Workers' Compensation: Benefits, Costs, and Safety Under Alternative Insurance Arrangements

Thomason, Schmidle, and Burton make use of a unique data set to delve into how insurance arrangements affect several objectives of the workers' compensation (WC) program. They underscore the effects of deregulation and other changes in WC insurance pricing arrangements by performing empirical analyses that use state-specific cost, benefit, and injury data from 48 states for 1975-1995. This allows them to address the interactive relationships among the four objectives of WC systems adequacy of benefits, affordability of WC insurance, efficiency in the benefits delivery system, and prevention of workplace injuries and diseases and how various public policies adopted by states or the federal government work to achieve them. Several important contributions result. For instance, the authors quantify the tradeoffs between adequacy and affordability that would result from a federal mandate requiring adequate benefits. They also provide analysis of the possible tradeoffs in using different public policies regarding insurance arrangements, e.g., the expected savings to employers from deregulation of private insurance carriers. Overall, their results clarify the complicated relationships between insurance arrangements and employers' costs, and the impact of regulation on employers' costs, WC insurance market structure, and workplace health and safety.