Restore Balance Solution

Workers' Compensation

Significant progress has been made in recent years to begin a process to restore financial stability to the West Virginia's Workers' Compensation Program.  First, in 2003 the West Virginia Legislature enacted comprehensive reforms to the state's Workers' Compensation program.  These reforms have been successful in improving the system's overall administration, establishing new standards and medical requirements for benefit eligibility and working toward restoring financial stability to this troubled system. 

Then in 2005, Governor Joe Manchin and the Legislature enacted legislation that will resolve the long-term debt ($3 billion) situation of this Fund and start a process that will ultimately lead to the program's privatization.  The legislation, enacted during a special session in January 2005, will

• Establish a process to first convert the Workers’ Compensation program to a mutual company (on Jan. 1, 2006 ) and then to a fully privatized the program on July 1, 2008 . The current Board of Managers stays in place until Dec. 31, 2005 . Workers’ Comp administrative/regulatory functions will be reassigned to the state Insurance Commission on Jan. 1, 2006 .
• Create a $230 million funding package to eliminate the Workers’ Compensation Fund’s $3 billion unfunded liability.  Ninety million dollars of this will come from increased Severance Taxes on coal, natural gas and timber.  (The Chairman of the House Finance Committee said this funding formula is likely to be reviewed again in the future.)
• Allow the state to reduce Workers’ Compensation premiums on employers on Jan. 1, 2006 , by a range of 5 percent to 20 percent, generally.

In doing this, West Virginia has taken the first steps toward truly managing this troubled program.  Even in spite of this, West Virginia employers still will be burdened with Workers' compensation costs that are the highest in the nation.  The rate of claim filings is also among the highest in the country.  Diligence needs to be followed in order manage this program and continue to try to bring its "out of step" costs in line with surrounding states and the nation.

Facts:

National Foundation for Unemployment & Workers' Compensation
West Virginia has the highest Workers' Comp rates in the nation - more than three times the national average, and twice as much as the next closest state...California.
State Workers' Compensation Cost Study, December 2003

West Virginia -        $1,073
U.S. (average) -     $   350
Virginia -                 $   207
Kentucky -              $   309
Ohio -                     $  420
Pennsylvania -         $   448
Maryland -               $   343

Other Solutions:

West Virginia needs to enact legislation that will eliminate the five-part test and restore the statute to a true deliberate intent.  The Legislature’s efforts to fix the major problems in the state’s Workers’ Compensation program could be threatened, yet again, by a backwards interpretation of the law by the West Virginia Supreme Court of Appeals.  This is because of the high court’s stance that “deliberate intent” may be considered as an “alleged” factor in workplace injuries.  This theory, which exposes employers to massive liability claims, may mean that workplace injury claims may move out of the Workers’ Comp system and back into the courts for litigation.  The West Virginia Legislature can and should correct this misinterpretation of the law.

West Virginia's economy needs to grow at a rate that will "outgrown" this massive debt.  As a last resort, possible sources of financing may be required.  These may include tobacco settlement fund securitization, special revenue accounts or general revenue dollars.

Also, future work of the Legislature must be upheld by the West Virginia Supreme Court.

Articles:

Workers' Comp Running Big Bills
Coalfield school systems rack up high costs for state
The Charleston Gazette, June 14, 2005