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Workers’ Compensation of the Future: Will Mutual Dystopia Be the New Normal?

October 03, 2017 (12 min read)

By Richard B. Rubenstein, Esq., Rothenberg, Rubenstein, Berliner & Shinrod, LLC, Livingston, New Jersey

It is 2017, and among the most watched properties in our media are A Handmaid’s Tale and Hunger Games. Dystopia rules in 2017. With this in mind, Mark Walls, a prolific producer of seminars for the workers’ compensation industry, set the table for a panel of workers’ compensation professionals with the premise: “What if the Supreme Court of the United States invalidated state workers’ compensation laws as unconstitutional, and gave us all six months to reinvent it?” (Click here for a recording of the Workers' Compensation 2.0 program at the WCI Conference.) The foundation for the exercise, according to Kimberly George, a co-moderator along with Mark Walls, is the recent constitutional challenges to workers’ compensation systems in Alabama, Oklahoma and twice in Florida. By the end of the seminar, one is led to wonder whether the demise and resurrection of workers’ compensation as we know it would be dystopian, or utopian. As one panelist pointed out, with mordant wit, the demise would be catastrophic at least to the vendors who live off the inefficiencies in the system. For workers and employers, however, the non-jury is still out. Is workers’ compensation 1.0 a dumpster fire, or still a Grand Bargain?

It’s a novel idea: Gather together titans of the workers’ compensation and healthcare world:  David Stills, Risk Manager for Wal-Mart Stores; David North, the CEO of Sedgwick; Mark Wilhelm, the CEO of Safety National Insurance, and Matt Peterson, the CEO of a division of United Healthcare. Ask them to find a way off the island to which we have all been consigned. Pose all the right questions:

> What should Workers’ Compensation 2.0 look like?

> How important is it to preserve the exclusive remedy doctrine?

> How would Workers’ Compensation 2.0 address bureaucracy and efficiency?

> How would you integrate a Workers’ Compensation system into 2017, where other employee benefits interact and conflict with the concept of Workers’ Compensation?

> How will Workers’ Compensation 2.0 be paid for?

Unfortunately, even given a friendly audience, uncritical moderators, and a panel with a near identity of interests, the result resembles the herding of cats. Every panelist went largely in his own direction, employing MBA buzzwords like “non-subscription,” “less bureaucracy,” and “outcome-based” to answer every question posed, a bit less responsively than one might hope. For one thing, all of the successful challenges to the constitutionality of state workers’ compensation statutes have resulted from a legislative attempt to either reduce workers’ benefits (or prevent them from being updated to modern financial realities), and yet the vast majority of the opportunities advanced by the panel would further reduce workers’ benefits. Opportunity and opportunism are, of course, two very different words.

It is fitting that the first query concerned the survival of workers’ compensation as an exclusive remedy against employers. Without the threat of sympathetic juries, the Grand Bargain would never had been struck over 100 years ago. Likewise, without the lure of guaranteed benefits, organized labor, then a vital, growing, and powerful movement, would never have joined the Bargain. The considerations then, as the panelists agree, were cost containment, subsistence for the injured worker, and the mutual incentive to restore workers to productive activity. The government, desiring to avoid financial responsibility for injured workers and their families, was only too happy to facilitate and administer the Grand Bargain. As the panelists remind us, state government collects two billion dollars a year for that benevolent stewardship of the workers’ compensation system.

David Stills attached great importance to the exclusive remedy, finding the jury system “inefficient” and risky for employers, fearing a “jackpot approach.” Mark Wilhelm noted that when workers’ compensation was enacted in the early 1900’s, it was “less litigious,” and offered somewhat ironically that only lawyers would benefit from the erosion of the exclusive remedy doctrine. Mr. Wilhelm might have footnoted that workers’ compensation was less litigious back then because few states provided for attorney's fees for claimants, thus placing injured workers at the mercy of either pro bono or pro se litigation, a dream revisited, if only temporarily, in Florida recently. In perhaps the least responsive answer, David North served up a virtual buffet of red meat to the industry: choice for employers, non-subscription, a redistribution of burdens (including to “society,”, and “outcome based medicine,” finishing with “advocacy, not adversaries”). How that related to the query of whether the exclusive remedy doctrine should survive continues to puzzle this writer.

