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IAIABC Taking Part in Shaping the Future of Workers’ Compensation

May 04, 2016 (10 min read)

By Jennifer C. Jordan, Esq., General Counsel, MEDVAL, LLC

On April 20, 2016, the IAIABC kicked off the National Conversation on the Future of Workers’ Compensation at its Forum in Santa Fe, New Mexico. In a three hour session, questions were presented to about 100 attendees to debate in round table format and then share with the group as a whole. One thing for certain was reflected in this effort and that was that there is a lot to discuss and no one easy answer as to how to adapt the workers’ compensation system to better suit the 21st century.

Due to the nature of the conference, the crowd consisted primarily of members from state workers’ compensation agencies from throughout the nation. Accordingly, the best interests of injured workers was disproportionately represented and those advocating for employers in the minority. Because of this, the crowd seemed supportive of broader classifications and coverage and better and less restrictive medical care with little consideration of balancing concessions for employers. It was apparent from the answers that many have forgotten that in a bargain, both sides have something to gain.

When asked had the Grand Bargain been breached since workers’ compensation was first introduced in the United States, most tables responded no. “Substantially no,” “seriously eroded,” “stretched and frayed but remains,” “not breached but deteriorated” were among the responses. One table responded yes but could not figure out breached by which side given the number of benefit expansions and contractions over the years. But for those who responded yes, it seemed that they had forgotten that the Grand Bargain was simply an exchange of exclusive remedy for no-fault benefits which is the only part that remains intact today.

Due to changes in our society over the past century, benefits expanded both in and out of comp that have certainly favored injured workers more so than employers. Manufacturing jobs have been largely replaced by service industries and with that, catastrophic losses that spurred the original legislation have been replaced by injuries such as lumbar strain and carpal tunnel, symptoms of which likely predate employment. Coverage is provided today for things not originally contemplated, such as occupational diseases and presumptions, with little to no consideration of preexisting conditions or comorbidities that are the result of personal life choices. Public benefits such as Social Security, Medicare and Medicaid that did not exist at the time the Grand Bargain was struck provide supplemental benefits that make return to work less necessary and less attractive. Yet employers only ever got exclusive remedy. Benefits broadened gradually over time and legislative efforts to contract or exclude some of the increased benefits seem to have only exposed employers to tort liabilities or resulted in constitutional challenges. The Grand Bargain may not be dead but the playing field is certainly not level.

The conversation began by attempting to outline objectives for a workers’ compensation system in 2016 and beyond. The group acknowledged that the economy had changed over the past 100 years, as had technology and medical capabilities, and that workers’ compensation needs to improve its adaptability to change along with it. The following priorities were identified by the attendees:

•    Broad coverage for covered employees
•    Cover all working people to eliminate misclassification
•    Equitable benefits to employees at a reasonable cost to employers
•    Efficient benefit delivery system
•    Encourage safety
•    Adequate communications to all workers and employers about their rights and responsibilities
•    Focus on outcomes, which include return to work and health
•    Flexible and adaptable system
•    Maintain exclusive remedy

Participants discussed responsibilities of the various parties involved the process, such as the injured worker, employer and the state. Interestingly, many points raised would mitigate risk of injury rather than represent what actually must occur once an injury has occurred. Maintaining a safe work environment should be a given and not an element of what transpires once an injury occurs. With regard to employers, attendees felt that they should communicate with the injured worker, follow all applicable laws, report claims in a timely manner, provide timely medical care and provide modified or alternative duty to facilitate return to work. Attendees found that employees need to participate in their care by complying with treatment plans and to do their part in returning to work. And the states were there to leveling the playing field by making sure all parties meet their respective responsibilities.

When asked what the most serious challenges are for workers’ compensation today, the responses were endless: Employee misclassifications, opioids, self-interest influence, comorbidities, aging workforce, system complexity leading to attorney involvement, medical management, medical providers refusing to accept fee schedules, etc. It is obvious that there is far too much money at stake for the system to be easily adaptable. Legislative remedies have to be sought to counter actions of a few bad actors. The group considered whether claimants having skin in the game would change their behaviors, such as if implementing a copay would cause claimants to become more engaged in medical decisions. In the end, it was difficult to even ascertain whether workers’ compensation as it exists today was a right or a benefit.

The one area of total agreement was reached in the context of pros and cons of federal regulation. Jokes such as not being to decide between answering “no” and “hell no” were freely tossed about. Although federalization offers possibilities of a single, uniform system across the entire nation that would end the race to the bottom by states lowering rates and using workers’ compensation as an economic development tool, a one size fits all solution is not ideal. Due to experience with the inefficient manner in which certain federal agencies that currently overlap comp operate, the consensus was that states would always have a better connection with their residents—injured workers, employers and medical providers alike—and would be better suited to each maintain their separate workers’ compensation systems, with perhaps an eye towards better efforts to deal with claims that cross state lines.

