How Does Health Insurance Affect Workers’ Compensation Filing?

I. INTRODUCTION Workers' compensation serves as a near-universal health insurance system for workers who become sick or injured because of their job. Almost every private sector worker in the United States is covered by workers' compensation, which typically provides full reimbursement for medical expenditures and partial reimbursement for wage losses incurred as a result of a workplace injury or illness. (1) Given that employer-provided health insurance usually involves cost sharing for medical expenditures and offers no income replacement, one would expect workers to seek compensation for nearly all workplace health conditions. However, it appears that many injured workers elect not to participate in workers' compensation. Using data from a survey of workers in Michigan, Biddle and Roberts (2003) found that just 55.1% of the workers with lost time reported filing for any workers' compensation benefits and just 39.1% reported filing for wage replacement. This suggests that workers may not view workers' compensation filing as "free." For example, workers might lack information about the availability, or even the existence, of workers' compensation benefits. Employers might discourage participation, and there could be a stigma associated with filing for benefits. Additionally, a worker might be uncertain about his or her ability to prove that an injury or an illness is work related. As a result, pursuing a workers' compensation claim could require that a worker spend money on healthcare consultations upfront, with uncertain prospects for reimbursement. While any of these costs could lead a worker not to file a claim, the magnitude of nonparticipation is still surprising. The existence of alternatives to workers' compensation, specifically health insurance, is often thought to exacerbate nonparticipation. Injured workers may be unwilling to bear workers' compensation filing costs if their health insurance reduces or eliminates the burden of medical costs. Moreover, individuals without health insurance have greater incentive to pass off nonoccupational injuries or illnesses as work related. If the possession of health insurance explained nonparticipation, there would be fewer normative concerns that poor participation imperils the health of injured workers. However, a look at data on health insurance and workers' compensation filing from the National Longitudinal Survey of Youth (NLSY), reported in Table 1, calls the conventional wisdom into question. The first two columns of the table show that injured workers without health insurance are 7 percentage points (about 13%) less likely to file a claim than those with health coverage. (2) This is in spite of the fact that uninsured workers are more likely to have lost wages and missed more days of work as a result of their injuries. This result is puzzling, given the argument above that the uninsured worker should be more likely to file. The last two columns of the table add nuance to this picture, showing that the gap in filing widens substantially when we compare workers in firms that do and do not offer health insurance. Workers in insuring firms are 16 percentage points more likely to file a claim, even though their injuries are still less severe in terms of lost wages and work time. It would appear that the effects of health insurance on workers' compensation claiming are not as straightforward as they might appear and may have more to do with the characteristics of employers who offer health insurance than with the incentives faced by the workers. This table illustrates a result that we confirm in this study; actual health insurance coverage itself is much less important than whether an employer offers health insurance. We found that injured workers are more likely to file claims when they work for an employer who offers health insurance. This result holds even when we incorporate worker fixed effects and other control variables, suggesting that the characteristics of the employer are not simply proxies for unobserved worker characteristics. …