An Overview of the Arthurs Report, Part V: Occupational Disease and Indexation of Benefits for Partially Disabled Workers
By Kevin MacNeill
We are now at our final entry reviewing the key chapters of the Arthurs Report. We will not be reviewing chapter 9, which comments on a number of matters that Professor Arthurs felt compelled to mention, but which he says fell outside his mandate.
To conclude then, chapter 7 of the Report considers funding occupational diseases, short and sweet.
To contextualize his ultimate recommendations, Arthurs notes that occupational disease claims constitute a rapidly growing number of total claims, up from 6% in 2000 to 10% in 2010. This trend is likely to continue to grow but we cannot say by how much. This presents a particular cost concern since in occupational disease claims, there is a higher percentage of fatalities, which means disease claims typically cost 10 times as much as other claims, often with $400,000 to $600,000 in survivor benefits. Having all this in mind the WSIB has established a $600 million reserve for future costs, which is considered by the experts to be a reasonable mid-range estimate as to future occupational disease costs.
As noted at the end of this blog entry, Arthurs recommends, firstly, to set up a medical/scientific panel to continue to study issues related to occupational diseases and, secondly, to keep the costs of such claims in the WSIB system.
His next recommendation deals with the issue of who pays for occupational disease claims. Here, happily, he recommends that the WSIB continue its current approach of not subjecting long latency diseases to experience rating. Arthurs also proposes that the cost of the reserve fund noted above should be borne by all Schedule 1 employers. However, when it comes to a decision to treat certain diseases as being associated with a particular work process or industry, Arthurs proposes that up until such a decision is made the claims costs should be split between the industry class/sectoral group and all Schedule 1 employers. Thereafter, the costs of such new claims should be assigned to the industry class/sectoral group alone.
Moving on to chapter 8, Arthurs deals with the subject of inflation protection for partially disabled workers.
He notes that historically these workers have either been denied this protection or have been given ad hoc increases. He ultimately recommends that both fully and partially disabled workers should receive annual increases as per the Consumer Price Index in the future.
As for how to deal with the past erosion of benefits due to inflation, Arthurs suggests a one-time adjustment to their benefits base, but rejects the idea that any retroactive payments should be made, notably given the cost and complexity of doing so.
With respect to the proposed increase to the benefits base of partially disabled workers, to recognize past erosion of their benefits due to inflation, Arthurs comes up with a compromise.
Fully restoring the benefits base would have cost employers roughly $1.7 billion, an option which Arthurs rejected.
On the other hand, he argues that partially disabled workers are entitled to at least some amount as a matter of fairness and he has fixed that amount at half a billion dollars. As we can see from the chart below, much of this goes to workers injured previous to 1999 and there is no payment for those injured subsequent to 2006.
By way of a brief conclusion on the Arthurs Report as a whole, I cannot do justice to all the information that is contained in it in a few short (I know some may say long) blog entries, and it is anticipated that there will be further developments to the law and WSIB policy in the coming years as a result of the Report and several discussions with which it engages.
However, we can see that, overall, we are entering into a period of significant change in the WSIB world and it is anticipated that the road ahead will be bumpy for employers in a number of respects.
ANNEX: RECOMMENDATIONS 7 & 8
Here are the final recommendations as to occupational diseases and indexation of benefits for partially disabled workers:
7-1.1 The WSIB should re-establish a medical / scientific panel to enable it to identify occupational diseases that should be eligible for compensation under the WSIA, the conditions and/or presumptions which should govern eligibility for compensation, and advice that will enable the WSIB to forecast likely future costs attributable to those diseases.
7-1.2 The WSIB should closely monitor long term trends in occupational disease costs and the emergence of “new” occupational diseases, and make prudent financial provision for future benefit costs.
7-1.3 The WSIB should not establish a special segregated fund to cover the future cost of occupational diseases.
The cost of occupational diseases should continue to be covered under the WSIA and not be shifted to the general welfare system or the Ontario Health Insurance Plan.
7-3.1 The cost of benefits attributable to occupational diseases should normally be charged to the industry class or sectoral group where the claim originated.
7-3.2 When a decision is taken to compensate workers who have contracted a “new” occupational disease – a disease not previously recognized or connected with particular workplace conditions – the cost of compensation for workers who have already contracted the disease as of that date should be divided between the industry class or sectoral group and all Schedule 1 employers. The cost of benefits for workers who contract the disease after that date should be borne by the industry class or sectoral group alone.
7-3.3 In accordance with present policy, the costs of long-latency occupational diseases should not be used in connection with experience rating.
7-3.4 The cost of maintaining a reserve to cover anticipated future increases in occupational disease claims ($600 million at present) should be distributed among all Schedule 1 employers on the basis of a formula to be determined by the WSIB.
8-1.1 The benefits of fully and partially disabled workers should be indexed on the same basis. The WSIA should therefore be amended to restore full indexation of the benefits of partially disabled workers on a going-forward basis.
8-1.2 The present statutory language, allowing for ad hoc indexation, should be repealed.
8-2.1 Beginning in the budget year following release of this report, the benefits of both partially and fully disabled workers should be increased annually by 100% of the annual increase in the Consumer Price Index.
8-2.2 The following adjustments should be made to the benefit base of partially disabled workers:
• For the cohort injured up to and including 1999, an aggregate adjustment of $475 million to restore 45% of the erosion of that base caused by inflation;
• For the cohort injured from 2000 up to and including 2005, an aggregate adjustment of $25 million to restore 40% of the erosion of that base caused by inflation; and
• For the cohort injured in or after 2006, no adjustment should be made since they have suffered no erosion of their benefit base.
8-2.3 The aggregate adjustment to base for each cohort should be distributed pro rata among its members as a percentage of their benefits.