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Journal Articles

Law and Economics

2001

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Insurer Moral Hazard In The Workers' Compensation Crisis: Reforming Cost Inflation, Not Rate Suppression, Martha T. Mccluskey Jan 2001

Insurer Moral Hazard In The Workers' Compensation Crisis: Reforming Cost Inflation, Not Rate Suppression, Martha T. Mccluskey

Journal Articles

This article challenges the standard story of the insurance crisis that led to the near-collapse and major reform of a number of states’ workers’ compensation programs in the 1980s and 1990s.

In the prevailing account, insurance costs rose due to expanding costs of benefits for injured workers’, much of which was blamed on wasteful or abusive "moral hazard" by workers and their lawyers and doctors. Because state regulators had substantial power to control insurance rates, this account claims governments tried to suppress prices in the face of rising benefit costs in a misguided attempt to avoid political trade-offs between labor ...