Workers’ compensation insurance is not used nearly enough in the United States to meet the multibillion-dollar cost of workplace illnesses and injuries.
Instead, about 80% of these expenditures are covered by employer-provided health insurance, Medicare, Medicaid, Social Security, and other disability funds, as well as employees and other payers.
According to a study published in the Journal of Occupational and Environmental Medicine, this cost shifting results in artificially low workers’ compensation premiums, which should be used to provide income replacement and medical care for employees injured on the job.
Keep reading to find out why this happens.
What are the alternatives: Medicare, Medicaid, and Social Security?
Regarding alternative sources of coverage for workplace injuries, Medicare and Medicaid are the two most extensive government-sponsored programs.
In 2016, the most recent year for which data is available, Medicare covered 15.5% of all occupational injuries and illnesses, while Medicaid covered 8.6%.
Social Security disability insurance covered another 5.1%
This leaves a much smaller share of workplace injury and illness costs to be picked up by employer-provided health insurance (47.3%), out-of-pocket payments (11.5%), and other sources (17.6%).
How does this cost-shifting affect workers?
A variety of stakeholders bear the cost of workplace injuries and illnesses, but workers and their families are the ones who suffer the most.
In addition to the physical pain and suffering caused by workplace injuries, there is also the financial burden.
According to the Bureau of Labour Statistics, the median time lost from work due to workplace injuries was eight days in 2017.
This can represent a significant loss of income, especially for low-wage workers.
In addition, worker’s compensation only covers a fraction of the medical costs associated with workplace injuries.
How this leaves hardworking Americans vulnerable to injury?
This lack of comprehensive coverage leaves many hardworking Americans vulnerable to serious financial difficulties if injured on the job. If they are unable to work, they may not be able to earn a living and could face mounting medical bills.
In addition, this cost shifting means that employers have no incentive to improve safety in the workplace, as they are not directly responsible for the cost of workplace injuries. This can lead to dangerous and even deadly working conditions for employees.
What does this mean?
Paul Leigh, lead author of the study and a University of California, Davis professor of public health sciences, states:
“Workers’ injuries and illnesses cost much more than current workers’ compensation payments suggest, and the resulting low premiums provide little incentive for companies to promote workplace safety.”
While workers’ compensation insurance premiums totalled $15.6 billion in 2005, this only covered 6.2% of the cost of workplace injuries and illnesses. The remaining costs were borne by employees, other health insurance payers, and taxpayers.
The study highlights the need for reform in the workers’ compensation system to provide better coverage for injured workers and create incentives for employers to improve workplace safety.
Additionally, Leigh discovered that these sources predominantly paid medical costs for occupational accidents and illnesses by aggregating 2007 data from multiple government and non-profit agencies, including the Bureau of Labour Statistics and the National Council on Compensation Insurance:
- Workers’ compensation: $29.86 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
- Social Security: $5.09 billion
- All other sources (including private disability insurance, state disability insurance, and other sources): $3.85 billion
This cost shifting has severe implications for workers and society. Injured workers may be unable to return to work and earn a living, leading to poverty and social instability. In addition, employers have little incentive to improve workplace safety, which can lead to dangerous and even deadly working conditions for employees.
In conclusion, workers’ compensation insurance does not cover most workplace injury costs because of the high deductibles, co-pays, and other out-of-pocket costs that injured workers must pay. For more information on how we can help you, please contact us at 2H Law (619) 374-9320.