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BACKGROUND -- Workers’ compensation is a no-fault insurance program that is supposed to pay medical costs and partially reimburse the lost wages of workers who suffer job-related injuries or illnesses. In Washington, that insurance is provided through the nonprofit State Fund, or for some large businesses, through direct payment of claims (self-insurance).
Who funds the State Fund? The businesses that are not self-insured and their employees pay premiums into the fund to insure workers’ claims. (About 70% of workers are covered under the State Fund.) In return, businesses receive not only insurance against these claims, but more importantly, immunity from lawsuits for damages resulting from workplace injury and illness.
The workers’ compensation system in Washington State remains one of the lowest cost systems in the country. This is in part because workers pay between 25 – 27% of the overall premium in the system. Washington State is the only state in the country where workers pay a portion of the premium. The Oregon Workers’ Compensation Bureau just rated Washington the 38th lowest cost state in the nation with regards to workers’ compensation. When you subtract the workers’ share the costs for businesses drops us to about 45th lowest in cost in the nation.
Insurance actuary calculations, based on anticipated injured-worker claims in 2009 and medical inflation, indicated a need for a 6.35 premium increase. Given considerations for the economy rates will rise only 3% with the reserve absorbing the loss.
Every year in the Legislature there is pressure to reduce benefits from business interests seeking to lower their premiums. Labor, on the other hand, seeks to keep funding stable and maintain or increase the benefits for injured workers.
In addition, there also is pressure from the private insurance industry, which is excluded from the workers’ compensation market, and sees a huge new potential for profit in industrial insurance. Several attempts have been made over the years to allow private insurers to tap into that market.
LABOR’S POSITION -- The goal of our workers’ compensation system is set forth in RCW 51.04.010: "...sure and certain relief for workers, injured in their work, and their families and dependents."
The Washington State Labor Council believes all attempts to change our system should be judged by that standard: "Will changes promote sure and certain relief for injured workers, and provide fair compensation for the disability suffered by the worker?" Not "Will it save businesses money?" or "Will it allow insurance companies to make more money?"
Washington, with its many problems, is viewed as a model of efficiency for the entire country. The 1998 performance audit found our state’s system to be in the top 25% in benefits paid, and the bottom 25% in costs. Subsequent state-by-state studies consistently rank our state in the bottom third in terms of workers’ compensation costs and don’t even account for employees’ share of the premium or the Retrospective Rebate Program, which pays employers hundreds of millions of workers’ compensation dollars in safety incentives.
So if it ain’t broke, why fix it?
Because, over the years, some practices have developed within the Department of Labor and Industries (L&I) that cause great hardship and even cruelty to injured workers. While employers have received nearly $1 billion in dividends and refunds in recent years, too many injured workers are found employable at minimum wage and cut out of the system, or they are sent to "Independent Medical Exams" that are neither independent nor performed by practicing medical providers.
In 2009, the Washington State Labor Council will be supporting legislation that limits ex parte communication between the employer and the injured worker’s doctor during appeals to the Board of Industrial Insurance.
Following are specific categories that legislative proposals to change workers’ compensation have fallen under:
Appeals & Protests
BACKGROUND -- When an injured worker files a workers’ compensation claim, L&I decides if the claim is compensable and what benefits, if any, are due to the worker. By statute, an employer or injured worker has 60 days to protest an L&I decision. (The main reason an employer would protest is because claims may affect its "experience rating," which may result in a higher premium.) If an employer or worker is dissatisfied with L&I’s decision on the protest, they can appeal to the Board of Industrial Insurance Appeals.
The problem is this: when an employer protests an L&I decision finding an injured worker’s claim compensable, the claim is put in abeyance and usually time-loss benefits cease. Because the protest resolution can take months, this creates an undue financial hardship for the injured worker and his or her family.
Similarly, appeals to the Board of Industrial Insurance Appeals suspend the worker’s time-loss and medical benefits pending the decision. It is not uncommon for a board decision to take 18 months.
