© 2008 property casualty insurers association of america cas spring meeting june 17, 2008 second...
TRANSCRIPT
© 2008 Property Casualty Insurers Association of America
CAS Spring MeetingJune 17, 2008
Second Injury Funds:From the Beginning to the End?
Keith Bateman, Vice President, Workers Compensation
Property Casualty Insurers Association of America (PCI)
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Will Cover
Philosophical Tension Underlying Second
Injury Funds
History of Second Injury Funds
Variation in SIFs
Pros and Cons
Recent Developments
Future Influences?
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Philosophical Tension
Balancing Interests ofEmployer and Employee
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Employee Interest
Socializing (Spreading) Cost of Industrial
Injury
Non-Fault
(Limited) Income Protection
Taking Worker As He Walked Through Plant
Gate
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Employer Concerns
Compensate Only Industrial Injury
Don’t Penalize Employer Good Citizenship
Maintain the Limited Income Protection
Concept
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History
Rationale for Creation
Growth
Number
Scope and Size
Changing Nature
Movement to Repeal
Impact of Changing External Environment
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Rationale
Encourage Employment of the Handicapped
Provide Economic Relief to Employer
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Growth
Number
A Rose by Any Other Name
First New York 1916
By Start of World War II, 12-14
By End, 34
By Early 1950’s, 41 States
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D.C.
SIF High Water Mark
Wyoming was the only state not having Second Injury Fund
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Growth
Scope and Size Changes in Pre-existing Conditions Covered Elimination of Knowledge Requirement Move Away from Permanent Total Soft Tissue/Cumulative Injury Rather than
Traumatic Weakening of Impact on Employment
Requirements 1970’s Expansion of Workers Compensation Changes in Life Expectancy
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Movement to Repeal – The Drivers
Assessment Growth
Unfunded Liabilities
ADA and State Anti-Discrimination Laws
Contraction of System
Accounting Standards
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Movement to Repeal – How Far To Go
Repeal/Close v. Tightening Entry
Example of Tightening
Restore Knowledge Requirement Massachusetts
1991, South Carolina 2003
Increase Employer Retention
New York 1996
Also, some funds closed because little used – tough
entry requirements or inadequately funded
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D.C.
Closures 1990-94 1995-2000 2001-2005
2006-Present
No Fund
Closed in 2000, but reopened
Repeals/Closures
UTCO
NM
SD
NE
KS
OK
MN
AR
KY
AL GA
FL
SC
WV
NY
VT
CT
RI
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Impact of Changing External Environment
In addition to those mentioned earlier, the following have been suggested as factors influencing SIF:
Factors Leading to Fund Expansion Expansion of Compensability Expansion of Benefits
Lifetime or Long Duration (Indemnity and Medical) Medical Treatment Improvements and Technology Indexing Benefits Limits on Settlement
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Factors Leading to Fund Contraction
Contraction in Compensability
Limits on Duration
Cut Backs in Indexing
Moving PPD to Impairment Basis
Apportionment
Unfortunately, don’t know of any credible studies
that have tested these
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Variations in SIFs
Differences
Treatment of Pre-existing Conditions
How Combined Effects are Treated
Knowledge Requirement
Conditions Covered
Impact of Employability
Degree Disability/Impairment Increase
Thresholds
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Differences (continued)
Relief Provided to Employer Financing/Administration Single Purpose v. Multi-Purpose
Multi-Purpose Concurrent Employment Uninsured Employer Cost of Living/Supplemental Benefits Occupational Diseases or Special
Disease/Injury Provisions
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Pros and Cons
Arguments For
Need Hasn’t Changed Provides Employer Incentive to Hire Protects Income Maintenance While Removing
Employer Perception of Unfairness ADA and Anti-Discrimination Acts Have Had Limited
Impact Funding Problems may not be due to Second Injuries Closing Funds and Running Off Likely to Increase
Employer Short Run Costs Encourages Anti-Worker Legislation
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Arguments Against
No Evidence Hiring of Handicapped Encouraged ADA and Anti-Discrimination Laws make SIF
Obsolete Undermines Internalization of Cost/Safety Incentive Because Pay-As-You-Go, Unfunded Liabilities Build
Up Apportionment Eliminates Need Financial Impact Of Combined Effect Overstated Negative Impact of Loss-Based Assessments on
Insurers Increase Transaction Costs Funds Subject to Legislative Raids
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Recent Developments
Repeal Verses Reform Differences Among Employers and Among the
Industry
Alternatives to Second Injury Funds The Oregon Approaches
State Activity Limited Activity in 2008 Fewer Enactments
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The Future
Is the Second Injury Fund Era Ending?
Can’t answer, but here are some questions to think about.
Have been several decades of greater concern about employer costs than about benefits. What if:
Political climate moves to the left? Will it matter if economy doesn’t grow rapidly? Has the move to a world economy changed the
political environment?
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The Future (continued) What impact will an aging workforce and population
have on both politics and the views about pre-existing conditions?
Will science allow us to better separate out occupational and nonoccupational factors in impairment, disability, and causation or will it complicate determinations?
Which produces more transaction costs – apportionment or second injury funds?
Will the return of our citizen soldiers from the Middle-East produce the same pressures as World War II?
How will the movement from national to international accounting standards impact how liabilities must be recorded?