Jury Still Out on Effectiveness of Workers’ Compensation Reforms

Jury Still Out on Effectiveness of Workers’ Compensation Reforms

Jury Still Out on Effectiveness of Workers’ Compensation Reforms

By John Stahl, Esq.

A November 21, 2013 seminar titled “The Legal Perspective of the Latest Workers’ Compensation Reforms” at the 22nd Annual National Workers’ Compensation and Disability Conference & Expo in Las Vegas examined the real-world impact of efforts by regulators to address high costs and other challenges in the workers’ compensation system. Stuart D. Colburn, Esq., who is a shareholder in the law firm Downs Stanford, of Austin, Texas moderated the session. Thomas A. Robinson, J.D., a staff writer for Larson’s Workers’ Compensation Law, was one of the three speakers. Brad Bleakney, Esq., the Managing Partner in the law firm Bleakney & Troiani, of Chicago was another speaker. The third speaker was Rebecca Shafer, J.D., President of Amaxx Risk Solutions, Inc., of Hartford, Connecticut.

Oklahoma’s New Opt-Out Law

Colburn started the session by commenting that Texas has allowed some employers to opt out of that state’s workers’ compensation system for several years; he then began discussing Oklahoma’s more recent experience with that option in the context of that reform offering employers there some of the same benefits as its neighboring state.

Colburn then turned the microphone over to Robinson, who described the Oklahoma opt-out legislation as highly significant. This speaker recapped the legislative history of this law and emphasized that it did not require that a benefits plan that an employer developed complied with the standards under the federal Employee Retirement Income Security Act (ERISA), but in all likelihood employers would choose to do so. He emphasized that the actual impact of all the legal changes was uncertain and added later in the presentations that the law would become effective in early 2014.

Robinson noted as well that the new Oklahoma law allowed any employer in that state to opt out of the workers’ compensation system in that state by meeting standards that included:

> Providing the company’s employees and Oklahoma the required notice of the opt out; and

> Submitting a written plan that described how the employer would operate the benefits plan that replaced the workers’ compensation coverage.

The next portion of this presentation predicted that most Oklahoma employers who opted out would develop ERISA-compliant plans. Robinson based this prediction on ERISA preemption requiring that every dispute of any nature regarding a benefits plan be presented in a federal court. Robinson pointed out that because of the broad preemption clause found within ERISA, if an employer could craft the opt-out plan so as to come under ERISA, all disputes related to the plan would have to be determined in the federal court. The Oklahoma Commission or its state court system would be powerless to adjudicate any dispute as they would have NO jurisdiction. He noted that this contrasted with the provisions in workers’ compensation systems for handling such conflicts within the administrative or judicial system of a state. Colburn added that many employers find federal court friendlier than state court.

Robinson emphasized as well regarding these ERISA-compliant benefits plan that “the Oklahoma [workers’ compensation] Commission or its state court system would be powerless to adjudicate any dispute as they would have NO jurisdiction.”

One identified downside regarding the ERISA provision that was discussed above was that that pre-emption did not apply if a benefits plan was written only to meet the standards of a workers’ compensation system. Robinson noted that some experts referred to plans that addressed that limitation as workers’ compensation plans that had a toothbrush as an add-on. The “workers’ compensation plus a toothbrush” was a euphemism for indicating that the employer wouldn’t have to provide much, in addition to the workers’ compensation provisions, to get around the “solely for workers’ compensation” clause in ERISA’s preemption clause.

Provided examples of such extras included providing for annual physicals and other preventative measures as a means to obtain the ERISA pre-emption.

This presentation on the Oklahoma reforms next discussed the legal provision in that state for administrative arbitration of basic disputes related to compensation for employment-related injuries; the provided information noted that that option existed even if an employer adopted an ERISA-compliant opt-out plan. Robinson observed that employers believed that the arbitration process provided them more control than resolving disputes through a state’s administrative process.

