A 2006 policy adopted by the Division of Workers’ Compensation has been draining the state’s pension funds while providing a windfall for insurers, and investigation by acting State Comptroller Kevin Walsh found.
The policy shifted financial obligations for employee injuries to pensions funds by encouraging injured employees to accept continuing medical monitoring and coverage instead of cash settlements, a move Walsh said shifted the financial burden off of insurance providers.
“State agencies should all be rowing in the same direction and not implementing or tolerating policies that expose the pension funds to costs that insurers already agreed to pay,” Walsh said. “The medical coverage policy has been a drain on New Jersey’s pension funds for 15 years. It is a loophole that has cost taxpayers an incalculable sum of money and undermined the laws adopted by the Legislature.”
At least 114 public employees won a medical monitoring settlement between 2016 and 2019, but investigators were unable to tally the cost those settlements levied on state pensions.
The office further found the policy directly contradicts state law, which limits medical coverage for work-related injuries to two years. The law also requires such benefits undergo periodic reviews, but the medical monitoring settlements are awarded for life without any further appraisals.
Insurers reap the largest benefit from the policy, Walsh said. The policy lets them avoid large cash payments to injured employees by passing costs to pension funds, though employees with less-severe wounds can still receive cash payments.
Attorneys representing injured employees are paid for worker’s comp cases even when their clients receive no cash benefits, though the law requires attorneys’ fees be based on insurer payments to injured employees.
The Division of Workers’ Compensation is already planning to rescind the policy in response to the comptroller’s investigation.
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