Workers’ Compensation 2030
At the WCRI Annual Issues & Research Conference Dr Richard Victor, former CEO of WCRI and currently a senior fellow with Sedgwick Institute, discussed his views of workers’ compensation in the future.
The workers’ compensation system was a compromise between labor and business designed to provide no fault benefits in an environment that gave exclusive remedy protections to employers. Over the years there have been ebbs and flows to the system in an effort to maintain balance in the system. There is a constant struggle to balance benefits to workers with the costs of the system paid by employers.
In the past, when the workers’ compensation system got out of balance it was due to actions from those within the system. That is something the system could correct with regulatory change. However, right now there are things outside of the workers’ compensation system which could significantly impact it and cause a rethinking of the grand bargain.
Emerging labor shortages
Retiring baby boomers will cause labor shortages in healthcare and the insurance industry which will delay claims and medical care. This will ultimately lead to increased claims costs.
In addition, a stronger economy leads to more jobs being created, which is ultimately going to lead to a severe labor shortage. When you pair the aging workforce and people retiring with a growing job market you end up with a situation where there are not enough qualified applicants to fill the positions. With a labor shortage to that magnitude, employers have to relax their hiring standards to fill vacancies. This leads to unqualified applicants being hired. These people will likely have higher accident rates.
Changes in the non-occupational health system
As workers see their out of pocket health insurance rise, it becomes more attractive to try and shift illness and injury episodes into the workers’ compensation system. Richard feels that this shifting will result in a 25% increase in workers’ compensation claims by 2030. With soft tissue injuries, it would be very easy for the the worker to indicate the injury happened at work instead of at home. Disproving that would be very challenging for employers. Higher deductibles will greatly incentivize workers to look for these cost shifting possibilities.
Millions of workers losing health insurance
The number of uninsured workers is expected to decrease significantly as elements of the Affordable Care Act are repealed or weakened. These uninsured workers are also highly incentivized to shift their treatment into the workers’ compensation system. Richard estimates a 15% increase in workers’ compensation claims due to this.
The injury rates for the older workers is higher than for younger workers. As the U.S. workforce ages, we will see higher injury rates across the employee population.
Federal immigration policies and practices
Limiting the flow of immigrants into the U.S. at a time there is a labor shortage will only compound the problem. The only way to grow our workforce to keep up with the demand is with immigrants. All of the growth in the labor force going forward is projected to come from immigrants.
Roughly 15% of all healthcare workers in the U.S. are foreign born. If we discourage immigration into this country Richard feels it could cause a labor shortage in the healthcare industry.
It does not even take a change in policy to see a change in immigration flow. After the Brexit vote there was a significant reduction in European nurses registering to work in the U.K. This is even though there had yet to be a policy change in the country.
Taking all of this outside factors into consideration, Richard estimates a 55% increase in the number of workers’ compensation claims by the year 2030. When you add in medical inflation the costs of the workers’ compensation system could triple by 2030 with no change in indemnity benefit levels.
With this significant increase in costs there will be questions about the continued viability of workers’ compensation. What is the solution to this? Are there viable options to traditional workers’ compensation? ERISA style plans like the opt out in Texas have been widely criticized for providing inadequate protections for injured workers. Union carve out plans only apply to a very small sector of the workforce. Could we see workers’ compensation claims organizations become accountable to both employers and workers with the employee having the ability to choose which claims organization they want to utilize?