LABOR’S POSITION -- The solution seems simple. Whatever L&I’s initial decision is, it ought to stand pending the next decision, whether it is a protest to L&I or an appeal to the Board. Organized labor supports this common sense approach. (By the way, more than 70% of the Board’s final decisions uphold L&I’s initial decision that a worker’s claim is compensable.)
BACKGROUND -- Washington is a relatively low-cost, relatively high-benefit state. Because workers make a significant contribution to workers’ compensation premiums, they have enjoyed benefits which are acknowledged to be among the top 25% in the country.
Time-loss benefits are calculated based on a worker’s earnings at the time of injury using a formula that also takes into account family size. In addition, the formula provides for cases where an employer pays for some level of support for health care coverage prior to injury and ceases health care payment after a work-related injury or disease. In those cases, the employer contribution to the health care premium is considered in calculating time-loss benefits so injured workers have additional resources to address health care needs unrelated to the injury or work-related disease. (This is the Cockle decision.)
There is a maximum benefit any injured worker can receive regardless of the formula factors. Under no circumstances can an injured worker receive more than 120% of the state average wage, (approximately $40,000), regardless of how much they were earning at the time of injury. Most injured workers receive substantially less than the maximum. Finally, time-loss benefits are based on the worker’s earnings at the time of injury.
LABOR’S POSITION -- The Washington State Labor Council believes workers’ substantial contribution to premiums in this state entitles them to good benefits. We support a formula that takes into account family size. We also support consideration of the amount employers contribute to general health care coverage if that contribution ceases when the worker is injured.
The WSLC would, however, accept an alternative that would require employers to continue the payment of health care premiums while the worker is off work and receiving time-loss benefits. Our state should do everything possible to make sure that worker injuries do not lead to increases in the number of people without health care insurance.
The WSLC opposes any effort to reduce workers’ compensation benefits by adopting a wage-averaging formula rather than basing time-loss benefits on the wages at the time of injury.
Finally, the WSLC believes that a maximum benefit of 120% of the state average wage produces enormous hardship on higher-paid workers whose pre-injury lifestyle reflects their earnings. We will oppose any efforts to reduces this maximum benefit.
Chemically Related Injuries
BACKGROUND -- There is a growing number of chemically related injuries, including multiple chemical sensitivity, traced to workplace exposure in Washington state. The Department of Labor and Industries, by its own statistics, is denying a large number of workers’ compensation claims in this area. In fact, L&I and self-insurers deny the very existence of MCS as a work-related illness.
Meanwhile, more and more families are suffering physically, psychologically and financially from this failure of our industrial insurance system to cover their work-related injury or illness.
LABOR’S POSITION -- At the present time, a worker must prove a nexus between a chemical exposure and the physical harm they have experienced. But the science on the impact of many, if not most, chemicals is at a very undeveloped state. This standard of proof has led to literally thousands of chemically injured workers being denied workers’ compensation benefits.
Washington law should follow the example of the Federal Longshore and Harbor Workers Act. This law requires a worker who is exposed to a hazardous chemical in the course of employment to prove that he or she has suffered some harm or pain, and that an accident occurred or working conditions existed which could have caused the harm.
Once the worker meets this burden of proof, the injury will be covered under the Industrial Insurance Act unless there is evidence that the worker suffers no physiological symptoms or that the physiological symptoms were not caused or aggravated by the exposure.
BACKGROUND -- Unfortunately, in many cases, injured workers suffer an injury or illness that makes it impossible to return to their job of injury. L&I or the self-insured employers then begin a process that, in many cases, leads to an "employability" or "able to work" assessment.
The problem is this: L&I adopted a standard in 1985 that defined "employability" or "able to work" as the ability to work at a job that pays at least the federal minimum wage. Since 1985, about 75,000 workers injured so severely that they could not return to their job of injury have been found "employable." Their benefits have been terminated and they have been left, in many cases, either unemployed or working at jobs with substantially less income than their wage at the time they were injured. They have received no vocational training, as they are ineligible once they are found "employable" at federal minimum wage. Workers who have spent years developing their skills are told they can be employed at a minimum wage job, regardless of what they were earning at the time they were injured.
