The Evolution of Reform: WCRI Panel Examines Resilience and Renovation in Workers’ Compensation

Closing session at WCRI’s annual conference examines workers’ comp systems in Texas, Pennsylvania, Oregon and Florida

By Ryan Benharris, Esq.

Focusing on Resilience or Renovation, the 2015 Workers Compensation Research Institute Annual Convention (WCRI) closed its seminar on March 6, 2015 with back-to-back sessions investigating reformed state workers’ compensation systems over a 20-year span.

In the first panel, “Resilience: Lessons From Two Decades of Reform,” WCRI investigated how specific states have changed their workers’ compensation systems over the previous 20 years.

Reform in general was discussed by Dr. Richard A. Victor, WCRI’s President and Chief Executive Officer. “The systems have adapted to enormous changes in what is considered fair and in economic conditions,” Victor explained. Over 20 years the number of claims has drastically increased and states have been forced to reform their systems to adjust to the demands of injured workers, insurer concerns and employer coverage issues.

Representatives from Texas, Pennsylvania, Oregon, and Florida were invited to share their states’ individual reform stories.

Texas

Amy Lee, the Special Deputy Commissioner for Policy and Research at the Texas Department of Insurance, Division of Workers’ Compensation indicated that the Texas reform was the result of a recognized “crisis” through 2005. She said that high medical costs were forcing employers to opt out of workers’ compensation systems, forcing a drop in injured workers returning to work. Texas looked to the state health care systems as a guide to curb the cost of medical care to injured workers.

Lee identified problems in the pre-reform Texas workers’ compensation system as high medical costs, poor return to work outcomes, poor access to care, high insurance premiums, increasing numbers of employers choosing non-subscription and an increasing number of medical disputes.

Texas doctors who were polled indicated that one of their biggest complaints about the workers’ compensation system was that there were too many treatment-specific billing requirements. By reducing the number of these requirements, Texas saw an increase in access to treatment and an overall reduction in the number of claims.

Lee said that as a result of the reforms, medical costs went from some of the highest in the country to below the national median. Texas also saw a 50 percent reduction in insurance rates and saw an increase in employers opting into the system. The most significant change resulting from the Texas reforms was that the number of organic medical disputes dropped by 71 percent.

Pennsylvania

Bruce Hockman of JLT Re is a former WCRI Chairperson. He presented the current status of the Pennsylvania workers’ compensation system after its last major reform during 1991-1996.

Hockman indicated that using strictly insurer’s issues as a vehicle for reform would result in certain failure. According to Hockman, “[I]f we were going to get people to pay attention to this issue, it could not be seen as an insurance issue.” Instead, Hockman stated, “[I]t had to be seen as a system issue.” As a result, Pennsylvania recast the issues as “business and labor” issues rather than issues about insurers paying too much for medical costs.

The Pennsylvania Legislature set a series of rules as to what was going to be reformed. Employee benefits were immediately taken off the table. Hockman outlined how Pennsylvania instead set a series of four targets for reform, specifically:

> Addressing the reduction of medical costs while assuring prompt, appropriate levels of care;

> Addressing both “per usage” charges as well as “utilization creep”;

> Addressing increasing litigation and related costs; and

> Addressing perceived “cartel control” in the insurance marketplace.

Hoffman emphasized that “[T]he one thing we were not willing to sacrifice was an injured worker’s access to prompt and adequate medical care.” As a result, Pennsylvania saw the number of injuries decrease after 1996. Hockman also revealed that Pennsylvania has been consistent in the management of its Workers’ Compensation system since the reform.

Oregon

The most unique reform story came from the state of Oregon. Bob Shiprack of the Oregon State House of Representatives, who chaired the House Labor Committee from 1983 to 1991, described the Oregon Workers’ Compensation Reform which was passed in 1990.

Shiprack illustrated how Oregon established a committee comprised of six labor and six management people who met in the basement of the Governor’s house to create the reformed system. Since the 1990 reform, no bill on workers’ compensation is allowed to go to the legislature for a vote without first going through the committee.

“Everybody gave a little on this,” Shiprack said. “If you want to rework workers’ compensation, you better look at safety. And we had a safety problem.”

By “safety problem,” Shiprack was talking about the risks employees were expected to take on the job. “The risks I was expected to take back then would get me fired today,” he said. Eliminating and regulating risks prevented injuries.

Shiprack explained that the Oregon committee then turned its focus to the type of care injured workers were seeking. He said that they had a problem involving workers being treated excessively by chiropractors and the committee truly wanted to increase the quality of care the injured workers were receiving. He noted the importance of having doctors who want to treat injured workers as well.

Shiprack said that heavy subsidizing of employers’ early return to work programs encouraged employers to work with their employees to get them back to work. At this time, Oregon also adopted a “major contributing cause” standard with respect to determining a causal relationship.

Oregon next looked to the issues in litigation. The state tried to speed up litigation by clearing up those specific issues that could be brought to a hearing.