Utopia apparently has no bureaucracy. David Stills of Wal-Mart discussed the problem of 50 parallel state systems each with its own regulations and procedures and forms, and the difficulty of doing business that way. His solution: Texas-style non-subscription. An employer like Wal-Mart could then have a private system, uniform in all 50 states, with the resulting savings, no doubt negotiated as perhaps only a multi-billion-dollar company can bargain with a minimum-wage employee with no union, no doubt. It is similarly no surprise that Wal-Mart and its excess/reinsurer would take the position that reform of Workers’ Compensation should involve burden-shifting to existing government disability programs. After all, in many states, Wal-Mart employees make up the largest group of Medicaid, SNAP, and Food Stamp beneficiaries.

Answering the call as to how Workers’ Compensation 2.0 can defeat the problem of bureaucracy, Matt Peterson mused about the savings generated by auto-adjudication of medical and pharmacy bills, which are done with speed and simplicity. Of course, while these kinds of improvements may be prudent, they in no way depend upon the striking down of any state laws at all, only upon modernization and common-sense processing of medical claims. It certainly would not require the gavel of the United States Supreme Court to modernize or reimagine medical claims processing. It might, however, require a re-balancing of the priority of cost-containment vs. collection of high premiums to scale up the size of an insurance company spreadsheet. More than one panelist hinted that there should be no distinction between a workplace injury and one sustained at home, offering that the employee benefits should now be identical, with the added advantage for employers that state temporary benefits and general health benefits could take up the slack if that philosophy were to be enacted.

As to the prevention of tort remedies for injured workers, the entire panel agreed exclusivity in workers’ compensation should continue as before. So, as one might predict from an insurance industry panel, the opportunities to recast Workers’ Compensation as Version 2.0 must reside primarily in “benefits alterations,” to use a neutral euphemism. The concept of a uniform, federal workers’ compensation system was greeted with abject horror by the panel, although the concept of national standards, adopted voluntarily, received unanimous support. No mention was made of the federal studies of the 1960’s, which resulted in highly suggested standards for state system reform. The federal standards were avidly ignored and vigorously rejected by State Legislatures. New Jersey, for instance, which enacted a wholesale reform of the entire system in 1979, enacted fewer than half of the federal uniform standards. The panelists feared that a federal system would be expensive and vulnerable to politics. . . unlike the current state systems, which are expensive and. . . .as we’ve seen in Florida, Alabama and Oklahoma. . .vulnerable to politics. Mark Walls himself offered up that in a federal system, benefits would be too liberal, citing the fanciful example of a worker chided for using social media at her desk, filing for mental anguish. This caricature of the Federal Workers’ Compensation system does not actually resemble the system in place, by way of disclaimer. A panelist suggested that the National Association of Insurance Commissioners could collaborate in creating uniform forms and procedures in the event of a Constitutionally-imposed vacuum. Of course, most state Workers’ Compensation systems are separate from property, casualty, and health insurance regulation, so these Commissioners would have little or no familiarity with the standards, practices, problems, and solutions. Ignorance in government officials is now virtue, apparently.

What does the utopia of Workers’ Compensation 2.0 look like? Perhaps painters and novelists can translate utopia into images and prose, but a panel of insurance experts are apparently not Magritte or Sir Thomas More.* The experts were certainly better at confirming the shortcomings of the modern iteration of the Grand Bargain, than drawing a treasure map to Workers' Comp Shangri La. As noted previously, the entire premise of the Seminar was based on the recent Constitutional challenges in Florida and Alabama. In Alabama, the law was struck down because permanent partial disability rates were so low as to be absurd. In Florida, the first challenge was to the banishment of claimant’s lawyers from the system, which placed claimants at a catastrophic disadvantage, a manifest unfairness. The second challenge was to a provision which capped temporary total disability benefits at 100 weeks, even if the injured worker is actively, curatively treating. This left a gap, where a worker is disabled, and has nothing to live on until his permanency claim is adjudicated. Strangely, a panel presented with the visitation of tragic injustices affecting injured workers, responded with benefits reductions or increased profitability and efficiency of their business models. The recurrent theme seems to be: Unconstitutionality begets opportunism.

The fly in the ointment of any hypothetical Workers’ Compensation 2.0 is the cost of health care, of course. The runaway cost of healthcare in the United States of America is arguably not a function of supply and demand, of lack of competition, of inefficiency, of burden-shifting, or of choice. It is more probably one of a pernicious fee-for-services medical system fed by negative incentives for both the providers and the consumers of medical treatment. While opt-outs, shifting cost burdens to other systems, and reductions of operating costs for insurance companies and TPA’s may keep Workers’ Compensation 1.0 on life support a while longer, the next Grand Bargain will require a paradigm shift on health care delivery, not an Excel spreadsheet.

