Updated October 17, 2017
Workers’ Compensation: Overview and Issues
Introduction
prohibited from suing their employers and workers’
Nearly all workers and employers in the United States are
compensation is the exclusive remedy for workplace
covered by workers’ compensation. When a covered worker
injuries, illnesses, and deaths. Employers are protected from
is injured, becomes sick, or dies as a result of his or her
lawsuits but must pay statutorily defined benefits in all
employment, that worker is entitled to full medical
cases. Employers can purchase insurance to mitigate their
coverage for the injury, cash benefits to replace a portion of
financial risk and increase cost predictability.
wages lost due to inability to work, and benefits for
surviving family members in case of death. Employers are
Workers’ Compensation Benefits
responsible for providing workers’ compensation benefits
Workers’ compensation benefits are set by state or federal
to their workers and generally purchase insurance to cover
law and thus differ among programs. However, all systems
these costs. The federal government has only a limited role
provide for complete medical coverage, at no cost to the
in the provision of workers’ compensation because most
worker, for any treatment of covered injuries and illnesses.
workers are covered by state laws. Although every state has
Systems differ on the rights of employees to select
a workers’ compensation system, there is no federal
treatment providers. Approximately 75% of all workers’
mandate that states have workers’ compensation, no federal
compensation cases involve only medical benefits with no
standards for state programs, and no oversight of state
time lost from work due to injury or illness.
systems.
In addition, all systems provide for limited wage
Table 1. Total Workers’ Compensation Costs and
replacement, usually two-thirds of the pre-injury wage, if an
Benefits, 2015
injury or illness prevents an employee from working. For
certain permanent partial disabilities, such as the loss of a
Per $100 in
limb or an eye, a set amount of benefits are paid regardless
Billions of $
Covered Payroll
of ability to work. Survivors benefits are paid to the family
Total Benefits
61.9
0.86
members of workers who die on the job and most systems
offer vocational rehabilitation to assist employees’ return to
Medical Benefits
the workplace. Systems differ in the duration of benefit
31.1
0.43
eligibility with some systems capping lifetime benefits at a
Cash Benefits
30.7
0.43
certain amount or number of months and others paying for
the duration of disability or life of the worker.
Employer Costs
94.8
1.32
Source: Christopher F. McLaren and Marjorie L. Baldwin, Workers’
Federal Workers’ Compensation
Compensation: Benefits, Coverage, and Costs (2015 Data), National
Programs
Academy of Social Insurance, October 2017, p. 1.
Each state operates its own workers’ compensation program
and these state programs cover the majority of employees in
The Grand Bargain of Workers’
the United States. The federal government, through the
Compensation
Department of Labor, administers the following workers’
Before the first workers’ compensation laws were passed by
compensation programs:
Congress in 1908 and the states in 1911, workers were
required to sue their employers for costs associated with
Federal Employees’ Compensation Act (FECA) for
medical care and lost work due to job-related accidents and
federal civilian employees;
illnesses. In addition to the costs of bringing such suits,
workers had to demonstrate that their employers, and not
Longshore and Harbor Workers’ Compensation Act
any third parties or the workers themselves, were
(LHWCA) for private-sector longshore workers, and
responsible for their injuries. Although employers could
through extensions of the LHWCA, overseas
often avoid being held liable for employment-related
government contractors, non-appropriated fund
injuries, illnesses, or deaths, employers faced uncertainty in
instrumentality workers, and workers on the Outer
what their costs would be if they lost a case and a single
Continental Shelf;
case could, depending on the damages awarded by the
court, have a catastrophic financial impact on an employer.
Energy Employees Occupational Illness Compensation
Program Act (EEOICPA) for former public and private-
Workers’ compensation is often referred to as a “grand
sector workers in the atomic weapons and related
bargain” between workers and employers. Under workers’
industries; and
compensation, workers receive benefits for covered
injuries, illnesses, and deaths without regard to fault or
Black Lung Benefits Act for coal miners with coal
liability. In exchange for this coverage, employees are
workers’ pneumoconiosis (black lung disease).
https://crsreports.congress.gov
Workers’ Compensation: Overview and Issues
In addition, the federal government administers limited
Issues
benefit programs for certain other workers, including
Policymakers have raised the following issues regarding
former atomic testing workers and September 11th
federal and state workers’ compensation programs:
responders.
