Posts Tagged ‘opt-out’

A 10 year anniversary Health Wonk Review & more noteworthy news

Thursday, September 22nd, 2016

It’s Health Wonk Review week! Louise and Jay Norris host a special edition at Colorado Health Insurance – not only is it a mere 46 days to the next election so that has the wonkers opining – it is also the 10th blogging anniversary for the hosting blog – The “We’re Ten!” Edition of the Health Wonk Review. There are great entries from both the usual subjects and some fresh faces. Louise is a great host, framing everything nicely. Congratulations on 10 years of blogging, Louise & Jay. *clinks champagne glass*

More news of note

Just by way of coincidence, September is our birthday month here at Work Comp Insider, too – we launched in 2003! That makes us a grizzled old timer in Internet time.

Oklahoma and opt out– in case you missed it, the Oklahoma Supreme Court Ruled Workers’ Comp Opt-Out Unconstitutional:

Justice Watt, in the Court’s highly anticipated written decision, said the OWCC previously found the Opt Out Act: “1) constituted an unconstitutional special law; 2) denied equal protection to Oklahoma’s injured workers; and 3) denied injured workers the constitutionally protected right of access to courts.”

And the high court agreed, finding that the core provision of the Act “creates impermissible, unequal disparate treatment of a select group of injured workers.”

The PCI and AIA were quick to applaud the decision. Joe Paduda hopes this is the end to what he sees as the pointless debate about Opt-Out (we hope so too). Bob Wilson looks at some of the loose ends in the wake of this decision.

Psych indicators – Most of us in the industry are pretty familiar with triggers or warning signs that would indicate an accident investigation or the need for early medical intervention — but perhapsare  less familiar with indicators that might signal the need for a psychological evaluation. Our friends at Work Comp Psych Net have posted a handy reference list of Predictive Psychosocial Triggers For Workers’ Compensation Claims.

Obesity’s toll on WC – A new study in the September Journal of Occupational and Environmental Medicine shows that obese and overweight workers are more likely to incur high costs related to workers’ compensation claims for major injuries;

But for workers with major injuries, high BMI was associated with higher workers’ compensation costs. In this group, costs averaged about $470,000 for obese and $270,000 for overweight workers, compared to $180,000 for normal-weight workers.

After adjustment for other factors—including high-cost spinal surgeries or injections—obese or overweight workers with major injuries were about twice as likely to incur costs of $100,000 or higher. Body mass index had no effect on costs for closed claims or for less-severe injuries.

Safety Culture Does Not Exist!  – This is a half-hour podcast interview with Dr. Edgar Schein, Professor at MIT Sloan School of Management. Well worth a listen. We weren’t aware of this podcast series and it looks great: The Pre Accident Podcast is an ongoing discussion of Human Performance, Systems Safety, & Safety Culture. The Dr. Schein interview is the #88th edition!

Speaking of safety …. It’s Farm Safety & Health Week from September 18-24.

More news of note

WCRI: Day One, Part Three: The 2nd Opt-Out Session

Thursday, March 10th, 2016

Bruce Wood, of the American Insurance Association, led off the second Opt-Out session by reminding participants that the 1972 National Commission “considered and rejected employer or employee choice of benefit plans.” So, right away we knew where Mr. Wood was heading. He boarded the Trey Gillespie train and left the station smartly. His conclusions:

  • Opt-Out raises fundamental issues of public policy that policymakers have failed to consider;
  • Opt-Out lacks an organizing principle that reflects acceptable social policy; and,
  • Opt-Out is flawed and should not be enacted.

You know where Mr. Wood stands.

The second presenter was Elizabeth Bailey, VP of Workers’ Compensation & Safety for Waffle House, Inc. Waffle House, headquartered in Georgia,  is in a number of states, Texas being one of them. The company has been a Texas Non-Subscriber (it’s Opted-Out) since 2002, and, according to Ms. Bailey, has enjoyed spectacular results ever since. Such as:

  • Within one year, claims cost per restaurant dropped 57%;
  • Indemnity claims went from 15.03% of total claims to 3.23%;and,
  • Indemnity costs declined 99%

Wow!

