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Workers' compensation faces new challenges.

Workers' Compensation Faces New Challenges

When asked about challenges facing the American workers' compensation system during the next decade, a seminar panelist replied, "workers' compensation is so close to my heart that it's giving me heartburn." One need only consider the 1988 loss and expense ratio of workers' compensation claims to understand the reason for his answer: It was 118 last year.

According to Thomas Rittenhouse, director of risk management for Gencorp, Inc., the greatest workers' compensation challenge to be met in the 1990s will be to correct problems that exist in the system. "I would suggest that we clearly and honestly define the problems and choose the solutions that are most consistent with the original objective of workers' compensation, which is to provide wage and medical benefits to employees for injury or death occurring in the course of employment," he said.

In Mr. Rittenhouse's view, one of the biggest problems facing the system is the inequitable distribution of benefits between seriously- and not-so-seriously injured workers. "I don't like the fact that workers with truly serious injuries still receive inadequate benefits, while employers continue to bear an increasing burden due to extravagant awards from less serious injuries," Mr. Rittenhouse said. He added that permanent total disability benefits for a worker who is totally disabled at the outset of disability are inadequate, and when overtime due to inflation is computed into the equation, the benefits grow progressively more inadequate.

`Nightmare on Elm Street'

"Why can't we provide adequate benefits to employees who are totally disabled in the course of employment?" he asked. "I suspect we can't because if we did the 20 percent of a man, 30 percent of an arm and 10 percent of a hand disability claim would wreak economic havoc on all employers." In such a case, Mr. Rittenhouse believes the concept of limited liability under workers' compensation would be akin to a "Nightmare on Elm Street." However, he maintained that if partial disability benefits were limited to wage loss, medical and reasonable rehabilitation, "we could afford to provide an adequate benefit to the totally disabled."

According to Mr. Rittenhouse, a more compassionate system would favor permanent total and rehabilitation benefits before all other benefits. "In recent years, we have witnessed the tragedy of asbestos," he said. "Thousands of men and women have suffered total disability and death as a result of their jobs. Did the workers' compensation system provide them with equitable compensation? I think not. Perhaps some people would say thank God it didn't have to. Those who feel that way are ignoring the primary criterion which will ultimately decide whether workers' compensation is working or not."

An issue that goes hand in hand with the question of whether or not to provide compensation to the totally disabled is exactly how to define the term total disability. The current accepted definition strays from pure physical disability and relates, in part, to the capacity to perform a specific job.

"The definition should be structured in terms of physical incapacities, not in terms of vocational incapacities," Mr. Rittenhouse said. "The system cannot afford to pay permanent total settlements to people who are not totally disabled, and also pay adequate benefits to people who are totally disabled. In my opinion, both reason and compassion tell us that the current allocation of benefits is not right."

A `Two-Pronged' Problem

Another "two-pronged" problem cited by Mr. Rittenhouse is the difficulty case workers have in distinguishing between work-related and non-work related injuries and their subsequent inability to effectively evaluate the injury.

"The crux of both these problems is that workers' compensation is almost always a remedial statute requiring that the common law rule of liberal construction be used during interpretation. Moreover, a preponderance of evidence standard gives way to an evidence to support the finding standard," Mr. Rittenhouse said. These legal constructions are the principal reasons why stress, occupational disease, permanent partial benefits, unlimited medical and lawyers may overwhelm the system.

"A doctor, not a lawyer, should determine whether physical exertion at work or 95 percent blockage in three arteries caused your heart attack," he said. "A doctor, not a lawyer, should determine whether or not you are ready to return to work. It really is not that difficult to obtain a consensus of informed professional medical opinion on these conditions; however, it is impossible to obtain unanimity on any one of them." Mr. Rittenhouse believes that putting the employee and the employer on equal footing under the statute and using a preponderance of evidence standard will be essential for the survival of the workers' compensation system in the next decade.

"I caution you not to mistake the symptoms for the problem," Mr. Rittenhouse said. "At the turn of the century we will look back at the last decade of this millennium and see that occupational disease did not run rampant through the workplace; that employees are a little older but are not senile; that America has not yet become a welfare state; and that state and federal bureaucrats are still arguing about who can do the best job."

Complex Claims Increase

As the baby boomer generation gets older, fewer claims will be submitted, but their severity will increase. That is the view held by Richard Victor, executive director of the Workers' Compensation Institute. "Complex claims will increase due to specific diseases of aging like hearing loss, cancers and joint diseases," he said. "In addition, new occupation disease claims will increasingly be filed, and they could be as ubiquitous as eye strain from too much work at a video terminal." Mr. Victor added that mental stress will also find its share of workers' compensation claimants. "That's a tough nut to crack because it goes to the heart of what is supposed to be compensated," he said. "Issues of diagnosis, causation and what states will allow all challenge the dispute resolution process of workers' compensation."

According to Mr. Victor, the use of alternative dispute resolution is a key factor in keeping workers' compensation claim costs down.

A Symbiotic Relationship

Keeping the lines of communication open is also espoused by Edward Welch, director of the Bureau of Workers Disability Compensation for the Michigan Department of Labor. But Mr. Welch believes that such symbiosis must also occur between employers and employees to have real impact.

"Employers should treat their workers like football players, like part of a team," he said. "That way you can guard against two divergent employee philosophies when it comes to workers' compensation claims. One is the `all I want coming is my fair share philosophy;' the other is `I want every dime I can get outta this.'"

One way to avoid such bad attitudes is to pay a simple sick call at the hospital. "You'd be surprised how many workers, after sticking the company with a claim, utter lines like, `I gave that company the best years of my life, and no one came to see me.' All it takes sometimes is a visit from a first line supervisor, human resources person or adjustor." Mr. Welch added that it is important to remember that being injured and out of work may be the worst time in their lives. "In many cases, these people have always supported their families, but we only see them at their most difficult juncture."

In the words of Gary Countryman, president and chief executive officer of Liberty Mutual Insurance Group, "Are the problems confronting workers' compensation part of pernicious pattern, or just an emerging trend that the private insurance industry cannot deal with effectively?" In Mr. Countryman's view, one way "out of the wilderness" of high costs and growing litigiousness is for the workers' compensation system to align with its only natural constituency, the business community that it serves.

"You have the clout to improve the system, we don't," he admonished employers. "We must join in battle to win it." Mr. Countryman said he is not asking for a "burst of altruism" or any charitability, but instead, action based on self-interest. "We can provide risk spreading, loss control and dispute resolution capabilities," he said. "But in the long run, the business community is going to pay for every last dollar of 50 workers' compensation systems that exist. Liberty Mutual and the insurance industry at large isn't going to pay."

PHOTO : An attendee gets the lay of the land upon arriving in Atlanta. RIMS members "bag it"

PHOTO : courtesy of Hartford Steam Boiler. A check for $63,960 is presented to Spencer Foundation

PHOTO : Chairman James C. Newton Jr.
COPYRIGHT 1989 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Author:Johnson, Tom
Publication:Risk Management
Date:Jun 1, 1989
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