What will Donald Trump’s election mean for workers’ compensation? Although we don’t have a crystal ball, we do expect to see some changes.
Since workers’ compensation is administered by the states, any presidential election would have little direct effect on comp. However, it can have indirect effects.Some employers and insurers feared that the Department of Labor was gearing up to create another National Commission on Workers’ Compensation, modeled after the National Commission on State Workmen’s Compensation Laws created by the Occupational Safety and Health Act of 1970. The Commission evaluated state workers’ compensation laws using five major objectives. Its 1972 report, which concluded that “… [state workers’] compensation laws are in general neither adequate nor equitable,” led to major system reforms.
In 2016, the Department of Labor published Does the Workers’ Compensation System Fulfill Its Obligations to Injured Workers? In this report, the DOL pointed out that workers’ compensation insurance costs paid by employers declined by 59 percent between 1991 and 2013. From the early 1990s to 2013, benefits per $100 of payroll have declined from a high of $1.65 to $0.98 in 2013.
During the same time, the share employers pay of the overall costs of occupational injury and illness—an estimated $206 billion in 2013—has shrunk to only 20 percent, according to a study published in the Journal of Occupational and Environmental Medicine (Leigh JP, Marcin JP. “Workers’ compensation benefits and shifting costs for occupational injury and illness,” 2012;54:445-450). Workers and other social benefit systems, “…including Social Security retirement benefits, Social Security Disability Insurance, Medicare, and, most recently, the Affordable Care Act…” are picking up the slack.
Another report, The Uncompensated Worker: The Financial Impact of Workers’ Comp on Injured Workers & Their Families, by Work Comp Central, expanded on the same theme. It took a closer look at the shortfalls the current workers’ compensation system creates for injured workers in several ways:
- Formulas for calculating replacement wages: Most states calculate benefits using a percentage of a workers’ pre-injury income. In the majority of states, benefits are at least 15 percent lower than their pre-injury wages.
- Waiting periods: Most states have a waiting period of one or more days during which an injured worker receives no pay, despite having a valid occupational injury.
- Benefit caps: Most states cap benefits at a certain maximum weekly amount, regardless of the worker’s pre-injury wage.
A Hillary Clinton administration might have used these studies to springboard stronger safety and health initiatives. However, many industry and political observers expect the Department of Labor under Donald Trump’s administration to back away from any commissions, studies or federal workers’ compensation standards. They expect to see few, if any, new safety and health regulations proposed and also much less emphasis on enforcement of existing regulations.
The Affordable Care Act and Workers’ Compensation
Donald Trump’s promised rollback of the Affordable Care Act could create some problems for workers’ compensation. The ACA has covered some 25 million people who previously lacked health insurance. Having health insurance coverage tends to reduce cost-shifting to the workers’ compensation system, as workers with health insurance have less temptation to pass off non-occupational injuries as occupational injuries.
Consulting firm Cognizant’s report, The Affordable Care Act and Its Impact on Workers’ Compensation, looked at Massachusetts’ Health Care Reform Act to predict what effect the ACA might have on cost-shifting. Published in 2015, before the ACA was fully implemented, the report found that emergency room visits billed to workers’ compensation dropped by 7.2 percent in Massachusetts post-reform.
It also pointed out that the Affordable Care Act encourages prevention and wellness by covering many of these benefits with no deductible. Wellness initiatives reduce employers’ medical costs about $3.27 for every dollar spent. Wellness programs can help reduce comorbidity factors, such as obesity, that increase the costs of treating occupational injuries and illnesses. Therefore, any change that discourages wellness or prevention could have an effect on employers’ workers’ compensation costs.
Finally, Trump has promised massive investment in infrastructure projects. These types of projects usually involve heavy construction—i.e., high-risk jobs, which could increase injury rates.
The bottom line? Aside from minimizing any expansion of OSHA regulation or enforcement, a change in administration will have little direct, immediate impact on your workers’ compensation. Indirect changes could take a while to be felt in the system.
For more information on trends affecting your workers’ compensation costs, please contact us.