Al Smith - January 19, 2010
Montana Trial Lawyers Association
Workers Compensation - Another Bailout?
January 19, 2010
Al Smith , Montana Trial Lawyers Association
Workers’ Compensation - Another Bailout?
Over the last several months I have been spending quite a lot of time on Montana’s workers’ compensation system. I have been attending meetings of the Governor’s Labor Management Advisory Council and an interim legislative committee both tasked with looking at various workers’ compensation issues, and I have been participating in the promotional efforts of Work Safe MT to lower the rate at which Montana workers are injured on the job and to get injured workers back on the job sooner.
So, what is workers’ compensation? Workers’ Compensation was developed early in the last century to meet two needs: the need of employers to protect themselves from lawsuits brought by injured workers; and, the need of injured workers to obtain prompt medical treatment, rehabilitation and fair compensation for injuries that they received on the job. Employers gave up the right to have injured workers prove that they were injured due to the negligence of the employer. Workers gave up the right to sue the employer for negligence.
Employers and workers relied upon the state to enact the laws and procedures governing the Workers Compensation system. And, they relied upon the state to manage a state insurance fund, through which employers could purchase coverage to pay for their injured employees.
The system, while not perfect, worked reasonably well for decades. Private insurance companies, seeing an opportunity for profit, also offered workers’ compensation insurance. Workers generally received prompt medical treatment, rehabilitation and fair compensation for their injuries.
In the 1980's the Montana system experienced problems, chiefly medical and rehabilitation costs started rising rapidly, and, the state bureaucratic system was increasingly inefficient. To cover increased costs, insurance rates rose. This led to employers demanding lower rates.
Heeding the employers’ call, the state, made a political not a business response. It lowered rates, but it did not adequately address the costs and inefficiencies that had led to the problems that caused higher rates in the first place. Soon, contrary to good fiscal practices, the state was not bringing in enough rate revenue to cover the costs of the system. Private insurers were unable to compete with the state’s below cost rates.
It didn’t take long for the system to implode. A staggering debt was left behind, to be paid through the Old Fund Liability Tax by employers who had been paying artificial, below cost rates and by employees, whose only fault was that they were powerless to force the state to operate the system in a fiscally responsible manner.
Needed changes were made and the system began to operate more efficiently. Not satisfied with the savings from a more efficient system, the legislature then began a series of cuts in benefits to be paid to injured workers.
Trial lawyers have fought for workers as benefits have eroded. Unfortunately, legal action can only help so much. And, legal gains that help injured workers are usually taken away in the next corporate dominated legislative session. Additionally, legislation has specifically limited an injured worker’s ability to obtain legal representation. Why? Because workers who are not represented can be more easily denied the compensation and benefits they are entitled to, thereby keeping costs down.
Employers still receive the full benefit that was the original basis for the Workers’ Compensation system: they are protected from lawsuits brought by injured workers. Workers, however, no longer receive the full benefit of their quid pro quo agreement. All too often, injured workers no longer obtain the prompt medical treatment, rehabilitation and fair compensation that they bargained for when they gave up the right to sue their employer for negligence.
Montana’s workers’ compensation system offers a strange paradox - we have some of the highest insurance rates in the country, and our benefits are among the lowest. The primary reasons for Montana’s high workers’ compensation costs are our high rate of on the job injuries, high medical costs and injured Montanans are out of work longer than injured workers in most states. The chief culprit is the sad fact that Montana workers are more likely to be injured or killed on the job than workers in most other states, regardless of the type of work - our loggers, our miners, our office staff, our sales force, all categories of Montana workers are injured more frequently.
The Governor’s Labor Management Advisory Council, the Economic Affairs interim legislative committee and WorkSafeMT are looking at ways to reduce workers’ compensation costs. And, there is even some discussion of doing something to improve benefits for injured workers, though there is decidedly more effort and enthusiasm directed towards reducing costs. For further information on what’s being considered we have links on our website at www.monttla.com.
I haven’t met anyone who isn’t upset with recent news of large bonuses being paid to executives of banks that owe their continued existence to taxpayer funded bailouts. Unfortunately, injured workers are all too familiar with that scenario. While benefits for injured workers have been cut, employers have received dividends and executives at the State Fund have enjoyed pay raises and bonuses. Funny isn’t it, how businesses can decry a living wage or even an increase in the minimum wage, and then defend bonuses and raises for executives as necessary to keep them on the job? Funny, except to those injured workers who see the bonuses and raises coming from the monies denied them as compensation for their injuries, or from their tax dollars.
Let’s hope the current efforts to revamp Montana’s workers’ compensation system yield more than just another injured worker bailout of employers and insurers.
This is Al Smith for the Montana Trial Lawyers Association.
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