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For immediate release: Privatize
Workers' Compensation System Says Canada's Leading Workers' Compensation
Consultants Marsh
& McLennan outlines five-point plan to eliminate massive $11.4 billion
unfunded liability and pave road for a private system TORONTO, Ontario (May 23, 1995) -- In a major position paper released today, Marsh & McLennan, Canada's leading injury management and workers' compensation consulting firm, issued a direct challenge to the next government of Ontario to eliminate the Workers' Compensation Board's (WCB) $11.4 billion deficit in the next five years and take steps to introduce a private sector insurance option for employers. "Tough,
decisive action is required immediately to fix the workers' compensation fiasco
in Ontario. The three parties in
the current Ontario election campaign have only nibbled at the edges of this
financial debacle, but they have not grasped the degree to which it is killing
jobs, failing injured workers, saddling employers with unnecessary costs and
impairing Ontario's reputation as a good place to do business," said Lorne
Scully, Managing Director of Marsh & McLennan. In
the paper, Marsh & McLennan argues that the current $11.4 billion deficit
can be eliminated in the next five years -- the term of the next government --
by bringing benefit levels in line with other jurisdictions.
Concurrent steps should be taken to privatize workers' compensation in
Ontario. Under a private system,
premiums would reflect the real costs of the system, and the discipline of the
market would provide all parties with the incentive to keep costs in check.
Insurers and employers would seek to minimize claims costs with the best
and most effective rehabilitation practices and workers would have greater
incentive to return to the workplace as healthy and productive members of
society. "It
is no surprise that the workers' compensation system in Ontario has run up an
$11.4 billion deficit when you consider that our benefits for injured workers
are the highest by far in North America. In
some cases, an injured worker can receive benefits of up to 120 per cent of his
or her take home pay while off work. And
the trend toward including every conceivable condition such as stress as a
work-related injury is only exacerbating an already badly flawed
situation," said Scully. "There
are too many pressures at the political level to expand benefits without
considering the consequences on costs. Ontario's
current problems arise from the cumulative effect of successive governments
courting political favour by making benefits more generous while pushing
financial obligations into the future," said Scully.
"This kind of approach invites a day of reckoning, when the
viability of the workers' compensation system itself is threatened. That day is
fast approaching in Ontario." In
the paper, Marsh & McLennan outlines a workable plan to eliminate the
deficit within five years. Specifically, the plan calls for: -
Reducing benefits to 75 per cent of pre-tax income from the current level
of 90 per cent of pre-tax income. Since benefits are not taxed, some workers are
now effectively paid approximately 120 per cent of their original take home pay.
Savings from this measure would amount to $5.0 billion over five years. -
Increasing the frequency of reviews for Future Economic Loss Awards (FEL)
to an annual basis. Currently, workers are compensated for future losses based
on an assessment made one year after an accident and reviewed on the third and
sixth anniversaries. More frequent reviews are estimated to save $3.6 billion. -
Strengthening the definition of what constitutes a work-related accident.
Today, coverage is provided even if the injury is not caused by an actual
employment situation. Estimated
savings over the five year period are $2.5 billion. -
Reviewing utilization of the system. Workers' files should be reviewed
when an injury has exceeded its usual healing time. Currently employers can seek
cost relief from the WCB when this happens, but a file review for medical
treatment, medical compatibility and other factors would be far more cost
effective. Approximately $2.5 billion could be saved by implementing these
reviews. -
Implementing a variety of cost efficiencies including allowing
provisional Non-Economic Loss Awards for soft tissues injuries and streamlining
administration. Marsh & McLennan believes there are approximately $1.8
billion of such efficiencies. "Our
more than $15 billion in savings against future obligations is the immediate
crash diet we're prescribing for the WCB," said Mr. Scully. "At the
same time, we propose introducing the private insurance option as a permanent
solution to Ontario's worker compensation woes." In
the long term, implementation of a fully privatized system provides the best
antidote to the chronic tendency of Ontario's worker compensation system to
build up a deficit through a never ending cycle of increasing benefits and an
expanding definition of compensable injury. Private
insurers cannot deficit finance to cover the gap between costs and assessments.
Individual companies would still be required, by law, to purchase
workers' compensation insurance. Premium assessments under such a scheme would
reflect the real cost of the system by more fairly assigning costs to individual
companies based on their own accident frequency and claim costs. Marsh
& McLennan's extensive experience in Canada and around the world in workers'
compensation and injury management issues shows that the best workers'
compensation systems are built on a foundation of fiscal accountability, fair
coverage and incentives for injured workers to recover and return to work as
quickly as possible. "We
believe that everyone would benefit from this fundamental change in our approach
to workers' compensation, and our supporters are growing," said Mr. Scully.
"Both opposition parties have already indicated a pressing need to make
changes at the WCB. We're upping the ante with our challenge to resist the quick
fix in favour of making permanent and meaningful reform." Marsh
& McLennan is the world's largest insurance broker and a leader in the
fields of workers' compensation and injury management issues consulting. In Canada, we offer injury management services which include
claims management, experience rating reviews, hearings, revenue audits and
Health & Safety/Ergonomics services. -30- For
further information: Sean McPhee Full versions of this paper are available by request. Please email us at: smcphee@scmcphee.com |
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