Ministers fear that insurance premiums would rise sharply if the the NHS stops footing the bill and transfers the £100m cost to the private sector.
Under Department for Health plans, the cost of treating workplace injuries, which is now borne by the National Health Service, would be passed to employment liability insurers. This would inevitably lead to rises in the cost of premiums.
Health and safety minister Nick Brown ordered the review of the proposals after a crisis meeting with the Construction Confederation last month, when the confederation told Brown that the plan would lead to such high premiums that firms could start trading without cover.
These premium increases would come on top of dramatic rises in employers liability insurance that have hit the industry over the past year. Some companies have been faced with hikes in the cost of insurance cover of 1000%.
Andy Sneddon, health and safety director, Construction Confederation
If the cost was passed on, firms would work without cover
Andy Sneddon, health and safety director at the Construction Confederation, welcomed the intervention by Brown
He said: "If the cost to insurers was passed on to employers in blanket fashion, with no regard to health and safety performance, firms would be forced to stop trading, or worse still, work without cover."
A Construction Confederation spokesperson said that if the proposals were to go ahead, the costs passed on to contractors could be in the region of £100m.
He said the money would be better spent on the occupational health needs of construction workers, rather than being used to pay for the treatment of injuries.
The spokesperson said: "There is a compelling argument for 'ring fencing' recovered funds for health surveillance, clinical diagnosis and early rehabilitation."
It is expected that the proposals will now be reviewed as part of a Department for Work and Pensions study of employers liability insurance. The deadline for industry submissions to the report was last week.