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Opt-Out Plans and Other Changes Reducing Benefits for Injured Workers

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On October 20, 2015, ten members of Congress sent a letter to the United States Department of Labor (DOL), questioning changes to state worker’s compensation laws. They state that since 2004, when the DOL stopped reporting on states’ compliance with the 19 essential standards for worker’s compensation, states have reduced compensation to workers by limiting benefits or making it harder for workers to qualify for them.

At the center of the issue is the new “opt-out” laws enacted by some states that allow employers to set up their own worker compensation plans. These plans often have restrictions that end up hurting workers and reducing their ability to pay for medical care and disability.

“State workers’ compensation laws are no longer providing adequate levels of support and compensation for workers injured on the job,” the members of Congress wrote; “instead, costs are increasingly being shifted to the American taxpayers to foot the bill.”

Workers Forced to Bear the Brunt of Injury Costs

A series of reports by National Public Radio (NPR) and independent newsroom ProPublica increased awareness of the issue back in March 2015. According to these reports, 33 states have cut benefits to worker’s compensation, with only seven states in the union following at least 15 of the 19 essential standards established by the National Commission on State Workmen’s Compensation Laws in 1972. Four states follow less than half of the standards.

The Occupational Safety & Health Administration (OSHA) also conducted their own investigation into the issue, releasing their report in June 2015. They noted similar findings, in that changes in state-based workers’ compensation programs “have made it increasingly difficult for injured workers to receive the full benefits (including adequate wage-replacement payments and coverage for medical expenses) to which they are entitled.”

OSHA went on to state that employers now provide coverage for only about 20 percent of the overall cost of workplace injuries and illnesses through workers’ compensation plans, and that the rest is being borne by injured workers, their families, and taxpayers.

New Plans Have Reduced Benefits

The original idea of workers’ compensation was to protect companies and workers at the same time. Workers agreed that they could not sue employers for injury compensation, and employers agreed to pay medical bills and wages while injured workers recovered, regardless of fault.

But since oversight by the DOL stopped, states have been making changes that have shifted the balance. Among the changes are the new “opt-out” plans available in some states like Texas and Oklahoma. Companies can opt out of workers’ compensation plans and develop their own. In their investigation of 120 of these types of plans, NPR and ProPublica found that many of them cover medical care for only about two years, cutting off benefits at that time and leaving workers with costs they can’t afford.

Some plans deny benefits if workers don’t report injuries by the end of their shifts, or within a very limited time frame, even if employees are in the hospital or heavily medicated and unable to report the incident. Some also pay only a lump sum death benefit rather than ongoing benefits to help families cope with situations where members were killed on the job.

Workers Turning to Other Programs for Help

OSHA notes that other changes in the workplace— such as misclassifying employees as independent contractors and using more temporary workers—are increasing work injuries and the number of workers unable to pay for medical care after injuries. “The change in employment relationships also reduces the incentives for companies to assume responsibility for providing safe working conditions, which may result in increased overall risk of workplace injury,” they state in their report.

Without workers’ compensation to cover costs, employees are turning to other federal programs like food stamps and disability to try to manage. According to the Center for Economic and Policy Research, there’s been an increase in the number of workers receiving Social Security Disability Insurance over the last quarter century—an increase that is only partly explained by demographic factors.

“At the national level,” they state in their report, “there is a clear correlation between the sharp decline in WC benefits over the last quarter century and the rise in DI benefits.” They go on to state that people are turning to DI because they are less able to collect benefits from workers’ comp.

For workers injured on the job who work for companies who have opted out of workman’s comp, there is one silver lining—they can sue the company for damages. Workman’s comp protects companies from liability, but once they choose to supply their own plans, they give up that immunity.

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  1. Betsy Lee says:
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    This is very concerning to see this trend in States alloying companies that ability to opt out. We have come such a long way in holding companies accountable for providing a safe work place. If there are changes to be made in the system why not hold employees accountable for unsafe practices?

    Who pays for the attorney if an injured worker does not have recourse?

    Is there another agenda here?