We have been following the cosmic shift in the administration of workers’ comp in West Virginia, where a monopolistic state has morphed into a competitive market. The future looks rosy, but there is much pain in the transition. It’s one thing to tighten up eligibility requirements and build a new “return-to-work” culture; the problem comes when the new culture clashes with West Virginia’s long established “culture of disability.”
About a year ago we blogged the transition from state administration to Brickstreet. One of the key elements in the transition involves moving about 46,000 existing claims from state claims adjusters to third party administrators (TPAs). That’s a task that makes Hercules’s cleaning of the Augean stables look easy! Sedgewick now handles about 39,000 of the claims, with American Mining and Wells Fargo picking up about 4,000 each. Try to imagine all those (mostly paper) files moving out of state offices, followed by the task of picking up the narrative and developing revised strategies for each and every claim.
The state’s unfunded liability for these claims is about $3 billion – a big enough number for any state, let alone a small one. Over the years, the “culture of disability” resulted in one in seventy lost time claims turning into permanent and total disability (the next closest state comes in at a rate of one in 220).
It’s not hard to imagine the pain and confusion inherent in transitioning the claims from the public to the private sector. TPAs will apply new and presumably much more stringent standards in determining ongoing eligibility. There is no way they will allow one in seventy claims to drift into permanent total status.
The Pain in Change
Which brings us to the heart of the matter: the very painful price exacted in any cultural transition. In West Virginia, disability payments had become a way of life, a way of supporting workers with no other means of support. In the state’s perpetually depressed economy, indemnity for workplace injury paid the bills for thousands of families. This disability culture evolved over decades; it will not change in the Brickstreet blink of an eye. The three TPAs are sorting through 46,000 narratives of pain and loss. They are confronted with an embedded expectation that the benefits are an entitlement and should go on indefinitely. (One claim stems from an injury in 1929!)
The TPAs are trying to apply standard insurance criteria to long-established claims; they are breaking apart the old culture and paving the way for a new one. It will probably take 8 to 10 years to complete the process. Let’s not minimize the trauma: the transition in West Virginia is comparable to the collapse of the auto industry – with one important difference, of course: in Detroit the old culture built cars; in West Virginia, the old culture built disability narratives. No amount of retooling can (or should) preserve that inherently unproductive way of life.