Robinson wrapped up his presentation on the new Oklahoma law by comparing it with the Texas opt-out provisions; the highlighted differences between those states that he and Colburn discussed included:

> A Texas employer who opted out was subject to tort liability for harm that was compensable under workers’ compensation; an Oklahoma employer who opted out still enjoyed the protections of the exclusive remedy aspect of workers’ compensation;

> There were indications that the Oklahoma law allowed a written plan of an opt-out employer to require that an injured employee notify an employer of a claim within 24 hours of an injury and that such an employee loses the right to receive benefits if he or she does not meet that requirement; and

> Oklahoma required that an opt-out plan provided an injured worker who met the relevant standards benefits that were equivalent to those that workers’ compensation provided, but Texas had no equivalent standard. One example was a Texas plan may not provide benefits for harm that caused permanent disabilities.

Reform in Illinois

Bleakney opened his review of Illinois reforms from 2011 by noting that a study from the National Council on Compensation Insurance, Inc. concluded that post-reform recommendations for premiums for workers’ compensation insurance have fallen 14 percent from pre-reform levels.

Bleakney attributed some of this success to modifying legal standards that affected the utilization review process in Illinois. Identified areas of concern included reducing workers’ compensation claims for excessive:

> Physical therapy;

> Chiropractic treatment; and

> Drug treatments in the form of injections.

His presentation also expressed concern regarding not properly managing a utilization review system; particular issues included possible abuse and overuse of such a system generating costs that offset the savings from more efficiently managing the benefits that medical-care providers offered claimants.

This overview of Illinois reforms also addressed the impact of requiring consideration of the AMA Guides to the Evaluation of Permanent Impairment (Guides) when evaluating a request for permanent disability benefits. Bleakney emphasized that assessing disability awards involved several factors in addition to the ratings provided by the Guides. He added that many experts have concluded that reform efforts requiring evaluations of claims considering use of the AMA Guides 6th has reduced the monetary amounts of awards for permanent partial disabilities by approximately15 percent as measured against a prior high-water mark regarding those awards.

Bleakney elaborated on this topic by noting that the workers’ compensation laws in many states required using the most recent version of the Guides when conducting permanency reviews; these remarks acknowledged that concerns related to how the 6th edition of the AMA Guides established impairment ratings have prompted some states to revert to basing their reviews on the 5th edition. Colburn added that some states still use the 3rd and 4th editions.

A practical issue that Bleakney identified related to use of impairment ratings was that it led to the attorney for a claimant more routinely deposing the physician who prepared an impairment rating for an employer. The theory behind this tactic was that it would discredit the process by which the physician reached his or her conclusion.

The discussion of introducing Preferred Provider Program (PPP) employer networks in Illinois noted the delay associated with implementing PPP programs in obtaining state approval to establish those networks. The expected impact of PPP program approval is in granting employers greater control regarding which medical-care providers treated claimants and in further expected cost reductions; Bleakney followed up this statement with an expressed desire that employers select the best doctors available and not allow costs to unduly influence their selection of a treating physician.

This presentation also indicated that Illinois employers would continue to follow what Bleakney referred to as the industry model of entering into medical service fee agreements through their workers’ compensation insurers. He noted that the prearranged discount model was probably the least expensive alternative for employers and that insurers generally provided good service under it.

When asked for the perspective of an employer regarding the Illinois reforms, Shafer noted the necessity of employers properly understanding every option regarding the medical benefits that a claimant received. She added that a widespread practice of inadequate communication between employers, insurance brokers, insurance carriers, and third-party insurance administrators created problems that included employers not being aware of better options regarding the network of medical-care providers with whom they operated. This advice included being aware of existing resources, rather than limiting research to possible changes.

Other provided advice from the employer perspective related to studying not only the ratio of in-network to out-of-network care but also differences regarding the amount of care that in-network locations provided; Shafer noted that discovering that claimants utilized one  in-network location far more frequently  than another in-network location could indicate that the latter was not operating properly.

Shafer continued reiterating the importance of communication among every participant in the workers’ compensation system throughout the seminar because the absence of communication leads to higher litigation rates.

Colburn then shifted the focus of the discussion by referring to California reforms that contributed to 30,000 monthly requests for independent medical reviews destabilizing the workers’ compensation system in that state. Bleakney’s immediate response to Colburn’s question regarding whether Bleakney expected a comparably heavy demand in Illinois was “absolutely.”

