A light hearted look at my adventures as the head of safety and risk management for a company that serves the entire staffing industry from temps to contract staffing to Professional Employer Organizations.
********************************************************************************************************
CLICK ON ANY PICTURE TO SEE THE COMPLETE PICTURE
I have also stated that this blog is about the staffing industry, safety, risk, and technology. I cover this issues of risk and technology as they relate to the staffingindustry and to safety. Risk does not only involve physical harm, but also financial harm, lawsuits, loss of profit, legal compliance, etc.
In another previous post,"Obamacare, the Gift that Keeps on Giving... and Taking" I covered the pandora's box that we are discovering that Obamacare is, and the potential risk that it puts employers in. Today I discovered another risk that it puts employers in.
Along with that, I also feel that I have to (also) voice the dangers that this puts the citizens of the United States in from our own government. Just as it would be wrong of me not to point out a worksite hazard, it is just as wrong of me not to point out the dangers of this law.
“It is the first responsibility of every citizen to question authority.”
―
Benjamin Franklin
Furthermore, beyond the civil liberties issues, (the other risk to employers this law poses) IS related to this blog. I have also want you to develop CriticalThinking! Hopefully I have accomplished my goal.
“I do this real moron thing, and it's called thinking. And apparently
I'm not a very good American because I like to form my own opinions.”
―
George Carlin
Obamacare Marketplace: Personal Data Can Be Used For ‘Law Enforcement and Audit Activities’
Maryland's Health Connection, the state's Obamacare marketplace, has been plagued by delays in the first days of open enrollment. If users are able to endure long page-loading delays, they are presented with the website's privacy policy, a ubiquitous fine-print feature on websites that often go unread. Nevertheless, users are asked to check off a box that they agree to the terms.
The policy contains many standard statements about information automatically collected regarding Internet browsers and IP addresses, temporary "cookies" used by the site, and website accessibility. However, at least two conditions may give some users pause before proceeding.
The first is regarding personal information submitted with an application for those users who follow through on the sign up process all the way to the end. The policy states that all information to help in applying for coverage and even for making a payment will be kept strictly confidential and only be used to carry out the function of the marketplace. There is, however, an exception: "[W]e may share information provided in your application with the appropriate authorities for law enforcement and audit activities." Here is the entire paragraph from the policy the includes the exception [emphasis added]:
Should you decide to apply for health coverage through Maryland Health Connection, the information you supply in your application will be used to determine whether you are eligible for health and dental coverage offered through Maryland Health Connection and for insurance affordability programs. It also may be used to assist you in making a payment for the insurance plan you select, and for related automated reminders or other activities permitted by law. We will preserve the privacy of personal records and protect confidential or privileged information in full accordance with federal and State law. We will not sell your information to others. Any information that you provide to us in your application will be used only to carry out the functions of Maryland Health Connection. The only exception to this policy is that we may share information provided in your application with the appropriate authorities for law enforcement and audit activities.
The site does not specify if "appropriate authorities" refers only to state authorities or if it could include the federal government, as well. Neither is there any detail on what type of law enforcement and/or audit activities would justify the release of the personal information, or who exactly is authorized to make such a determination. An email to the Maryland Health Connection's media contact seeking clarification has not yet been answered
The second privacy term that may prompt caution by users relates to email communications. The policy reads:
If you send us an e-mail, we use the information you send us to respond to your inquiry. E-mail correspondence may become a public record. As a public record, your correspondence could be disclosed to other parties upon their request in accordance with Maryland’s Public Information Act.
Since emails to the marketplace could conceivably involve private matters regarding finances, health history, and other sensitive issues, the fact that such information could be made part of the "public record" could prevent users from being as free with their information than they might otherwise be. However, as noted, any requests for such emails would still be subject to Maryland's Public Information Act which contains certain exceptions to the disclosure rules.
In addition to the three big CRAs (Experian, TransUnion, and Equifax), the FCRA also classifies dozens of other information technology companies as "nationwide specialty consumer reporting agencies" that produce individual consumer reports used to make credit determinations.
