Economy, Expenses, Employers’ Clout Likely to Discourage Major Changes to System

I begin with the following assumptions:

The economic situation at the state and federal level will continue — if not worsen — over the next two to five years and unemployment will remain high before falling into the more normal range after five years.

The current workforce will continue to age resulting in an older workforce.

The medical cost crisis has not been fixed and legislative tinkering over the next decade is unlikely to correct the underlying problems.

Investment income, a wild card, will significantly impact the workers’ compensation insurance market place.

Now my projections based upon specific areas of the program.

Coverage — Little change will be seen in terms of who and what is covered. The problem with independent contractors will continue to grow. Little has been done to resolve the issue and as the economy begins to improve, employers will continue to look for means to minimize costs. Solution may require some form of state certification of independent contractors. The exclusive remedy attacks on the compensation system will continue but with limited success.

Indemnity Benefits — State economic problems along with greater employer influence in the political arena will preclude any type of benefit improvements. We will likely see an increased effort to terminate indemnity benefits at Social Security normal retirement age. This will not result in substantial savings but will remove one form of perceived abuse (“double dipping”). Efforts will continue to develop “a more equitable” system for rating permanent partial disability, but in the end, there will be little change.

Medical Benefits — Pressure on medical expenses will increase with Medicare and Medicaid doing more to ensure coordination with medical insurance programs. As group medical premiums continue to increase, more employers are likely to drop such coverage, prompting some effort to refer non-occupational claims into the workers’ compensation system. These claims will include back strains that are difficult to disprove and can be expensive in the long-run. Medical technology advances will result in more testing, more sophisticated treatments, and ultimately higher medical costs. Pressure to control costs through fee schedules will result in increases in the number of treatment sessions to compensate reduced fees. Workers’ compensation medical costs can be resolved only when the total health care program is repaired.

Workers’ compensation will see little in the way of major reforms. However, as Cassius memorably said, “The fault, dear Brutus, is not in our stars, but in ourselves”; i.e. greater emphasis on safety and loss control, more emphasis on subrogation; and aggressive pursuit of fraud with a focus on understated payroll and misclassification of risks.

DeCarlo, Esq., WCP, is the principal of an independent law firm in New York that bears his name. His practice focuses on mediation/arbitration and regulatory and insurance consulting. He is also chairman and president of the American Society of Workers Comp Professionals, Inc. (AMCOMP), (www.amcomppro.com), a not-for-profit corporation dedicated to professional excellence in the field of workers compensation. DeCarlo holds the group’s WCP (Workers Compensation Professional) designation.

Topics Commercial Lines Workers' Compensation Business Insurance