Rousmaniere: A Bigger Future for Workers' Comp?

At the annual Workers’ Compensation Research Institute (WCRI) conference in March this year, former executive director Richard Victor presented a scenario in which workers’ compensation claims would rise significantly in the future. His scenario in essence is a basket of provocative and necessary questions. 

To be sure, Victor anticipates that work injury frequency will continue to decline. Due to a very slow growth in the workforce, this will result in 27% fewer injuries in 2030 than in 2017. That’s a reduction of somewhat more than 2% in the number of injuries, year over year, all if you simply project past trends.

However, he said, forces could conspire to drive workers’ compensation claims to a level much higher than what we experience today. He predicts that the absolute number of work injuries will be one third higher in 2030 than they are today. One may not buy his scenario, but concur that he has did a rare thing to suggest what might happen.

Victor, now a senior fellow at the Sedgwick Institute, is actually analyzing lost work day injuries, not workers’ compensation claims. There is no central register of workers’ compensation claims. He and others (including myself) use estimates by the Bureau of Labor Statistics, which draws upon a large sample of employers to construct a wealth of numbers and rates, and which has been doing this extensively since the early 1990s.

First, what is the effect of aging? The workforce has been and is aging pretty rapidly. This appears to be driven both by the large numbers of Baby Boomers who are reaching their late 60s, and by financial pressure on aging households. Older workers are at greater risk of injuries and have longer durations of disability for the injuries they suffer. Compare, for instance, equal sets of 40-year-old and 60-year-old workers, and assume that if injured all stay out on injury for the median days of their age cohort. The 60-year-olds will incur 57% more work disability days. This looks alarming, yet the demographic shift is not, Victor cautions, to be large in the context of a 130 million — plus workforce. So, the impact on total lost work day injuries will be relatively minor, an increase of injuries at 5%.

Next, what about tight labor markets? Much more impactful for Victor is a labor shortage, triggering a 20% rise in injuries above his initial 2030 projection. Demographers have known for some time, but the public, and many in our field, have yet to fully appreciate how little the native-born population has been growing. We owe almost all of our population growth to immigration. Consider that the foreign-born share of our workforce in 1990, which marks the advent of the workers’ compensation that we know, was 9.3%, but is now about 17%.  And, in view of new young workers, some 30% of all children now either were born outside the country or are children of at least one immigrant parent. In his address, Victor predicted that the Trump Administration’s cutback on immigration will make the job market even tighter than it is today.

Immigrants are over-represented in key jobs that have relatively high injury risk, do not require a lot of formal education, nor require English proficiency. They include housekeeping, construction and warehouse work.

Victor translated a tight job market into higher workers’ compensation claims (here he referred expressly to claims) by citing a study of workers’ comp claiming in Massachusetts in the 1980s. At least one attendee questioned the usefulness of this study. Victor’s main point was that in tight labor markets, employers lower their hiring standards. They hire more workers that “are less capable and have lower attachment to the labor force,” he wrote me after the conference.

Third, what about the possible impact of health insurance changes? He referred to case shifting, a shift of cases that would ordinarily be covered by health insurance to workers’ comp claims payers. He projects that workers covered by health insurance will shift their cases to workers’ comp, causing claims to rise by 25%. Workers not covered by workers’ comp will, per Victor, cause claims to rise by 15%.

These cases, Victor was quick to point out, do not involve fraud. They are for conditions, such as knees and shoulders, for which work causation is plausible. And the shift is due to the financial distress on households caused by high deductible health plans (HDHPs). RAND Corp. said that “multiple studies confirm that individuals use less health care when faced with health plans requiring higher cost sharing, such as HDHPs.” The Kaiser Family Foundation reported that the average deductible for people with employer-provided health coverage rose from $303 to $1,505 between 2006 and 2017.

Victor said that weakening the Affordable Care Act will cause many workers to lose their health insurance. For them, there is no health insurance backup. “Un-insurance,” Victor said, citing a RAND study, drives up workers’ comp claims.

One argument that he did not make for the case shifting scenario is that very many work-related injuries today do not result in workers’ comp claims. (I’ve completed a study of that.) Victor’s projections are much more plausible if the claiming rate rises.

My goal here is not to critique Victor’s projections. I think much can be said that labor-saving mechanization will be employers’ ultimate response to chronic labor shortages. And, if there were a systemic shifting of cases from group health to workers’ comp, we might well have documented that so far. But it is important to think through his reasoning, if only to come to other conclusions.   

ABOUT THE AUTHOR

Peter Rousmaniere is widely known throughout the workers’ compensation industry, both for his writing and consulting experience. Based in the picture perfect New England town of Woodstock, VT, he is a regular on the conference circuit, and is deeply in tune with trends and developments within the industry. His passion is writing and presenting on issues largely related to immigration, and he maintains a blog on the subject at www.workingimmigrants.com.

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