Workers' compensation is out of control. Eighty-six percent of respondents say it's a significant or major issue for them. Who's to blame? The lawyers, of course.

By what percentage have your workers' compensation premiums increased over the past three years?

0%-25% 32% 76%-100% 10%

26%-50% 32 More than 100% 19

51%-75% 7

By what percentage has the number of claims increased over the past three years?

0%-25% 65% 76%-100% 10%

26%-50% 14 More than 100% 9

51%-75% 2

It seems that the larger your company, the larger your workers' comp problem. Seventy-four percent of companies with fewer than 20 employees thought it was a significant issue, and 93% of those with more than 100 employees agreed. More than 20% of you reported a rise of greater than 50% in either premiums or number of claims or both.

Who is most responsible for recent increases in workers' comp costs or fraud?
Lawyers 47% Medical system 10%

State governments 26 Federal government 3

Employees 19 Employers 3

Insurance companies 16 Unions 3

The problem, many said, is all that advertising in which lawyers incite employees to "get what they're owed," advertising that "encourages marginal and fraudulent claims." Others blamed employees directly, citing either negligence ("Accidents are often caused by carelessness rather than unsafe conditions") or fraud ("Employees see it as a good way to get a paid vacation"). Still others blamed insurance companies, saying they're "too willing to settle, rather than investigate for fraud." Those insurers would rather just pay the claim, then "raise premiums to cover their costs." What can you do to control the situation? Many of your comments focused on improving safety, educating staff about proper procedures, and installing "strict rules and enforcement" with the ultimate goal of improving your experience rating. Some have tried to reduce risk by limiting or altering their work force. Their tactics include subcontracting out jobs, using employee-leasing companies, having no full-time employees at all, replacing workers with machines wherever possible, and eliminating high-risk positions. Some respondents said that to abate long-term disability, they are using early-return-to-work programs and restricted or light-duty programs. Some are trying to prevent problems by hiring cautiously, using preemployment screening procedures such as drug testing, security clearance, physical exams, psychological profiles, and checking for previous workers' comp claims (although many states prohibit that last tactic). Many are becoming more proactive about claims and procedures, paying small claims out of pocket rather than watching premiums go up with every little claim. Some, if their states allow it, require workers to see approved care providers. Some are dogging their insurance companies to become more aggressive about investigating possible fraud and are actively negotiating for correct and fair classification.

But no matter what you do on an individual basis, it's a losing battle unless the system undergoes fundamental change. "Regulations make it far too easy to make a claim and far too hard to refute it." Some advocated caps on legal fees, or better yet, just "getting the lawyers out of the system entirely" with a "no-fault" arbitration system. Others said there should be caps on medical charges, or a mandate for "settlements to cover medical costs only." Claims for stress and mental anguish should be eliminated, because they are so hard to define and open the door for fraud. In terms of limiting long-term disability, the state should "create incentives for rehabilitation and back-to-work programs." And in general, you thought employers should be given greater leeway to challenge claims, with the burden of proof for the claim falling on the employee rather than the employer.

Has your state done anything to regulate workers' compensation?

No 52% Yes 48%

Has that made things better or worse?

Better 27% Much worse 35%

Worse 38

Is there anyone doing anything that works? Well, although a distressing 85% of Texans said workers' comp is a major problem, 57% said things have gotten better since the state stepped in. And 0% of Texans called for more regulations. What is Texas doing right? In early 1991 a Texas law that attempted to reduce litigation took effect. It limited the appeals process, eliminated lump-sum settlements, and established an administrative-review process, making the system work by mediation rather than litigation. The state also set up a fund that competes with insurance companies by offering alternative insurance, although admission is on a case-by-case basis. The law's constitutionality is currently being challenged, but it does seem like a promising first step.

-- Christopher Caggiano