Ms. Bailey described how Waffle House has increased its safety and health efforts while providing equivalent benefits as those required by the workers’ compensation statute. The company’s economic results are certainly stellar, but at what cost to employees? We were left wondering. However, as David Deitz pointed out in the question period, Ms. Bailey was the only Opt-out presenter who “presented” any data.

 

The third presenter, Alan Pierce, is a Massachusetts plaintiffs attorney, but that doesn’t begin to describe his standing in the legal community. He is one of the nation’s foremost advocates for injured workers and is the past chair of the Workers’ Compensation Section of the American Bar Association and the Massachusetts Bar Association. As expected, he offered an eloquent precis suggesting that workers’ compensation is not a benefit, but rather an employee right. He, too, cited the 1972 National Commission pointing out that most of its recommendations have never been adopted. Mr. Pierce is always interesting.

The last presented was Oklahoma Insurance Department Chief of Staff James Mills. I was somewhat surprised to hear him defend the Oklahoma Opt-Out statute. Essentially, Attorney Mills said that he was open to any program or law that might have the chance of benefiting both employers and employees and likened the statute, which had 57 legislative authors, to some other ideas that needed time to grow and prosper. Who knows? Maybe that’s what will happen to Opt-Out.

But I wouldn’t hold my breath waiting for that to happen.

WCRI: Day One, Part Two: The 1st Opt-Out Session

Thursday, March 10th, 2016

The afternoon of WCRI’s 2016 Annual Conference was devoted to Opt-Out. The first of two sessions was a Point-Counterpoint exercise. Trey Gillespie of the Property & Casualty Association of America led off. To Mr. Gillespie, with Opt-Out it’s 1910 all over again. He described Opt-Out in Texas and Oklahoma as allowing employers to deliver sub-standard care to injured workers without government oversight. Showing stark contrasts between what is allowed in Opt-Out and required in workers’ compensation, he suggested that employees were at the mercy of employers, which could sometimes be good and sometimes be bad. Opt-Out’s a kind of Employer Personal Responsibility Plan.

Bill Minick, of PartnerSource, followed with a presentation in favor of “Options to Workers’ Compensation.” Minick has been the loudest proponent and most significant advocate for Opt-Out. He and Opt-Out were the subject of a Propublica investigative journalism story late last year. He described Opt-out as a substantial improvement on a failed system and painted a picture of employers being able to provide better care for injured workers at less cost, because regulatory and bureaucratic requirements have been stripped out. Essentially, Minick claims that the workers’ compensation system makes employers go from Massachusetts to Rhode Island by way of Alex Swedlow’s California. He’d rather just drive the 30 miles down Route 95.

My basic problem with Opt-Out, wherever it is, is that some employers with resources and good intentions welcome the chance to design their own injury benefit plans that will provide benefits at least as good as traditional workers’ compensation at significantly less cost. This, in itself, is a good thing. Some large employers in Texas, such as Costco, seem to have done that. Trouble is, not every employer is Costco. As I wrote when I evaluated Opt-Out in 2014, I’m concerned about Kenny’s Citgo, down the street and around the corner, where Kenny and his five hourly workers labor without the benefits of a mandated workers’ compensation plan, because Kenny has Opted-Out. There are more Kenny’s than Costcos.

Peter Rousmaniere’s Seismic Shifts in Workers’ Comp: A Thought-Provoking Call To Arms

Monday, February 23rd, 2015

In the mid-1980s, workers’ compensation underwent a management revolution. Until then, employers bought insurance policies, and when injuries occurred passed the baton to their carriers. Then they went back to making widgets trusting that the carriers would take care of everything.

That didn’t work out so well, and costs took a rocket ride to the moon. Across America, employers looked for help. Why would injured workers remain out of work long after it was medically necessary for them to do so. The answer, as we all know, was found in the mirror. Employers, themselves, were the key to getting injured workers back into the bosom of the workplace, but they’d never been taught how to do that. Didn’t know it was their job.

