Workers Compensation

Workers’ Compensation Workers’ Compensation (WC) is one of, if not the, largest employee expense a contractor embraces. And out of all the business environment issues, WC is the one issue most addressed by state government in recent years. The reason for this is the wildly out of control WC rates. In the last three years, workers compensation insurance pure premium rates set by each state’s Department of Insurance have risen nearly 50 percent on an average. Some businesses have seen their premiums increase as much as 200 percent and more, while others have experienced a more modest but steady increase. There are a number of reasons why this has happened and leading the list is rapidly increasing health care costs. There are some things we can do to help our WC picture. There are many internal actions we can take to help our Worker’s Compensation status. First and foremost is establishing a meaningful safety program. NFSA has developed an excellent Safety Program Guide and more information on our safety program can be found in our Members Only section. But simply having a safety program in writing is not the solution in the eyes of the insurers who, in many cases, have developed a system to evaluate the management of the program and other quality control measures. Safety must be a major part of supervisor training as well as supervisor evaluations and while the insurers look at the safety program, they also evaluate management’s commitment to making the safety program work. Fleet management is another area viewed by insurers and an area where supervision and annual or more frequent evaluations of supervisors and employees must take place. Many major injuries and WC claims have occurred in the fleet operations arena. Other internal actions include a back-to-work program and incentives to help stop claiming physical ailments as a WC injury. The purpose of a return to work program is to combat errant attitudes, characterize other elements of the program such as light duty options, and to create a positive, productive atmosphere or company climate. More on this in the Members Only section. Another critical issue discussed in the Members Only section is preventing health claims from becoming workers’ compensation claims. In group health claims there are no settlements and most-likely no long-term disability benefits while in WC there may be a disability payment while the employee is incapacitated and there may be a settlement offer. There are many external actions one can take to address WC rates. First is joining a coalition of construction trades as this provides political power through numbers to overcome the big insurance and trial lawyer lobbyists. Secondly is to identify specifically what will solve your WC rate problem. Florida had too many exemptions meaning fewer employers were involved in contributing premium rates to help make the WC market viable. And to make matters worst for a specific class like a sprinkler pipe fitter, ALL injuries, regardless if they were an employee of a company paying for WC or not, were reported to the insurer whose rates were then adjusted accordingly. Simply stated, the uninsured injury rate impacts the rate of the insured. Leading the nation in exemptions is Texas where 38% of the employers do not provide WC for their employees. The battle was set and the 2001 Florida Legislature responded by to funding a study to address the impact of exemptions. The study reported that there would be a 20%+ reduction in WC rates if all exemptions were removed, which became the mission in subsequent Legislative sessions. The 2003 Florida Legislature passed a law greatly reducing exemptions. Because of fear that the same business would have difficulty in obtaining insurance, a Joint Underwriters’ Association (JUA) was created and state-funded. The 2003 Florida law resulted in a 14% reduction on July 1, 2003 and starting on January 1, 2005 we expect another 5% reduction. The coalition of construction trades concept worked as this law would not have passed had it not been for this consolidated effort. The process revealed another problem that needs oversight. While all construction trades received a WC rate reduction on July 1, 2003, the insurers request for rate increases effective January 1, 2003 was excessively high. Most (35) states accept WC rate filings of the National Council for Compensation Insurance, a Florida-based company that manages rate filings for insurers. The funding for NCCI comes from the insurers. And most states that use the NCCI rate filings also allow for a hearing on the rate change requests. Absent a request or challenge to the rationale behind rate increases, the rate increase is then typically approved by the State’s Department of Insurance. We have been successful to knock a few percentage points off rate filings through the hearing process but this can be difficult as the typical response means data research not by the Department of Insurance, but by NCCI. Thus, the insurer, through NCCI, collect the loss data, analysis and structure the loss data, maintain the loss data, and base rate changes on this data. They control it all and the Department of Insurance acts more as a mitigator – the big message here is if you do not monitor WC rate change requests, the insurer’s rate request typically stands. I wish I could pass laws creating fire sprinkler mandates based upon our success data. There are 15 states that have established there own Compensation Insurance Rating Bureau and in many of these states there appears to be strong relationships between insurers and political officials. There are many