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Study: Workers' compensation does not cover majority cost of injuries

The workers' compensation system in California, like all workers' compensation systems, is designed to ensure that employees who suffer injury on the job or suffer a work-related illness receive fixed compensation without having to sue their employer for the injury. In this sense, filing a workers' compensation claim is similar to filing an insurance claim and is considered a substitute for a lawsuit against an employer. The benefits a worker receives comes from a state workers' compensation fund. According to a recent study, the majority cost of workplace illnesses and injuries are not actually paid from the system. Instead health insurance, public benefits and other disability funds cover most of the cost-a statistic that draws question to the effectiveness of the workers' compensation system.

In California, workers injured on the job receive medical care and disability benefits meant to cover wages lost to injury. According to a study published in the Journal of Occupational and Environmental Medicine, nearly 80 percent of the costs of workplace illnesses and injuries are paid by employer-provided health insurance, Medicare, Medicaid, Social Security, other disability funds, employees and other payers. The authors of the study say the cost shifting of workplace injuries from the workers' compensation system to other systems, entities and the employees artificially lowers the workers' compensation premiums employers pay to cover medical care and lost wages for employees injured on the job. In reaching their conclusion, the authors of the study examined different sets of data from government and nonprofit organizations, including the National Council on Compensation Insurance and the Bureau of Labor Statistics.

The lead author of the study, a professor of public health sciences at the University of California-Davis, calculated the yearly costs of occupational injuries and illnesses in 2007 to be around $250 billion. Almost $70 billion of the amount was spent on medical care and the remaining $180 billion was spent on payments for lost wages. Building on that information, the professor examined what parties covered the costs. In the recent study, the professor showed that only 21 percent or $51.7 billion of the costs of occupational injuries and illnesses were covered by the workers' compensation system. The professor also identified the sources that covered the remaining 79 percent of the cost.

The professor found the medical costs for work-related injuries and illnesses were paid by the following sources:

  • Workers' compensation: $29.89 billion
  • Other non-workers' compensation health insurance: $14.22 billion
  • Workers and their families: $10. 38 billion
  • Medicare: $7.16 billion
  • Medicaid: $5.47 billion

The professor also broke down the source of coverage for costs related to disability benefits paid for lost wages. Again, workers' compensation, though designed to totally cover the cost, only covers a fraction of the total cost in lost production costs. The majority of lost wage costs are covered by other sources, such as workers and their families, state disability funds and the Social Security Disability fund.

If the cost of occupational injuries and illnesses that is covered by workers' compensation is subsidized by other sources, then current workers' compensation premiums are lower than they should be. In addition, the author of the study suggests the low premiums may not encourage employers to provide safer workplaces.

The study offers suggestions to change the workers' compensation and the state of cost shifting away from the system, thereby further ensuring a safer workplace:

  • To lower premiums, premiums should be based on company-specific injury experience rather than industry-wide estimates.
  • To reduce administrative costs, encourage more states to adopt single-payer government-managed systems.
  • To encourage use of the system, eliminate the stigma frequently associated with filing workers' compensation claims.

If you have suffered injury at work, contact an experienced workers' compensation attorney to ensure you receive proper compensation.

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