Workers' Compensation: Coverage, Benefits, and Costs, 1989

Article excerpt

Approximately 93.7 million wage and salary workers were covered under the State and Federal workers' compensation programs in 1989. Monthly cash benefits totaled $34.3 billion and total cost to employers reached $48.0 billion. The workers' compensation programs' intent is to provide protection to workers and their families that will compensate for lost wages and medical expenses. Workers are protected under the separate laws of 51 jurdictions (including the District of Columbia) and two Federal programs--the Federal Employees Compensation Act and the Longshoremen's and Harbor Workers' Compensation Act.(1) In addition, the Federal Black Lung program--a specialized workers' compensation program--provides monthly cash benefits to totally disabled coal miners, their dependents, and their survivors. Medical benefits are also payable on the basis of a diagnosis of pneumoconiosis (Black Lung disease).

Benefits are paid to workers whose disability is the result of a work-related injury or illness and to the dependents of workers whose death resulted from a job-related accident or an occupational disease. Of the $34.3 billion in benefits paid in 1989, approximately $20.9 billion was paid as partial compensation for lost wages and $13.4 billion was paid for medical expenses.

Employers paid nearly $48.0 billion in 1989, about 10.8 percent more than in 1988, to provide workers' compensation protection to their employees. These costs include premium payments to private insurance companies, State insurance funds, and self-insurance benefits and administrative costs.

Although workers' compensation laws vary from one jurisdiction to another, the underlying principle is that employers should assume the costs of occupational disabilities without regard to fault. Thus, employers are relieved of liability from common-law suits involving negligence and any resulting economic losses are considered production costs. Before the enactment of workers' compensation laws in the United States (the first of which was in 1908) a injured worker could recover damages only if he or she could establish that the injury was due to the negligence of the employer. By 1949, all States had established programs to provide income-maintenance protection to workers and their dependents in the event of disability or death from work-related injury or illness.

About three-fourths of all compensable claims for workers' compensation benefits and one-fourth of all such cash benefits paid involve temporary total disability--that is, the employee is unable to work at all while he or she is recovering from the injury, but is expected to recover fully. Benefits are paid under most State laws as long as the disability lasts and the condition continues to improve with medical treatment. If the temporary total disability becomes permanent, most State laws provide weekly benefits either for life or for the duration of the disability.

When the worker is permanently disabled for any type of gainful employment (which occurs in less than 1 percent of all compensable workers' compensation claims), he or she may be eligible for cash benefits under both workers' compensation and the Social Security Disability Insurance (DI) program. The 1965 Amendments to the Social Security Act provide for a reduction in Social Security benefits so that total payments under both programs do not exceed the higher of 80 percent of a worker's former earnings or the total family benefit under Social Security before the offset.(2)

The Social Security Administration (SSA) has prepared annual estimates of experience under State workers' compensation programs, by type of insurer, since 1942, when it developed methods of estimating the amount of benefits provided under each State program. These annual data were gathered from government and nongovernment sources before they were aggregated at the national level. Emphasis was placed on developing measures of the scope and adequacy of benefits and on measuring interstate variations. …