The Occupational Safety and Health Administration at 50—the Failure to Improve Workers’ Compensation

In the 1950s and 1960s, it was widely recognized that workers’ compensation was failing in its mission to provide economic security for injured workers. After decades of concern, Congress called for a formal review of these state-based programs in the Occupational Safety and Health Act of 1970. Congress gave this responsibility to the National Commission on State Workmen’s Compensation Laws (“National Commission”).

In 1970, 19 states did not require any employers to provide workers’ compensation coverage. Other states mandated coverage for only a fraction of workers. Only about half the states provided benefits to cover two thirds of lost wages, and in most states the maximum weekly benefit was less than the national poverty level for a family of four. In addition, programs frequently did not cover all injuries and provided even less comprehensive coverage for occupational diseases.

In its 1972 report, the National Commission concluded, “The protection furthered by workmen’s [sic] compensation to American workers presently is, in general, inadequate and inequitable.”¹ It proposed five basic objectives for workers’ compensation systems:

• 1.“Broad coverage of employees and of work-related injuries and diseases,”
• 2.“Substantial protection against interruption of income,”
• 3.“Provision of sufficient medical care and rehabilitation services,”
• 4.“Encouragement of safety,” and
• 5.“An effective system for delivery of the benefits and services.”

Based on these objectives, it made 84 recommendations, 19 of which it considered essential.

These essential recommendations became a benchmark for judging state workers’ compensation systems. In the 1970s, in light of the National Commission’s report, several bills were introduced in Congress to create federal minimum standards. These bills did not pass. But the National Commission’s report, together with the threat of federal intervention, led many states to enact legislation that provided broader and more adequate benefits, expanding the number of covered workers and increasing levels of statutory benefits. Protection expanded in many states through the 1970s and 1980s.

These improvements, together with a sustained rise in medical costs, led to substantial increases in costs. Between 1984 and 1990, employers’ average costs per $100 of payroll rose from $1.49 to $2.18, an increase of almost 50% (Figure 1). In addition, the workers’ compensation insurance industry was unprofitable in every year from 1984 to 1992.²

FIGURE 1—

Workers’ Compensation Benefits and Costs per $100 of Covered Wages: United States, 1980–2016

Source. Weiss E, Griffin M, Boden LI; National Academy of Social Insurance. Workers’ compensation: benefits, costs and coverage—2017 data. 2019. Available at: https://www.nasi.org/research/2019/report-workers%E2%80%99-compensation-benefits-costs-coverage-%E2%80%93-2017. Accessed January 2, 2020.

This rise in employer costs and decline in insurance profitability led to a counterreformation. From 1990 on, employers and insurers made a concerted effort to push for legislation specifically designed to reduce employer costs. This push was typically framed as a mechanism to improve a state’s attractiveness to employers compared with other (often nearby) states. This led to a workers’ compensation “race to the bottom.”

Over the past three decades, legislative efforts to reduce costs largely did not focus on improving safety or the efficiency of benefit delivery: they focused primarily on reducing both medical costs and cash benefits to injured workers.³ And many of the laws passed since 1990 reduced costs by making it harder for people with occupational injuries and illnesses to receive compensation.⁴

Here are some of the ways that states have attempted to reduce employer costs:

• 1.They have made it more difficult for workers to prove their case. In the past, many states gave workers the benefit of the doubt: the tie went to the worker. Some of these states have changed the standard to “preponderance of the evidence” or “clear and convincing evidence.”
• 2.Some states have required “objective” medical evidence to sustain a worker’s case. This is a substantial burden for some common injuries; low-back pain is a prime example.
• 3.Many states now use the American Medical Association’s Guides to the Evaluation of Permanent Impairment to determine the degree of permanent partial disability. The guides are notoriously stingy. After California adopted these guides in 2005, physician disability ratings dropped more than 40%.⁵
• 4.States have substantially limited the range of compensable injuries. For example, they may rule out compensation for “diseases of aging.” More broadly, they require that the job be the main cause of the injury. The tradition that employers “take their workers as they find them” has been eroded.
• 5.Other states, including California, require that payers apportion disability between work and nonwork causes, with benefits paid only for the work-related fraction of disability. This both reduces benefits for those injuries and increases the cost of demonstrating eligibility.
• 6.States have developed public antifraud campaigns targeting workers. These campaigns have stigmatized claim filing. This is despite evidence that worker fraud is rare and that employer and provider fraud involve much greater sums than does worker fraud.
• 7.The “grand bargain” underlying workers’ compensation provides benefits to workers on a no-fault basis and shields employers from tort liability because workers’ compensation is the worker’s exclusive remedy. In recent decades, legislative “reforms” often have made it difficult or impossible for workers to qualify for workers’ compensation benefits, but they nevertheless preclude workers from bringing tort suits against their employers.⁴
• 8.Finally, in recent years, there have been efforts to replace workers’ compensation programs with employer-designed disability programs. These programs provide even lower and less-frequent benefits, limit which injuries and diseases are compensable, and yet still protect employers from tort liability. The Oklahoma legislature passed such a law, but it was struck down by the state’s supreme court. Employers in other states have, however, continued to push for this approach.

Over the past 20 years, studies have demonstrated that many injured workers entitled to workers’ compensation benefits do not receive them.⁴ They have also shown that the benefits provided do not come close to replacing two thirds of lost earnings,⁶ the standard codified by the National Commission.

The failure of workers’ compensation means that the costs of occupational injuries and diseases are being transferred away from this dedicated system of social insurance and outward—to families, communities, and other social programs. Many families do not have the savings to cover the earnings lost following a workplace injury. In 2016, only 24% of families had liquid savings of $400 or more⁷; racial and ethnic minorities have less wealth than Whites. And other social programs, such as the Supplemental Nutrition Assistance Program, are currently under attack.

We need a new national commission. We need federal standards that state workers’ compensation systems must meet. We need to end the race to the bottom (https://bit.ly/2MykOxV).