The Impact of Mental Health Claims on the Future of Worker’s Comp
The Changing Landscape of Workers’ Compensation
In recent years, the workers’ compensation landscape has been rapidly evolving, with mental health becoming a significant focus. According to a report by the National Council on Compensation Insurance (and brought to our attention by our friends at the Insurance Journal), mental health issues, along with physical space and environmental impacts, are critical factors to watch in the realm of workers’ comp. This shift reflects a broader recognition of the importance of mental well-being in the workplace.
Per the Insurance Journal Article, “Workers’ compensation recognizes three types of psychological injuries: Physical mental (PM), caused by a physical injury, makes up the vast majority of mental health-related claims. PM injuries make up about 8.5% to 10% of all lost time claims over the last 12 years. Mental-physical (MP), mental injury with accompanying physical injury, and mental-mental (MM), mental-only injury with no accompanying physical injury, together make up less than 2% of the total number of mental health related claims each year."
The Growing Concern of Mental Health Claims
In another great article from Insurance Business Mag, author Daniel Wood writes “A February report from WorkSafe Australia found that mental health claims have risen by more than 35% since 2017. While still only accounting for about 10% of all serious workers’ comp claims, businesses lost four times more time from employees with these injuries compared to those injured physically. More surprising: WorkSafe also found that the median compensation paid for mental health conditions was more than three times greater than that of all physical injuries and illnesses.”
The article goes on to quote Jason Lardelli, the executive director of Return to Work Victoria, that the current schemes were primarily designed for physical injuries. He states, "The ongoing growth in mental health claims and the trend of more people staying longer on compensation have significantly impacted the financial sustainability of the WorkCover scheme." This necessitates a reevaluation of how mental health claims are managed to ensure the system's sustainability.
The Cost Implications
The economic implications of mental health claims are profound. Injuries with mental health components are, on average, six times more expensive than those without. Even after adjusting for the mix of medical conditions, claims involving mental health diagnoses are still 2.5 times costlier. This stark difference underscores the need for effective management strategies to mitigate these costs.
Legislative Changes and Their Impact
In response to these rising challenges, state governments are revising workers’ compensation legislation. For example, Victoria has implemented significant changes to its WorkCover scheme, including redefining mental injury to require a diagnosis according to the most recent DSM and excluding stress or burnout as eligible for compensation. These changes aim to balance the system's financial sustainability while still providing necessary support for injured workers. The implication of this move for broader systemic changes as well as the potential worker outcry that could follow are both worth considering in the immediate future.
Early Intervention and Risk Management
One crucial strategy for managing mental health claims is early intervention. As NCCI's report indicates, early detection and intervention are critical to speeding up physical recovery and preventing long-term mental health impacts. By addressing psychosocial risk factors such as stress and anxiety early on, employers can help mitigate the potential for more severe and costly claims down the line.
"Injured workers with high-severity injuries are more likely to be diagnosed with mental disorders, particularly when experiencing chronic pain or a traumatic brain injury."
The Role of Safety Technology
Advanced safety technologies also have a significant role to play in this evolving landscape. High-tech solutions like advanced wearables, computer vision, and AI applications are becoming more common in preventing injuries, including those related to mental health. As these technologies continue to evolve, their potential to transform workplace safety and reduce both physical and mental health claims is substantial.
Conclusion: Looking Ahead
The rise in mental health claims presents a complex challenge for the workers’ compensation sector. As insurance professionals, staying informed about these trends and adapting to legislative changes is crucial. By embracing early intervention strategies and leveraging advanced safety technologies, we can better manage these claims and support the mental well-being of our workforce. The future of workers’ compensation will undoubtedly be shaped by how effectively we address these mental health challenges.
Author: PJ Hughes
Links to original articles:
Insurance Journal - NCCI Identifies ‘Big 3′ Workers’ Comp Issues to Watch
Insurance Business Mag - Broker Opportunity? Workers’ Compensation Schemes are Changing
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