Legislation Aims to Improve New Jersey's Benefit Structure

Over the course of the last few years the United States economy has undergone radical change that will require New Jersey industry to reevaluate the manner in which it conducts business. New Jersey's robust economy is reflective of a national trend towards full employment, but its workers' compensation benefits have not kept pace with other states.

The NJ Department of Labor continues to report additional new jobs each month and a continued decline in the unemployment rate, which has fallen to the lowest level in three decades. The tight labor market has forced employers to offer incentives such as better benefits and flexible hours to attract new employees. This unusual phenomenon is unfolding as a result of a robust economy based upon rapidly developing service industries generated by new technology. In other areas of the country, employers who are unable to attract additional workers have been forced to cease operation.

One of the most seriously deficient benefit packages offered to employees in New Jersey is the workers' compensation insurance benefits program. A review of census data throughout the United States indicates that those states providing enhanced workers' compensation benefits have shown a dramatic ability to attract an increased workforce through population migration. The U.S. Bureau of the Census has reported that the 10 fastest growing states, calculated from census data taken from 1990 through 1997, provide significantly better workers' compensation benefits than those that are available in the State of New Jersey.

According to data provided by the A.F.L-.C.I.O, New Jersey ranks forty-sixth in the country in the payment of temporary total disability benefits in 1999. New Jersey currently provides for a maximum benefit of 75% of the statewide average weekly wage (SAWW). This amounts to a maximum benefit of $539.00 per week. According to census figures, New Jersey has experienced a population growth of only 3.3% since 1990. The State of Washington, which has experienced a 15.3% population growth, provides for a benefit of 121% of the SAWW yielding a dollar benefit of $711.00 per week. Even Iowa, a state with a relatively static population, provides a competitive 198% benefit of the SAWW or a maximum of $947.00 per week. Vermont, which is experiencing a 7.2% population growth, offers 149% of the SAWW or a maximum benefit of $727.00. Likewise, other New England States such as New Hampshire, which experienced a 5.5% population growth, offers a benefit based on 149% of the statewide average weekly wage or $840.00 per week. This scenario is also present in the Southern states such as North Carolina, which has experienced an 11.7% population growth and which offers a benefit based on 110% of the SAWW or $560.00 per week. Furthermore, the reduced number of collective bargaining units reflected in the decline of union membership from 1983 when it was 20.1% to 14.1% in 1997 has resulted in the workforce's reliance upon governmentally mandated programs for a significant portion of its benefits.

Recognizing a new national economy which has been termed, "more significant than the Industrial Revolution", New Jersey is gearing up for material changes in its workers' compensation system which was visited last by the Legislature more than two decades ago. A package of legislation has been offered by Assemblyman Neil M. Cohen (D-Union) to make the NJ workers' compensation systems competitive with the other states.

A proposal has been made to amend the temporary disability benefits (TDB) law to provide for validation of its lien and reimbursement of State or private plan monies paid out only in cases in which there has been payment of workers' compensation temporary disability benefits in the work-related claim. At the present time when there is a contested workers' compensation claim, an injured worker may seek benefits from the State TDB fund (or private plan) when the worker is temporarily totally disabled and under medical treatment. The fund is paid for by deductions from the employee's salary for non-compensable disabilities. When there is a failure to prove the workers' compensation claim and the injured worker has filed a claim for benefits under the Workers' Compensation Act, TDB will make payments to the injured individual for the maximum number of weeks or until there is an adjudication of the workers' compensation action, whichever occurs first

At the present time, the Department of Labor has mandated, through an advisory opinion from the Attorney General, that TDB payments must be reimbursed to the NJ TDB fund from any workers' compensation award even if no temporary disability payments were paid by the workers' compensation insurance carrier. Therefore, even if the petitioner's workers' compensation claim is disposed of by way of N.J.S.A. 34:15-20, which does not indicate that the injury was compensable, judges of compensation have routinely ordered that the TDB lien be reimbursed out of the petitioner's award. In other words, under current practice, State temporary disability liens are being reimbursed even when the temporary total disability for which payments were made has been deemed not to be work-related, exactly what the State temporary disability benefit program (or private plan) was intended to cover. N.J.S.A. 34:15-57.1.

Assembly bill A-3387 will amend the NJ TDB law to provide for reimbursement of a TDB lien, whether State plan or private plan benefits are utilized, only in situations where the TDB payment is made for the same illness or injury and for the same period of time as the workers' compensation benefits. The TDB plan will have the burden to prove that the plan is entitled to reimbursement. This will provide a more equitable benefit and one that is more in accordance with the intent of N.J.S.A. 34:15-57.1

Another proposed enhancement to the workers' compensation benefit system is embodied in A-3388 which increases the workers' compensation benefit amount for temporary disability, total permanent disability, and partial permanent disability from 70% to 80% of the worker's weekly wages received at the time of the injury, subject to the maximum rate allowed. New Jersey's current payment limitations are further complicated by low earnings as reported by a Rutgers University study in 1997 entitled, " The State of Working New Jersey." The study reported that wages in New Jersey were stagnant or falling for all but the top 20% of the workforce between 1990 and 1995. While there was a rapid increase in the number of working poor between 1988 and 1995, there was significant uniformity in household incomes, which resulted in living standards that were either stagnant or falling for the majority of the workforce despite the State's strong economic growth. Increasing the percentage cap on wages will significantly benefit low-income workers since the majority of the workforce is not eligible to receive the maximum rate. The proposed law will also increase the maximum benefit from 75% to 80% of the SAWW for all workers in the State. Under the current law, an injured worker's benefit cannot exceed 70% of his or her wages subject to the maximum rate, which is based on 75% of the SAWW. N.J.S.A. 34:15-12.