Under Section 603(x) of the Fair Credit Reporting Act, the term “nationwide specialty consumer reporting agency” means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis relating to:
medical records or payments;
residential or tenant history;
check writing history;
employment history; or
insurance claims.
This designation makes CRAs and speciality CRAs subject to credit reporting and privacy disclosures to the subject of the report (i.e. your employee). I have mentioned before that if a accident investigation is conducted in a certain manner, that opens up the employer and (possibly) the safety investigator to provisions of the FCRA.
A Bad Situation...
Consider this scenario: an employer (in Maryland) gives full time employees a monthly subsidy to purchase health insurance in Maryland's Obamacare marketplace.
The question arises, what responsibility does the employer have to disclose that the market place "...information you (the employee) supply... may be shared... with the appropriate authorities for law enforcement and audit activities"?
More, and More Big Brother
Along with the "retaliation provision" in the Affordable Care Act (ACA) being administered by OSHA, the IRS is granted 46 new powers by the ACA (reference: the Galen Institute). These powers are:
collecting taxes;
distributing subsidies;
collecting information;
and enforcement.
Collecting Information:
State Exchange Information Reporting: Requires state exchanges to send to Treasury a list of the individuals exempt from having minimum essential coverage, those eligible for the premium assistance tax credit, and those who notified the exchange of change in employer or who ceased coverage of a qualified health plan.
Exchange Participation Requirement: Outlines the procedures for determining eligibility for exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions.
Taxpayer Information Disclosure:Authorizes IRS to disclose certain taxpayer information to HHS for purposes of determining eligibility for premium tax credit, cost-sharing subsidy, or state programs including Medicaid, including (1) taxpayer identity; (2) the filing status of such taxpayer; (3) the modified adjusted gross income of taxpayer, spouse, or dependents; and (4) tax year of information.
Insurance Provider Information Reporting: Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.
Large Employer Information Reporting: Requires information reporting of health insurance coverage information by large employers (subject to IRC 4980H) and certain other employers.
Medicare Beneficiary Information Disclosure: Authorizes IRS to disclose certain taxpayer information to the Social Security Administration (SSA) regarding reduction in the subsidy for Medicare Part D for high-income beneficiaries. (Conforming amendment)
Enforcement:
Health Plan Penalty: Imposes a penalty on health plans identified in an annual Department of Health and Human Services (HHS) penalty fee report, which is to be collected by the Financial Management Service after notice by the Department of the Treasury (Treasury).
New Group Plan Penalty: Subjects new group health plans to certain Public Health Service Act requirements and imposes the excise tax on plans that fail to meet those requirements. (Conforming amendment)
Group Plan Compensation Discrimination Prohibition: Prohibits group health plans from discriminating in favor of highly compensated individuals. (Complaints of discrimination investigated by OSHA)
Nonprofit Indicator System: Requires the independent institute partnering with the National Academy of Sciences (NAS) to implement a key national indicator system to be a nonprofit entity under section 501(c)(3).
Small Business Exemption for Cafeteria Plans: Allows small businesses to offer simple cafeteria plans-plans that increase employees’ health benefit options without the nondiscrimination requirements of regular cafeteria plans. (Complaints of discrimination investigated by OSHA)
Corporate Tax Advance: Increases the required payment of corporate estimated tax due in the third quarter of 2014 by 15.75 percent for corporations with more than $1 billion in assets, and reduces the next payment due by the same amount.
How the ACA will affect work comp is till unclear. Technically, Work Comp is a form of health insurance and a form of life insurance. Consider the following taxing powers afforded the IRS:
Tax on Health Insurers: Imposes an annual fee on any entity that provides health insurance for any U.S. health risk with net premiums written during the calendar year that exceed $25 million.
Excise Tax on Health Insurance: Imposes a 40 percent excise tax on high cost employer-sponsored health insurance coverage on the aggregate value of certain benefits that exceeds the threshold amount.
Individual Mandate Tax: Requires all U.S. citizens and legal residents and their dependents to maintain minimum essential insurance coverage unless exempted starting in 2014 and imposes a fine on those failing to maintain such coverage.
We still do not know (for sure) how these provisions apply to Work Comp. Once the IRS gets a hold on this, will they be sending out tax bills to WC carriers and self insured employers?