Bleakney elaborated by explaining that Illinois had not adopted any one specific guideline regarding medical care which allowed an employer seeking a utilization review to base an argument on any relevant national medical guideline available; he noted as well the possibility that the doctor who conducted the UR review could base his or her conclusion on a conflicting medical guideline which had the potential to spark legal disputes regarding which guideline should determine the outcome. Bleakney also observed that the delays and high costs associated with court proceedings could offset the benefits of utilization reviews if UR is over utilized.

Shafer stated regarding this topic that workers’ compensation insurance experts needed to better educate employers regarding both the concept of utilization reviews and how to conduct one. She stressed the importance that such tutorials be sufficiently detailed.

RICO Claims in Workers’ Compensation Disputes

The analysis of the direct relevance of federal law to workers’ compensation began with Colburn briefly commenting about the issues in Oklahoma regarding a benefits plan that an opt-out employer developed not complying with ERISA standards if that plan was merely a substitute for workers’ compensation coverage.

Colburn’s introduction of the topic led to Robinson discussing the issues in the Michigan cases of Brown v. Cassens Transport Company and Jackson v. Sedgwick Claims Management Services, Inc. Robinson noted that the unresolved disputes in those lawsuits included whether the exclusive remedy provisions in the workers’ compensation law of Michigan applied to a claim under the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Robinson shared that the relevant RICO issues included whether an employer had conspired with doctors who conducted independent medical reviews.

The panel went on to discuss workers’ compensation disputes in other states in which an alleged RICO violation provided the basis for one or more claims. Colburn explicitly wrapped up this portion of the seminar by observing that the courts seemed to favor employers regarding RICO claims in workers’ compensation cases but that the potential liability regarding allegations related to that law should still concern that group.

Opioid Reform

The panel’s conversation regarding the particularly bothersome issue of opioid abuse by claimants focused on reforms in Washington State. In discussing the formulary that Washington adopted, Robinson noted that a guideline required considering discontinuing prescribing opioids if a claimant had not improved within 90 days of undergoing surgery. He stressed that merely reducing a claimant’s pain did not qualify as improvement for purposes of that evaluation.

Colburn noted that an 82-percent reduction in the cost of Schedule II opioids had followed Texas adopting a closed formulary. He further stated that many opioid-related reforms stemmed from the need to address inappropriate prescription practices of some physicians.

Bleakney’s input regarding harmful prescription practices including observing that the PPP program in Illinois reduced the opportunity of a claimant to select a doctor who would not follow proper guidelines regarding opioids.

Time Will Tell

A common element of the panel’s analysis of recent workers’ compensation reform is that it is a little early to reach a final conclusion regarding their effectiveness. Doubt remains regarding whether employers and claimants will respond in the manner that legislators and regulators intended when amending the relevant laws and administrative codes. Additionally, the workers’ compensation community is waiting for the courts to weigh in regarding the interpretations of some aspects of these changes.

© Copyright 2014 LexisNexis. All rights reserved.


Price $99*; Books shipping now to customers! 


Keep track of how the workers' comp landscape is changing with this 400+ page compendium. Here's what you get: 

  • A 50 state survey at a glance of workers' comp-related legislation, including selected drug bills, with commentary from 27 defense attorneys, 16 claimant's attorneys, and National expert Thomas A. Robinson, staff writer for Larson's Workers' Compensation Law
  • In-depth analysis and insight on key issues, including exclusive remedy, medical marijuana, opt outs, Affordable Care Act & much more
  • Larson's Spotlight on interesting cases for 2013, written by national expert Thomas A. Robinson

View the brochure & table of contents.

View sample pages.


Order online or contact Christine Hyatt at  ph. 937-247-8166, or Email: Christine.E.Hyatt@lexisnexis.com.


*Price does not include sales tax, shipping or handling. Price subject to change without notice.

For more information about LexisNexis products and solutions connect with us through our corporate site.




(online course)

Instructor: Jennifer C. Jordan, Esq., Editor-in-Chief of LexisNexis' The Complete Guide to Medicare Secondary Payer Compliance

$119. Register today