DLES Workers' Compensation Program by pharmphresh33


									Progress Report
March 2001                                                                                  Report No. 01-15

The Workers’ Compensation Program Makes
Progress by Implementing Recommendations
at a glance                                                        Background ___________
The program and the Legislature have begun                         Workers' compensation systems are designed
implementing many of the recommendations from                      to benefit both employees and employers.
    1999                          collecting
our 1999 report. The program is collecting more                    Employers furnish workers with job-related
information electronically, but still collects too                 injuries or illnesses with medical benefits and
much information in paper form. The program is                     indemnity benefits (lost wages) by purchasing
becoming more proactive in recommending                            workers' compensation insurance from an
legislation and policy changes and has boosted                     insurance carrier or by self-insuring. Employers
oversight. Recommendations implemented to                          are able to avoid costly litigation because
date have saved about $3.6 million annually.                       workers’ compensation claims are handled
                                                                   through an administrative rather than a
However, several other recommendations to                          judicial process.      Employees benefit by
streamline the program, which would save about                     receiving immediate medical treatment for
$6.7 million annually, have not been implemented.                  work-related injuries or illnesses and some

Purpose ______________
                                                                   financial compensation for lost income.
                                                                   For purposes of performance-based program
In accordance with state law, this progress                        budgeting, the Department of Labor and
report informs the Legislature of actions taken                    Employment Security established a single
by the Department of Labor and Employment                          Safety and Workers’ Compensation Program.
Security (DLES) in response to a 1999 OPPAGA                       Two department divisions carried out most
report. 1, 2 This report assesses the extent to                    program functions. The former Division of
which        our     earlier    findings    and                    Safety had primary responsibility for activities
recommendations have been addressed.                               intended to prevent workplace injuries. The
                                                                   Division of Worker’s Compensation continues
                                                                   to administer the program and enforces the
                                                                   mandatory purchase of insurance by
                                                                   employers; regulates insurance carriers, self-
    Section 11.45(7)(f), F.S.                                      insurers, and benefit providers; and assists
    Justification Review of the Safety and Workers’ Compensation   participants through dispute resolution and
    Program Within the Department of Labor and Employment
    Security, OPPAGA Report No. 98-76, March 1999.
                                                                   education. Some program-related activities are

Office of Program Policy Analysis and Government Accountability
an office of the Florida Legislature
Progress Report

performed by other state government entities,
such    the    Agency    for   Health    Care
                                                         Program Oversight
Administration and the Department of                     Lack of problem solving
Insurance. The program is funded by the                  Our prior report concluded that the program
Workers' Compensation Administration Trust               had not been proactive in making
Fund. The fund's revenues are generated from             administrative changes or recommending
an assessment on workers' compensation                   legislative actions that could improve the
insurance premiums. For Fiscal Year 2000-01,             workers' compensation system. For example,
the Legislature appropriated $45.2 million for           the program had not sought legislative
operations and 604 FTE.                                  clarification as to whether the program or the
                                                         Agency for Health Care Administration should
Status of Prior                                          enforce the requirement that no insurer may

Recommendations _____
                                                         offer or use a managed care arrangement
                                                         without the agency’s authorization.
Overall, the department and the Legislature              As we recommended, the program has become
have taken steps to implement many of the                more proactive in proposing changes to
recommendations of our prior report.                     improve the program. We continue to believe
However, other recommendations have not                  that the Legislature should clarify the
been adopted. We continue to believe that                program’s role in this area.
these additional steps would improve program
                                                         Lack of program coordination
operations and save state funds.
                                                         Our prior report concluded that the program
OPPAGA’s prior report included several                   also had focused its efforts on handling
recommendations related to the workplace                 individual processes rather than identifying
safety component of the program administered             and solving systemic problems. For example,
by the Division of Safety. Effective July 1, 2000,       the program’s monitoring efforts focused on
the Division of Safety, was eliminated by s. 2,          how individual claims are handled rather than
Ch. 99-240, Laws of Florida, which reduced the           on determining whether carriers or the overall
overall budget by $7.1 million. This action              insurance industry had effective claims
effectively implemented $3.1 million of our              handling practices. We recommended that the
recommendations        for     this     program          program focus on providing effective
component.                                               management of program functions and
Our prior report concluded that the program              coordinating activities across system entities
was not taking effective enforcement action              and functions.
when it detected employers who failed to carry           As we recommended, the Division of Workers’
required workers’ compensation insurance.                Compensation has broadened its oversight
The      program        has     adopted    our           efforts over the last year. For example, the
recommendation to impose sanctions on these              division has initiated a cooperative agreement
companies. As a result, penalty assessments              and co-located the medical benefit oversight
increased from $900,000 in Fiscal Year 1997-98           unit with the Agency for Health Care
to $1,500,000 in Fiscal Year 1999-2000.                  Administration.       The division also has
The status of recommendations that have not              integrated several of its databases to ease
been fully implemented is presented below.               program employee use of databases. We
The recommendations have been organized by               believe that the division should expand and
topic area. These topic areas are program                continue these efforts.
oversight, regulation of employers, regulation
of insurers, and assistance to employees.

