Don't Tinker with Workers Compensation Success Story

Posted by Christopher Geehern on Oct 9, 2013 10:04:00 AM

The Massachusetts workers compensation system is, well, working.

Workers CompensationOnce on the brink of financial collapse, the commonwealth’s system for paying the lost wages and medical bills of workers injured on the job is now a model for the rest of the country. A landmark reform passed in 1991 has reduced average workers compensation premiums 60 percent, improved workplace safety and redirected hundreds of millions of dollars to employers for investment in growth.

And that’s exactly why lawmakers should tread lightly in reviewing more than 30 bills that have been filed proposing changes to the workers compensation system. AIM supports some of these changes – including one that would increase the funeral benefit for workers killed on the job – but overall believes it is dangerous to tinker with one of the great economic and policy success stories of the past 30 years.

“By every measure, the reforms of 1991 are working and they were beneficial to both employees and employers.  This is a tremendous success story.  Rather than funding a broken system, hundreds of millions of dollars are made available to companies to invest in creating jobs and improving safety.  We have a system that works,” said John Regan, Executive Vice President of Government Affairs at AIM, in testimony yesterday before the Legislature’s Joint Committee on Labor and Workforce Development.

The turnaround of workers compensation is by now a familiar tale to most Massachusetts employers.

The system hurtled out of control from the 1980s until late 1991 as excessive benefit duration spawned an unhealthy mentality for workers who were urged to hold out for huge lump-sum settlements.  One in five workers made more while collecting workers compensation benefits than they did while earning pre-injury wages.  The voluntary insurance market collapsed, resulting in an assignment of 65 percent of workers' compensation premiums to the assigned risk pool.   

The 1991 reform stabilized the system and subsequently made the system work for both employers and workers:

  • Attention paid to workplace safety is up and accident frequency is down;
  • The number of disputed cases continues to decline;
  • The amount of insurance premium written through the assigned risk pool is modest;
  • Insurance rates are down more than 68 percent since 1993;
  • Insurers are coming to Massachusetts – 357 licensed workers compensation insurers.   

Regan outlined for legislators four principles by which AIM evaluates any proposal to change the workers compensation system:

  1. AIM supports a cost effective workers compensation system which provides for injured workers during their period of injury, helping them achieve maximum medical improvement, and allowing them to return to work earning a living for themselves and their families as soon as is safely possible.
  2. Workers compensation is a cost of doing business, which during the past several years has gone from among the highest in the nation to a more appropriate level. Massachusetts' workers' compensation costs must remain within the national average for all states. In fact, the Massachusetts system is characterized as a relatively low cost/high benefit state. At 60 percent of pre-injury wages, given the tax exempt status of compensation and given that many other work-related deductions for benefits are not withheld, take home pay for workers collecting benefits is at the appropriate level. We strongly oppose any change that will add cost to the existing system, placing Massachusetts companies at a competitive disadvantage relative to other states.
  3. AIM believes that any discussion regarding change to the current workers compensation system must be preceded by a full and fair cost/benefit analysis, which determines the practical impact of any change to the system on all parties, and on bottom-line costs.
  4. AIM advocates that all parties to the workers compensation system — workers, their families and the business community —be treated fairly, neither particularly advantaged nor disadvantaged by any proposed change. AIM is particularly concerned about increasing or incurring costs that do not accrue to the benefit of workers but to others associated with the workers compensation system.


Topics: Workers Compensation, Massachusetts Legislature, Issues

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