Cost Shifting in Workers' Comp

Thursday, April 30, 2015 | 1

Cost shifting in workers’ comp is an increasing concern.

Cost shifting comes in various forms.

Employer premium fraud disadvantages honest employers and distorts the insurance market. We recently saw high-profile arrests of officials at a Los Angeles area sewing contractor for True Religion jeans. The sewing subcontractors are alleged to have misrepresented payroll in order to avoid workers’ comp premium.

Applicant attorneys continue to believe that the UR and IMR system is driving many injured workers to use other health insurance or public resources to cover treatments.

One irony about this is that cost shifting of medical treatment may be coming at a time when the Affordable Care Act curtails the ability of health insurers to refuse payment for workers’ comp-caused preexisting conditions.

Cost-shifting concerns are not unique to workers’ comp, however.

UC Berkeley’s Labor Center has recently produced an important research brief, “The High Public Cost of Low Wages.”

Researchers at the Labor Center (Ken Jacobs, Ian Perry and Jennifer MacGillvary) document that federal and state governments are providing huge subsidies to low-wage working families. They conclude that:

“Overall, we find that between 2009 and 2011, the federal government spent $127.8 billion per year on these four programs for working families and the states collectively spent $25 billion per year on Medicaid/CHIP and TANF for working families for a total of $152.8 billion per year. In all, more than half – 56 percent – of combined state and federal spending on public assistance goes to working families.”

Here are the working families’ share of enrollment for four big programs:

• Medicaid & CHIP (Children’s Health Insurance Program)- 61%.
• TANF (Temporary Aid to Needy Families)- 32%.
• EITC (Earned Income Tax Credit)- 74%.
• SNAP (Supplemental Nutrition Assistance Program)- 36%.

According to the report, California’s budgetary cost for enrollment of low-wage workers in these four key programs is at least $3.67 billion (note that the report “did not include all of the public assistance programs supported by federal and state dollars” due to lack of available data on some programs). The authors of the report claim that the federal cost for working families for the four programs is $13.73 billion.

The study charges that 52% of fast food workers, 46% of child care workers, 48% of home care workers and 25% of college part-time faculty are in families with at least one family member relying on one of the four public assistance programs.

The UC Berkeley study doesn’t look at usage of the federal and state programs by work-disabled individuals.

So what does all of this have to do with workers’ comp?

For me, the moral of the study is that we need to dig deeper to find how workers’ comp is interacting with usage of various state and federal programs.

For example, when eligibility for temporary disability indemnity payments was capped at 104 weeks (with very limited exceptions), did that force many seriously injured workers disabled after two years to rely on federal and state social net programs?

Has the large volume of UR denials and the poor likelihood of prevailing on IMR appeals in fact delayed treatment, causing workers to eventually resort to forms of public assistance?

Are low-wage workers on such a precarious economic tightrope that delays and denials in workers’ comp push them into federal and state programs?

Do members of some ethnic and racial minorities avoid workers’ comp altogether, relying on various forms of public assistance instead?

The current leadership at the DIR and DWC have repeatedly indicated their interest in formulating data-driven policy.

But as far as I’m aware, there has been a paucity of research on how California workers’ comp interacts with these federal and state social net programs.

Maybe it’s time to have CHSWC dig into these issues. Perhaps CHSWC could contract with the Labor Center to conduct such a study.

Julius Young is an applicants' attorney with the Boxer & Gerson law firm in Oakland, California. This column was reprinted with his permission from his Workers' Comp Zone blog.