Universal Workers' Compensation

Saturday, December 30, 2006 | 0

By Richard S. Geiger

Author's Note: At a workers' compensation seminar sponsored by the Insurance Council of Texas, I participated in a panel discussion concerning House Bill 7 enacted by the 79th Legislature (2005) and what further changes need to occur to make the workers compensation benefit system in Texas better. At that panel discussion, I asserted that the Legislature should require every employer to provide workers' compensation benefits to all employees. Since that time, I have heard rumblings from some stakeholders critical of my support for this change. I was asked to prepare this paper for inclusion in the Insurance Council of Texas Workers' Compensation newsletter. The views expressed in this paper are mine alone. They do not necessarily represent the viewpoint of the Insurance Council of Texas or any of its member companies.

Why is universal workers' compensation important to Texas?

Despite all of the technological advances that have been seen during the 20th and the first part of the 21st centuries, the U.S. economy remains dependent upon the workers who compose its workforce and the value that labor brings to our economy. Those workers are exposed to varying degrees of risk of bodily injury inherent to the workplace. Work related disabilities may strike workers and create impairments that reduce or end their productivity. The common law regarding compensation for work injuries developed when most employers had few employees. Little thought was given to the value per se that a worker's skill and experience brings to the production of goods and services. This is the critical element that labor brings to the employer and is a valued asset of the worker. The simple fact is that the common law, both at the time workers' compensation statutes were enacted, and today, is inadequate and inequitable for injured workers.

Under the common law remedy, the worker, as plaintiff, has to prove the employer's negligence that the employer failed to provide a safe place to work. Even with the removal of the defenses of contributory negligence, the fellow servant doctrine, and assumption of risk, the injured worker is still at a disadvantage under the common law remedy.

Workers' compensation had its origin in Europe and migrated to the United States in the second decade of the 20th century. Between 1911 and 1920, all but six states passed workers' compensation statutes. Since then, all states have adopted this protection for workers and employers.

Workers' compensation brought with it the concept of no fault liability. That is basic to all workers' compensation benefit systems. Under this arrangement, the employer accepts liability for work place injuries and the employee agrees to limited, but specific damages for work place injuries.

In 1970, Congress passed the "Occupational Safety and Health Act of 1970." As a part of that act, the National Commission on State Workmen's Compensation Laws was established and directed to study and evaluate state compensation laws. Its purpose was to determine if those laws provide an adequate, prompt, and equitable system of compensation. The Act further required that the commission make a detailed statement of its findings and conclusions, "together with such recommendations as it deems advisable."

The Commission identified five major objectives for a modern workers' compensation program. As stated in their report1:

The four basic objectives are:

* Broad coverage of employees and work-related injuries and diseases;

Protection should be extended to as many workers as feasible, and all work-related injuries and diseases should be covered.

* Substantial protection against interruption of income;

A high proportion of a disabled worker's lost earnings should be replaced by workmen's compensation benefits.

* Provision of sufficient medical care and rehabilitation services; and

The injured worker's physical condition and earning capacity should be promptly restored.

* Encouragement of safety.

Economic incentives in the program should reduce the number of work-related injuries and diseases.

The achievement of these basic objectives is dependent on an equally important fifth objective:

An effective system for delivery of the benefits and services.

The basic objectives should be met comprehensively and efficiently.

At the time of its report, barely half of the states mandated employers to provide workers' compensation coverage. Now, Texas is the only state that does not mandate coverage.

On October 20, 2004, the Texas Department of Insurance Workers' Compensation Research Group issued its report on "Employer Participation in the Texas Workers' Compensation System: 2004 Estimates". This was an extension of similar surveys done in 1993, 1995, 1996 and 2001.

According to those estimates for 2004, 38% of employers are non-subscribers, which is up from a low of 35% in 2001. Previous years were higher. 24% of employees in Texas are employed by non-subscribers, up from a low of 16% in 2001. This is the highest percentage of non-subscriber employment during the period for which estimates have been made.

Highest non-subscription (54%) was in the industry type of arts/entertainment/accomoda-tion/food services". Among Texas employers, the highest non-subscription rate (46%) is among employers of one to four employees. In 1995, the percentage was 55%.

The survey sought the top five primary reasons why subscribing employers said they did purchase and did not purchase workers' compensation coverage. The main reason given for not purchasing (37.9%) was because "workers' compensation insurance premiums were too high". Perhaps more telling than this was that 37% of non-subscriber employers asserted that they would never consider purchasing workers' compensation insurance. Unfortunately, such an attitude is fostered by many employer groups in Texas.

The proponents of universal workers' compensation must consider the arguments against it. The current argument by employer groups is "why should we require employers to be in a broken system with its high costs and inefficiencies?" A similar argument is made by the proponents of school vouchers, who assert that the public school system is a failure and parents should be given the alternative of school vouchers and private education.

Both of these arguments, of course, seemingly justify desired alternatives. If the workers' compensation system and the public school system are "broken", then the only appropriate legislative answer is to attack the weaknesses of the systems and make them work as they should.

Proponents for non-subscription also argue that most non-subscribers purchase occupational and accident coverage as a substitute for workers' compensation and that the average costs to employers are 40% less than workers' compensation. This undocumented assertion is probably not true. Most significantly, these plans provide benefits for brief periods of time following an injury, most typically two years. At that time income replacement and medical cost coverage both come to an end. The proponents of non-subscription lack any reliable data to support the assertion that "most non-subscribers" provide alternative coverage.

The dilemma for the worker is that an insurance program providing wage replacement (disability insurance) and one providing health care coverage both almost without exception contain the workplace injury exclusion. This means that the employee employed by a non-subscriber cannot protect himself or herself if the employer does not provide workers' compensation coverage. Probably no other insuring situation contains such a roadblock.

The employee of a non-subscriber is deprived of the ability to protect himself. The workers of Texas deserve better. There is also a significant benefit the employer gets from being a subscriber. Workers' compensation is the exclusive remedy of the employee for workplace injuries. Just as the employer is deprived of common law defenses, there is the off-setting benefit of limited liability of the employer which is assumed by the insurer.

Those familiar with the debates on workers' compensation in the Texas Legislature know that universal coverage is favored by workers organizations such as the AFL-CIO and opposed by employer organizations. The discussions of universal coverage have not been in the forefront of any recent legislative initiative that might succeed. Labor has lost some of its political clout, but employers haven't. The issue of universal coverage is unlikely to succeed in the legislature any time soon, but it is one that should.

Richard S. Geiger is an attorney who is of counsel with the Dallas-based law firm of Thompson, Coe, Cousin & Irons, LLP. This article was reprinted with permission from the Insurance Council of Texas.

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