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How competition can lower worker’s comp costs and improve outcomes

Updated: Jul 21, 2023

Workers' compensation is defined by the United States Centers for Disease Control as, “systems [that] were established to provide partial medical care and income protection to employees who are injured or become ill from their job.”

Workers’ compensation was established to incentivize employers to reduce injury and illness to their employees. While the federal government has established this overarching definition of workers’ compensation and its purpose, each state government is responsible for creating its own system and regulation for workers’ compensation. This has led to some stark differences in the workers’ compensation systems of varying states.

Washington and Wyoming, for example, are two of just four states (North Dakota and Ohio are the others) with a monopoly worker’s comp system. This top-down control without any competition has led to increasing rates and questionable customer service. Meanwhile, in Idaho and Montana, employers can choose to purchase their worker’s compensation from the state, from private companies, or can self-insure, leading to declining rates.

While there is some debate about which system – private or state-controlled – works best, there is ample research to suggest the private model uses the free market to improve coverage, lower costs and protect workers.

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