Oregon workers comp: Low premiums, high benefits. How do they do it?

Given that workers’ compensation systems are worsening nationwide, as documented by a ProPublica report [See related story ], how is Oregon’s system faring? It depends to some extent on who you ask.

“We really have not engaged in the kinds of cuts mentioned in the ProPublica investigation,” says Oregon State Sen. Diane Rosenbaum (D-Portland), a workers’ comp expert.

Yet Oregon’s workers’ comp premiums have fallen even more than those in other states. Much earlier than other states, Oregon passed controversial legislation to lower workers’ comp premiums—in 1990. Since then, Oregon workers’ comp premiums have fallen from an average of $4.86 for every $100 in wages in 1988 to $1.37 today. That’s remarkable given that medical costs— which make up over half of what workers’ comp pays for— have only gone up. And unlike other states, Oregon actually increased benefit levels while lowering the premiums. Where have the savings come from?

“It’s an oversimplification to say those savings are on the backs of workers,” says attorney Nelson Hall, who’s represented workers in workers’ comp cases since before the 1990 changes.

But in one sense, some of the savings literally do come on the backs of workers—because back conditions are one of the biggest categories of denied claims: The 1990 law changed the definition of compensable injury. Before, insurers paid claims when the workplace was a “contributing factor” to the injury or illness. Now, the workplace has to be the “major contributing cause,” i.e., at least 51 percent of the problem.

As a result, thousands of workers, particularly older workers, have had claims denied. They injure their back or a joint on the job, and have initial claims paid, but then get dropped from further benefits when doctors determine there was pre-existing deterioration.

“One of the classic situations in Oregon is, ‘We’ll accept the back strain, but we’re not going to accept the underlying herniated disk,’” says Hall, the attorney. “Insurance doctors will line up by the dozen and say somehow miraculously a muscle strain resolves in six to eight weeks…. So if you’re still having problems after three months, it must not be the muscle strain accepted as work related; it must be some other problem.”

John Shilts, head of Oregon’s workers’ comp division, admits some savings have come from the “major contributing cause” change, but says much of Oregon’s savings come from a focus on returning workers to work as soon as doctors determine they’re able. Oregon employers get a break on premiums when they bring an injured worker back on light duty while they’re recovering. And when injuries require extended absence from work, new employers get a 50 percent wage subsidy for three months for hiring an injured worker, plus money for special equipment, clothing, and training. Those features save the system money on wage replacement. Oregon also relies on managed care organizations to contain costs.

“Doctors today treat workers more like athletes,” Shilts says. Shilts says Oregon also saved money by creating the Management Labor Advisory Committee (MLAC)—made up only of employer and labor representatives—to hash out future policy changes. By custom, the Oregon Legislature won’t consider any reform that hasn’t been approved by MLAC. In theory, that lessens the influence of other vested interests, like doctors, lawyers, and insurance companies. But it also means no reform is likely that benefits only workers. And it turns out that the exclusion of doctors and lawyers may have gone too far. There were as many as 400 workers’ comp attorneys defending Oregon workers 25 years ago; today there as few as 70, and it can be hard for an injured worker to find representation. Meanwhile, many doctors today refuse to take workers’ comp patients because of the added paperwork. Sen. Rosenbaum, a former member of MLAC, says the Legislature is looking at tweaks increasing attorney compensation to attract more worker advocates.