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Workers' Compensation

Workers’ Compensation and the Future: The Macro Versus the Micro View

By Deborah G. Kohl, Esq., Fall River, MA

Over the past several weeks, practitioners in the field have been discussing what the workers’ compensation should or might look like in the future. For example, at one conference, an interesting discussion took place regarding what we as lawyers, judges, court administrators and claims people would seek to change if we had a magic wand and could “fix” workers’ compensation.  The question “What Will Workers’ Comp Look Like in the Future” was recently posed to several LexisNexis authors who responded with their views of what that might include. 

Vernon Sumwalt from North Carolina, and the author of LexisNexis Practice Guide North Carolina Workers’ Compensation, talked about the potential for more occupational disease type claims as automation takes over the workplace.  Interestingly, he anticipates that as the nature of the work environment shifts from the traditional brick and mortar to more remote and non-traditional work locations, there will be a greater emphasis on multijurisdictional litigation and an overall decrease in claims.  Stuart Colburn from Texas, and the co-author of Texas Workers’ Compensation Handbook (LexisNexis), agrees that the changing nature of the labor force, including the increasing use of the gig economy and artificial intelligence, and soaring medical and indemnity costs might ultimately result in an increased standardization of workers’ compensation across state lines and changes in the way that insurance policies are written and sold. Obviously, politics would play a substantial role in whether or not a “federalization” or “standardization” of compensation occurs.

Those discussions by practitioners were from the street level—day to day practice of law, adjustment of claims and administration of the system.  At the WCRI Annual Meeting held in Boston on March 22-23 of this year, Past President and founder of WCRI, economist and lawyer Richard Victor discussed the future of workers’ compensation from a macro perspective—what is likely to happen to the system by the year 2030. 

The theme of the session focused on an anticipated tripling of workers’ compensation costs by 2030 without any change in the benefit structure and with this cost growth driven by outside factors.  Dr. Victor described areas that might challenge the current workers’ compensation system with a particular emphasis on emerging labor shortages and on inadequate or non-existent health insurance for workers.                                  

The two most significant factors effecting labor shortages include the aging work force and immigration policies.  The baby boomers (including most folks in the seminar audience) are slowly retiring.  This has multiple ripple effects on workers’ compensation.  Jobs may be left unfilled, there might be higher employee turnover rates, all of which certainly leads to employer’s using less experienced staff or to a relaxation of hiring standards.   All of these facts result in more claims than in a normal market.  Alternatively, the aging labor force may remain at work, resulting in potentially more injuries as they age and certainly in longer duration of claim and more expensive medical treatment.   The medical industry is not immune to the retirement problem as a shortage of healthcare professionals is anticipated, leading to potential delays in medical care.

Current national immigration policies will lead to less immigration, less new workers entering the market and a greater labor shortage.  The studies clearly document that labor shortages over the years have led to increases in indemnity claims.  Extrapolating the data, Dr. Victor was able to show how a 30% increase in costs could occur by the year 2030. 

Health insurance is the other potential cost-shifter in the dynamic for the future.  As health benefits are cut, deductibles go up and folks become uninsured, workers may be forced to “case-shift” their medical problems.  As Dr. Victor noted, “case-shifting” is not “cost-shifting”, nor is it necessarily fraud.  As an example, an employee has low back pain and has a physical job.  Is the pain from work?  If the employee has $3000 deductible or no health insurance, his or her decision to shift the claim to the employer may be inevitable.  The studies would show that this could result in a 55% in WC claims by 2030 without any increase in benefits. 

So, we have a micro view of the future from the participants in the system seeking changes in benefits, administration and claims adjusting at a minimum, and we have a macro view of the future asking how will the system survive a 30% cost increase.  We have lawyers anticipating a decrease in claims based on the changing nature of the labor force and the more non-traditional work place, and we have an economist anticipating an increase in the number of claims.   There are no easy answers, but both the micro and the macro issues need to be addressed in a comprehensive manner.  The gauntlet has certainly been thrown down.  Let those brave enough enter the fray and begin the discussion.

Any information or opinions contained in this commentary are not necessarily endorsed by LexisNexis® or its affiliates.

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