The Startling Truth About Workers' Compensation and Declines in Claim Frequency
A startling 69% of injuries and illnesses may never make it
into the BLS Survey of Occupational Injuries and Illnesses (SOII), the nation's
annual workplace safety and health "report card." The chronic and even gross
underreporting of work-related injuries is among the most troubling conclusions
in Hidden Tragedy: Underreporting of Workplace Injuries and Illnesses, a
majority staff report by the Committee on Education and Labor, US House of
These findings have profound implications for Workers'
Compensation. For more than a decade, declining claims frequency have been
celebrated as a major force in reigning in the costs of Workers' Compensation.
While the economic shift from manufacturing to services reduced injury exposure,
stepped up injury prevention efforts by employers and increased awareness of the
benefits of expeditiously returning injured employees to work were heralded as
major contributors to the declining rates.
Underreporting, however, distorts the factual basis and casts
serious doubt on the validity of the data that drives decision-making. Annual
reports of dramatic declines in claims frequency for the past decade have lulled
employers into a false sense of security: we're doing an outstanding job by
consistently lowering the incidence of injuries and illnesses, our programs are
working, and we have properly allocated our resources on preventive health and
safety measures. Contrarily the Hidden Tragedy concludes, the "SOII cannot be
trusted as a gauge of the safety of American workplaces."
There are many reasons for underreporting and some, such as
the exclusion of public employees and lack of understanding of reporting
requirements, can be addressed with improved recordkeeping and training. Others
such as occupational illnesses that have a long latency period (time between
exposure and disease) are more difficult and will require investment in
comprehensive health data collection systems. Yet, the one that is most
worrisome is that both employers and employees underreport injuries and
illnesses, compelled by economic or peer pressures.
Recognizing that OSHA relies on self-reporting, employers
face strong incentives to underreport. Increasingly, injury and illness rates
are used as evaluation criteria in the award of government and private contracts
and bonuses; lower rates improve a bidder's chances. Businesses with fewer
injuries are less likely to be inspected by OSHA, will have lower Experience
Mods and look better to stockholders and consumers.
Furthermore, it is likely the level of underreporting is
indicative of the employer's safety culture and affects an employee's
willingness to report an injury. There are many reasons an employee might decide
not to file a claim, ranging from fear of reprisal and peer pressure to a lack
of understanding of the compensation system. Sometimes there is the belief that
the injury is not work-related. Nevertheless, it is clear that the employer's
behavior is a key determinant in a worker's decision to file.
Widespread reports of employee harassment and intimidation
are cited in the report, including a heart wrenching account in the Charlotte
Observer about poultry workers who were disciplined, harassed and fired for
reporting injuries. Other tactics used to discourage reporting include bringing
seriously injured workers right back to work to avoid lost work-time and
discouraging appropriate medical care, including pressuring physicians, to avoid
a treatment plan that precipitates an OSHA Recordable injury.
The problem is even more complex for immigrant workers who
face language barriers, as well as fear of job loss or deportation, if
undocumented. Although the death rate among Hispanics in construction is much
higher than that for the rest of the industry, the work-related injury rate is
lower. This trend defies logic, however it reflects the fact that fatalities are
difficult to hide.
Whereas a moral appeal may not dissuade employers who
habitually underreport and abuse the system, employers should be compelled by
the economic hazard in underreporting. In many ways, the practice is a disaster
waiting to happen, akin to the perverse logic that drove the subprime mortgage
One of the overarching principles of Workers' Comp cost
control is early reporting and intervention. The definitive study, prepared by
the Hartford Financial Services Group, found that injuries reported between the
4th and 5th week following an injury are 45% more expensive than those reported
in the first week. Moreover, delayed reporting significantly increases the
likelihood of litigations, further compounding the costs.
As a case in point, studies have also found significant
underreporting in musculoskeletal disorders (MSDs), the common "soft tissue"
workplace injury. Yet the probability of reporting increases with the severity
of the condition As the injury remains untreated, it becomes unbearable, a claim
is filed, treatment is extensive and the costs exorbitant. It simply does not
pay to underreport. One late report can cost significantly more than five timely
Current data reveals that the costs and severity of claims
are rising. While there are many reasons for the rising costs, it's easy to
postulate that underreporting can be a contributing factor. The right medical
attention, delivered most expeditiously, is the best way to help employees
recover faster and, ultimately, is the most economically sound approach for
Not all employers are guilty of willful underreporting. Even
in companies where management takes a constructive, proactive approach to injury
prevention, their actions may unwittingly discourage reporting. Employers often
provide monetary incentives (safety bonus and award programs) to workers to
increase safety awareness on the job and reduce workplace injuries and
When the program significantly rewards a reduction in or zero
recordable injuries, the focus becomes the reward rather than safety. Workers
who incur injuries may suffer pejorative and disparaging treatment from peers or
supervisors when they jeopardize the reward or bonus.
To counteract this problem, employers must evaluate what they
are measuring and rewarding. Identifying close calls and taking corrective
action, time lags in reporting, disability duration and treatment conforming to
evidence-based guidelines, equipment maintenance, training, and supervisor
support and implementation of carefully structured Return-to-Work programs are
Responsible employers are guided by injury and illness
statistics in designing and implementing workplace health and safety programs,
and if employers are not fully aware of the events that occur in their
workplace, preventive efforts become less of a priority. Supervisors need to be
held accountable and rewarded for accurate recordkeeping and prompt injury
reporting. Turn the no-report culture on its head to 'if you get hurt, we want
to know immediately.'
There is little doubt that the current method of reporting is
flawed. We don't really know what is happening with workplace injury trends, but
we do know that the trends are not as good as they seem. Over the long term we
can work for improvements in the reliability and source of data. Yet, our most
important task is to convey that the biggest threat of underreporting is really
to the economic health of the employer.
Frank Pennachio, CWCA is co-founder and Director of Learning
at the Institute of WorkComp Professionals, Asheville, NC, the largest network
of Workers' Compensation professionals in the nation. He is also president of a
Workers' Compensation insurance agency, and a licensee and trainer for Injury
Management Partners. A well-known speaker, his articles appear regularly in
business and trade associations.
He can be contacted at email@example.com.