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Workers' Compensation

Issue

Are further reforms to Minnesota's workers' compensation system needed?

Policy

The Legislature should not consider any changes to the workers' compensation system unless the Workers' Compensation Advisory Council approves them. The Advisory Council was created in 1992. Its membership is equally divided between labor and management. Now that major reform is complete, the Advisory Council can and should be able to recommend changes to the system.

The Minnesota Chamber recommends that the Advisory Council approve medical cost containment reforms that deal with pharmaceutical costs, managed care, hospital costs, the medical fee schedule and utilization review. Measures are needed because workers' compensation medical costs have increased by 65 percent during the last six years and are now approximately 56 percent of total loss costs.

In addition, the Chamber's recommendation to the Advisory Council's employer representatives is to oppose any benefit increases until the $265 million that the 2002 and 2003 Legislatures took from the Special Compensation Fund (SCF) is returned, the assessment that finances the SCF is reduced to its pretransfer level, and a loss portfolio transfer is made. (A loss portfolio transfer would transfer a sum of money to a reinsurance company along with some of the liabilities of the SCF.)

The Chamber supports maintaining workers' compensation as the exclusive remedy for workplace injuries and will oppose any legislative effort to erode it. The exclusive remedy is the foundation of the workers' compensation system. In Minnesota and the rest of the nation, the workers' compensation system was established when employers agreed to pay wage loss and medical benefits to all workers injured in the course of employment regardless of fault, and labor agreed that the new workers' compensation system would be the exclusive remedy.

Business Impact

Workers' compensation costs have increased since 2000 for a variety of reasons. However, medical costs seem to be the dominant factor. According to the Department of Labor & Industry, between policy years 1997 and 2003 (the most recent data available), medical benefits per claim grew 63 percent. The Minnesota Workers' Compensation Insurers Association (MWCIA) reports that medical costs now represent more than half of all loss costs within the workers' compensation system. The MWCIA also notes that medical costs will be a major driver of future premium increases.

Legislation to allow employees to sue their employers outside of the workers' compensation system for workplace injuries would essentially eliminate the exclusive remedy of Minnesota's law. It would encourage lawsuits against businesses and drive up system costs.

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