Rousmaniere: The Future of Two Cities

04.26.2017


By Peter Rousmaniere

The City of Work Injuries is shrinking in population while the City of Non-Occ Absences expands. During the Trump Administration, these trends are sure to persist. At some time they will change the workers’ comp industry as we know it.

When and how? I predicted in 2015 a scenario for the 2020s by which the current workers’ compensation would incrementally convert to a more privatized worker benefit placed on a platform shared with non-occupational absence protections that employees demand. These include short term and long term disability, paid sick leave, and paid parental leave.

President Trump jumped the gun in its first month by airing the idea of paid parental leave. In his address to Congress on Jan. 20, he proposed “to help ensure new parents have paid family leave.” 

Demographics have made the workers’ comp system less and less aligned with worker concerns. (To be sure, some sectors where the risks of very high injury costs are elevated, such as construction and mining, might stay entirely in the workers’ comp system that we know.)

The City of Work Injuries is Shrinking

Recent history paints the workers’ comp industry as mature, and in fact shrinking. Injury frequency has declined and benefits have been flat.

Frequency of injuries with lost time declined by an average annual rate of about 3.3% from 2012 and 2015. This follows an average annual decline from 2002 through 2012 of about 5.5%, relatively fast over the past 25 years and probably due to great declines in  higher risk jobs in the mid and late 2000s. 

Between 2012 and 2015 the average cost of lost time injuries, as reported by NCCI, rose by under 1% a year on average. The total amount of benefits paid, according to the National Academy of Social Insurance, declined by an average annual rate between 2012 and 2014 of about 5%.

This picture of maturity extends even to California. Between 2008 and 2015, total benefits barely budged. The only reason that total losses rose by 4% for the entire period was that loss adjustment expenses shot up.

Long-term Trends

Focus on trends in serious injuries. The workers’ comp system is designed for these injuries. Were all work disabilities very brief, the elaborate machinery of mandatory workers’ comp systems would be under-used and of questionable value to workers and employers.

By serious injuries, consider the Bureau of Labor Statistics’ estimate of the number of lost time injuries of more than 30 lost workdays. In 1993, there were 3,500 such injuries for every million workers. In 2012, the rate dropped to 1,600 per million workers. I project that in 2022 there will 1,000 per million workers.

These declines, past and future, are split about evenly between work injury risk reductions across all industries, and the decline in the size of higher risk workforces. For instance, manufacturing had both a big improvement in safety and a big drop in workers.

The City of Non-Occ Absences Grows

Let’s start with the president’s proposed paid parental leave.

The Integrated Benefits Institute reports that the U.S. is the only developed nation that does not guarantee paid parental leave. Only 12% of U.S. private sector workers have access to paid family leave through their employer. The benefit is legally mandated in California, New Jersey and Rhode Island, and pending in Maryland and New York. The benefit becomes widely known in 2015 due to initiatives by internet sector employers including Netflix, Microsoft, Amazon, Facebook and PayPal. Bank of America and Wells Fargo came to the table in 2016. 

IBI interviewed companies with the benefit. For finance sector companies (which more likely represent the typical American employer than do IT firms), the average paid leave is eight weeks for moms and two weeks for dads. They offer the benefit to attract and keep talent, express corporate social values, and to standardize leave policies. These employers have learned how to leverage their family and medical leave act (FLMA) and disability experiences, and to pay attention to return-to-work by new parents.

Paid parental leave is a tiny slice of all employee leaves in America. The IBI estimates $128 billion a year is spent in wage replacement alone, itself a small share of associated productivity loss and medical costs. Workers’ comp wage replacement is $25 billion, the balance composed of sick leave, short and long term disability, and FMLA. Workers’ comp accounts for only 12% of total lost days. 

How will workers’ comp merge onto common platform with non-occ? Not due to initiative within the workers’ comp industry. I know of no state that is even considering this future. I expect nationwide firms with good employee relations will work with a bi-partisan though Republican-initiated group in Congress, perhaps to add a major new section to ERISA which will include a floor for the quality of benefits.

ABOUT THE AUTHOR

Peter RousmanierePeter Rousmaniere is widely known throughout the workers’ compensation industry, both for his writing and consulting experience. Based in the picture perfect New England town of Woodstock, VT, he is a regular on the conference circuit, and is deeply in tune with trends and developments within the industry. His passion is writing and presenting on issues largely related to immigration, and he maintains a blog on the subject at www.workingimmigrants.com.

 

 

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