NCPA - National Center for Policy Analysis

Workers' Comp Needs Reform

July 28, 2003

States could improve their economies and reduce their budget deficits by reforming state-regulated workers' compensation, suggests the Wall Street Journal. Workers' comp insurance pays benefits for on-the-job injuries, but although workplaces have gotten safer, the nationwide average cost of workers' comp insurance has risen 50 percent in the past three years.

Some states have expanded benefits and encourage workers to overuse the system, while others are instituting reforms.

  • In California, for example, insurance costs have doubled over the past three years -- although the number of claims per worker per year declined 20 percent between 1996 and 2001, mirroring a national trend.
  • The state caps the amount of money it pays for each visit to a chiropractor, but places no limits on their number -- thus there is an average of 34 visits to a chiropractor on a workers' comp claim, compared to 14 nationwide.
  • Furthermore, litigation is now so prevalent that employers and insurers must hire lawyers to deal with a full 29 percent of claims in which the employee lost a week of work.
  • And last year California Gov. Gray Davis signed a bill that increased weekly benefits to employees who miss work because of their injuries.

By contrast, Connecticut initiated a massive reform in the early 1990s. It introduced managed care to help rein in excessive medical spending; it increased the number of administrative judges to hear appeals and beefed up an informal arbitration system that is used to settle an estimated 90 percent of all appealed claims.

Connecticut remains a high-benefit state, but employers pay less for the same level of coverage than in some other states thanks to the reforms.

Source: Editorial, "Workers Comp Crisis," Wall Street Journal, July 28, 2003.

 

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