If the IRS deems that these provisions apply to Work Comp, that has the potential to double premiums.
Independent Contractors
The ACA adds another layer of danger, confusion and potential liability for those companies wanting to use independent contractors across the United States. The ACA may tempt employers to misclassify full time employees as independent contractors.
The ACA mandates that any employer with 50 or more full time equivalent employees is responsible for providing health insurance. Employers who hover around the 50 employee threshold may be tempted to intentionally misclassify workers (meaning incorrectly classify employees as independent contractors) to get around new expenses placed upon companies by the ACA.
The ACA does not require employers to provide insurance to part-time employees. However, part-time employees can be crucial in determining whether the employer meets the threshold number of employees (and therefore whether the employer is actually subject to the ACA). When an employer has 50 full time employees (or a combined total of 50 full time equivalent), the employer is subject to the tax under the ACA.
Independent contractors do not count as employees. Under the ACA, independent contractors do not count as employees when determining whether the employer meets the minimum threshold as a large employer.
Is Your Job, as a Safety Professional at Risk?
When the economy took a downturn, marketing and safety were hit the hardest. Now, with the ACA deadline approaching, are you, as a safety professional at risk of becoming an independent contractor or part time employee? Think of how many other safety professionals that you know who have lost their jobs.
It is common practice for companies that cannot afford a full time safety professional to utilize independent contractors for safety functions. Your company may pay you a little more, but your company will save on Work Comp, health insurance, and payroll taxes.
Ask yourself; given the option of spending so much more, how likely is my company of re-hiring me as an independent contractor?
Will Health Insurance Replace Work Comp for Independent Contractors?
With all the mandates in the ACA, will health insurance replace Work Comp for independent contractors? If health insurers have to cove a wider range of injury and illnesses, then health insurance can act as WC (excluding indemnity). This will only provide additional incentive for companies to use independent contractors.
More Reporting
The ACA requires Employer Reporting of Insurance on W-2s: Requires employers to disclose the value of the employee’s health insurance coverage sponsored by the employer on the annual Form W-2.
The ACA further requires Insurance Provider Information Reporting: Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.
Am I crazy?
Am I crazy?
Yes, but that does NOT mean I am wrong. Think about how the government handled things in the past...
George Orwell was Right
I am not going into a rant on how our government has eroded our civil liberties or trounced the Constitution, but I will put some links so that you can read more and think for yourself.
No one is sure yet how the ACA will work and how it relates to WC. I hope it does work. I hope it does not damage our WC system. Having health insurance will reduce WC claims.
A little-known provision in the Affordable Care Act could put
employers in the middle of retaliation lawsuits if they restructure
their workforce in 2014.
A provision in the ACA prohibits employers from taking negative
actions against employees — such as reducing benefits and cutting hours —
in retaliation for employees getting subsidized coverage on the Arizona
Marketplace, also known as the health exchange.
Once the exchanges are up and running, employers will get monthly
reports from the feds, detailing which employees received subsidized
health insurance coverage through the exchange. (These reports were
designed to have employers help the U.S. Internal Revenue Service
determine who is covered by health insurance, because individuals will
be fined $95 a year if they don’t have coverage.)
Here’s the trap: Now that employers will know which employees dump
their employer-based insurance and go to the exchange to buy coverage,
it puts them in the awkward position of getting sued — even if the
employer’s workforce restructuring was not even related to the ACA.
This retaliation provision is included as an amendment to the Fair
Labor Standards Act and will be administered by Occupational Safety and
Health Administration, or OSHA.
So if an employer reduces an employee’s hours or lays off that person
— who also happens to be somebody who dumped employer coverage to buy
insurance from the exchange — the retaliation provision kicks in, said Erwin Kratz, director of the employee benefits section for the Phoenix law firm of Fennemore Craig.
“If an employee wants to challenge the decision, all they have to do
is say, ‘I got this subsidy and the employer knew it and took action
against me,’” he said. “That will be enough to shift the burden to the
employer to show that the action had nothing to do with the subsidy.”