Thus was the workers’ comp management consulting industry born. My company, Lynch Ryan, was first out of the gate. We were the Pathfinders, and Peter Rousmaniere was Employee Number 3 in what was to become a 55 person firm. Peter – Groton School, Harvard BA, Harvard MBA – wanted to join us because he was looking for a challenge. I wanted Peter to join us because he was really smart, and his brain worked like nobody’s I’d ever met. Peter thought “outside the box” before there was an outside the box.

Peter still thinks like nobody else, and today Work Comp Central has published his Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers’ Comp, subtitled, How Technology and Demographics Will Impact Workers’ Comp From Today Through 2022. This self-funded, year-long venture looks out into the future and envisions another revolution, one that we ignore at our peril.

In Seismic Shifts, Rousmaniere catalogues the nearly unnoticed, but drumbeatingly steady, changes in workers’ compensation since the early 1990s. He shows that since 1991 lost time injuries have declined by 60% and projects that by 2022 there will be a further decline of at least another 35%. He is perplexed about how the insurance industry has missed this decline in injuries and claims, what he calls ‘the elephant in the room,” and suggests that it has done so because for more than a decade it has been obsessively fixated on medical costs, an observation with which I agree. Rousmaniere contends that the insurance industry does not understand how this has happened or why.

His thesis is that this sea change, this seismic shift, is the result of employer improvements in safety engineering, information technology, telematics, robotic design, predictive modelling analytics and the continuous yearning for enhanced productivity. And most important, this natural gravitational movement will continue inexorably. Further, he believes that the workers’ compensation insurance industry has not considered where all of this will lead, how it can be part of and optimize this transformational movement and what kind of workforce it will need to take advantage of this new paradigm.

In Rousmaniere’s view, workers’ compensation practitioners, as well as occupants of the C-Suite, would be well-advised to understand what’s happening and embrace, rather than resist, these evolutionary developments. In his mind, the embracers will succeed and control the future; the resisters will be swept away. It’s as simple as that. He describes, as example, the profound employer movement toward total absence management, rather than merely occupational absence. The move toward total absence management is gathering steam at larger employers, and workers’ comp insurers don’t know what to do about that. Neither do they have a plan for coping with the “opt out” phenomenon. First Texas, then Oklahoma, and just last Friday legislators in Tennessee filed opt-out legislation built on the Oklahoma model. This is becoming a trend.

But the workers’ compensation industry has never distinguished itself in the race to the future. It will be interesting, indeed, to see if Rousmaniere’s clarion call is even acknowledged by today’s potentates. To help it along Work Comp Central is hosting a 4-part webinar series during which Peter will lay out his thesis and try to persuade others in the workers’ comp community to join him in his effort to drag the industry kicking and screaming into the future. Check with Work Comp Central for dates of the Webinars.

Seismic Shifts is an important work, one deserving of your attention and consideration.

Texas Workers’ Compensation Opt-Out Report: A Herculean Effort Lighting a Path to the Future (Or Maybe the Past)

