What Will Workers’ Compensation Look Like in 20 Years?
Workers’ Compensation’s Inefficient Delivery
At the 67th Annual SAWCA Convention, Frank Neuhauser, Executive Director of the Center for the Study of Social Insurance (CSSI) at University of California at Berkeley, opened this keynote session by discussing the future of workers’ compensation. He noted that the current system does not efficiently address the issues that employers and employees face today. In 1915, the system was primarily created to support a heavily industrialized workforce, which is no longer the case.
The organizational costs associated with administering $1.00 of medical treatment under workers’ compensation is estimated to be $1.25 versus .14 cents to administer at this same level of service under a group health plan.
In addition, the use of workers’ compensation Medicare set asides (MSA) create a loss between 25-40% to Medicare and the MSA process has exposures related to it that are inefficient and have the potential to become costly.
Neuhauser recommends that a more-streamlined approach needs to be designed by the states to limit the duration of employers’ liability of two years and then assess insurers and self-insurers “fair” payment to a Medicare Trust Fund.
Improvement Needed on Controlling Non-Traumatic Claims Costs
Non-traumatic injuries make up 67% of claims and 75% of claim dollars. So where do these injuries frequently occur? An employee is four times more likely to suffer a fatal injury away from the workplace and 75% of workers are in occupations that are low hazard.
In the next 20 years, this may lead to the conclusion that the workers’ compensation requirement for employers and occupations with negligible additional risk should be eliminated over this period.
Based on this conclusion and the ability to administer medical benefits more efficiently, Neuhauser recommends that this 75% of employers should administer their workers’ compensation through a group health plan.