LABOR’S POSITION -- The solution is proposed in the 1998 Performance Audit. To quote, "The standard for employability as it relates to vocational rehabilitation benefits should be some portion of wages at the time of injury rather than the federal minimum wage."
Labor has proposed a standard of 80% of wage of injury. A worker unable to return to their job of injury would be eligible for vocational retraining unless they were, in a vocational assessment, determined able to work at a job paying 80% or better of their wage of injury.
BACKGROUND -- Large companies can opt out of the Workers’ Compensation State Fund system by insuring themselves. But some small and medium-sized businesses believe they should be allowed to form associations to provide their own coverage. This is called group self-insurance.
Proponents of group self-insurance argue that employers will pay greater attention to safety if they are self-insured, because an increasing number of claims would result more directly to increased premiums. But this would also give employers incentive to underreport or try to deny injury claims by their workers.
LABOR’S POSITION -- Group self-insurance sets a dangerous precedent that would lead to dramatically increased premiums for employers who remain in the State Fund and could lead to the collapse of the entire system.
The problem is that the lowest-risk employers would band together and self-insure, which would cause those employers left behind to pay much higher premiums. State Fund actuaries estimate that the existence of self-insurance in this state has already caused premiums to be about 10% higher than they otherwise would be.
And we should learn from what happened in Florida after group self-insurance was legalized: Several group funds went bankrupt, leaving injured workers twisting in the wind without benefits.
Labor believes there are already enough financial incentives for maintaining safe workplaces. There is no reason to open the door to fraud and abuse, and put the entire State Fund at risk, with group self-insurance.
BACKGROUND -- Medical determinations in the industrial insurance system are central to the issues of eligibility for benefits, determination of ability to return to work, decisions about whether a worker has reached maximum medical improvement, and the level of permanent disability. Each of these decisions triggers certain benefits or loss of benefits for the worker, and these decisions are frequently the source of disagreement between the injured worker and the department or the self-insured employer.
LABOR’S POSITION -- There must be recognition that the medical provider who consistently treats the injured worker has the best sense of what is going on with the worker. If an Independent Medical Exam is required, it should be at a medical facility suitable for the examination, and in a location reasonably convenient for the worker. The examination must be conducted with due regard and respect for the privacy and dignity of the injured worker. The worker, at his or her own expense, should have the right to have a representative at the examination who, without interfering or obstructing the exam, can record the examination.
The worker’s attending or treating provider should be given the first opportunity to conduct an examination or make a report on the medical issue in question. The treating provider should be able to make a consultation referral. There should be an effort to set up an agreed-to exam -- with the exam being agreed to by the worker and the state or employer (if self-insured). Only after these steps should an Independent Medical Exam be ordered.
A worker should be entitled to receive a copy of the independent medical examiner’s report. If the department or self-insurer relies on the Independent Medical Exam to deny, limit or terminate benefits, the treating physician should be given the opportunity to provide a written response before benefits are negatively impacted. More weight should be given to the opinion of the treating physician as they know the injured worker’s condition better than a one-time independent medical examiner.
There should be significant qualifications required of independent medical examiners, including licensure to practice in the same field or specialty as the worker’s treating physician. Additionally, the examiner should have an active practice involving the treatment of patients at least weekly in the field or specialty of the treating physician. There also should be criterion for removing examiners from the approved list, including misconduct and incompetence.
Retrospective Rating Program
BACKGROUND -- The Retrospective Rating Program is designed to be an incentive for workplace safety. Employers in the State Fund can band together into "retro groups," establish industry-specific safety programs, and receive tens of millions of dollars in safety-incentive payments.
But employers in that program are seeking even greater savings and control over injured workers. Among other things, they have sought to choose Independent Medical Exam doctors (who determine the existence, nature and extent of worker injuries) and vocational rehabilitation counselors, and to close medical claims.