It may well be that for Workers’ Compensation 2.0 to take shape, stakeholders must first acknowledge the impending failure of 1.0, and the changes that brought us to this point. Organized labor is at its lowest ebb in power and influence in a century. The medical profession has been warped by to fee-for-services remuneration incentivizing expensive care with no regard for outcome. The insurance industry, fueled by high costs, has inflated its books with high premiums and high payouts they will not easily relinquish. Multiple parallel systems of medical provision, from general health insurance, Medicare, Medicaid, Charity Care, to Workers’ Compensation, replicate overlapping bureaucracies, creating a stream of revenue for the medical service providers that cannot be deciphered or untangled by laypeople, professionals, or regulators. The incentives are simply not there to reduce costs and return workers to gainful employment more quickly and efficiently.

Perhaps the parties to Workers Compensation 1.0 should recast their views to admit that the current system is not just a business failure, but a moral failure. Employers do not feel their money is well-spent and do not trust their employees to employ the system fairly. Injured workers fear case-workers, and mistrust doctors they neither choose nor interact with as their own physicians. Physicians often seem conflicted and confused about for whom they are working, and toward what end. All too often, they buy the idea that injured workers are second-class patients, profit-generators or slackers, and their patients sense this, adding to the atmosphere of mistrust and litigiousness.

A modest proposal, and not in the Swiftian sense: Let organized labor, insurance and government collaborate in a major industrial center to create a center of excellence for workers’ compensation as a test. Create a place where board-certified specialists in emergency medicine, orthopedics, neurology, pulmonary medicine, physiatry and general surgery are paid adequate salaries to preside over a medical complex along the lines of the Cleveland Clinic. In so doing, remove the profit motive for excessive, unproductive treatment. Insulate it from litigation by creating forms and processes which are collaborated upon and agreed upon by legal representatives on both sides, asking questions about diagnosis, prognosis, need-for-treatment, and work status which are uncolored by bias in both the question and the response. Mandate speedy payment to the provider and the worker. Do not tie “repeat business” to a doctor’s answer to the most critical medical-legal questions. Set goals of return to gainful employment which are developed by physician, patient and employer jointly, so that all three are partners in the outcome. The paternalistic relationship between doctor, employer and injured worker is poisonous to recovery and economy. It is adversarial by nature. To change, a sense of trust and partnership in the recovery must be created and supplant the enmity generated by claims people. Articulate goals and contract for them among worker, doctor and employee, in accordance with the goals: A return to work will be anticipated and planned for, a place made for the employee, and a transition planned with full communication between the three parties to the “contract.” Perhaps, given success in the laboratory of workers’ compensation, this paradigm will spread to the rest of the medical community.

The system and scale of paying claimants for lost time or permanent partial disability are not a critical financial problem for the system, compared to the cost of medical treatment. Leave it alone. Much of it will be addressed if quality treatment at a reasonable cost is provided, and workers are enabled to return to work without penalty or rancor because of a collaborative process that involves employers pro-actively, perhaps with ombudsmen or facilitators, in the return to work of an injured employee.

In the end, not all employers are evil. Not all injured workers are lazy, and not all physicians are greedy. A system featuring negative incentives, overlapping benefit structures, and an immediate cleavage between employer and employee as soon as an injury occurs is a toxic soup of confusion, fear, and waste. Each human component of the problem can bring value to a solution, if the conversation from worker, employer and doctor begins with, “what’s the next step?” instead of “who do I sue, who do I fire, and who do I bill?”

How does the conversation start? The insurance community takes the financial position that much expensive and extended medical treatment is wasteful and unnecessary. Injured workers and their counsel take the legal position that the expensive and extensive treatment seldom achieves a positive result. The conversation can start from that point of near-collision. One is reminded of the old joke about the two elderly women, leaving a resort. One says to the other, “the food was terrible!” Her friend responds, “Yes! And such small portions!” Utopia may start with a conversation like that, where co-dependents agree, from opposite perspectives, on a common enemy.

*The author extends his apologies to utopians Rene Magritte, Jonathan Swift, and Sir Thomas More, the author of Utopia, who no doubt never dreamed an analogy could be strained this far.

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