Description
In the Learning Activity “Workers’ and Unemployment Compensation” the similarities and differences between these are discussed. List one similarity and two differences presented in the text. Research the two states mentioned in the text where workers’ compensation was not mandatory. Is this still the case? Would this affect your decision to work in either of these states? Please explain. Now, refer to Figure 4.2 and list the pieces of holistic risk that Workers’ and Unemployment Compensation address. Do you feel that you are protected by having these in a job? Why or why not?
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INTRODUCTION
Workers’ and
Unemployment
Compensation
Introduction
Read the content below to learn about workers’ and unemployment
compensation and how this relates to workers’ compensation laws.
This section will also note the need to ensure the development of a
holistic risk management strategy. Complete the Learning Journal
below.
Risks Related to the Job: Workers’ Compensation and
Unemployment Compensation
Workers’ compensation is a state-mandated coverage
that is exclusively related to the workplace.
Unemployment compensation is also a mandated
program required of employers. Both are considered
social insurance programs, as is Social Security. Social
insurance programs are required coverages as a
matter of law. The programs are based only on the
connection to the labor force, not on need. Both
workers’ compensation and unemployment
compensation are part of the risk management of
businesses in the United States.
Workers’ compensation was one of the coverages that
helped the families who lost their breadwinners in the
attacks of September 11, 2001, when New York City
and the state of New York suffered their largest-ever
loss of human lives. Because most of the loss of life
occurred while the employees were at work, those
injured received medical care, rehabilitation, and
disability income under the New York workers’
compensation system, and families of the deceased
received survivors’ benefits. The huge payouts raised
the question of what would happen to workers’
compensation rates. The National Council on
Compensation Insurance (NCCI) predicted a grim
outlook then, but by 2005, conditions improved as
frequency of losses declined and the industry’s
reserves increased. (The workers’ compensation line
has maintained this strong reserve position and has
been helped by a continual downward trend in loss
frequency. Consequently, the industry reported a
combined ratio of 93% in 2006 and projects a 99%
combined ratio for 2007. This indicates positive
underwriting results. However, medical claims
severity [in contrast to frequency] has continued to
grow, as shown in Figure 4.1 “Changes in the
Distribution of Medical vs. Indemnity Claims in
Workers’ Compensation.”)
Workers’ compensation is considered a social
insurance program. Another social insurance program
is the unemployment compensation offered in all the
states.
Figure 4.1 Changes in the Distribution of Medical Versus
Indemnity Claims in Workers’ Compensation*
*2007p: preliminary based on data valued as of December 31, 2007; 1987, 1997: based on
data through December 31, 2006, developed to ultimate; based on the states where NCCI
provides rate-making services, excludes the effects of deductible policies. Source: Mealy,
D.C., FCAS, MAAA, National Council on Compensation Insurance (NCCI), Inc. Chief
Actuary, “State of the line” Annul Issues Symposium (AIS), May 8, 2008, Accessed March
28, 2009, https://www.ncci.com/documents/AIS-2008-SOL-Complete.pdf. © 2008 NCCI
Holdings, Inc. Reproduced with permission.
Links
At this point in our study, we look at the coverage
employers provide for you and your family in case you
are hurt on the job (workers’ compensation) or lose
your job involuntarily (unemployment
compensation). As noted above, these coverages are
mandatory in most states. Workers’ compensation is
not mandatory in New Jersey and Texas (although
most employers in these states provide it anyway).
Later, you will see the employer-provided group life,
health, disability, and pensions as part of noncash
compensation programs. These coverages complete
important parts of your holistic risk management.
You know that, at least for work-related injury, you
have protection, and that if you are laid off, limited
unemployment compensation is available to you for
six months. These coverages are paid completely by
the employer; the rates for workers’ compensation
are based on your occupational classification.
In some cases, the employer does not purchase
workers’ compensation coverage from a private
insurer but buys it from a state’s monopolistic fund or
self-insures the coverage. For unemployment
compensation, the coverage, in most cases, is
provided by the states. Regardless of the method of
obtaining the coverage, you are assured by statutes to
receive the benefits.
External market conditions are a very important
indication of the cost of coverage to your employer.
When rates increase dramatically, many employers
will opt to self-insure and use a third-party
administrator (TPA) to manage the claims. In
workers’ compensation, loss control and safety
engineering are important parts of the risk
management process. One of the causes of loss is
ergonomics, particularly as related to computers. You
would like to minimize your injury at work, and your
employer is obligated under federal and state laws to
secure a safe workplace for you.
Thus, in your pursuit of a holistic risk management
program, workers’ compensation coverage is an
important piece of the puzzle that completes your risk
mitigation. The coverages you receive are only for
work-related injuries. What happens if you are
injured away from work? One trend is integrated
benefits, in which the employer integrates the
disability and medical coverages of workers’
compensation with voluntary health and disability
insurance. Integrated benefits are part of the effort to
provide 24-hour coverage regardless of whether an
injury occurred at work or away from work. Currently,
nonwork-related injuries are covered for medical
procedures by the employer-provided health
insurance and for loss of income by group disability
insurance. Integrating the benefits is assumed to
prevent double dipping (receiving benefits under
workers’ compensation and also under health
insurance or disability insurance) and to ensure
security of coverage regardless of being at work or
not. Health and disability coverages are provided
voluntarily by your employer, and it is your
responsibility to seek individual coverages when the
pieces that are offered are insufficient to complete
your holistic risk management. Figure 4.2 shows how
your holistic risk pieces relate to the risk management
parts available under workers’ compensation and
unemployment compensation.
Figure 4.2 Links between Holistic Risk Pieces and Workers’
Compensation and Unemployment Compensation
Note. Adapted from “Risks Related to the Job:
Workers’ Compensation and Unemployment
Compensation,” by Baranoff, E., Brockett, P., and
Kahane, Y., 2009, Risk Management for Enterprises and
Individuals, Chapter 16. Copyright 2009 Flat World
Knowledge, Inc.
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