Finally, the reform established a huge increase in statutory benefits. Shiprack said that prior to the reform, Oregon had one of the lowest benefits in the country. By liberalizing permanent and total disability, Oregon is now in line with the national median when it comes to employee benefits.

As a result of the reform, Oregon now has the ninth lowest system cost in the country. And as Shiprack pointed out, “[T]he fact that we work on a labor management basis has been critical to this system.”

Florida

An investigation of the Florida workers’ compensation system rounded out the presentation. Tamela Perdue, General Counsel for the Associated Industries of Florida, discussed the state’s 2003 reform.

“One of the most important things was to really identify that employers and employees are the only critical parties to the workers’ compensation system,” Perdue said. “If affordability had been the only piece they were talking about, reform wouldn’t have happened.”

Perdue indicated that prior to the reforms, carriers and employers were at odds as to coverage and rates. In 2001, Florida had the highest workers’ compensation rates for employers. As a result of the reform, Florida is now 28th in the nation.

Because of the Florida reform, Perdue said that a drastic reduction has occurred in litigation over medical expenses. She also indicated that the reform has resulted in almost 90 percent of injured workers being represented by attorneys, thereby increasing more efficient access to justice.

Consistent Themes of State Reform

The constant among all four states that led to reform of their workers’ compensation systems was frustration. Clearly, in each instance, insurance carriers were frustrated by the cost of medical care while employers were frustrated with the cost of coverage. Each presenter was cautious to remind the audience that employee rights were never ignored in the reform process. For the most part, this has led to improvements in how employees navigate their state workers’ compensation systems.

It was with an investigation of those frustrations and the challenges that might lead to reform that WCRI chose to close its conference.

Challenges That Might Lead to Renovation

After the individual states presented their reform stories, Charles Davoli, immediate past president of Workers’ Injury Law & Advocacy Group (WILG) and partner of Davoli, Krumholt & Price in Baton Rouge, Louisiana, described the challenges from an injured worker’s perspective.

“There’s too much friction in the workers’ compensation system,” Davoli said. “The huge industry will inhibit change.”

Davoli pointed out that injured workers are frequently discriminated against when it comes to medical treatment for an industrial accident. “A guy who falls down the stairs at work and a guy who falls down the stairs at home are treated entirely differently,” he said.

Pointing to a morality problem, and describing workers’ compensation as a moral commitment for a better system, Davoli commented, “[I]f there is no longer any morality in the issue, where do these people go?”

Davoli indicated that part of the problem with reform is that states tend to compare their results to a national median. He said that the problem with doing that is that there is no real standard for the median.

Davoli spent the majority of his presentation examining the quid pro quo between creating workers’ compensation as an exclusive remedy for injured workers (as opposed to a fault-based system) and the fact that reform has inhibited injured workers’ access to benefits that they have only because of exclusivity.

A specific challenge that might lead to renovation of workers’ compensation is an aging workforce. Judge David Langham of the Florida Office of Judges of Compensation Claims and Division of Administrative Hearings indicated that by 2020, 25 percent of American workers will be 55 or older.

Causation issues in workers’ compensation are generally tied to pre-existing conditions. Judge Langham indicated that with an aging workforce comes a vast increase in pre-existing conditions. Langham said that aging workers are forcing states to reconstruct their causal relationship standards. This tends to favor the aging injured workers as the causal relationship standards tend to liberalize over time.

Conclusion

Over the last two decades, state workers’ compensation systems faced drastic challenges that have caused significant reform. WCRI’s presentation showed how differently each state approached theories of reform.

It’s quite apparent that as employers, insurers and employees change, workers’ compensation systems will have to adapt to their needs. As the needs of each party become more polarized, it is evident that evolution in state workers’ compensation systems into the future may be impossible to predict.

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About the author. Ryan Benharris is a Partner at the Law Offices of Deborah G. Kohl in Fall River, Massachusetts. Mr. Benharris concentrates his practice in the areas of Massachusetts Workers’ Compensation, the Longshore and Harbor Workers’ Compensation Act, Social Security Disability, and Municipal Accidental Disability Retirements and Appeals. He earned his B.A. from the University of Massachusetts – Amherst in 2001 and his J.D. at Southern New England School of Law (now known as University of Massachusetts School of Law – Dartmouth) in 2005. In 2008, he was awarded the Stanley Rudman Award for Advocacy by Massachusetts Continuing Legal Education. He is a frequent lecture at MCLE on Massachusetts Workers’ Compensation. He also served on the faculty for the 2013 Massachusetts National Academy of Elder Law Attorneys CLE as a speaker on Social Security Disability Practice for Attorneys. Outside of his practice, Mr. Benharris was elected President of the University of Massachusetts School of Law Alumni Association in 2013 after serving as a Director on the board for more than five years (two as its Vice-President). Mr. Benharris is a member of the Massachusetts Bar Association, the Workers’ Injury Law & Advocacy Group (both its original chapter and its Longshore and Harbor Workers Compensation sub-division), and the National Organization of Social Security Claimants’ Representatives. He is a contributing writer for LexisNexis Practice Guide Massachusetts Workers’ Compensation (LexisNexis).