A more competitive dependency benefit is proposed in A-3389 which provides that benefits for dependents of a worker who dies from a workplace injury or accident will not be reduced because of the death of the injured breadwinner. The current law provides that maximum dependency benefits cannot exceed between 50% and 70% (depending on the number of dependents) of the worker's wages subject to a ceiling equal to the maximum weekly benefit for the year of death using the wages earned at the date of death. There has been a dramatic decrease in the number of workers killed on the job from 21 per 100,000 in 1960 to 4 per 100,000 in 1996. It is unfair to penalize the family and dependents of the injured worker even further by significantly reducing their income after the death of the worker. Bill A-3389 proposes that New Jersey increase benefits due the dependents of an injured worker to 100% of the worker's weekly wage at the time of his death, subject to the maximum rate, regardless of the number of dependents. N.J.S.A. 34:15-13.

Workers' compensation insurance carriers in times of full employment benefit from increased premiums received for currently written workers' compensation policies. New Jersey's Second Injury Fund (SIF) was established to encourage employers to hire handicapped workers. The SIF furnishes contributions for disabilities for pre-existing medical conditions, which in combination with the last compensable event, render the petitioner to be totally and permanently disabled. The SIF therefore limits the liability of last employers of partially disabled workers at the time of hire. The last carrier of the last employer is therefore liable only for the last compensable event.

The SIF is currently funded as an assessment on self-insured employers and workers' compensation insurers in an amount equal to 150% of the amount established by the Commissioner of Labor. The SIF, which was established in 1923, not only pays totally disabled workers but also funds the administrative costs of the Division of Workers' Compensation (DWC). The SIF was experiencing a surplus during 1999 and $ 30,000,000 of the surplus was appropriated by The New Jersey Legislature to the State Treasury for use as general revenue. P.L. 1999 c. 138.

Strong objection continues to what the New Jersey Self Insurers' Association has labeled, "A Raid on the New Jersey Second Injury Fund." Various suggestions have been proposed to increase and improve the quality of the NJ workforce which have included using these funds for the retraining and rehabilitation of partially disabled workers. Proposed legislation A-3392, would amend N.J.S.A. 34:15-94 to reduce the surcharge levied annually on workers' compensation insurance policyholders and on self-insured employers to finance the SIF from 150% to 110% and would provide a surcharge of 100% for administrative costs of the DWC. Additionally, the proposed legislation would re-appropriate $ 30,000,000 from the general treasury to the SIF which would in effect repay the amount that was transferred from the SIF to the general treasury in the fiscal year 2000 Annual Appropriations Act. The legislation also requires the Joint Budget Oversight Committee to review and approve the proposed aggregate annual surcharge for the following calendar year.

States throughout the country have been enacting privacy legislation for medical information acquired in relation to a workers' compensation claim. This concept, which was originally mandated by the European Community, has now become a patchwork of state legislation as a result of a congressional stalemate. New Jersey legislators have recognized that a growing commercial market exists for medical information generated by workers' compensation claims, unrestricted dissemination of which may result in a broad spectrum of employment, credit, and collateral insurance coverage problems not only for the injured worker, but also for his or her family members.

The unrestricted use of certain information, especially beyond the scope of that which is necessary to adjudicate the work related event, would have a tremendous adverse effect upon a broad spectrum of activities including employment promotion, ability to obtain health or life insurance coverage, and other non-work related activities. See, "Whose Business is it Anyway? Workers' Comp Claims Raise New Issues in the Privacy Debate," 150 N.J.L.J. 592 (Nov. 16, 1998).The Workers' Compensation Medical Information Confidentiality Act (WCMICA), A-3396, will prohibit an employer, workers' compensation insurance carrier, or other party to a workers' compensation claim, or health care provider involved in the claim, from disclosing medical information about the work-related event to anyone other than a party to the case, an involved health care provider, the DWC, an insurance-support organization, or the Compensation Rating and Inspection Bureau. Additionally, the legislation would prohibit the DWC from disclosing the information unless the identity of the individual is redacted. The WCMICA would also require notification to the injured worker in writing when the DWC or any other party discloses medical information obtained in an investigation concerning a workers' compensation claim.

The proposed legislative package, which has been offered to enhance the present NJ workers' compensation benefit structure, will provide a strong and competitive incentive to maintain if not increase the workforce in this State. Ironically, what is good for the worker is equally good for industry and for the State of New Jersey.