10 Ways in Which Workers’ Compensation Needs to Evolve

1. Change the medical delivery model

The single biggest flaw in workers' compensation is the current medical delivery model. Medical costs keep rising, and outcomes are often poor. This is because historically, the medical delivery model in workers' compensation has been focused on two things: discounts and conflict.

Too often, medical treatment in workers' compensation claims is used as a weapon for secondary gain. Certain attorneys consistently refer injured workers to certain physicians who extend disability, perform unnecessary treatment and ultimately produce poor medical outcomes for the injured workers. These physicians producing poor outcomes are well known by the payers, yet they are allowed to continue to ruin the lives of injured workers so that the settlement will be larger and the attorney fees higher. This is just wrong.

The reimbursement model has prominently focused on who will deliver the cheapest care — not necessarily the best care. In fact, sometimes the best physicians refuse to treat workers' compensation patients because of the low reimbursement rates.

Additionally, unnecessary utilization review can delay workers from receiving care. Bills are not submitted at fee schedule rates, which necessitates spending money on bill review services to ensure the appropriate amount is paid. There is a lot of money wasted on the bill churn that would be better spent on medical care.

The industry and regulators need to focus instead on identifying which medical providers produce the best outcomes for injured workers, and which providers follow established treatment guidelines. These physicians, and only these physicians, need to be treating workers' compensation patients. Let's eliminate the "plaintiff and defense" doctor mentality and just have good doctors treating our injured workers. Once we have identified those physicians, we need to get out of their way and let them treat the patient. There is no need for utilization review when an approved physician is following treatment guidelines and dispensing from the pharmacy formulary.

2. Reduce bureaucracy

The administrative bureaucracy around workers' compensation is complex, time-consuming and extremely costly. It also does little to enhance the underlying purpose of the workers' compensation system, which is to deliver benefits to injured workers and return them to the workplace in a timely manner. States create a never-ending mountain of forms that must be filed and data that must be reported. These requirements vary by state, forcing carriers and third-party administrators to comply with more than 50 different sets of rules and regulations.

State regulators need to take a critical look at their administrative requirements with a focus on increasing efficiency, reducing redundancy and lowering the costs to both payers and the states themselves.

3. Tighten thresholds of compensability

The threshold for something to be a compensable workers' compensation claim varies from 1% (aggravating condition) to more than 50% (major cause). workers' compensation benefits should be reserved for injuries and diseases caused by the workplace environment, not a simple aggravation.

Additionally, the normal human aging process should not produce a compensable workers' compensation claim under the theory of "repetitive trauma." There should not be workers' compensation benefits for simply standing, walking, bending and other basic activities related to daily living.  

States should adopt a consistent threshold that the work injury is the major cause of the disabling condition. If work is not more than 50% responsible for the condition, then it belongs under group health.

While we're at it, presumptions for certain conditions and occupations should be eliminated. These laws are based more on politics than science, and they add significant unnecessary costs to public entity employers — which, in turn, increases the tax burden on every person in this country. They also fly in the face of equal protection under the law by creating a preferred class of injured workers.

If the facts of the case and the science support a compensable claim, then it should be compensable. However, a firefighter who has smoked two packs of cigarettes a day for 20 years should not automatically receive workers' compensation benefits for lung cancer because of a legal presumption.

4. Focus on return to work

The human body is a remarkable machine because it has the ability to heal itself. In addition, medical treatment is specifically meant to restore function. Most injuries do not result in some type of permanent impairment, yet most states have a permanent partial disability benefit. Why? This is how workers' compensation attorneys get paid. Permanent partial disability benefits represent a tort element injected into this no-fault benefit delivery system, and this is the leading cause of litigation in workers' compensation.

The goal of workers' compensation is to return the injured worker to employment. If the employee can go back to regular earnings, then the goal is accomplished. If they cannot, then there should be a wage-loss benefit. This gives incentive to employers to return injured workers to employment, and it would significantly reduce litigation and conflict in the system.

5. Eliminate waiting periods

The suggestions I have provided thus far would all reduce workers' compensation costs. The savings produced should allow us to increase certain benefits without increasing employer costs. Let's start by eliminating the waiting period.

Why should someone have to go without pay for three to seven days because they suffered a workplace injury? This creates an unnecessary financial hardship on injured workers. You don't have a waiting period when taking sick days from work, so why is there a waiting period for workers' comp benefits?