But here’s the deal: Because the employer mandate was delayed a year,
employers have until Dec. 31 to restructure the workforce without the
fear of this new retaliation lawsuit.
This is something many employers already know, including the Maricopa Community Colleges, which announced earlier this year its plans to cut 1,3000 workers’ hours to avoid $13 million in health care costs.
Many employers have figured they have another year to comply with the
employer mandate, thinking they’ll just deal with this next year.
Wrong, said Kratz.
“They can do it now, but when they get to 2014, they better be
careful,” he said. “They better not say, ‘We’re doing this to avoid the
mandate.’ Because the employee is going to say, ‘Thank you. You lose.”
The danger to the economy is that this could trigger a mountain of layoffs before the end of the year, he said.
“It’s another one of the unintended consequences of the act,” he said.
Government report finds regulations have spiked under Obama
The Obama administration published more “major” final rules in its
first term than the George W. Bush administration did in its second,
according to the Congressional Research Service (CRS).
From
2009 through last year, there were more than 13,000 final rules
published in the Federal Register, while fewer than 12,400 were
finalized from 2005-2008, the report found. That’s an increase of nearly
five percent.
The Obama administration has come under
fire for its aggressive regulatory policies, with congressional
Republicans complaining that the wave of new rules is costing businesses
and amounts to executive overreach.
My Comments:
The Obama administration is continuing to increase regulation, not only in the number of regulations, but in having more agencies involved, and agencies regulating outside their scope. Consider the retaliation provision in the ACA:
This retaliation provision is included as an amendment to the Fair
Labor Standards Act and will be administered by Occupational Safety and
Health Administration (OSHA).
What about states that have state OSH, does federal OSHA enforce the ACA "retaliation provision" there or the states? What about states that have both state OSH (that covers private industry) and federal OSHA (that covers government entities)?
As if running a business was not hard enough. Since this falls under OSHA, will safety managers now have to deal with and be responsible for ACA provisions? Will the "gross negligence" provision of OSHA apply to the "retaliation provision" of the ACA and can managers be held liable?
Since OSHA has taken the view of a worksite as a whole, and extended to cover contractors and all employees at work sites, will the ACA (either the "retaliation provision" or the act in it's entirety) apply to contractors and all employees at work sites and will the general contractor be held liable for providing healthcare (under the ACA) to ALL site employees?
What about companies that use temporary staffing companies? How will OSHA's enforcement of the ACA's "retaliation provision" apply to the host company? Will the host company be responsible for providing healthcare (under the ACA) to temporary employees?
This is not so far fetched. The ACA is just beginning to be implemented. All areas have not been clearly defined and the ACA has not been tested yet by lawsuits, and the lawsuits will be coming!
The ACA as a whole has not been well thought out. It was based on the Medicare system (which was a good decision) because that was a working system already in place. But the rest seems to be piecemealed, rushed, and not well thought out. I will not even mention the issues with funding...
This is just another aspect of the Obama administration as a whole: increased regulation, increased taxes (the Supreme court upheld the ACA is a tax, see in forbes.com here:), and lack of clear procedures for regulation.
Universal Healthcare is coming: consider that the US is the only industrialized country without Universal Healthcare. In order for our companies to compete globally, they need Universal Healthcare. Consider the following example of a a domestic automaker and a foreign automaker competing here in the US:
The Associated Press reported that, for example, the average United Auto
Workers member makes $29.78 per hour at GM, while Toyota pays its
workers (most of whom are non-union) about $30 per hour. However, when
total benefits (including pensions and health care for workers, retirees
and their spouses) is factored in, GM's total hourly labor costs is
about $69, while Toyota's is about $48. Source: cbsnews.comMarch 30, 2009
Finally, let me say that I am NOT against Universal Healthcare, I just don't think that the system we got is the best way to deliver it. Furthermore the rules are not clear.
Note: This is Part 2 in a 2 part post. Chronologically it is posted first, but that is because of how blogspot.com displays posts.
On with the post...
The modern system of workers' compensation is so complex and arcane it produces considerable grief to those who must deal with it on a daily basis. Yet these often cumbersome regulations are so ultimately vital to society they appear, in one form or another, in all industrialized nations.