                                                                                                   Progress Report

Excessive data collection                               1999. We recommended that the Legislature
Our prior report concluded that the program             consider transferring the program's employer
collected data that were not used for a specific        compliance functions to DOI.
purpose, burdening program participants. For            This     recommendation    has    not    been
example, although carriers were required to             implemented. However, the division reports
report if an employee was unlikely to return to         improved coordination with DOI.           The
work, the program did not use this information          program referred 418 cases of suspected fraud
to identify individuals needing re-employment           to the department during 1998-99 and 1,136
assistance.     We recommended that the                 referrals in 1999-2000.
program revise its reporting requirements to
include only information that is needed and
implement less resource-intensive methods for
                                                        Regulation of Insurers
collecting data. To facilitate the integration          Ineffective and inefficient monitoring of
and sharing of information, we also                     insurance benefits
recommended that the program integrate its
                                                        Our prior report concluded that the program
separate functional databases.
                                                        had not developed an efficient and effective
The program has made some progress in                   system for receiving indemnity payment and
reducing unnecessary data collection. For               other claim information.       To enable the
example, the division reviewed and updated              program to ensure the provision of timely
its forms to reflect its current information            indemnity benefits to injured workers, carriers
needs. The program also recently initiated              must report information as to the payment
action that has the potential to eliminate a            date of the first indemnity payment and the
duplicative reporting requirement that results          amounts of indemnity and medical payments
in the manual submission of about 300,000               that were made for each claim. 3
forms annually. Information on these forms
                                                        We recommended that the program develop a
relates to the issuance, cancellation, or
                                                        comprehensive plan of action to encourage
reinstatement of workers’ compensation
                                                        carriers to submit information electronically,
policies. Insurance carriers may now permit
                                                        thus eliminating the need for the manual
the release of this electronic information to the
                                                        review and entry of data.             We also
program, which they already submit to the
                                                        recommended that the program modify its
National Council on Compensation Insurers,
                                                        information system to allow it to identify
Inc., in lieu of manually reporting duplicate
                                                        carriers that did not comply with all reporting
information to the program. The division
                                                        requirements. In addition, we recommended
anticipates that more progress will be made in
                                                        that the program integrate the information
streamlining its reporting requirements.
                                                        produced by the various monitoring activities
                                                        to allow an assessment of how well carriers are
Regulation of Employers                                 delivering workers' compensation benefits
Inadequate coordination with Department of
Insurance                                               These recommendations have been partly
                                                        implemented.       The division reports an
Although a 1997 Statewide Grand Jury
                                                        increased rate in the electronic submission of
recommended that the program report to the
                                                        program forms, thus reducing input cost and
Department of Insurance cases of suspected
                                                        errors. As a result, at least one FTE has been
employer fraud, program efforts had resulted
in few referrals. The program referred fewer
than 100 cases to the Department of Insurance                Carriers must report indemnity benefit amounts and costs of
                                                            medical care information on each claim six months after it is
(DOI) between December 1997 and January                     initially opened and every year thereafter. Carriers also must
                                                            report any change in case status and all denials of claims.
Progress Report

