WINNIPEG — Manitoba employers will be hit with higher payroll costs under a plan that will boost premiums for workers compensation. Besides adding staff and functions to the government’s Worker Adviser Office, funded by employers through Workers Compensation Board assessments, and massively raising the maximum fine for claim suppression, the government plans to change how employers’ annual WCB assessments are calculated.
The proposed change to setting employer assessments is highly dubious and suggests the government is moving backward, instead of forward, in managing the operation of workers compensation.
Let us go back 26 years ago, when I was appointed to reform the WCB. At that time, the WCB was a mess. After a period of NDP government stewardship, the WCB had a large unfunded liability; when the books were updated it amounted to an accumulated deficit of $232 million. The average annual WCB assessment on employers was approximately $2.40 per $100 of insured wages, far higher than today’s $1.61 average. There was no mathematically supported assessment model. Employers’ assessment rates were not aligned to claims experience.
The approach was so unscientific that firms might as well have thrown darts at balloons with random rates inside. As for service to injured workers, time to first payment could easily stretch out a month, and most rehabilitation was ineffectual. The benefit schedule provided a disincentive to return to work, with wage loss payments in excess of after-tax pre-injury incomes.
With an actuary, we developed a proper assessment model. It sets assessment rates taking into account accident experience, duration and severity. Employers responded positively and more attention was paid to keeping workplaces safe. We also fixed service to claimants and upgraded the WCB legislation.
The result was an agency with a more appropriate governance, benefit and administrative structure. The accumulated deficit was conquered and the average assessment rate fell dramatically. WCB was no longer at risk of bankruptcy.
In fixing the WCB we discovered a number of problems that now, again under NDP stewardship, are problematic. The average duration of a wage loss claim for all categories of injuries was far in excess of the experience of private insurers. And, with respect to long-term claimants, a test of 100 files found that 98 or 99 of the once-injured workers could have returned to work. Slow or inept claims management had led to swollen and unjustifiable claim payments.
When the economy slows, history suggests the duration of claims increases. And for injured workers with a tentative attachment to their employer, the duration of claims stretches out. The vast majority of claims injuries are “soft tissue” in nature. Yet, if their return to work extended past six months it was difficult to get them off WCB. The assessment model provided employers not only a real incentive to create and sustain safe workplaces but, also, an incentive to assist their employees to return to work. Any effort by an employer to pressure an injured worker not to report a workplace injury was properly seen as illegal.
Since those days, many changes have occurred that have improved the situation for injured workers. Much higher compensation payments are made, and claims related to diseases, where factors other than work are often present, are much more readily accepted. More is spent on rehabilitation and assuring safer workplaces. There are many safeguards in place to prevent claim suppression; if a case does arise, it should be prosecuted. Injured worker satisfaction remains high, higher than the satisfaction level of employers.
Don’t throw out the baby with the bath water. Assessment models that recognize the frequency and severity of claims represent a fair and effective way of managing the distribution of WCB costs among employers. Instead of favouring workers over employers, the government should review the usefulness of the present design for both groups. What is needed is a comprehensive jointly funded any time all-cause (injuries and disease) plan.
The WCB, unfortunately, remains an outdated relic and there is no evidence this government intends to reverse the situation.
» Graham Lane is a retired chartered accountant. He was the WCB’s CEO from 1988-92, when operational, governance and legislative reform took place. This article also appeared in the Winnipeg Free Press.