The wide variance in state benefit levels, especially for
State Insurance Systems
permanent-partial disability benefits and the concern
States workers’ compensation laws differ in how employers
that some states may be engaged in a “race to the
may provide for benefits. In all states, except Texas which
bottom” on workers’ compensation;
allows employers to opt out of coverage, workers’
compensation is mandatory for nearly all employers. In four
The role of prescription drugs, especially opioid pain
states, employers must purchase insurance from state-
killers, compounded drugs, and physician-dispensed
administered funds rather than the open market. In 17
drugs, in workers’ compensation treatment;
states, employers may elect to purchase insurance from
state funds or private insurers. Thirty states do not offer
The persistence of litigation in workers’ compensation
state funds and in all but two states, qualified employers
systems despite the grand bargain and the role of
may self-insure for workers’ compensation.
settlements between insurers and workers in long-term
cases;
Past Congressional Involvement in
Workers’ Compensation
The interaction of workers’ compensation with other
Congress has historically left it up to the states to decide
public systems, such as Social Security Disability
whether to have workers’ compensation programs and to
Insurance (SSDI) and Medicare, including issues related
regulate the make-up and administration of these programs.
to employers and insurers shifting costs from workers’
In addition to creating federal programs for federal
compensation to these federal benefit programs;
employees and other workers, the most significant
congressional involvement in workers’ compensation came
The integration of workers’ compensation into the larger
in 1970 with the Occupational Safety and Health Act (OSH
issue of occupational safety and health; and
Act). In addition to requiring employers to comply with
federal worker-safety standards, the OSH Act created a
How workers’ compensation systems designed in the
national commission to study state workers’ compensation
early 20th century can best provide for workers and
laws to see if these laws needed reform. The commission
employers in the changing workplaces of today.
issued its final report in 1973 and called on states to reduce
the number and types of workers excluded from coverage
For Additional Information
and provide a minimum level of benefits of two-thirds of a
CRS Report R44580, Workers’ Compensation: Overview
worker’s pre-disability wage.
and Issues, by Scott D. Szymendera
After publication of the national commission’s report,
CRS Report R42107, The Federal Employees’
legislation was introduced in Congress to require states to
Compensation Act (FECA): Workers’ Compensation for
comply with minimum standards of workers’ compensation
Federal Employees, by Scott D. Szymendera
based on the commission’s recommendations or have the
federal government take over their workers’ compensation
Department of Labor, Does the Workers’ Compensation
systems. This legislation was not enacted into law and
System Fulfill its Obligations to Injured Workers?, October
Congress has made no significant attempt since the early
2016, https://www.dol.gov/asp/
1970s to set minimum standards for state workers’
WorkersCompensationSystem/
compensation systems.
WorkersCompensationSystemReport.pdf
Congressional Activity
Christopher F. McLaren and Marjorie L. Baldwin, Workers’
Activity in the last few years has focused on proposed
Compensation: Benefits, Coverage, and Costs (2015 Data),
changes to FECA designed to reduce program costs and
National Academy of Social Insurance, October 2017,
bring benefit levels more in line with state programs. These
https://www.nasi.org/sites/default/files/research/
changes would, among other things, eliminate augmented
NASI_Workers%20Comp%20Report%202017.pdf
compensation, which brings benefits to 75% of a worker’s
pre-disability wage if there are dependents and adjust
Workers’ Compensation Research Institute
benefits at retirement age to encourage federal workers to
http://www.wcrinet.org/
switch from the FECA program to federal retirement
benefits. In addition, because United States Postal Service
Scott D. Szymendera, Analyst in Disability Policy
makes up more than 45% of all FECA cases, Congress has
framed FECA reforms in the context of larger legislation to
IF10308
make changes to the Postal Service.
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Workers’ Compensation: Overview and Issues
Disclaimer
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