eliminated from this functional area. However,                consider privatizing this function to reduce
most forms still are not submitted                            costs.
electronically, indicating that continued effort
                                                              The program initially agreed with our
is needed by the program (see Exhibit 1).
                                                              conclusion that assessed penalties should not
                                                              be waived, and its use of this practice declined
Exhibit 1
                                                              in Fiscal Year 1998-89. However, program
More Information Is Processed Electronically
                                                              managers now state that they support the
                                Percentage of Forms           waiver of penalties when a subsequent re-audit
 Form          Form            Submitted Electronically       is passed.        The division has shifted
Number         Type             1998-
                                1998-99      1999-
                                                              enforcement resources toward training of
DWC 1    Claims                13,132 12%    23,351 20%
                                                              carriers in support of its current view that the
DWC13    Claims                47,578 23%    54,753 25%
DWC 9    Medical            2,493,857 84% 2,448,980 87%
                                                              purpose of audits is to “encourage
DWC 11   Medical/dental             0 0%        356 47%       compliance...not to impose penalties,” resulting
DWC 90   Medical/hospital      49,723 11%   189,215 36%       in an increase in the waiver of audit penalties
Source: Division of Workers' Compensation, DLES.              in Fiscal Year 1999-2000.
                                                              OPPAGA maintains that, in an industry with
Audit function is costly and inefficient                      claims and counterclaims of significant fraud,
Our prior report concluded that the program's                 there exists the need for enforcement actions
insurer audit function was inefficient and                    that provide a significant deterrent effect. We
costly. In 1997-98, the program had 22 FTE                    continue to recommend a policy of strict
allocated to the audit section and spent                      imposition of penalties when violations are
$900,000 to conduct 95 audits. The program’s                  discovered. Such a policy would also ensure
auditors were located in Tallahassee while                    that the program’s enforcement policies
most carriers and third party administrators                  towards carriers parallel those it applies to
were located throughout Florida.        Also,                 employers.
although program staff were imposing                          Provision of Medical Benefits
penalties against insurers who were not in
compliance, during 1997-98, 26% of all                        Changes needed to medical benefits
penalties were waived.                                        regulatory process
                                                              Our prior report concluded that state law
We recommended that the Legislature
                                                              directed the program to carry out regulatory
privatize this function to reduce audit costs. To
                                                              activities that, with the implementation of
improve the deterrent effects of the audit
                                                              managed care, were no longer needed as they
function, we also recommended that the
                                                              duplicated those carried out through the
program alter its liberal policy of waiving
                                                              insurer’s managed care plan of operation.
                                                              These activities included health provider
These recommendations have not been                           certification, provider dispute resolution, and
implemented. The division has not explored                    medical services monitoring and auditing.
privatizing the audit function due to its belief
                                                              We recommended that the Legislature reduce
that this step would not be appropriate or cost-
                                                              or eliminate the program’s certification
effective. OPPAGA continues to believe that
                                                              responsibilities and clarify responsibilities
privatizing some audit functions is appropriate
                                                              related to provider dispute resolution. We also
and beneficial. For example, the Department
                                                              recommended the Legislature modify current
of Revenue has contracted out some its onsite
                                                              requirements for medical cost reporting and
audit functions while retaining responsibility
                                                              monitoring and that the program identify the
for penalty administration.           OPPAGA
                                                              data necessary to oversee, regulate, and
continues to recommend that the Legislature
                                                              monitor medical services provided under
                                                                                       Progress Report

