Pulse Survey Results: Mental health benefits
Survey: Since the pandemic began, 66% of employers report increased use of mental health resources offered through their benefits plan, and 62% indicate a significant spike in claim costs
According to the National Institute for Occupational Safety and Health (NIOSH), one in 10 underground coal miners who have worked for at least 25 years have been identified as having black lung disease, as reported in the American Journal of Public Health.1 Underground coal miners are not the only workers at risk. Surface miners and other occupations working within a coal mining operation can also be susceptible to the disease depending on several factors, including the location of work and length of exposure to coal dust. In addition to possible health concerns, coal mine operations have faced other challenges over the years that have strained the industry and reduced the number of coal mine companies. Funding mechanisms that depend upon revenue from solvent companies are, in turn, adversely affected. These types of challenges threaten the financial solvency of the industry, which could impact benefits.
As coal mining operations continue to decrease and more people reach retirement, an increasing number of coal mine workers will begin to file black lung claims at the federal and state level—presenting a large liability for insurance carriers and self-insured coal operators. One may think fewer active coal miners would generate less potential black lung claim liability, but it’s quite the opposite. With less work available and more individuals retiring, the industry could see an uptick in black lung claims. At the same, funding these liabilities is becoming increasingly difficult. How did we get here and what can be done to help manage these liabilities and allocate more funds to qualified workers?
The Federal Coal Mine Health and Safety Act of 1969 was the first federal program to compensate black lung claimants and their survivors. Congress later passed the Black Lung Benefits Act of 1972 (the Act) to establish state workers’ compensation payment systems for coal workers’ pneumoconiosis (CWP), commonly referred to as black lung disease, with the approval of the U.S. Department of Labor (DOL). However, no state workers’ compensation system has ever met the standards originally set forth in the Act and operators could not pay CWP benefits. Therefore, Congress passed the Black Lung Benefits Revenue Act of 1977, which established the Federal Black Lung Disability Trust Fund (Trust Fund). This vehicle would be funded by charging an excise coal tax on mining operations to pool money for coal miners who would suffer from the disease and require medical treatment as well as indemnity benefits after retirement. The Trust Fund has been providing compensation to certain coal miners and their survivors ever since.
The Trust Fund was primarily created for the express purpose of paying federal black lung benefits when the responsible coal mine operator or insurance carrier was unable to. The Trust Fund would also pay benefits in the interim while the federal black lung claim went through the litigation process. Although the Trust Fund is financed by excise taxes on coal sales, it has a long history of borrowing from the U.S. Treasury to support its operations. According to a 2019 report from the Government Accountability Office (GAO), the Trust Fund has needed to borrow from the Department of Treasury’s general fund to pay coal miner benefits almost every year since 1979. The GAO also reported in a simulated study that the Trust Fund’s outstanding debt could exceed $15 billion by 2050.2 Based on Milliman’s review of the available historical data, the DOL would need to implement changes to reverse these adverse trends.
The number of active coal miners could continue to decrease because of several factors: first, many coal mine workers are in the Baby Boomer generation and have reached or are soon to reach retirement age; second, a shift toward alternative energy options has led to decreased demand for coal production, shutting down coal mining operations and shrinking the workforce; and third, the ongoing COVID-19 pandemic may further affect miners, leading to a decrease in the workforce.
Insurance carriers and self-insured coal operators have exposure to future claim filings from coal miners who left employment in the past. Many of these claimants will be awarded federal black lung benefits after presenting evidence of CWP. Even for claims that are not awarded, the parties will still need to absorb expenses (including legal costs) throughout the lengthy adjudication process. There is no statute of limitations on the number of years that can pass between leaving employment and filing a federal black lung claim and no limit on the number of times an individual can refile. These factors create a long reporting tail that greatly increases the uncertainty in estimating future liabilities for federal black lung claims.
When federal black lung claims are awarded, indemnity benefits usually make up the largest portion of costs, though medical costs can also be a headache. Monthly indemnity benefits are established every year in accordance with Section 412(a)(1) of the Federal Coal Mine Health and Safety Act. In 2022, for a miner with one dependent, the indemnity benefit is $1,063.30 per month. For a single miner, the monthly amount is $708.90.5 Benefits continue to increase with the number of dependents. These indemnity benefits do not have a specific end date like certain state workers’ compensation claims. Federal black lung benefits continue for life. If the miner eventually passes away and is survived by living dependents, monthly benefits will continue to be paid to the dependents for a duration that varies by age and status. The table in Figure 2 shows the trends in the federal black lung benefit rate for a claimant and spouse since program inception.6
As mentioned previously, in some cases the medical benefits can also be costly. Once awarded a federal black lung claim, a miner may seek routine office visits with a family physician or pulmonologist. These physicians often require annual diagnostics to assess lung function via MRI, X-ray, or CT scan. Inhalers are often prescribed as well as oxygen tanks, depending on the condition of the miner’s lungs. Some miners undergo lung transplants, which involve not only the costly surgery7 but also an increased use of inhalers, oral medications, pulmonary rehabilitation, housing accommodations for procedures and associated travel expenses, hospitalizations, additional surgeries, and increased doctors’ visits and medical monitoring.