Thursday, December 13th, 2012

Unlike any other US state, Texas has never required its employers to buy or provide statutory workers’ compensation. Texas employers who opt-out of this traditional form of injury benefit system are called non-subscribers. In 1993, 44% of Texas employers were non-subscribers, and they employed 20% of the employees in the state. By 2008, employer non-subscribers had shrunk to 33%, but their percentage of the state’s total workers had grown to 25%. No one knows for sure, but estimates are that as many as 114,000 Texas employers have opted-out.
Until now, with the exception of two academic studies, one in 1996 examining lost injury days, the other, a 2010 survey of large, multi-state non-subscribers, no one has ever fully examined the Texas opt-out phenomenon. But, with the release today of the 87-page “Workers’ Compensation Opt-Out: Can Privatization Work? The Texas Experience and the Oklahoma Proposal,” that has changed.
Funded by the big TPA, Sedgwick CMS, published by the New Street Group and written by Primary Researcher Peter Rousmaniere and former Risk & Insurance editor and New Street Group founder Jack Roberts, this thorough, well-researched and entirely lucid analysis is certain to propel the opt-out debate now and in the foreseeable future.
In Texas, It’s 1910 All Over Again
To get a grasp of the back-to-the-future Texas opt-out, think 1910, the year before states began enacting workers’ compensation laws, the grand bargain in which employers promised to replace lost wages and cover medical costs due to injury and workers agreed not to sue employers when the workers were injured on the job.
Lots of employers buy workers’ comp in Texas, but for those who don’t it’s 1910 all over again with virtually no state oversight. Let me be clear about that: In Texas, there is no requirement for non-subscribers to pay for work injuries in any way. There is one important difference, however. The Texas legislature has statutorily removed the three major defenses used by employers prior to workers’ comp statutes being enacted to defend themselves against worker suits: contributory negligence, assumption of risk and the negligence of fellow employees. Also, without workers’ comp, there can be no “exclusive remedy,” and for non-subscribers there isn’t. Large non-subscribers, such as Costco, have been very creative in dealing with that.
Rousmaniere and Roberts discovered that Texas opt-out was a bit of a carnival sideshow until ten to fifteen years ago when large employers like Costco, whose program they analyze in depth, cottoned on to the idea that they could provide a sleek, fast-moving, common-sensible injury benefit management system if they wove it into their ERISA plans. ERISA, the Employee Retirement Income Security Act, is a federal program which allows employers to design their own benefit systems, and substantially more than a cottage industry has evolved in Texas to help them do that for worker injuries. The operable phrase in that last sentence is “design their own.”
Designing Their Own
Suppose someone, your boss for example, said to you, “There’s no more workers’ comp. Design me a plan that will provide our workers who get injured immediate medical care and wage replacement. Make worker participation mandatory. Keep the administration to nothing more than what is absolutely needed for it to run smoothly, and, before I forget, keep all the lawyers out of it.”
What would you do? Well, large employers in Texas have had about fifteen years to think about that, and at least one of them, Costco, has created the ideal program I would design myself if I had a magic wand. I say “at least one,” because Costco is the only employer Rousmaniere and Roberts point to, although they do report on interviews with many professionals involved in Texas opt-out. They also suggest that Costco is fairly typical of the large employer opt-out experience.
After much research and planning, Costco became a non-subscriber in 2007. At that time, the company operated 15 large warehouses throughout Texas, carried a payroll of $87 million and employed about 4,000 workers. Its loss costs had grown to around $150 per employee, or 97 cents per hundred dollars of payroll. In the four years following non-subscription, losses fell to 46 cents per hundred dollars of payroll, a decline of 52%, with high employee satisfaction for the system.
Here are the main points of Costco’s worker injury benefit program, and remember, Costco was able to start with a blank piece of paper:

  • Work must be the “sole cause” of injury, not just a “contributory factor.” More about this below.
  • Injuries “must” be reported by end of shift, but in no case later than 24 hours after happening. Failure to do this will negate any benefits. Workers who don’t report in time are on their own; most use group health to cover medical costs, but, as one can imagine, a worker is more likely to win the Powerball than to not report within 24 hours.
  • Employees receive a taxable 80% of pre-injury wages with no waiting period. They’re paid from day one.
  • Upon hiring, workers are required to accept binding arbitration for disputed claims, and Costco picks the arbitrators. If unsatisfied with the arbitrator’s ruling, employees do have the option of bringing suit for employer negligence in civil court, but since 2007 only three such suits have been brought; two were settled modestly, and the third is pending
  • Chiropractic care is not allowed (Costco’s analysis of its losses concluded that excessive chiropractic care was a major driver of loss costs and unnecessary for employee recovery)
  • There are no permanent partial disability awards
  • Wage and medical benefits end after 156 weeks, but, in rare cases, future medicals can be settled (Rousmaniere and Roberts don’t address this, but I’m wondering about the degree to which CMS plans on extending its long, bony Medicare fingers into this pie)
  • Costco carefully picked an emergency care and specialist medical provider network comprised of highly reputable physicians, with as many as possible being board-certified occupational medical physicians. Costco routinely pays its providers full invoiced charges
  • If employees fail to follow through on medical recommendations or miss appointments for no good reason, benefits are terminated
  • For the rare event when injuries extend beyond 156 weeks, Costco has purchased insurance to cover the tail
  • Because any disputes go quickly to arbitration, attorney involvement is nearly non-existent

