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Workers' Compensation

Workers' Compensation

Workers’ Compensation

AIA members write a major share of workers’ compensation insurance the nation’s oldest social insurance program, throughout the country and have an abiding interest in the health and stability of the nation’s workers’ compensation system. We endorse a system that provides high quality medical treatment and equitable benefits for lost wages at a reasonable cost to employers.  To that end, we work with employers, legislators and regulators around the country in an effort to constantly fine-tune state systems so they retain their financial balance.    

Workers’ compensation today remains mostly a state-based system.  The federal government administers workers’ compensation programs for federal employees (Federal Employees’ Compensation Act), maritime workers (Longshore & Harbor Workers’ Compensation Act), coal miners (Black Lung Benefits Act) and nuclear industry workers (Energy Employees’ Occupational Illness Compensation Program).       With the exception of Texas and Oklahoma (see “Opt-Out,” below) employers are required to participate in the workers’ compensation system, by securing coverage through a policy of insurance or qualifying to self-insure.  


AIA members write a major share of workers’ compensation insurance the nation’s oldest social insurance program, throughout the country and have an abiding interest in the health and stability of the nation’s workers’ compensation system.



AIA has led the industry charge in opposing opt-out (a system whereby employers are not required by state law or mandate to participate in the state workers’ compensation program), because it eliminates uniform protections and jeopardizes workers’ benefits by allowing employers, solely at their own discretion, to replace guaranteed workers’ compensation protections with unguaranteed “benefit plans” under the Employee Retirement Income Security Act (ERISA).  Opt-out plans do not guarantee medical benefits without duration limitation, as do workers’ compensation programs.  By eliminating a state’s promise to pay all reasonable and necessary medical benefits required because of the work injury or illness, opt-out legislation turns back the clock on the promise made to injured workers under our nation’s state workers’ compensation systems by almost a century and potentially transfers that unfunded cost to publicly funded programs. 

Prescription Drugs

There is no more urgent issue in workers’ compensation than the costs – human and dollar – of opioid abuse and of prescription cost abuse.   Although societal in scope, opioid abuse is especially problematic for workers’ compensation.  Under all workers’ compensation laws, the employer is required to provide all medical treatment “reasonable and necessary” for healing and returning the worker to work. Therefore, there is an embedded bias in favor of greater utilization of medical resources, including prescription medications.  Therefore, workers’ compensation must rely on robust regulatory speed bumps to slow inappropriate use, such as formularies, evidence-based treatment guidelines, and improved prescription drug monitoring programs.  AIA has been an industry leader in enacting prescription drug reform in several states.

Workers’ compensation also suffers from cost-abuse, the result of physician dispensing, a practice that is generally prohibited under other private or public medical benefit payment programs.  Workers’ compensation is different, in that it provides first-dollar coverage – no co-pays or deductibles – and without duration limitations – all so-called demand-side controls common under group health and other programs.  Physician dispensing not only drives up medication costs, but medical costs overall, as physicians bill for additional services, and it drives up indemnity costs because of delayed return to work. 

Related to physician dispensing is the increased physician dispensing of compound medications.  The medical need for a compound is rare, but physicians are dispensing mass-produced compounds that have little to no medical efficacy and at significant price markups.  AIA believes physician dispensing should be prohibited, a step several states have already taken, or the duration permitted be limited to a few days following the injury.  Compound medications should not be reimbursed absent pre-authorization and/or subject to a hard dollar cap.       

AIA Contact

Maggie Seidel
(202) 828-7196

Rachel Wallen
(202) 828-7149


AIA South Carolina Statement on Opt-out

AIA Tennessee Statement on Opt-out

AIA Statement - Essential Elements to Controlling the Use of Prescription Drugs in Workers’ Compensation