Obama proposes government-run workers’ comp insurer
Buried as a line-item in the Fiscal Year 2014 budget, the Obama administration proposes replacing coverage currently written by private insurers for federal contractors working overseas with “a new government-wide fund” that would be administered by the U.S. Department of Labor, all part of a proposed bill called the Overseas Contractors Compensation Act.
The White House claims the fund is needed because of the exploding caseload of federal contractors in the past decade who work on overseas defense bases and public works projects. According to the budget proposal, the number of workers’ comp cases covered under the federal Defense Base Act has increased from 430 in 2002 to 11,600 in 2011.
But R Street Senior Fellow R.J. Lehmann suggested the increased workload and processing costs associated with more federal contract workers in more foreign jurisdictions suggests the solution should be more, not less, private sector involvement.
“The federal government does not have a sterling history when it comes to running insurance plans, as we can see by the multi-billion dollar deficits of the National Flood Insurance Program, the Pension Benefit Guaranty Corp. and the Federal Housing Administration,” Lehmann said. “In addition, unlike the global insurance companies that currently provide coverage to federal contractors abroad, the DOL has no experience running a major workers’ comp program and no ability to project itself or communicate effectively in foreign countries where the worker injuries actually occur.”
Lehmann noted that in its most recent assessment of the performance of the Defense Base Act, the U.S. Department of Defense notes a number of significant problems that would arise from moving to a self-insured government fund, including:
- A higher risk of cost volatility, as well as possible Antideficiency Act implications
- Potential legal issues if contract employees are dissatisfied with the quality or timeliness of service
- Potential moral hazard problems and increased costs because contractors may no longer perceive they have a direct stake in the cost impact of their safety and risk management practices.
“Without much more detail about how such a program would work in practice, we would hope Congress will proceed with extreme skepticism about any purported cost-savings from this proposal. History is not on the federal government’s side on this one,” Lehmann said.