Worker’s Compensation

Worker’s Compensation

Chapter 5

Goetsch

Worker’s Compensation

Goal - injured employee compensation - no court

Rationale -

Fairness to employees

Reduction of costs to employees

Worker’s Compensation

No fault approach to

Minimize losses to employees

Rehabilitating employees

Employees give up right to seek unlimited compensation

Employers award the compensation regardless of negligence

Objectives

Replacement of Income

Rehabilitation

Prevention of accidents

Cost allocation

Replacement of Income

Current and future income

even if employer goes out of business

Rehabilitation

Return the employee to work

Maybe not same work

Provide needed medical care

Provide vocational training or retraining

Accident prevention

Lower insurance premiums should lead to better accident prevention efforts

Cost allocation

Spread the costs of worker’s compensation among industries

Who is covered?

Worker’s comp laws written at the state level- variation

80% of all employees

See page 109 for list of those not covered in some cases

Objectives of Worker’s Comp

Provide appropriate medical benefits and income

Reduce personal injury litigation

Relieve charities of the strain created by injuries

Objectives of Worker’s Comp

Eliminate trials and appeals

Promote maintenance of safe work environments - experience rating

Prevent accidents through effective investigations

Sounds good but...

Employee abuse

Increase in costs of medical care

Differences in state compensation laws

Compensation insurance

Costs can be borne as overhead

Ensure payment when out of business

Answer is insurance

Insurance rates

Number of employees

Types of work

Accident experience

Potential for future losses

Overhead and profits of employer

Quality of safety program

Estimates by actuaries

Determining premium rates

Schedule rating - insurance baseline, credits and debits from baseline

Manual rating - occupations have different rates, premium is a pro-rata combination

Determining premium rates

Experience rating - prediction of losses, adjusted according to history

Retrospective rating - established rate for a period with adjustment at end of period

Determining premium rates

Premium discounting - size of company less costly to administer

Combination method

Injuries and Worker’s Comp

Past definition of injury - sudden and unexpected

Current elimination of sudden

Harmful environment - included psychological, stress-related

AOE injuries

Arises out of employment

prescribed in job description

assigned

normally expected

Employees or contractors

Company payroll, benefits, supervised - employee

Contract to perform a service - not an employee

Supervision and direction are the issue

Disabilities and Worker’s Comp

Compensable injuries

temporary partial disabilities

temporary total disabilities

permanent partial disability

permanent total disability

Disabilities

Temporary disability

Be able to resume gainful employment with no or partial disability

Relates to work with the company that employed the worker at the time

Temporary disability

Temporary total - incapable or work at the time but is expected to recover fully

Temporary partial - capable of part-time or light duties

Most states prescribe benefits for temporary total

Permanent partial disability

Not expected to recover fully, can work but not at full capacity

Schedule - non-ambiguous injuries

Non-schedule - effects difficult to determine, head injuries

Permanent partial disability

Compensation depends on the effects, 25% disability

Four approached to handling

Whole person

Wage-loss

Loss of wage earning capacity

Combination

Whole person

Subtract current capabilities from previous capabilities

Age, education, occupation not considered

Wage loss

Determine how much the employee could have earned

Current wage subtracted from what he/she could have earned

No consideration of degree of injury

Only considers loss of actual wages

Loss of wage earning capacity

Considers:

What was being earned

What might have earned

Considers - job performance, education, age, gender, advancement potential

Permanent total disability

Cannot compete in the job market

Inability to reasonably compete

Death and burial benefits

Benefits accrue to the families and dependents of workers fatally injured

Life or remarriage or time limit

Age of maturity

Burial allowances are provided

Rehabilitation

Entitled to medical benefits

Rehabilitation - Medical and vocational

Medical - restore lost ability to function

Vocational - education and training to prepare for a new occupation

Administration and case management

Minor injuries not reported in many cases

Serious if requires 24 hours of active medical treatment

Fatalities, loss of limb is serious and must be reported

Notification

Notify agencies in appropriate time

Wait period for payments, generally retroactive

Maximum time for claim to be filed

Settlement

Direct settlement - prescribed payments

Agreement settlement - employer and employee work out settlement

Public hearing - employee feels inadequate compensation

Cost allocation

Spreading the cost across an industry

Costs based on experience rating of industry

Cost allocation fairness

Small firms - not accurate experience rating

Small firms rated by industry

Premium rates sensitive to experience levels in large firms

Efforts in fighting claims rather than preventing accidents

Future worker’s compensation

Reform is needed in worker’s compensation

Spotting Fraud/Abuse

Review page 134 (3rd edition)

Cost reduction strategies

Stay in touch with the injured employee

Have a return to work program and use it

Determine the cause of the accident

Specific strategies

Cultivate job satisfaction

Recognize and reward

Communicate

Give control

Encourage employees to talk among themselves

Practice conflict management

Provide adequate budgets

Encourage use of EAP

Specific strategies

Make safety a part of the culture

Have a systematic cost-reduction program

Use integrated managed care