Yes, this would result in more indemnity claims, but we are talking small dollars in additional benefits when compared to the benefit this would provide to injured workers by reducing the financial strain caused by a workplace injury.

6. Eliminate caps on indemnity benefits

All states cap the weekly indemnity benefits that injured workers can receive. These caps range from a high of $1,628 (Iowa) to a low of $469 (Mississippi). In 34 states, the benefit cap is less than $1,000 per week.

Think about that for a moment. In most states, if you are earning more than $78,000 per year you will be subject to the benefit cap. This is not something that only impacts the top 1% of the workforce. This cap impacts skilled trade workers, factory workers, teachers, healthcare workers, municipal employees, police, firefighters and a variety of others. It is truly a penalty on the middle class.

For workers subject to the cap, their workers' compensation benefits will be significantly less than their normal wages. How many of us could avoid financial ruin if our income was suddenly reduced by a large percentage?

Having a workers' compensation claim should not mean someone suffers a significant financial hardship simply because they earn a decent living. Eliminating the benefit cap would solve this problem.

7. Define and cover known occupational diseases

One area in which workers' compensation really needs to evolve is the coverage of occupational diseases. This concept was not contemplated when workers' compensation statutes were drafted because the focus was on sudden traumatic injuries, but we know that occupational diseases are a reality. Science tells us that there are certain conditions that may be caused by workplace exposures. These conditions can take years to manifest.

The industry and regulators need to work together to identify those diseases that are caused by the work environment and ensure that benefits are available to address them. This means eliminating statutes of limitations that are shorter than the latency period for the condition to develop.

I refer back to my comments on thresholds of compensability. If the workplace exposure is more than 50% responsible for the condition, then it should be covered. If not, then it should be paid under group health.

8. Reduce inconsistency among states

Workers' compensation is a state-based system, so there will always be variations among the states. However, there are some areas in which this inconsistency increases costs and does not treat all workers equally.

If states could agree on a common data template for carrier reporting, it would significantly reduce the administrative costs associated with gathering and reporting data. Every state doesn't need to use the same data elements, but they could accept the feed and ignore what they did not need. There have been efforts under way in this area for years with no resolution.

States vary on their definitions of employees versus independent contractors. Some states exclude farm workers and domestic servants from workers' compensation, while others mandate coverage for those workers. Whether you are eligible for workers' compensation should not vary based on your state (or type) of employment.

9. Ensure benefits are adequate

Workers' compensation benefits are supposed to help reduce the financial impact. Yet there are four jurisdictions that have hard caps on all indemnity benefits: Mississippi, Indiana, South Carolina and the District of Columbia. If you are permanently totally disabled in those states, benefits pay for 450–500 weeks. That means by design, those states shift permanently totally disabled claims to the social welfare system.

Things are even worse with death benefits: There are 19 states that cap death benefits, including the four listed previously. In Georgia and Florida, death benefits are capped at only $150,000. Some would argue that there may be life insurance to provide additional funds, but there is certainly no guarantee of that.

The most devastating injuries should not result in even more devastating financial consequences for the injured worker and their family.

10. Adopt an advocacy-based claims model

In many ways, workers' compensation is a system based on conflict. We have "adjusters" who "investigate" a claim. A very small percentage of claims are ultimately denied as not being compensable — yet the claims-review process is based on ^those claims, rather than the vast majority that resolve without any issues.

Many businesses often fail to treat their own injured employees with the same consideration they give to their customers. That customer-service focus needs to be extended not just to customers but to their own employees.In discussions around creating an "Advocacy-Based Claims Model," employers adopting this are seeing less litigation, lower costs and greater employee satisfaction. Rather than just denying a claim and inviting litigation, workers are told about their benefit options that are available when workers' compensation is not appropriate. Changing this model is about changing attitudes, the language we use to communicate and even the workflow. It can be done.

Workers' compensation is still a valuable protection for both injured workers and employers. However, the time has come for it to better reflect the realities of the current workforce, risks present in the workplace and advances in science and medicine. If workers' compensation is to remain relevant for another 100 years, it needs to keep up with changes in society.

Mark Walls is vice president of communications and strategic analysis for Safety National. The opinions expressed in this feature are his own.