Staying Alive
Taking a Stand
Many beleaguered entrepreneurs believe political action can help
reform workers' compensation and decrease costs.
"Workers' comp is killing me, so I've become a vocal
thorn in [the government's] side," says Hamman.
"I'm optimistic that this issue will create alliances of
small businesses." Entrepreneurs who have pushed for workers' comp reform have
focused on a few key issues. Working with national trade
organizations, or forming local small-business alliances, as Hauge
has done by creating San Francisco Small Business Advocates, they
have pushed for reform of workers' compensation litigation. One
issue: In many states, workers' comp attorneys are paid by the
hour, which encourages litigation over minor issues, according to
the Insurance Information Institute. Entrepreneurs have advocated
for states to restrict lawyers to a fixed rate for workers'
comp litigation, set more objective means of assessing workplace
injuries, and limit lawyers' ability to advertise so that more
money is spent on injured parties. What's more, entrepreneurs have pushed for reforms that
introduce ways to control workers' comp medical costs,
encourage competition in the insurance market and cut down on
fraud. Some have suggested that states introduce caps on the number
of visits workers' comp recipients can make to medical
specialists, add co-pays and deductibles to workers' comp, let
employers choose workers' comp physicians, and use other
elements of managed care. Even in California, the situation has
begun to improve. "California enacted workers' comp reform
[in October 2003]," says Oxfeld. "It was the result of
businesses in California uniting to pressure the legislature.
Things can change. Legislators do listen." | What Caused the Crisis? | - Rising health-care costs: According to Eric Oxfeld,
president of UWC-Strategic Services on Unemployment &
Workers' Compensation, costs rose because workers' comp
insurance doesn't include solutions to expensive health care,
such as co-pays and deductibles, which traditional medical
insurance uses. And since workers' comp provides unlimited
lifetime medical care, employees are tempted to claim all medical
problems under workers' comp.
- The aging work force: Older employees get hurt and sick
on the job more often, increasing workers' comp costs.
According to the National Academy of Social Insurance, injured
workers aged 45 to 64 were bedridden for an average of five weeks,
compared to about three and a half weeks for those aged 25 to
44.
- Lack of competition: According to the Insurance
Information Institute, 15 of the 39 insurers that failed in 2002
were in the workers' comp insurance business. "Now we put
out 10 bids to cover us and only get two [responses]," says
expert William S. Custer with Georgia State University in Atlanta.
That's because so many insurers are out of business.
- 9/11: September 11 decimated the balance sheets of
reinsurers that provide insurance for insurance carriers.
Reinsurers passed on costs to insurance companies, who passed them
on to clients. September 11 also showed office workers could be at
just as much risk as manual laborers. As a result, some insurance
firms raised workers' comp premiums for professional
businesses, making them equal to those paid by manufacturing firms,
which traditionally paid more for workers' comp.
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Content Continues Below
Joshua Kurlantzick is a writer in Washington, DC.
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