EDITORIAL: Reform Should Start with the Title

Monday, December 23, 2002 | 0

EDITORIAL:

Workers' compensation is at the top of most everyone's lost of those things people love to hate.

Injured workers are upset because the benefits are slim and take too long to get, assuming your claim is accepted. Employers complain that rates are too high and keep getting higher. Insurance companies always seem to lose money writing comp, end up in liquidation, or just plain stop writing. Professionals constantly fight for higher fees because there is no parity with other lines of work. There seems to be endless call for "reform" but no two people can agree on what needs to be reformed.

Let me postulate that in fact what really needs to be "reformed" is people's expectations, and that starts with the term "workers' compensation".

One of the real problems with workers' compensation is that we have forgotten what it is for, and why it serves a very real purpose.

Workers' compensation is the single most important social system in the modern economy. Virtually every industrialized nation in the world has some form of workers' compensation because it makes good business, social and economic sense. People get hurt working. If people are not working they use resources that could be directed elsewhere and business suffers because replacement people need to be hired and trained.

When workers' compensation was created a hundred years ago, it was a compromise - workers' received immediate assistance and employers had protection from large lawsuits. Both of them received some protection from events that could bring financial ruin.

Now it seems that all stakeholders are complaining that it is this very workers' compensation system that is causing them financial ruin. There are several problems with that mindset, and it all stems from expectations.

First, workers' compensation was never intended to replace a worker's income. It was intended only to be a supplement to income or savings in the event a wage earner got hurt and couldn't work. That we as a people have not saved for emergencies, such as not being able to work, is not a workers' compensation problem - it is an individual problem that has taken on large social implications (how many times have we heard economists say that the overall savings rate in the US is deplorable?).

Second, many business people today say that the cost of workers' compensation insurance is driving them out of business, or making them seriously consider taking their business elsewhere. This is an excuse that has been played so many times by California business that it is sounding like the proverbial worn out record, and yet the state's economy continues to grow year in and year out, with the influx of new business outpacing the exit of business by a comfortable margin every year.

In any legally operated competitive industry, all businesses face the same risks. It is up to management to control those risks. The difference between businesses in any given industry is how well risk is managed. In workers' compensation, management of risk means ensuring a safe work place, staying on top of claims, and being an active participant in returning the injured worker to employment status. Every business faces the same insurance rates as its competitor - it is up to business owners or executives to manage risk so that rates stay competitive.

Third, everyone complains about fraud. True, fraud does exist. People steal; always have, always will. But theft exists in every industry, and it is a business risk that becomes a management issue.

No, the real problem with workers' compensation today is that everyone wants it to be something other than what it was intended to be. People's expectations have become inflated because we have become a society of entitlement, and workers' compensation is viewed as an entitlement, by all stakeholders, not just injured workers. And just like a spoiled child, when we are given something, it is never enough, because it is our "right" to have it.

The first order of business towards workers' compensation reform is to get people's expectations adjusted. The first and simplest way is to rename the system. Forget calling it "workers' compensation". A better term is "work injury insurance". That is what the system is, and what it is for. The term "work injury insurance" means that the injured worker gets "work injury benefits" - no sense of entitlement in that term. There is no "compensation", which by most dictionary definitions is synonymous with remuneration, or the giving of money for a service or loss.

Changing the name has occurred in the past to reflect changes in our society - the system used to be called "workmans'" or "workmens'" compensation before massive changes in workplace demographics fostered gender neutrality in the title - and there is no reason not to do it now.

Before we reform any more laws, let's reform the title of the system to represent what it truly is supposed to be, and perhaps our expectations will then align with what was originally intended over 100 years ago.

David DePaolo, Editor in Chief, workcompcentral.com