Monday, June 23, 2003

Workers Compensation Crisis

Solution: Screw the Workers (What else?)

The nation-wide workers compensation crisis has hit the big time, if "big time" is measured by its placement in the NY Times. In this case, it's front-page, right hand column news. Its description of the crises is good, the analysis, however, is a bit thin.

Read the article. I only have a few comments, but I'd like to invite any workers comp experts out there in internet land to donate your analysis to be read by the tens of thousands (plus or minus tens of thousands) of Confined Space readers. E-mail me here and I'll be happy to reprint your comments.

Across the country, the cost of workers' compensation insurance is soaring at the highest rate in nearly a decade, adding yet another heavy burden on businesses and the struggling national economy.
Any effect on workers? You wouldn't know it by the number of labor union experts that were quoted (none). But then, why should workers be concerned? The real issues is the profit loss column of the workers comp insurance companies.

There's your requisite bit of job blackmail:
"The only way to reduce your cost is to reduce your payroll," said Allan Zaremberg, the president of the California Chamber of Commerce.
An attempt at analysis:
Part of the problem has been created by the insurers and the boom-and-bust cycle of their industry.

In the mid-90's, expenses for workers' compensation insurers dipped and profits skyrocketed just as the stock and bond markets were at their most exuberant.
Actually, if you talk to many workers comp experts, this was more cause than coincidence. Like many Americans, workers comp companies decided they could make more money in the stock market than from premiums. They invested heavily in stocks, and cut their rates to attract new customers. They, like millions of other Americans, lost their shirts when the stock market crashed, leaving them with no money and rates too low to cover their obligations. Oops. Better raise rates to cover their bad investments, and pressure legislators to cut workers' benefits.

One factor, of course, is the rising cost of medical care. This requires a comprehensive nation-wide solution (like maybe single-payer universal health care?) . In the meantime, it seems to be much easier to hit workers on both ends: raise their health insurance premiums or cut their coverage on one end, then reduce their workers comp benefits on the other.

Another cause mentioned by the article: fraud. The natural inclincation for most people when the word "fraud" is mentioned is to think of workers claiming false injuries. You have to read until the very end of the NY Times article to understand what fraud really means.

According to California Insurance Commissioner John Garamendi:
"There's fraud in every part of this situation," Mr. Garamendi said. "You have a situation where doctors and lawyers and chiropractors are involved in organized crime and ripping off the system. You have workers faking injuries, and you have companies not reporting the nature or the number of their employees," whose jobs are an important factor in determining how much the employer pays. "It's not unusual to see a roofing company paying premiums for one roofer and 30 secretaries."
In fact, most good studies of workers compensation fraud find that fraud by workers is by far the smallest portion.

Hey, I have a another good idea: We could make sure that workers don't get hurt in the first place.

More later (with your help.)