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
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