The escalating financial crisis of Lehman Brothers [stock down 94% Jan-Sept 2008], may have a major impact on workers’ compensation throughout the US. Over this weekend the financial gurus scheduled meetings in an effort to avoid a complete crash of Lehman Brothers. In the meantime, the waves of this potential economic meltdown are sending hurricane type surges throughout the US workers’ compensation system.
Workers’ Compensation is an employer funded benefit program. Even self-insured companies purchase reinsurance for economic protection. The reliance upon insurance companies to operate workers’ compensation programs in the US is vital.
Major insurance companies such as AIG [stock down 79% Jan-Sept 2008], the nations largest insurer, are intricately involved in operating and funding the nation’s workers’ compensation program. AIG’s shares fell 30% on Friday as the Lehman Brothers fiscal crisis continued to escalate. Congress Waxman has expressed concern over AIG’s premium charges. AIG’s decline was based on their questionable credit default swaps, covering loses on securities based on mortgages.
As this economic crisis continues to domino the question will be whether State the insolvency mechanisms in place will be sufficient to react to keep the system afloat and provide an adequate benefit flow to the workers’ compensation system. It is doubtful that the beneficiaries of the compensation system, and its administrators, will think kindly of becoming creditor in a bankruptcy reorganization scheme paying ten cents on the dollar.
This unfortunate economic scenario brings new life to a call for the reevaluation of the entire failing US workers’ compensation program and the need to look at a Federal approach to co-ordination and delivery of benefits.