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The
tradeoff between assured, limited coverage and lack of recourse
outside the worker compensation system is known as "the
compensation bargain." While plans differ between jurisdictions,
provision can be made for weekly payments in place of wages
(functioning in this case as a form of disability insurance),
compensation for economic loss (past and future), reimbursement or
payment of medical and like expenses (functioning in this case as a
form of health insurance), and benefits payable to the dependents of
workers killed during employment (functioning in this case as a form
of life insurance). General damages for pain and suffering, and
punitive damages for employer negligence, are generally not available
in worker compensation plans.
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Employees'
compensation laws are usually a feature of highly developed
industrial societies, implemented after long and hard-fought
struggles by trade unions. Supporters of such programs believe they
improve working conditions and provide an economic safety net for
employees. Conversely, these programs are often criticised for
removing or restricting workers' common-law rights (such as suit in
tort for negligence) in order to reduce governments' or insurance
companies' financial liability. These laws were first enacted in
Europe and Oceania, with the United States following shortly
thereafter.
Workers'
compensation laws were enacted to reduce the need for litigation, and
to mitigate the requirement that injured workers prove their injuries
were their employer's "fault". The first state law was
passed in Maryland in 1902, and the first law covering federal
employees was passed in 1906. By 1949, all states had enacted some
kind of workers' compensation regime. Such schemes were originally
known as "workman's compensation," but today, most
jurisdictions have adopted the term "workers' compensation"
as a gender-neutral alternative.
In the
United States, most employees who are injured on the job have an
absolute right to medical care for that injury, and in many cases,
monetary payments to compensate for resulting temporary or permanent
disabilities. Most employers are required to subscribe to insurance
for workers' compensation, and an employer who does not may have
financial penalties imposed. In many states, there are public
uninsured employer funds to pay benefits to workers employed by
companies who illegally fail to purchase insurance. Insurance
policies are available to employers through commercial insurance
companies: if the employer is deemed an excessive risk to insure at
market rates, it can obtain coverage through an assigned-risk
program.
In the
vast majority of states, workers' compensation is solely provided by
private insurance companies. 12 states operate a state fund (which
serves as a model to private insurers and insures state employees),
and a handful have state-owned monopolies. To keep the state funds
from crowding out private insurers, they are generally required to
act as assigned-risk programs or insurers of last resort, and they
can only write workers' compensation policies. In contrast, private
insurers can turn away the worst risks and can write comprehensive
insurance packages covering general liability, natural disasters, and
so on. Of the 12 state funds, the largest is California's State
Compensation Insurance Fund. The federal government pays its workers'
compensation obligations for its own employees through regular
appropriations.
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