Hassle-Free Health Coverage: The Ins and Outs of Workers' Compensation Introduction
So far, we have concentrated on how the various kinds of personal health care coverage work. Outside of -- or in addition to -- those kind of coverage is a health care financing mechanism that comes from the corporate world: Workers' compensation.
Workers' comp programs are designed to provide a satisfactory means of handling occupational injuries and disabilities. As a consumer, you'll probably never buy a workers' comp policy...but you may care a lot about how the things work if you're ever hurt on the job.
In terms of claims paid each year, workers' comp systems account for more health care than indemnity plans, managed care plans or Medicare.
Workers' comp is administered on the state level. And every state requires employers to provide some
form of workers' comp benefits for their employees. Some history helps explain why the programs are so important.
The industrial revolution gave birth to new industries and brought together great numbers of employees: unskilled, undisciplined -- and often selected without regard to character. Workers were exposed to hazards not in existence before, such as rapidly moving power belts, moving machine parts, hot or molten metals, poisonous gases and chemicals. More often than not, workers toiled in places that were poorly lighted and ventilated. Labor was plentiful, wages were low, and workers were exhausted from long hours on the job.
Industrial development proceeded rapidly, though at the expense of the workers. An industrial accident could leave a worker injured with little or no recourse in response to injuries or lost wages.
During the 19th Century, if you were injured on the job you only had one source of redress against your employer: Institute a suit under common law.
There were no written laws or statutes with regards to the employer/employee relationship. Common law cases favored the employer -- the only way you could recover money for injuries was to prove that the injuries were due to your employer's negligence.
Negligence was defined as "the lack of that degree of care that a person of ordinary prudence would exercise under like or similar circumstances." In this case, person refers to employers -- but it's a good idea to keep in mind, generally.
When an injured employee could establish that injuries were the result of the employer's negligence, damages could be recovered. However, the common law allowed the employer three defenses against negligence suits brought by employees for injuries sustained in the course of employment. The three common law defenses were:
- assumption of risk,
- contributory negligence, and
- fellow-servant rule.
The assumption of risk defense stated that an employer could not be held liable for injury to an employee who voluntarily enters into the employment, knowing about any unsafe conditions of the premises or work, and who understands the risks likely to accompany the employment.
The contributory negligence defense held that even if the employer violated his duty to provide a safe workplace and was negligent, the injured employee was not entitled to recover damages if the employee's own negligence had contributed to the injuries.
This concept evolved into comparative negligence, or consideration given to the extent to which each party's negligence contributed to the injury. That remains a big employment issue today.
The third principle, the fellow-servant rule, stated that an employer was not liable for an injury to an employee injured solely as a result of the negligence of a fellow servant (that is, a fellow employee), who was acting within the scope of his or her employment. This was an often-used argument.
Needless to say, getting your employer to pay during the industrial revolution wasn't exactly a piece of cake. This inability increased the number of industrial injuries and diseases and resulted in a large number of uncompensated workers and their families. Eventually, this began to pose serious social problems and impact the nation's economic health.
Today, with the enactment of workers' comp laws, things are done somewhat differently. Now, the law holds that the employer shall assume the costs for benefits that the law says the employee is owed.
You -- the employee -- pay nothing for this protection. Your employer includes the cost of workers' comp benefits in the price charged for products or services just as he includes other operating costs -- such as salaries, rent, telephone expenses, supplies and other operating and production expenses.
This coverage isn't completely free. In most situations, employees have given up their right to file suit against employers for workplace injuries in exchange for the benefits. Some classes of employees are exempt from the laws, and suits may still be filed for damages which are not covered by the compensation law. In those cases which do fall outside the law, the three common law defenses are still available to the employers.
The workers' comp system benefits both you and your employer. Even though your employer loses the right to defend himself in cases where he may not have been negligent, he can predict the costs necessary for employee injuries by means of his workers' compensation insurance premium. In most states, he can even reduce the insurance premium by reducing losses through implementing a safety program.
Through the 1980s and 1990s, however, the cost of workers' comp exploded. In 1991, the system cost employers $70 billion -- that's almost twice what they paid in 1985. The impact was even wider than the 1986-to-1991 statistics suggest. The cost of the average workers' comp claim more than tripled in ten years, passing the $20,000 mark.
While all state systems have the same objective -- to provide benefits to injured workers -- the similarity ends there. State laws differ not only in detail, but in almost every major feature. So, it's important that you look into the features that make up your state laws and figure out how the program is administered in your state.
