Million dollar deficits are impacting injured workers
Every year, Alberta’s Workers’ Compensation Board publishes a financial and operational report that often flies under the radar. While it rarely garners headlines, this document holds vital clues about the system’s health and its impact on injured workers and employers alike. Yet, at Blue Collar Consulting, we scrutinize every detail because the Board’s financial health profoundly influences its decisions and the lives of injured workers across the province.
WCB’s mandate isn’t just to support injured workers; it’s also tasked with ensuring there are sufficient funds to meet both current and future liabilities. This requires minimizing financial risks, stabilizing costs, and maintaining affordability for employers. These priorities shape not just executive decisions but trickle down to frontline caseworkers whose interpretations of policy determine the fate of individual claims.
Unlike government departments, which can run deficits with the assurance of taxpayer bailouts, WCB operates independently. This independence makes financial sustainability paramount. It’s embedded in every aspect of WCB’s operations, influencing decisions for better or worse. While this approach attempts to ensure accountability and careful planning, it also places immense pressure on the Board to manage finances prudently, particularly when facing economic uncertainties.
As 2024 winds down, one figure from 2023 stands out: a $22.6 million funding basis deficit. On the surface, it might appear alarming, but the reality is far less dramatic. This deficit is a recalibration—a financial adjustment to account for future obligations. To label it as a financial crisis would be misleading, yet to dismiss it entirely would miss the broader implications for a system increasingly reliant on global financial markets and navigating growing operational challenges. Likewise, Blue Collar has witnessed firsthand how these financial pressures have been swaying caseworkers and their daily decisions.
What the Deficit Tells Us
The $22.6 million deficit is a snapshot of WCB’s current challenge: the gap between what it collects from employer premiums and what it pays out in claims and administration. In 2023, employer premiums brought in $1.43 billion, but claim costs hit $1.48 billion, and administrative expenses added another $164.5 million. The result? A shortfall of $220.9 million before investment income came to the rescue.
And rescue it did. WCB’s investment portfolio delivered a stellar 7.8% return, generating $939.3 million. This income didn’t just cover the operational gap; it left room for some margin. But even with such a windfall, the recalculation of future liabilities—a routine accounting adjustment that takes into account inflation, claim duration, and other factors—produced a deficit on paper.
What if that investment return had been more modest? A hypothetical 5% yield would have reduced investment income to $602.1 million, leaving the Board with a shortfall of $359.8 million. This dependency on market performance underscores a critical vulnerability: WCB’s sustainability is, quite literally, tied to the ups and downs of global financial markets.
The Reliance on Investments: A Double-Edged Sword
Alberta’s WCB operates on a simple but risky premise: employer premiums alone can’t fund the system. In 2023, the average premium rate was $1.24 per $100 of assessable earnings—far below the actuarial requirement of $1.44. This shortfall means investment income isn’t just a bonus; it’s a lifeline.
The problem with this model is its susceptibility to market volatility. While a 7.8% return in 2023 feels like a triumph, the system’s vulnerability became clear in 2022, when poor market performance left WCB in a far more precarious position. For a system meant to provide stability, this reliance on inherently unstable markets is an obvious weak spot.
How Alberta Compares
On the surface, WCB looks strong. Its funded ratio of 107.3% exceeds the minimum requirement for sustainability. By comparison, Ontario’s Workplace Safety and Insurance Board (WSIB) struggled with an unfunded liability for years before recently climbing to a funded ratio of 118%.
However, Alberta’s low premium rates make its system an outlier. In British Columbia, WorkSafeBC collects premiums closer to actuarial requirements, providing a financial buffer but at a higher cost to employers. This trade-off between affordability and stability defines Alberta’s WCB—and exposes it to greater risk.
The nature of claims also sets Alberta apart. The increasing prevalence of psychological injuries, particularly PTSD, has introduced complexities and costs. These claims are often harder to resolve and require longer recovery times, adding pressure to an already stretched system.
Manifestations of Belt-Tightening in Claim Management
As WCB navigates its financial balancing act, cost-containment measures are visibly impacting the treatment of injured workers. While the Board emphasizes financial sustainability, these strategies often come at the expense of injured workers’ dignity and recovery. Here are some of the key ways these pressures are manifesting on the ground:
- Unrealistic Employment Expectations
Injured workers, regardless of age, skill level, or employability, are routinely directed to find work in an increasingly competitive labor market. This blanket approach disregards significant barriers like lack of education, specialized skill sets, geographic isolation, and disability-related limitations. Workers are often gaslit into believing they are competitive in a labor market that, in reality, offers them limited opportunities. - Inflated Earnings Potential
For elderly blue-collar workers with narrow or outdated skill sets, WCB’s standard response is to recommend computer training as a means of “enhancing employability.” However, this strategy often fails to account for the real-world challenges these individuals face in securing meaningful work, especially in roles that match their abilities and limitations. - Restricted Home Services Benefits
The adjudication of home maintenance and housekeeping allowances has been reassigned from case managers to a specialized team. The result? These benefits are now far more difficult to obtain, leaving injured workers struggling with basic daily tasks that their injuries prevent them from performing. - Increased Surveillance
Surveillance of injured workers has become more prevalent, as WCB contracts private investigators to monitor and film workers in a bid to disqualify them from benefits. This practice creates a climate of mistrust and often misrepresents the realities of a worker’s condition, eroding trust between the Board and the people it is supposed to support. - Deference to Internal Medical Consultants
WCB prioritizes the opinions of its internal medical consultants—who are often general practitioners—over those of external specialists. This dynamic allows the less-specialized opinions of WCB’s consultants to override expert recommendations, undermining the credibility of claims adjudication. - Employment Demands Amid Disability
In a particularly egregious practice, disabled workers waiting for surgeries are instructed to find jobs despite their inability to perform most work tasks. Workers who fail to comply risk having their benefits cut, creating additional stress and financial hardship during an already challenging time.
Future Challenges
- Inflation and Financial Pressures
Alberta’s economy is booming, which is good news for premium revenues but bad news for claim costs. Rising wages and healthcare expenses inflate the value of future claims, creating a double-edged sword for WCB. Without adjustments to premium rates, the system risks falling further behind. - Operational Strain
The rise in complex claims—particularly psychological injuries—demands specialized resources and longer recovery periods. Workers with PTSD face unique barriers to returning to work, and these cases are driving up the average duration of claims. - Political and Social Dynamics
Balancing worker and employer interests has never been easy. Workers’ advocates push for expanded coverage, particularly for mental health. Employers, meanwhile, resist premium increases, arguing that higher costs would stifle economic growth. Any move to raise rates closer to actuarial requirements is likely to ignite controversy.
What Lies Ahead for 2025?
The $22.6 million deficit from 2023 serves as a reminder that even a well-funded system like Alberta’s WCB isn’t immune to financial pressures. While Alberta remains competitive compared to other provinces, its reliance on investment income and low premium rates leaves it exposed to external shocks.
Injured workers can expect these financial pressures to continue shaping the decisions of caseworkers and adjudicators. From inflated employability assessments to stricter adjudication of benefits and increased surveillance, the push for cost containment is likely to persist. These measures, while addressing short-term financial challenges, risk undermining trust and fairness in the system.
The upcoming 2024 Annual Report will provide more clarity, but one thing is certain: the path forward requires adaptation. By addressing its vulnerabilities and embracing reform, the Board can better balance financial sustainability with its mission to support injured workers and employers alike. After all, the real test of a system isn’t how it performs in good times but how it weathers the storms.
