Innovations in Workers’ Compensation Regulation From the IAIABC Conference, 2016

By Elizabeth Connellan Smith, Counsel, Verrill Dana LLP, Portland, ME

Innovation isn’t always the first word associated with the regulation of workers’ compensation, but innovation was in the forefront of the Commissioners and Associate Members Roundtable on Tuesday, September 27, 2016 at the 102nd IAIABC Conference, held in Portland, Maine. The conference, which ran from September 26, 2016 through September 29, 2016, offered many educational and forward-looking brainstorming sessions, but one of the most interesting was the informal Commissioners and Associate Members Roundtable. Led by IAIABC Board President R.D. Maynard and Matt Bryant, Chair of the Associate Members Council, Commissioner and Associate Members from all participating jurisdictions were invited to share a two-minute update on innovations implemented or planned for their jurisdiction. Before the sharing session began, the Commissioner and Associate Members were asked to participate in an informal vote on three over-arching questions: (1) What will influence workers’ compensation in the next twelve months; (2) what industry factors will influence workers’ compensation; and (3) do we think that workers’ compensation will exist as we know it today, in ten years?

In response to the first survey question, the audience felt that the top two influences were the economy, from a regulatory standpoint, and healthcare as a cost-driver. Interestingly, no one voted for federal regulation as an “influence”. Next, the audience voted overwhelmingly for cost and medical care as the two industry factors that will influence workers’ compensation. Finally, while thirty percent of the audience doubts that, in ten years, workers’ compensation will exist as we know it today, the majority felt that overall the system will remain much as we know it today. The seventy-thirty split may be more nuanced than a show of hands can reflect, as many of the subsequent presentations over the course of the conference highlighted the need for nimbleness and reinvention on the part of industry and regulators in response to the emerging “on-demand” economy.

After welcoming remarks, the attending Commissioner and Associate Members were invited to share something they had done or were planning to do to reduce complexity in their workers’ compensation systems. A number of jurisdictions have or are implementing auto-staffing, especially around electronic data interchange, or EDI. Pennsylvania, Washington, Arizona and Virginia all mentioned enhancing online systems to streamline processes and promote literacy for stakeholders. Pennsylvania, on September 16, 2016, went live with fully integrated business processes, and are now taking data from EDI to populate into forms, automating the forms and attaching them to claims, and even sending the forms back in a secure format to be shared by the insurer with the injured worker. Pennsylvania anticipates a significant costs savings from this innovation. Washington, D.C. is eliminating all computer applications and rebuilding their system. Maryland has engaged a firm to analyze the business process used by its regulators because their paperless system is twenty years old and not nimble enough anymore. Maryland’s representative mentioned that he was impressed by how energized his staff was to contribute to the process of updating systems. Maine’s Executive Director mentioned the just-launched Rules Committee, made up of Plaintiff and Defense counsel as well as other stakeholders. The Rules Committee will be conducting a thorough review of all of the rules and regulations and eliminate those that no longer make sense, while editing others to make more practical sense. Additionally, Maine’s Executive Director mentioned a shift in the Monitoring, Auditing and Enforcement mission from one of enforcement to one of education. Education over enforcement was a theme repeated by several other jurisdictions, including Ohio and the District of Columbia.

Another recurrent theme was work to address the opioid epidemic, with Arkansas, Arizona, Montana, Georgia, Maine, South Carolina, Tennessee, Ohio, Rhode Island and Louisiana all mentioning their own state initiatives to combat the epidemic in the workers’ compensation arena. Alternative Dispute Resolution is also being employed in a number of jurisdictions early in the claims process, including in Virginia and South Carolina. Colorado mentioned that Universal Healthcare legislation is on their upcoming ballot, but noted that the effect of any such legislation on workers’ compensation is not yet known. However, it could conceivably eliminate medical care coverage under workers’ compensation law, if passed. Texas noted that fraud is the number-two issue in their system and so that is a focus of their regulators for the upcoming year.

Employee misclassification remains a topic of interest in several jurisdictions, including Nebraska, where a bill aimed at addressing the Independent Contractor issue failed, but the feeling was that a similar bill is likely next year. Finally, a topic of some interest that did appear in other sessions was that of legalized medical marijuana and its use in the workers’ compensation system. Maine and New Mexico lead the country with both states already holding that medical marijuana may be reimbursable under workers’ compensation law. Minnesota mentioned the fact that medical cannabis, another name for medical marijuana, was causing stakeholders in that state concern and Michigan noted that a bill proposed in 2012 specifically excluded medical marijuana from workers’ compensation coverage. Oregon, of course, has legalized both medical and recreational marijuana although the issue of coverage under workers’ compensation law does not appear to have yet come up.

Utah mentioned an interesting law suit brought by a number of “activist” injured worker attorneys who argued that the attorney fee schedule in that state is unconstitutional, as it is a violation of the separation of powers because the Supreme Court in Utah has sole power to regulate lawyers. The suit was successful, so there is no longer an attorney’s fee schedule in Utah, although most attorneys appear to still be using the old fee schedule.

The German Commission member noted that the rate of reintegration back into the workforce following an industrial injury is ninety percent presently, and education is being used to work toward a goal of no fatal accidents within ten years. Germany is also already looking at the “new” work environment, that of work-in-place, autonomous driving and the question of whether employers and employees really still exist. Six percent of the German gross domestic product is found on the cloud according to the most recently available statistics, but that figure doubles every six months, according to the German Commission member.

The session closed with a heightened energy from the exchange of these ideas both among the Commissioners and Associate Members, and the members of the general audience. This type of idea exchange is critical for the evolution of workers’ compensation and the pre-session conclusion that workers’ compensation will be much as it is today in ten years may ultimately prove wrong, albeit in a good way, given the many innovations described by the session participants.

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