In addition, a number of business lobbying groups that administer these retro groups are skimming tens of millions of dollars from the employers’ incentive payments -- above and beyond the cost of administering their retro programs -- to fund partisan political activities. In the case of the Building Industry Association of Washington, which operates the largest retro program in the state, the group skimmed a record $6.4 million from incentive payments in the past year, far more than it costs to administer the program, and used it (among other things) to finance a more than million-dollar campaign to replace incumbent State Supreme Court justices with BIAW attorneys. The BIAW freely admits it spends retro money intended to promote workplace safety on its notoriously aggressive political program.
LABOR’S POSITION -- Allowing the expansion of control sought by employers participating in the retro program would place injured workers at a terrible disadvantage. If employers can cherry-pick IME doctors or voc-rehab counselors (who are then beholden to the employer), it would relocate power from a third party with no financial stake to a party with a huge financial stake. Does this move sound like it meets the criteria of the RCW 51.04.010 by promoting "sure and certain relief for injured workers"? No. It’s a gift of more employer control over the victims of unsafe, unhealthy workplaces. The Washington State Labor Council opposes such legislation.
In 1989, it was determined that the Medical Aid fund premiums, 50% of which are paid by workers, would be used in the formula developed to calculate the retro incentive payments. The Washington State Labor Council believes that contributions to the Medical Aid fund, whether they are worker or employer paid contribution, should not be part of that formula.
In 1999, legislation was passed that required the department to offer a Retrospective Rating Program. This legislation stated that "the retrospective rating group must be composed of employers who are substantially similar considering the services or activities performed by the employees of those employers." It has now come to light that a few retro groups have a variety of employers (e.g. public entities in a residential construction retro group). It is time to pass legislation that assures that the intent of the 1999 legislation is followed.
Reasonable limits should be set on how much of the incentive payments retrospective associations may retain. At least 90% of the payments should be returned to the employers that earned them. Employers whose safety records are worse than the average of the employers in the same industry with the same risk class should not receive incentive payments as they do now. Additionally, the quantity of injuries as well as their severity should be part of any formula determining entitlement to incentive payments.
Three-Way Industrial Insurance
BACKGROUND -- "Three-Way" is the term for allowing the private insurance industry into the state’s industrial insurance market.
Attempts to do this have occurred on various levels in various degrees, and there is every reason to believe the insurance lobbyists will continue to try to gain access to this new market.
Our state has a model workers’ compensation system administered through the State Fund. It boasts some of the lowest costs to employers of any plan in the country, while remaining in the top 25% in benefits paid to workers. It’s a win-win situation.
But not to the insurance companies. They claim they can make the system even more efficient and even more inexpensive for employers. Analysis of the experience of other states that have allowed this, however, reveals a dramatic decline in eligibility and benefits for injured workers. Profits of the insurance companies have to come from somewhere -- and they come on the backs of injured workers and their families.
LABOR’S POSITION -- Labor strongly believes three-way industrial insurance in any form is one of the most dire threats to injured workers and our workers’ compensation system that exists.
In private industry, competition is socially wholesome. In a social insurance program like workers’ compensation, it has proven to be wasteful and destructive. There are reams of evidence that injured workers are the ones who pay the price in the other states that have allowed three-way. Insurance companies say they can cut costs. The biggest cost of workers’ compensation is benefits. The only way to significantly cut costs is to reduce the number of claims, so the incentive to obstruct claims is built right into the system.
Our nonprofit State Fund is not under pressure to maintain profit margins or engage in cutthroat competition. It functions not as an adversary, but as a trustee, in evaluating the claims of injured workers. And by most accounts, it is doing the job well.
The most recent legislative attempts at three-way have been to allow the insurance industry to break down the firewall between their role as reinsurers for self-insured employers and their desire to be third-party administrators.
The 1972 legislation allowing self-insurance specifically barred reinsurers from participating in "administration of the responsibilities of the self-insurer..."
The insurance industry gladly accepted this caveat to prevent conflict of interest 35 years ago, but now they are hoping we’ve forgotten. Organized labor hasn’t, and is adamantly opposed to our state taking the first step onto this slippery slope.
In the final analysis, the workers’ compensation system belongs to the workers it serves, not the employers... and certainly not to the insurance companies looking for a new way to make money.
Copyright © 2009 — Washington State Labor Council, AFL-CIO