The National Academy of Social Insurance (NASI) issued a report recently that they say shows benefits paid to injured workers in the US have continued to decline, while covered employment and wages continue to rise. This was a surprise for many, since, with the exception of Oklahoma reforms in 2014, no state has taken any action to reduce the payment structures for injured workers in recent years. This leads us to ask, is the interpretation of the data by NASI seriously flawed?

The short answer is, yes, I believe it is.

In a news release, NASI reports that, “Employee coverage has increased fairly steadily over the past two decades, but employer costs have fallen from just over $1.50 per $100 of covered wages in 1997 to $1.25 in 2017. Worker benefits decreased even more, from $1.17 twenty years ago to $0.80 per $100 of covered wages in 2017.” They also report that:

  • Covered jobs increased in all jurisdictions except Alaska, North Dakota, West Virginia, and Wyoming. Covered wages increased in all jurisdictions except Wyoming.
  • Benefits per $100 of covered wages decreased in all jurisdictions except Missouri and Hawaii, where they increased by $0.09 and $0.04, respectively.
  • Costs per $100 of covered wages, or standardized costs, decreased in all but five jurisdictions, with the largest percent decrease (38.3 percent) in Oklahoma.

First, a reduction in employer costs does not by itself equate to an automatic reduction in worker benefits. There are many factors that could result in those reduced costs seen by businesses around the nation. There has been a marked decrease in incident rates during the 20-year period used in NASI’s study. According to the Bureau of Labor Statistics, there were 2,834,500 non-fatal workplace injuries and illnesses reported in 2018. Compare that to 5.3 million in 2002, the earliest year available in BLS archives. On the job deaths have seen a dramatic decline over the period this study covers. In 2017 workplace fatalities were 19.8% lower than in 1997, the first year included in the NASI study. Other factors, including technology and improvements in medical care also affect the total costs absorbed by employers.

And they have nothing to do with the total benefits paid to workers.

The other big oversight, in my humble and non-statistically trained opinion, is the NASI study dependence on “benefits per $100 in payroll,” particularly when combined with mandated state benefit caps, could potentially skew the results into appearing as something they are not. Wages have increased significantly in recent years, but state benefit caps have not increased at the same pace. While this means that some injured workers may today see less benefits as a percentage of their pre-injury workplace earnings, it does not necessarily imply that benefits were reduced.

Average hourly wages for our nation in 1997 for were $12.29. Today that number is $23.70. That is an increase of 92.8%. Compare that to maximum benefit caps and you will see they have largely been outpaced by that wage growth. In Illinois for example, the max benefit payment for PPD in 1997 was $796.97. In 2019 it is $813.87, an increase of only 2%. Higher earning injured workers in Michigan have fared a bit better, as their cap has increased 72.8% since 1997, from $533 to $921. That is still less than the pace of growth in wages across the nation.

While some states have kept pace with wage growth in their rate structure, many, if not most, have not. That does not, nevertheless, mean that workers are being paid less in benefits. A reduction in payment relative to current wages does not automatically mean that benefits have been cut, as the NASI assessment of their study would have you believe. The truth is that benefit payments have been increasing, but not at the pace of wages people earned prior to their injury.

Some will say this doesn’t matter; that the study shows that injured workers’ benefits aren’t keeping up with the times. The difference is important, because if you wish to create a solution, the problem must first be accurately defined. Simply telling people that “benefits paid to injured workers in the US have continued to decline” offers a skewed narrative that serves no one well. It places the focus primarily on private players in the industry, when the issue may be a much broader concern for workers’ compensation.

As previously indicated, knowing the problem is only half of the solution. But you still need to know what that real problem is.

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