When surveying the workers' compensation landscape, one is struck by how eerily quiet the atmosphere surrounding the industry has become. Five years past the heated debates that resulted in the 2003 reforms, the law changes pressed for by employers and carriers have largely lived up to their expectations without producing the horrors that many claimant attorneys predicted. Ironically, if anything, the reforms might be proving to be too successful. Rates have dropped by 40 percent and the conventional wisdom is that the market is facing another significant double-digit decrease.

This brings up a speculative question of whether the market may in fact contract, not because costs are too high, but rather because the rates have fallen too low. I pose this question as a counterfactual since it runs opposite of the common understanding of capitalism. In a free market, lower prices signal an increase in capacity that favors employers. And in theory, somewhere there is a pricing floor where price and capacity reach a level of equilibrium that bring about that all-too-elusive state of stability.

But it pays to remember that insurance doesn't operate under a pure free market system. Prices are regulated with exhibit A being the shortage of capacity in the homeowners' market. Under a pure free market, homeowners' premiums would be significantly higher than where they now stand, which in theory would bring more carriers into the market and eventually lead to lower premiums. However, the government has made the decision that even under that economic model; the price of coverage would exceed what homeowners could reasonably pay. Therefore, through government intervention, rates have been artificially suppressed, and any market contraction has been offset by the creation of an infinite supply of affordable capacity through Citizens Property Insurance Corporation.