Time to Reform FECA?

I would consider reforming the administration of the Federal Employees Compensation Act (FECA) in two fundamental ways.

[Caveat: FECA is the federal workers’ compensation (WC) program. My FECA understanding is on thin ice – brief readings and short discussions with a handful of federal OHS professionals. My financial estimates are rudimentary. Is what follows on or off target? I’m not sure; you tell me.]

The U.S. Department of Labor (DOL) centrally administers FECA.The other 17 participating departments appear at the mercy of management decisions outside their control and suffer a charge-back system that makes them pay for DOL policy – good, bad or indifferent. This reminds me of discredited central planning.

WC claims management should be at the lowest viable administrative unit, managed by the lead OHS professional. This is the optimal point and integrates the local OHS program with this fundamental OHS performance measure. The DOL function could be reorganized along the lines of state WC commissions.

Currently, FECA administration rewards injury. States recognize rewarding injury leads to waste, fraud and abuse. An incentive to return to gainful employment is required. The federal system appears to violate this principle in two ways. First, claims below a certain threshold are not contested. Those of us who have improved WC management efforts know dealing with questionable claims means skirmishing, not just battles.

Second, employees can elect 45 days of continuation of regular pay while out on a claim. Nearly all private sector workers accept a sum below their own or a state average weekly income and the duration is dependent on injury recovery. The lack of equivalent pay in the private sector might appear unfair, unless one recalls the legal defenses employers surrendered during the formation of WC systems (e.g., assumed risk, own negligence, co-worker negligence). Also, 45 days exceeds the generally recognized 30-day threshold after which workers risk long-term social problems.

I estimate federal WC performance at $1.60 in benefits per $100 payroll. The national average appears to be $1.20 in benefits per $100. My own state averages $0.80 of benefits per $100.

The total federal WC benefit payout is running about $2.4 billion. I suspect costs could be halved by both decentralized WC oversight and eliminating disincentives regarding return-to-work.

Dave Ermer, CIH, QEP, CLSO, can be reached at Ermland@comcast.net.