Reserving for black lung claims can be a more complicated undertaking than in typical workers’ compensation reserving. First, conventional actuarial techniques for estimating incurred but not reported (IBNR) reserves do not work well for federal black lung claims, due to the many distinguishing features of such claims, including the long reporting tail discussed above and the unlimited ability to refile. Further, in some black lung cases, the standard industry approach of incorporating average medical costs based on average life expectancy cannot be applied and a more detailed medical analysis is required. Often this analysis can be challenging because of limited medical information. Costs of medical treatment also tend to increase with inflation and new technology, which needs to be appropriately incorporated. Based on underlying health conditions and comorbidities, rated ages need to be evaluated for each claimant (i.e., applying a shorter than standard life expectancy). Using specific mortality tables to derive a life annuity for each miner is necessary to cover the length of time in which to pay ongoing future medical costs. Mortality tables for the spouse of a miner are also critical when it comes to the expected duration of paying monthly indemnity benefits. Incorporating the appropriate indemnity escalation rates is needed in conjunction with the use of specific mortality tables and rated ages. Finally, when a federal black lung claim is filed, it goes through a lengthy federal adjudication process. Detailed actuarial studies are needed to determine the probability of a claimant being awarded or denied benefits at each level of that process. Several factors need to be considered, such as prior decisions and location of employment.8
Federal black lung claims cannot be settled. The Federal Coal Mine Health and Safety Act does not expressly prohibit settlements; however, the court set precedential case law, which has been virtually impossible to overturn. However, settlement is a recognized method of resolution for almost every other workers’ compensation claim, both in terms of indemnity and medical benefits. This includes federal programs like the Longshore and Harbor Workers’ Compensation Act. States such as Alabama, Illinois, Kentucky, Pennsylvania, Virginia, and West Virginia all allow settlement of state black lung claims. These states also have the majority of coal mine employment.
The prohibition on settling federal black lung claims should be reexamined. The inability to settle significantly lengthens the amount of time a claim remains open, increasing uncertainty and interest rate risk. Reserving for liabilities that remain open potentially decades into the future adds an additional level of complexity and difficulty for actuaries who do not possess a deep understanding of the framework underlying the black lung history and adjudication process. The increased risk translates to increased costs, which are passed on to the consumer. In addition, prohibiting settlements of federal black lung claims denies the coal miners and surviving family members options that they may find financially beneficial. Offering settlement as a solution creates additional payment alternatives and financial flexibility for miners. A settlement option benefits all parties involved by putting control into the miners’ hands, decreasing risk and uncertainty, decreasing “travel time” in the litigation process, and decreasing expenses and costs (freeing up that money to be paid directly to claimants)—all of which will provide more stability to protect the financial integrity of the Trust Fund and other payers.
It is difficult to dispute that a complex environment has evolved around federal black lung claims, in which:
These problems add complexity and increased costs to an already struggling industry. Although the various parties impacted may at times have different interests, we can all agree that maintaining the financial strength of an injured workers’ compensation benefit system for coal miners remains of paramount concern for all involved. Without a unified approach to discussing and addressing these issues, the industry will continue to needlessly gasp for air.
1 CDC (July 20, 2018). Prevalence of Black Lung Continues to Increase among U.S. Coal Miners. NIOSH Update. Retrieved February 28, 2022, from https://www.cdc.gov/niosh/updates/upd-07-20-18.html#:~:text=One%20in%20ten%20underground%20coal,American%20Journal%20of%20Public%20Health%20.
2 GAO (June 20, 2019). Testimony: Black Lung Benefits Program Financing and Oversight Challenges Are Adversely Affecting the Trust Fund. Retrieved February 28, 2022, from https://www.gao.gov/assets/gao-19-622t.pdf.
3 DOL. Mine Data Retrieval System. Retrieved February 28, 2022, from https://www.msha.gov/mine-data-retrieval-system.
5 DOL. Black Lung Monthly Benefit Rates for 2022. Retrieved February 28, 2022, from https://www.dol.gov/agencies/owcp/dcmwc/regs/compliance/blbene.
7 Bentley, T.S. & Ortner, N. (January 2020). 2020 U.S. Organ and Tissue Transplants: Cost Estimates, Discussion, and Emerging Issues. Milliman Research Report. Retrieved February 28, 2022, from https://www.milliman.com/en/insight/2020-us-organ-and-tissue-transplants.