more issues that should be considered when viewing your specific workers’ compensation laws to determine what can be changed to reduce rates. Many fall in the tort reform category. The following are issues or initiatives that you may consider when reviewing your workers’ compensation law in addition to visiting the exemptions as noted above: 1. Proof of Injury: This initiative will require the employee to prove an injury occurred at work. It will require the employee to prove the injury by a preponderance of the evidence. It will also require that all workers' compensation laws be interpreted in an impartial and balanced manner so that the employee and the employer will be considered equal before the law. There are a number of “red flags” when managing workers’ compensation issues and one big one is when the injury is not witnessed and it occurs Monday morning. 2. Apportionment of Permanent Disability: The initiative provides that injured employees receive permanent disability benefits from their employer only for the portion of disability caused as the direct result of the injury arising out of and occurring in the course of employment. Employers would not be liable for injuries or conditions that are not a direct result of the employment. 3. Treating Physicians: This initiative requires that treating physicians, whether pre-designated or selected thirty days after the injury occurs, be mutually agreed upon by the employer and the employee. 4. Qualified Medical Evaluators: This initiative will require that the selected Qualified Medical Evaluator’s specialty is relevant to the type of injury for which the evaluation is sought. Evaluators will be required to support their opinions using objective findings. The intent here is to minimize the number of for hire physicians whose field of expertise is outside that of what they are being asked to testify. The physician used as an expert witness must be held accountable for their testimony. A not uncommon trick of the attorney’s to increase their revenue is to delay the proceedings by delaying the medical expert’ witnesses deposition. Timelines should be added into the law. 5. Medical Treatment Dispute Resolution: Disputes regarding the denial, modification, delay or approval of medical treatment would be decided by medical professionals. This also should include the employer’s right to choose a physician or at least mutually agree on a physician with the injured. 6. Standardized Treatment Guidelines: The diagnosis and treatment of industrial injuries will be governed by guidelines established by the American College of Occupational and Environmental Medicine. Those guidelines are based upon the best available scientific evidence. This will require evidence-based opinions by doctors and it will remove speculation and conjecture as the basis for an opinion 7. Workers’ Rights and Benefits Clarity: Permanent disability benefits should be reviewed for the most seriously injured employees to ensure fairness. Also, partial disability criteria and definitions must be specific. Also when defining and permanent disability, a distinction must exist between disability and impairment. The AMA has established a guide to help determine impairment but the results of this impairment on the disability is dependent on the individual and the job. Also, some insurers have a history of slow and harassing payments and interaction with the injured. A filing of a WC claim is and should be deemed a good faith effort and while there must be fraud laws to protect the insurer and the owner, there should also be protection for the injured. Some insurance companies have reduced compensation very early, which some argue results in a lower settlement as the workers’ struggles to survive. And a cost of living increase should also be considered not all disabled from an injury are at or near retirement age. And finally, some injuries may have the worker off the job for more an extended time and retirement benefits typically do not accrue while being paid WC. And the worker should be copied on correspondence from the insurer to attending physicians, particularly when the insurer recommends a treatment change or a reduction in benefits. 8. Centralized Performance System: A web-based where insurers will have access to their performance data and will have access to respond to changes through this website portal of the state Department of Insurance. The intent of this centralized system is to monitor the insurers payment timing with a goal of improving the timeliness of payments to the injured and the medical provider with a goal of all medical bills paid within 45 days. Often poor payment timeliness of the insurers finds its way to other employees in the company causing company environment issues. 9. Workers’ Compensation Fraud: This initiative is intended to ensure that WC fraud laws are aggressive and potent. A major deterrent to filing health issues as WC claims are strong WC fraud laws. 10. Workers’ Compensation Hearings: The WC hearing process must be reviewed to ensure fairness to the employer and the employee. Timeliness must be added into the law to expedite the process and to ensure that the information presented at the hearings is current and applicable. And there must be timelines for the appeals process so appeals are not dragged out for years. 11. Eliminate Excessive Exemptions: The larger the premium base, the better the loss/cost ratio appears as most if not all insurers report total injuries by classification, not just those covered by WC. Please share your WC issues with me so we may add to this list of WC law review points. Buddy Dewar