Disability Insurance Articles
Workers Compensation And Its Role In Disability Insurance
2010-08-03
The relationship and functions of worker's compensation and disability insurance have grown and changed over time. At the beginning of the Industrial Revolution the deck was thoroughly stacked against the worker who was injured on the job. Although laws mandating relief income for disabled workers have been around a long time, industrialists refused to take the human cost of their profitable businesses into account. Instead of a system of worker's compensation, in England signing a "death contract" was a prerequisite for being hired. This contract nullified the right of the worker to sue or to be compensated for death or injury. This attitude was prevalent all over the industrialized West, including the United States.
It changed when Bismarck, the Chancellor of Prussia, instituted employer liability laws. Then, in succession, Worker's Accident Insurance was instituted (which was the world's first comprehensive system of worker's compensation) and Public Pension Insurance, which paid a stipend to workers unable to work due to injury.
This was the start of the slow movement to institute worker protection in other industrialized countries. Eventually the United States followed suit. Here, government disability insurance was instituted by the Social Security Disability Insurance act of 1930, the first federal law mandating relief to injured workers. In decades previous, many states had attempted to pass a comprehensive worker's compensation system, with little luck. It was SSDI that turned the tide.
In their present incarnations, where worker's compensation and Social Security disability insurance differ is that the scope of worker's compensation is much greater. In its various functions it can work like life insurance, health insurance, or property insurance. SSDI is basically a monthly cash payment (with some additional extras) meant to keep the disabled person alive. Since for a while the government was paying more for disabled relief than the disabled person had been earning, SSDI has a Workman's Compensation offset-a claimant cannot collect both in full.
If a citizen isn't working for an employer with worker's compensation insurance then the private disability insurance market will pick up the slack. This also applies if the working citizen is not eligible for SSDI. Policies covering short- or long-term disabilities are available, with options (naturally adding to the cost) for in-home care, assisted living facility care, asset management, even such things as Alzheimer's care. Such private insurance is available for purchase even for those eligible for either Workman's Compensation or SSDI.
Certainly, as time goes on, and perhaps single-payer health insurance becomes a reality in America, the relationship between Workman's Compensation, SSDI, and the private insurance market will continue to evolve and grow.