If It Can’t Be Fixed, Is Opt-Out the Solution?

This belief in the state systems remaining preferable to other options, not just federal, resonated in a later session that same day highlighting a study contracted by IAIABC regarding opt-out legislation in Oklahoma and those proposed in Tennessee and South Carolina. Greg Krohm conducted a review of the various legislation and many option plans and presented his preliminary findings that will be included in a paper expected to be released by IAIABC in Spring 2016. Mr. Krohm began by providing an important warning that has not been adequately articulated in other presentations during the last year and that is that we should beware of generalizations as there are a number of types of plans and differing philosophies on claims administration. For example, the entire Oklahoma option is being condemned for the actions of certain employers such as ResCare and Dillards, whereas there are likely a number of employers operating option plans in good faith, the way they are being marketed. Because there is virtually no objective data publically available on how those other employers are operating, the industry is only hearing anecdotal data out of Texas of what those employers were able to accomplish outside of traditional comp or about the litigated cases where the plan went horribly wrong for the injured worker. It is impossible to judge a new system with no data, yet no actual data has materialized from opt-out proponents to dispel the anecdotal data that had risen to the forefront of this debate. Fair to judge on these terms or not, the Oklahoma law has fundamental legal issues that are a far bigger problem than its bad press.

The Oklahoma statute hinges on “equivalent benefits.” In Texas, where there is no mandatory comp system, any benefits provided in any employer benefit plan is more than the state law requires. But in Oklahoma, anything that a claimant receives that is less than the state system violates the state law. It is undisputed that some reported plans in Oklahoma have reporting requirements that are more restrictive than the state and excludes many injuries covered by the state plan, leading to some injuries not being provided coverage that would otherwise be entitled to benefits under the state system. Many plans require injured workers share in the cost of medical care in the form of copays whereas the state plan does not. Traditional comp typically pays 66.6% of wage tax free and although many option plans pay higher percentages, some even 100% starting on day one, those payments are treated as ordinary income and taxed accordingly. If a claimant voluntarily leaves employment, all benefits terminate, medical and indemnity, whereas state benefits attached on the date of injury and would continue regardless of employment status. While it would be nice if employers could reign in the expanded state benefits to a more reasonable level, the Oklahoma statute does not allow anything less than the state system provides and therefore the publically available plans studied are evidence as to why option programs are not a viable solution at this time. That is not to say that opt-out programs could not work, they just need a lot more work and perhaps better intentions of certain bad actors. Fundamentally, option programs need to at least appear to be fair on their face and that is currently not the case in many known plans.

Other areas of Mr. Krohm’s study will focus on quality of medical care and dispute resolution. Good occupational medicine “can transform WC into a more effective and beneficial system for workers and employers” regardless of whether delivered through traditional comp or opt-out. However most state systems struggle to promote good medicine, therefore we must infer that proponents of opt-out have built a better mousetrap. States have repeatedly demonstrated over time resistance by the medical community to control costs or implement evidence based medicine or AMA Guidelines. Yet opt-out alleges it is able to provide equal or better benefits at dramatic cost savings. Without that real data that has yet to be produced publically, the only plausible answer is that the option plan excludes a number of situations otherwise covered by comp.

Then there is the final area of Mr. Krohm’s study—dispute resolution. If there is less coverage categories overall or denials harder to overcome without representation as opt-out systems do not typically pay attorneys’ fees, then the system would be less costly. Workers’ compensation is a strong administrative law systems run by third parties with no vested interest in the outcome. Oklahoma plans on the other hand utilize an internal appeal process eventually ending with a review tribunal selected by the employer. It is difficult to believe that such a system with only internal controls is producing equivalent or better benefits without any hard actual data to back it up.

The IAIABC elected to proactively address opt-out to assist its members better understand what it is, its implications and the differences between it and traditional comp. The organization maintains a list of resources and reference materials on its website and Mr. Krohm’s study is expected to be available in Spring 2016. []

The Conversation Continues

Whether the industry collectively joins together to fix traditional workers’ compensation successively or if it turns out that opt-out is the better alternative, the IAIABC emphasized the need for change during its Forum this year. IAIABC is committed to keeping this conversation going throughout the year as further communication by all stakeholders is the only way to determine what the objectives and public policy goals of a successful workers’ compensation system in the 21st century look like. Additional National Conversations will be held by IAIABC at the Central States Association Spring Seminar in June in Madison, Wisconsin, and at the IAIABC 102nd Convention in September in Portland, Maine. Additional conversations by other workers’ compensation industry groups are currently in development, such as the one to be hosted in May 2016 by Bob Wilson of who originally posed the question as to who would lead this conversation back in February []. Discussions and responses from these National Conversations will be compiled by IAIABC at the end of the year into a report it hopes can be used by the industry to shape the future or workers’ compensation.

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