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6 Workers’ Compensation Reform Considerations

Originally published in PC360 | February 2, 2024

This year marks a significant year in the election cycle, with a presidential election and several gubernatorial elections taking place. One of the issues in consideration for some states includes reforms to their workers’ compensation system.

With insurance regulated at the state level, gubernatorial elections tend to bear more significance for the workers’ compensation industry. Governors have significant influence over state policy, often including appointing insurance regulators, so we should all keep a close eye on these election outcomes.

What follows are six considerations that stakeholders should contemplate when approaching workers’ compensation reforms.

1. Maintain balance

The workers’ compensation system is designed to protect both employees and their employers. It is a system built on a compromise where employees give up their right to sue in exchange for certain guaranteed benefits if a workplace injury occurs. Any reforms need to preserve that balance. Reducing cost benefits in one area may mean boosting benefits in another area.

2. Look at the data

Anecdotal stories are not usually a good foundation for workers’ compensation reform. Legislators need valid data to support said reforms. How does your state compare to others in terms of both benefits and costs? If there are glaring differences in the data, it can help build an argument for a reform’s focus area. The Workers’ Compensation Research Institute (WCRI), and bureaus like the National Council on Compensation Insurance (NCCI) are excellent sources for such comparative data.

3. Involve multiple stakeholders

All perspectives should be heard and considered. Business, labor, the medical community and trial attorneys are the main parties that typically participate in workers’ compensation reforms. Everyone should have a voice.

4. Beware of unintended consequences

One of the benefits of including multiple stakeholders is that it offers different viewpoints. Several years ago, a state passed workers’ compensation reforms that required judges to follow a “strict interpretation” of the law. That reform aimed to prevent judges from expanding the statutes beyond their intent. However, in this case, the underlying statute was poorly written, and for several years, the courts issued decisions that adversely impacted employers under this “strict interpretation” standard.

5. Reduce uncertainty

The term “reasonable” often appears in statutes. What defines reasonable, though? When reforming statutes, the goal should be to reduce uncertainty and areas of potential conflict. This may include adopting nationally recognized treatment guidelines, drug formularies and permanent impairment measurements.

6. Have a plan

Before drafting legislation, a plan supported by the appropriate stakeholders should be in place. What are the priorities of the reforms? What compromises are needed to accomplish its goals? At the least, the entire business community should be involved, including self-insureds, the chamber of commerce, and other business groups. A lack of unity in the plan may lead to an unsuccessful outcome.