Masonry Magazine March 1980 Page. 25
WORKERS COMPENSATION
Restoring the System's Balance
By ANDRE MAISONPIERRE
Vice President
Alliance of American Insurers
Sometimes I wonder whether all the efforts that have gone into the upgrading of our state workers compensation laws are justified. Listening to the critics of the state system certainly leads to discouragement. Yes, they admit to some progress, but they stress what they perceive to be continued major deficiencies. Furthermore, they claim these deficiencies can be overridden only through application of a liberal dose of federal standards. Or, should I say a dose of liberal federal standards?
More and more business people today are wondering if they were well advised to support the reform movement. Take costs: workers compensation in many of our states has almost grown to unmanageable proportions. And the abuses which were irritants in the past have become monsters in the process of devouring the whole system. From the insurance industry's standpoint, workers compensation has developed huge underwriting losses, forcing many carriers to pull in their horns and restrict their markets.
Are there any winners? Yes, there are. The industrially disabled.
Benefits Go Up, Up, Up. For the past six years benefits have spiraled upward at rates few people dreamed possible. Doubling and even tripling of benefit levels has not been unusual. By the end of 1977, workers compensation temporary total benefits were replacing on a national basis-as well as in 39 states-almost three-fourths of spendable earnings.
Substantial benefit increases are not the only improvements achieved by the state workers compensation system. Also:
Limitations on medical benefits today are a thing of the past.
Limitations on duration of benefits for total disability and death are fast disappearing.
Only a handful of states still have numerical exemptions and the number of these exemptions is rapidly dwindling.
Laws in all but a handful of states today are compulsory.
Occupational disease restrictions are fast disappearing.
State laws today bear little resemblance to those described by the National Commission on State Workmen's Compensation Laws in 1972. But the workers compensation benefit improvements have not come cheaply.
Costs Outstrip Estimates. Actually, Workers compensation costs to the business community have far outstripped the estimates used by the National Commission in support of its recommendations to the states. The spiraling upward cost of workers compensation is beginning to create serious affordability problems for some.
The present benefit levels have created imbalances in the system and, unless remedied at an early date, they will lead workers compensation insurance into a position similar to that morass where medical malpractice and product liability insurance recently found themselves.
How far off were the National Commission cost estimates?
They projected that if all the states would increase their maximum weekly benefits to 200% of state average weekly wages, the workers compensation cost would be increased by 44% on a national base. Today in 32 states the cost of workers compensation is already well above that average.
It may be argued, since rates are determined on a state basis, that national averages are meaningless. But when a state-by-state comparison is made the results are identical. Further, if the actual camparisons are limited to the National Commission's "essential recommendations" the cost picture is much more grim.
Serious Dislocations. Frankly, as a matter of public policy. I do not believe we can continue to ignore the cost law improvements. These rising costs are causing serious dislocation to both the business and insurance communities. The cost has reached a level of unaffordability for many small businesses as well as for employers in hazardous work.
Students of workers compensation historically have stressed the system must keep a reasonable cost balance. Arthur Larson, for instance, many years ago noted it early was recognized "measures had to be taken which would ensure that the cost of providing this protection to injured employees did not escalate to the point of economic impracticality."
Of course "the point of economic impracticality" in itself is elusive. There is very little data available respecting the total cost of workers compensation as a function of gross revenues.
However, from information submitted to the House Subcommittee on Compensation, Health and Safety as to the cost of the Longshoremen and Harbor Workers Compensation Act there is little doubt its "point of economic impracticality" has been reached.
There are three major factors which account for the unexpected spiraling cost of workers compensation:
Legislative efforts have been directed at meeting the National Commission's recommendations without simultaneously attempting to achieve much needed re-