Workers Comp "Reform": Babies and Bathwater

In the field of Workers Compensation, employers are understandably and legitimately concerned about the cost of Workers Compensation. Here in my home state of Illinois, for example, employers are often pushed to the wall by the cost of Workers Compensation insurance, and we here at Advanced Insurance Management often get to help them (and other employers all over the U.S. as well) successfully dispute Workers Comp insurance charges that are unwarranted and excessive. On a regular basis, we get to help keep some small employer in business, as they tell us that if they have to pay a recently-received "Shock Audit" for more money than they have, they will have to close their doors. It's always a special professional pleasure to help in those situations.

And in Illinois, our home state, employers are often told that Illinois is too lenient and corrupt when it comes to awarding Workers Comp benefits to workers, and in neighboring Indiana they know how to do things more efficiently and economically, and thus WC rates and insurance premiums are much, much lower there. And its true, Indian has much lower WC insurance rates (and lower benefits) than in Illinois.

I've written about this disparity before, and how much of the difference in costs between Indiana and Illinois are due to wage differences between the states and the much more restrictive benefits rules in Indiana. But now a new article in Slate makes clear the unintended consequences of some of the Workers Comp "reforms" that some employers and insurers advocate for, in the name of reducing claims costs. And those consequences can sometimes be measured in painful deaths and financial ruin for families, particularly if an employer fights a Workers Comp claim in ways both fair and foul.

To be fair, employers have every right in the world to fight for reasonable laws to combat fraudulent or exaggerated Workers Comp claims. Indeed, they have a responsibility to fight against such claims, as they weaken and undermine the entire Workers Comp system. And fraudulent or exaggerated claims are a reality most employers have to deal with, sadly. In response, many states have greatly increased efforts at catching and punishing fraudulent Workers Comp claims, with considerable success.

But I think it can be a terrible mistake to enact "reforms" that leave seriously injured or ill workers without benefit of the laws we have enacted to protect and compensate us all from the risks of occupational injury and illness. And we do not want to remove the financial incentives that currently exist to pressure employers to maintain safe workplaces.

Most employers, in my experience, want to maintain safe workplaces. They understand the need to keep their workers safe from the potential hazards of work. But even with the best of intentions, unexpected things can happen that result in serious claims. And sometimes it can be unclear if a questionable claim has been exaggerated or misrepresented. And, being human, employers (and their insurers) can be prone to sometimes allowing financial interests to cloud their judgement on such things.

That's why I tend to view arbitrary restrictions on Workers Comp claims as often throwing the baby out with the bathwater. The consequences of creating too many hurdles and barriers for those who are injured at work (or who claim to be so injured) can be devastating to people, and often contrary to the long term interests of the employer as well.

I know there are no easy solutions to this--because if there were, we would have done them already. But some of these proposed reforms strike me as just that--easy solutions for complex problems. That usually doesn't end well.

And our Workers Comp system is never going to be perfect, sad to say. But we need to keep in mind that unintended consequences can be powerful and long lasting, and that the unintended consequences of some of the proposed "reforms" to our Workers Compensation systems will be painful death, needless maiming, and financial ruin for decent people. We can do better than that.