That’s a question that’s been bouncing around between my neurons for some years.
These neurons finally fired intelligently when I got an email from good friend Todd Brown. Todd is Medata’s Compliance and Regulatory Affairs Practice Leader and he tracks pretty much everything and anything going on in work comp regulatory and legislative affairs around the country.
Todd’s latest summary included news that several states just re-set the maximum wage replacement payout for workers comp patients who are not working.
I don’t understand, or more accurately, don’t “get” why workers who make more than a certain arbitrarily set amount don’t get adequate wage replacement when injured and out of work. If you make more than the “AWW” (average weekly wage) you likely have expenses higher than folks who make less than the AWW, expenses that won’t be covered by even the maximum payout in most states.
So, Todd being way smarter than me on this, I asked him for his take. Here’s what he said:
In fact in my 30 years in this business I have never seen serious discussion regarding the capping issue except for the number of weeks for certain benefit types. As far back as I can research I have not come across the reasoning behind it. My supposition is that it makes the pricing of policies easier for actuaries. But that is just a guess. Years ago it wasn’t much of an issue as the gap between the high wage earners (excluding corporate officers) and low wage earners was not what it is today.
In 1970 a senior level professional made 3.6 times what the entry level person made. Today the senior level professional makes 6.6 times
In 1970 mid level professional made 1.9 time what entry level person made. Today the mid level makes 4.3 times
As the wage gap continues to widen between professionals and unskilled the situation will continue. For those at the bottom rung the statewide cap based on AWW will not affect them but for those midway and up the statewide cap based on AWW will be adversely affected.
Unless I’m missing something this seems eminently unfair.