Record Profit, Questionable Protections: The State of Workers’ Comp

According to a new report by the National Academy of Social Insurance (NASI), the workers’ compensation industry is more profitable than ever, employer costs are at a 40-year low, but serious questions exist about whether the workers’ compensation system is fulfilling its obligation to those injured or sickened on the job.

In the United States, workers’ compensation is primarily administered at the state level, and the federal government has no oversight authority of state workers’ compensation systems. In 2022, there were approximately 3 million workplace injuries and around 5,500 worker fatalities reported across the country. Younger and older workers, women, workers of color, and immigrant workers all faced heightened risks of disability or death.

Last year, we noted several concerning trends for injured and ill workers that we identified in NASI’s annual report on the workers’ compensation system. This year, we have found additional cause for alarm.

1. Benefits paid to workers injured or sickened on the job are at the lowest totals in 40 years. While some of this may be attributed to a declining number of workplace injuries, this trend started around 1990 when a wave of new laws attempted to alter workers’ compensation systems in many states. In 2014, a National Public Radio and ProPublica investigation found that 33 states had cut benefits for injured workers and/or made it harder to qualify for benefits in the preceding decade. In this year’s report, NASI also notes that the National Council of Compensation Insurance found that from 1999 to 2019, the number of workers’ compensation claims accepted by private insurers in 38 states decreased by a whopping 62%.

2. Workers’ compensation has never been cheaper for employers, but costs are being shifted to workers and the public. The cost for employers to provide benefits to their workers when injured in their workplace is only 2/3 of what it was 20 years ago. While controlling costs for employers is a legitimate concern, it shouldn’t be at the expense of critical protections for workers and their families. In 2015, the Department of Labor highlighted that because of changes to state workers’ compensation laws, the system was shouldering a mere 21% of the cost of workplace accidents. Workers, their families, and their private healthcare were bearing 63% of the cost of the injury, while taxpayers (not employers) covered the other 16%. In fact, programs funded by federal taxpayers, including Medicare, Medicaid and Social Security, had likely kicked in around $30 billion to help cover the gap.

3. Workers are bearing the burden of workplace injuries and illnesses in many ways that go untracked and unreported. Among these “considerable costs” are that workers often forgo benefits because of waiting periods and arbitrary caps on the duration of benefits enshrined in state laws. Also, lost overtime and premium pay are often not taken into account when calculating lost wages. When out of work from an injury, workers also often lose employer contributions to health insurance premiums. Beyond these costs, workers may lose some or all of their ability to perform housework and family care, resulting in new expenses.

Moreover, because workers’ compensation systems can be difficult to navigate, workers often have to hire attorneys to help them with their claims – legal fees average around 20% of the workers’ benefits. In fact, many workers don’t even file for, let alone receive, workers’ compensation benefits because of lack of knowledge or perceived barriers. The report notes that changes since 1990 have made it more difficult for most workers to apply. Evidence indicates that as many as 33% to 69% of work-related injuries and illnesses may go uncounted. The Department of Labor also noted in 2015 that several studies have found that fewer than 40% of eligible workers even apply for, let alone receive, workers’ compensation benefits. A 2019 report found that of 1,200 janitors in the Twin Cities of Minnesota, 56% reported not knowing how to file a workers’ compensation claim. A similar study from the state of Washington in 2022 found that janitors, often women, low-wage, older age, and immigrants, filed a workers’ compensation claim only 45% of the time. The most commonly cited barriers were fear of retaliation and lack of knowledge about the workers’ compensation system.

4. Only a handful of states are actually studying the adequacy of workers’ compensation benefits. In July 1972 – roughly 50 years after the passage of the first state workers’ compensation laws – the National Commission on State Workmen’s Compensation Laws evaluated whether state workers’ compensation systems provided “adequate, prompt and equitable” compensation to injured workers and issued 18 “essential” recommendations. In 2016, the Department of Labor found that states were moving away from, not toward, these recommendations. Furthermore, the NASI report found that workers were “at great risk of falling into poverty” if injured or sickened on the job because of the reforms many states had made to their workers’ compensation laws. More research is clearly needed to study the adequacy of workers’ compensation benefits.

5. Some states are making workers’ compensation coverage optional for employers. As we noted last year, South Dakota, Texas and Wyoming have already changed their state law to make coverage for injured and ill workers optional to some degree, and legislative proposals have been put forward in Arkansas, Oklahoma, South Carolina, and Tennessee to allow for alternative schemes. The International Association of Industrial Accident Boards and Commissions found that opt-out options raise serious questions about whether these alternatives provide injured workers benefits equal to those available under workers’ compensation. These changes are a radical departure from the “grand bargain” struck between employers and workers over 100 years ago, the foundation of the modern workers’ compensation system.

6. Millions of workers remain uncovered by workers’ compensation, and unemployment insurance, because they are not classified as employees. This includes independent contractors, agricultural and domestic care workers, and employees who are misclassified as independent contractors. Many of these workers are low-wage workers, women, immigrant workers and people of color. NASI estimates that around 20 million jobs in the United States lacked workers’ compensation coverage in 2021. Again, when workers not covered by workers’ compensation are injured on the job, they are forced to pay out of pocket for their medical treatment and additional costs are shifted away from the industries benefitting from the injured workers’ labor onto taxpayer funded programs like Social Security and Medicaid.

Every worker deserves to come home healthy and safe at the end of the day and have a voice in creating a healthy and safe workplace. When accidents do occur, workers need to receive the benefits to which they are entitled in a timely manner, and those benefits should provide financial security and peace of mind for themselves and their families. These are the worker protections at the core of the workers’ compensation “grand bargain.”

That’s why we continue to look for ways to collaborate with state workers’ compensation systems, and partner with other federal agencies and research organizations to identify best practices and solutions that improve outcomes for vulnerable workers. From making our claims forms available in multiple languages to making our website more user-friendly, we are tackling barriers and making it easier for workers to get the resources they need. Together, we are working to fulfill our obligation to workers injured or sickened in the workplace and build an economy that works for America’s workers.

Christopher J. Godfrey is director of the U.S. Department of Labor’s Office of Workers’ Compensation Programs and is a member of the Study Panel on Workers’ Compensation Data at the National Academy of Social Insurance.