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Paduda: The Coming Recession's Impact on Workers' Comp

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It’s not if — it’s when the next will recession hit. Things were looking iffy a couple months ago, and if anything, the outlook has worsened since then.

Joe Paduda

Joe Paduda

And when it does, workers’ comp will be affected like everything else.

Here’s how recessions affect workers’ comp: 

At the early stage of a recession, employees who get hurt are less likely to file a workers’ comp claim. While we don’t know why that happens, research suggests it’s because workers are concerned their bosses will eliminate their job while they are out on disability, and they’ll have no job to return to.

As the recession deepens, frequency tends to bump up as employees realize their jobs are in real jeopardy. Claims increase as a result, and it is tougher to find re-employment opportunities for workers ready to resume some level of work. This extends to part-time or other limited-duty work that is essential to recovery and return to full duty.

So, duration increases too.

In the final stages, as the economy recovers, frequency appears to accelerate. Employers put older, less-safe equipment back online, require workers to put in big overtime hours, hire temps who have minimal training on safety, and the pace of work picks up speed.

The result: more injuries.

So, that’s what we can expect. The question is, when will the recession arrive, how long will it last and how bad will it be?

What does this mean for you?

Fortune favors the prepared.

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.

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