workers’   compensation    managed      care.           stability of applicants and to monitor the
OPPAGA estimated that eliminating or                    continued financial stability of self-insured
modifying these duplicative activities would            employers.
result in an annual cost savings of
                                                        This recommendation        has not been
approximately $1 million.
                                                        implemented. The division continues its close
To further improve the efficiency and cost-             oversight of the financial stability of self-
effectiveness of its regulatory processes, we           insurers. We continue to believe that the
recommended that the program coordinate its             program should stop this duplication of effort,
responsibilities and functions with those of the        which would save $130,000 annually.
Agency for Health Care Administration to
eliminate duplicative or overlapping activities         Clarification of managed care enforcement
and ensure the exchange of data and                     responsibilities needed
information.                                            Our prior report concluded that the program
                                                        was not enforcing the requirement that self-
These recommendations have been partially
                                                        insurers receive authorization from the Agency
implemented. Laws related to the program’s
                                                        for Health Care Administration to offer or use a
medical benefits regulatory responsibilities
                                                        workers'      compensation      managed      care
have not been amended.            However, the
                                                        arrangement to deliver medical benefits. The
program has initiated a cooperative agreement
                                                        Agency for Health Care Administration
and co-located the medical benefit oversight
                                                        estimated that 80 out of 280 private sector self-
unit with the Agency for Health Care
                                                        insurers had not applied for authorization and
Administration, with the intent to increase
                                                        thus had not had their plans of operations
coordination, clarify responsibilities, and
                                                        reviewed to ensure that they complied with
reduce duplication. The Agency for Health
                                                        state requirements for the provision of workers'
Care Administration has taken responsibility
                                                        compensation managed care.              Program
for identifying the data necessary to oversee,
                                                        managers believed that Ch. 440, Florida
regulate, and monitor medial services provided
                                                        Statutes, did not give them the authority to
under the managed care delivery system. It is
                                                        force self-insurers to apply for authorization to
the program’s understanding that the Agency
                                                        use a workers' compensation managed care
for Health Care Administration will propose
                                                        arrangement. As a result, no action had been
legislation to enact this change within the law.
                                                        taken to address this problem.
Regulation of self-insurers                             To ensure that all employers deliver benefits to
Oversight of FSIGA could be reduced                     their employees through a managed care plan
Our prior report concluded that both the                of operation that has been approved by the
program and the Florida Self-Insurers                   Agency for Health Care Administration, we
Guaranty Association, Inc. (FSIGA), reviewed            recommended that the Legislature clarify the
applicants’ financial condition and monitored           program's responsibility to enforce the
the continued financial stability of authorized         requirement      that   self-insurers   obtain
self-insurers. The need for program staff to            authorization from the agency to offer or use a
duplicate the activity of reviewing the financial       managed care arrangement.
condition of self-insurers was questionable and         This recommendation          has not been
cost the program $130,000 annually.                     implemented. The Legislature has not clarified
We recommended that the program cease its               the responsibilities of the program related to
review and monitoring activities of self-               enforcing the requirement that self-insurers
insurers' financial stability and rely upon the         receive authorization from the Agency for
efforts of the Florida Self-Insurer Guaranty            Health Care Administration to offer or use a
Association, Inc., to determine the initial             workers'   compensation       managed     care

