Report holds good news for Second Injury Fund solvency

That’s good news, given that previous estimates pointed to insolvency several months earlier, in 2008.

The Second Injury Fund compensates injured employees when an existing work-related injury combines with a prior disability and results in a greater overall disability.

The Missouri Division of Workers’ Compensation delivered the study to Gov. Matt Blunt, who requested it after receiving a report in April by the state auditor that did not include an analysis of the fund’s history of expenditures, which grew to $68 million in 2006, up from $10.5 million in 1993, according to a Missouri Department of Labor and Industrial Relations news release.

The auditor’s report also did not have a thorough analysis of the financial impact of the Missouri Supreme Court’s decision in Schoemehl v. Treasurer of the State of Missouri, which extended payments to an injured worker’s dependents after the worker’s death, according to the release.

The study provided detailed information about expenditure history since 1994, and was able to gauge possible short- and long-term impact of the Schoemehl decision by evaluating claimants’ ages, genders and life expectancies. According to the report, the Schoemehl decision will boost fund costs by 24 percent.

PricewaterhouseCoopers identified key drivers to increased expenditures since 1994 as the number of claims filed, the size of the claims and the dynamics between claim reporting and resolution, and specifically noted an increase in payments for resolved claims.

According to the report, permanent total disability and permanent partial disability claims account for more than 98 percent of claim payments. Also, average lump-sum payments – primarily made directly to claimants in permanent partial disability cases – increased significantly starting in 2001, growing 206 percent between 1994 and 2006.

The study also suggested the workers’ compensation administrative fund as a possible funding source for Second Injury Fund benefits, and identified strengths and weaknesses in the current funding structure and made recommendations to ensure solvency.

“With this study, the necessary information is now available to policymakers to help them evaluate what is needed to protect the solvency of the fund,” said Jeff Baker, director of the Missouri Division of Workers’ Compensation, in the release.

In a separate news release, the Missouri Chamber of Commerce urged lawmakers to use the additional time before the fund hits insolvency to consider all options to ensure the fund’s longevity.

“We shouldn’t rush to the conclusion that we must place the burden of the fund’s impending debt on the back of Missouri’s employers,” said Michael Grote, Missouri chamber vice president of governmental affairs, in the chamber release.

See SBJ’s Aug. 6 issue for more on the Missouri Second Injury Fund and the In Focus: Manufacturing special section.