Workers' Compensation: Coverage, Benefits, and Costs, 1990-91

Article excerpt

Workers' compensation programs provide protection to workers a and their families. The programs compensate for lost wages and medical expenses incurred as a result of work-related injuries or illnesses. Survivor benefits are also provided when the disabilities result in death. In 1991, about $16.11 billion in medical benefits and $25.3 billion in wage-loss compensation was paid in settlement of claims filed for disabled or deceased workers.

These benefits were paid by private carriers, by State funds, or by self-insuring companies as determined by laws in each State. The employer's cost of providing workers' compensation coverage generally varies according to risk, industrial classification, and experience rating. Nationally, such costs were approximately 2.4 percent of payroll or about $590 for each of the 93.6 million protected employees. This article examines the recent changes in coverage, in benefit levels, and in employer costs and the factors influencing such changes. Over the past decade, workers' compensation benefits have increased by 157 percent and employer costs by 143 percent. In the same period, the number of covered employees has risen 22 percent and the amount of covered wage and salary payroll, 77 percent.

Payments to beneficiaries covered under workers' compensation programs in the United States rose more than 10 percent to $42.2 billion between 1990 and 1991, the eighth consecutive year of double-digit increases. Premium costs to employers rose by less than 4 percent to $55.2 billion in the same period, while the number of workers covered under the various State and Federal programs decreased to 93.6 million, a decline of 1.6 percent from 1990. This drop reflected a similar decline in the total work force, and the proportion of covered workers remained about the same at 87 percent of all wage and salary workers.

The workers' compensation program provides medical care, hospitalization benefits, and income-maintenance protection to workers whose disabilities are the result of work-related injuries or illnesses. The income-maintenance benefits are intended as partial replacement for lost wages. The program also provides survivor benefits to the dependents of deceased works whose deaths result from job-related accidents and/or occupational diseases. Before the enactment of workers' compensation laws, an injured worker could recover damages only if he or she could establish that the incident was due to the negligence of the employer. Currently, proof of employer negligence is not a prerequisite for benefit payment.

As the workers' compensation system grows, it continues to be of significant interest to administrators of the Social Security system because both are programs that provide for payments to disabled workers and to the survivors of workers. The 1965 Amendments to the Social Security Act provide for a reduction in Social Security payments so that total benefits under both programs do not exceed the higher of either 80 percent of a worker's former earnings or the total family benefit under Social Security.(1) The gaps and overlaps in coverage and the benefits and costs incurred under both the Social Security and workers' compensation programs are vital considerations in the effective implementation of the Social Security program.

The Federal Act of 1908 was the first workers' compensation law in the United States. This legislation provided limited benefits for certain Federal employees engaged in hazardous work. By 1911, workers' compensation legislation had been enacted in nine States and, by 1920, all but seven States had established such programs. However, it was not until 1949 that all States had programs to furnish income-maintenance protection. Today, workers' compensation consists of separate programs in 50 States and the District of Columbia, and two Federal programs: the Federal Employees Compensation Act covering civilian Federal Government employees and the Longshoremen's and Harbor Workers' Compensation Act covering longshore and harbor workers. …