Progress Report

arrangement.   OPPAGA       continues      to            Effective operation of employee assistance
recommend that the program’s responsibilities            office hindered by law
be clarified.
                                                         Our prior report noted that in July 1998, the
                                                         Employee Assistance Office implemented a
Assistance to Employees                                  pilot   program     to    contact   employees
                                                         immediately after the report of an injury to
Costs for informal dispute resolution can be             inform them about the services of the office, in
reduced                                                  a proactive effort to reduce the incidence of
Our prior report noted that Florida law                  disputes. Early indicators had shown the
requires employees to try to resolve any type of         program to be successful.
dispute through the program’s Employee
                                                         If the Legislature eliminated the requirement to
Assistance Office, prior to filing a Petition for
                                                         provide informal dispute resolution, OPPAGA
Benefits. The office created the Request for
                                                         recommended that the program eliminate
Assistance process to fulfill the Legislature's
                                                         some positions, redirect others to increase its
intent of reducing litigation costs; the process
                                                         proactive efforts to reduce the incidence of
had not been successful at reducing attorney
                                                         disputes, and assess whether these efforts
involvement or diverting cases from the formal
                                                         contributed to improving the effectiveness and
Petition for Benefits claims process.
                                                         self-executing nature of the workers'
If the use of the Employee Assistance Office             compensation system.
were to become optional, the number of FTE
                                                         This recommendation           has not been
positions required for the office could be
                                                         implemented because the Legislature has not
reduced while enabling the program to be
                                                         amended law to eliminate the informal
more proactive in its efforts to resolve disputes.
                                                         dispute resolution process. The program’s
We estimated that 75 positions associated with
                                                         pilot program has been successful and
the Request for Assistance process could have
                                                         implemented statewide. Although positive
been eliminated, resulting in an annual cost
                                                         results are anticipated to continue, full
savings of $3.6 million. Additional savings
                                                         implementation of the pilot and any
could have been realized by eliminating the
                                                         corresponding savings is hindered by the need
need to increase staff to meet the demands of a
                                                         to continue operation of the informal dispute
growing workload.
                                                         resolution process, as required by law.
We accordingly recommended that the
Legislature amend the law to rescind the                 Reemployment services are expensive
statutory requirement that injured workers               for results achieved
must attempt to resolve any dispute through              Our prior report concluded that the program’s
the program's Employee Assistance Office prior           service delivery system for reemployment
to filing a Petition for Benefits.                       services resulted in relatively high service costs
                                                         given the number of injured workers who
This recommendation         has not been
                                                         were eligible for substantive services (such as
implemented.       The Legislature has not
                                                         vocational evaluation or job placement
eliminated the statutory requirement that
                                                         assistance) and are successfully reemployed. In
injured workers attempt to resolve any dispute
                                                         over two-thirds of the cases closed in Fiscal
through the program's Employee Assistance
                                                         Year 1997-98, the clients did not receive any
Office prior to filing a Petition for Benefits.
                                                         services other than orientation and screening.
OPPAGA continues to recommend that this
                                                         Of the cases closed, 614 individuals became
law be amended.
                                                         reemployed. Expenditures for reemployment
                                                         services totaled $5.7 million in Fiscal Year

                                                                                                 Progress Report

1997-98, resulting in an average investment of         within the state, the program’s caseload still
$9,291 per successful reemployment outcome.            does not justify a district-based service delivery
                                                       system. As shown in Exhibit 2, although the
OPPAGA        identified   two    options    for
                                                       average      investment         per     successful
minimizing the cost of reemployment services.
                                                       reemployment outcome has decreased to
As the role of workers’ compensation managed
                                                       approximately $7,500 per year (a 19%
care is to treat injured employees to facilitate
                                                       improvement over Fiscal Year 1997-98), the
their return to work, the workers’
                                                       average caseload is still very low.
compensation managed care system could be
designed to coordinate workers’ medical
                                                       Exhibit 2
treatment with reemployment assistance. As
                                                       Costs to Deliver Reemployment Services Still High
an alternative, the program could contract for
service delivery with local providers to reduce                                            Fiscal Year
costs of low productivity by targeting resources                                     1997-
                                                                                     1997-98        1999-
                                                        District FTE                        92               91
and services to individual clients, rather than         District Costs             $5, 704,940       $6,249,288
maintaining full-time staff in field offices            Cases Closed                     2,264            2,849
regardless of workload demands.                         Individuals Eligible for
                                                        Substantive Services              788               991
We recommended that the Legislature                     Individuals Achieving
consider incorporating these services into the          Reemployment                      614               829
state’s workers’ compensation managed care              Eligible Case Per FTE               9                11
system to provide for continuity of services to         Cost Per Reemployment
                                                        Outcome                        $9,291             $7,538
injured workers and more cost-effective service
                                                       Source: Division of Workers' Compensation, DLES.
If the Legislature decided not to incorporate          OPPAGA recommends continued evaluation of
reemployment services into the state’s workers’        the service delivery system employed by the
compensation managed care system, we                   program.
recommended that the program redesign its
service delivery mechanism and evaluate the
cost-effectiveness of contracting with private
providers for case management, vocational
evaluation, and other reemployment services.
This recommendation has been partly
implemented.      The Legislature did not
incorporate reemployment services into the
state’s workers’ compensation managed care
system to provide for continuity of services to
injured workers and more cost-effective service
The program reports having made some
improvements in its delivery of reemployment
services. For example, the program reports
that screenings of injured employees now
occurs within weeks of receiving requests for
services rather than within months. Although
the program has made use of some private
contractors and is piloting privatization of
client screening services at some locations

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