation for losing an eye is $27,280 in Alabama, but $261,525 in Pennsylvania. [It’s $156,920 in Oregon, and $47,306 in Washington.]

The changes have been pushed by big businesses and insurance companies on the false premise that costs are out of control. In fact, employers are paying the lowest rates for workers’ comp insurance since the 1970s—even as the costs of health care have increased dramatically. Nationally, workers comp premiums were $3.42 for every $100 of workers’ wages in 1988. They were $1.85 in 2014.

The system we now have in place in so many states is utterly failing workers.” — AFL-CIO worker safety expert Peg Seminario

And, the investigation found, taxpayers are picking up costs that should be borne by workers comp. One University of California study estimated that workers’ comp covered less than a third of injured workers’ medical costs and lost earnings in 2007, and that government programs like Social Security Disability, Medicare and Medicaid had paid out about $30 billion to fill part of the gap. The rest of the gap came from regular health and disability insurance, or out of workers’ pockets, the study showed.

And it’s not clear workers’ comp systems were generous enough before state lawmakers started cutting. In the early 1970s, Congress established a commission to study state laws. The National Commission on State Workmen’s Compensation Laws issued its report in 1972, finding that “protection furnished by workmen’s compensation to American workers presently is, in general, inadequate and inequitable.”

Many states did make improvements. But a wave of cutbacks began in the 1990s, swelled in the mid-2000s, and picked up again after the 2008 recession. The U.S. Labor Department used to keep track of how states complied with the presidential commission’s recommendations, but stopped in 2004.

A few days after ProPublica and NPR published their investigation, the U.S. Occupational Safety and Health Administration (OSHA) released its own report, entitled “Adding Inequality to Injury: The Costs of Failing to Protect Workers on the Job.” The OSHA report says employers are increasingly using temporary workers, and misclassifying wage employees as independent contractors— both of which are increasing the risk of injury and adding to the number of workers facing financial hardships because of workplace injuries. When employers classify workers as “independent contractors,” they don’t pay workers’ compensation insurance. The OSHA report says that reduces their incentive to take responsibility for safe working conditions, which may result in increased overall risk of workplace injury.

The report pointed to two studies in the American Journal of Industrial Medicine, which found that more than half of hospital patients with work-related amputations in Massachusetts, and a third of those patients in California, didn’t receive workers’ comp benefits.

“We’ve seen a devastating strategic combination of employers and insurers, state by state, to gut workers’ comp laws,” says Peg Seminario, workers health expert at the national AFL-CIO. “The system we now have in place in so many states is utterly failing workers, with the result that people are both economically and psychologically devastated.”

MORE — In light of the national weakening of workers’ comp systems, read on to see how Oregon’s and Washington’s systems are holding up:

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