Total workers compensation benefits are dropping nationwide, and Rhode Island’s benefits are plummeting faster than the national average, a study published by the National Academy of Social Insurance shows. Total workers’ compensation benefits nationwide fell from $43.4 billion in 1995 to $42.4 billion in 1996, a 2.4 percent drop, according to the national academy’s latest survey published in March. It plans to release statistics for 1997 through 1998 in December. But preliminary numbers suggest that the statistics will continue to show that benefit payments are falling, as they have since the early to mid 1990s, said Daniel Mont, a senior research associate for the academy.
Rhode Island’s benefit payments – which include medical and cash payments – dropped from $153 million in 1995 to $122 million in 1996, a decline of 21 percent. Of that $122 million, $53 million was paid by private carriers, $32 million by the state fund, and $37 million by companies that self-insure, according to the academy.
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The declines nationally and locally are a sharp reversal of the trends of the 1980s and early 1990s, when workers’ compensation benefit payments skyrocketed, peaking in 1992 at $45.2 billion.
Several factors are pushing payments downward, Mont said. Nationwide, reported accidents are down, in part because employers have become more conscious about workplace safety, Mont said. Also, several states have tightened their regulations on injuries for which employees are eligible to be compensated. Meanwhile, the economy has been shifting steadily toward a service base, which produces fewer injuries, he said.
“There has been an increased focus on savings because of the large workers’ comp costs of the 1980s,” Mont said. But he added that as certain injuries are taken off the list of what injuries can be claimed by workers for compensation, “There isn’t as much reason to report (them).”
In a statement, John F. Burton, dean of the School of Management and Labor Relations at Rutgers University – who chaired the academy’s study panel – said: “The decline probably stems from a variety of factors, including fewer accidents, improvements in workers’ compensation programs, and a reduction in the generosity of those programs.”
Increased efficiency by insurance carriers is the main reason Rhode Island’s payments are going down, said Donald Vass, president and chief executive officer of Beacon Mutual Insurance Co., which is the workers’ compensation insurance provider of final resort in Rhode Island. During the 1980s and early 1990s, when the state was in the midst of a workers’ compensation crisis, insurers were guaranteed administrative fees and their losses were covered by a risk pool, Vass said.
The system provided little incentive to be efficient, Vass said. That changed in the early 1990s when the state General Assembly enacted reforms that led to the creation of Beacon Mutual Insurance – originally through a $5 million loan. Beacon took over the risk pool in 1992, and now carriers are forced to take responsibility for the losses they write, Vass said.
“In the late ’80s the system was in crisis – there were a lot of overpayments of benefits,” Vass said. “At this point the benefits are being paid fairly and objectively the way they should have been.”
Insurers have responded to the changes by becoming more efficient. For example, there is less overloading of claim staffs, Vass said, allowing claims to be administered and managed more effectively.
Sheldon Sollosy, president of Manpower Services, chairman of Beacon
Sheldon Sollosy, president of Manpower Temporary Services and chairman of the board of Beacon, said benefit payments are going down because claims are going down. In the 1980s, he said, insurers were primarily interested in collecting premiums and placed little emphasis on workplace injury prevention programs.
Generally speaking, industry has improved its attention to workplace safety over the past 20 years, said Kipp Hartmann, the Occupational Safety and Health Administration’s local area director. Still there are a good number of people getting hurt on the job, and many of them are suffering ergonomically caused injuries, most of which are quite preventable, he said.
“Employers clearly have a much (greater) awareness of the federal requirements of safety and health, and we’re seeing significant compliance out there in industry,” Hartmann said.
The number of total reported workplace injuries has declined significantly since 1990, according to the state Department of Labor and Training. Total reported injuries have dropped from 40,390 in 1990 to 33,745 in 1998. However, there were only 31,985 reported injuries in 1997, according to the department.
Frank Montanaro, president RI AFL-CIO
While insurers have become more efficient and workplace safety programs have become more prevalent, the number of people seeking to take advantage of the system has declined, since there is now less money to be paid out as result of the reforms of the early 1990s, said Frank Montanaro, president of the Rhode Island AFL-CIO. A decline in the overall state employee population may also be contributing to the decline in benefit payments, Montanaro said.
“We don’t have any where near the amount of abuses today that we had years back when people were taking advantage of the system,” he said. “When the changes went through, there was a decrease in the amount of money that was available to be paid out.”