With loss costs reduced by 52% and employee satisfaction high, Costco obviously has a winning program. Costco has seamlessly woven injury benefits into its ERISA plan, blending them with its group health and short and long-term disability programs.
One thing that Costco wrestles with is co-morbidity. Imagine a Type-1 diabetic warehouse worker without safety shoes who drops some heavy object on his or her foot. Because of the diabetes, the foot is much more susceptible to infection, which actually happens. Then, because diabetes seriously inhibits healing, the infection worsens, and the foot is amputated. In statutory workers’ comp, this would be covered, but what about at Costco. I asked Peter Rousmaniere about this. He wrote back:

“You are right, this would be excluded… With Obamacare assuring universal health coverage, the opt-out employer’s message will be something like, “Don’t expect indemnity payments for a work injury if there is a good chance that your personal health condition will contribute to it.”

Rousmaniere admits that this “sounds draconian,” but he believes that this issue, as well as what to do about degenerative conditions, such as what to do about the 55-year old wall board hanger whose rotator cuff finally gives out, will gradually self correct with help from the ADA as well as the Affordable Care Act. The jury on this is decidedly out. But, just for a moment, imagine that he’s right. What we could be moving toward, after decades of failed experiments, is the first manageable and potentially successful version of 24-hour care.
The Other Side of the Coin
One thing is clear from the Rousmaniere and Roberts study: Costco and other large employers like Target and Safeway, two other non-subscribers, have the resources and core values necessary to provide compassionate care for injured workers while bringing them back to work as fast as medically possible in a businesslike way. But what about Kenny’s CITGO, down the street on the corner with five employees, all of whom, including Kenny, live paycheck to paycheck? And Kenny is just as free to non-subscribe as Costco.
Kenny and others like him are the Third World of non-subscription. Operating with no regulatory or legal oversight by the state, he can do what he pleases or what he perceives he can afford, which is probably not much. If one of his workers is injured, and Kenny decides to offer nothing in the way of injury benefits, the worker is on his own. He can certainly sue Kenny for employer negligence, and Kenny won’t have those three pre-workers’ comp era defenses to rely on. However, no attorney is going to take the employee’s case because Kenny won’t have the resources to pay if he loses, which he probably would. But, to quote Rousmaniere and Roberts, “That is a hollow victory, indeed.”
And on a grander scale, what about the large employer with significant resources, but who also may have more than a bit of malevolence in its DNA and wants to play schoolyard bully (see Massey Energy)? In an environment without one scintilla of regulation will the bully treat workers fairly?
The Oklahoma Proposal
After studying the lay of the land for the Texas opt-out and seeing where the Punji Pits are (see Kenny’s CITGO and Massey Energy), Oklahoma legislators crafted a remarkable piece of opt-out legislation that narrowly lost 42 to 50 in the Oklahoma House of Representatives in late April, 2012.
The Oklahoma proposed legislation would have corrected many of the perceived flaws in the Texas opt-out system. For example, Oklahoma would require any employer choosing to opt-out to provide similar, in some cases better, benefits than the statutory system. Also, injury benefits would be required to be part of an ERISA-approved plan, although there is significant uncertainty if this provision would withstand a constitutionality challenge. Further, employers applying to opt-out would have to pay a fee of $1,500 annually to do so. This would more than likely eliminate the Kennys of the world, employers who just don’t have the resources to “pay to play.”
Rousmaniere and Roberts expect Oklahoma legislators to do some tinkering and re-file during 2013. They think there is a good chance that this time the legislation will pass. Whether Governor Mary Fallin, who campaigned on a platform of workers’ comp reforms, will sign it is another matter.
Summary
This 87-page report is a Herculean effort, and, in my view, the worker’s compensation insurance industry owes Rousmaniere and Roberts a huge debt for spending close to a year to produce it. Sedgwick should be commended for funding it. Perhaps we can forgive Rousmaniere for a bit of acquired bias, but he’s seen, up close, what a conscientious, fair-minded employer can do if given the chance. I come away from his report finding myself agreeing with him as he wrote me the other day: “Every state should offer and every medium and large sized employer should consider opt -out.” But to this I add, “With a healthy dose of regulatory and state oversight. Not everyone is Costco.”