Work Comp in Antiquity:
The history of compensation for bodily injury begins shortly after the advent of written history itself. The Nippur Tablet No. 3191 from ancient Sumeria outlines the law of Ur-Nammu, king of the city-state of Ur. It dates to approximately 2050 B.C. The law of Ur provided monetary compensation for specific injury to workers' body parts, including fractures. Hammurabi's Code (1750 B.C.) provided a similar set of rewards for specific injuries and their implied permanent impairments. Hammurabi was an ancient king of Babylon.
Ancient Greek, Roman, Arab, and Chinese law provided sets of compensation schedules, with precise payments for the loss of a body part. For example, under ancient Arab law, loss of a joint of the thumb was worth one-half the value of a finger. The loss of a penis was compensated by the amount of length lost, and the value an ear was based on its surface area.
All the early compensation schemes consisted of "schedules" such as this; specific injuries determined specific rewards. The concept of an "impairment" (the loss of function of a body part) separate from a "disability" (the loss of the ability to perform specific tasks or jobs) had not yet arisen.
The Middle Ages:
Yet the compensation schedules of antiquity were gradually replaced as feudalism of the Middle Ages gradually became the primary structure of government. The often arbitrary benevolence of the feudal lord determined what, if any, injuries garnered recompense. The concept of compensation for the worker was bound up in the doctrine of noblesse oblige; an honorable lord would care for his injured serf.
The development of English common law in the late Middle Ages and Renaissance provided a legal framework that persisted into the early Industrial Revolution across Europe and America. Three critical principles gradually developed which determined what injuries were compensable. They were generally so restrictive they became known as the "unholy trinity of defenses.
1. Contributory negligence.
If the worker was in any way responsible for his injury, the doctrine of contributory negligence held the employer was not at fault. Regardless of how hazardous the exposed machinery of the day was, any worker who slipped and lost an arm or leg was not entitled to any compensation. This was established in the United States through the case of Martin v. the Wabash Railroad, in which a freight conductor fell off his train. Although inspectors subsequently blamed a loose handrail, his injuries did not receive compensation because inspecting the train for faulty equipment was one of his job duties.
2. The "fellow servant" rule.
Under the "fellow servant" rule, employers were not held liable if the worker's injuries resulted in any part from the action or negligence of a fellow employee. This was established in Britain through the case of Priestly v. Fowler in 1837, a case of an injured butcher boy. In America, precedent was provided five years later by Farnwell v. The Boston and Worcester Railroad Company.
3. The "assumption of risk."
The doctrine of "assumption of risk" was exceptionally far-reaching. It held simply that employees know of the hazards of any particular job when they sign their contracts. Therefore, by agreeing to work in a position they assume any inherent risk it carries. Employers were required to provide such safety measures as were considered appropriate in the industry as a whole. In the 19th century, this often left a great deal to be desired. Assumption of risk was often formalized at the beginning of an employee's tenure; many industries required contracts in which workers abdicated their right to sue for injury. These became known as the "worker's right to die," or "death contracts."
While these common law principles were quite restrictive, it was their method of enforcement that proved most cumbersome. An injured worker's only recourse was through the use of torts. In the 19th century as in our own, these were exceptionally expensive legal affairs. Most countries required considerable fees simply to file a personal injury lawsuit. These more often than not were beyond the limited means of the injured worker. It was so uncommon for a working man to win compensation for injury that private organizations such as the English "Friendly Societies" and German "Krankenkassen" were formed that offered more affluent laborers the option of buying various kinds of disability insurance. Nevertheless, the worker did occasionally prevail through tort legislation. As the century wore on, this began to happen frequently enough that employers too became uncomfortable with the capricious nature and high cost of battling civil suits.
The First Modern Workers' Compensation Law:
The watershed events in the development of modern workers' compensation law occurred in the improbable setting of Prussia (now modern day Germany) under the even more improbable leadership of its stern Chancellor, Otto von Bismarck. The Chancellor was certainly no great humanitarian, but he was the force behind Realpolitik, the school of political pragmatism. Germany at the time had a very active Marxist and socialist movement, and social protection for workers was at the top of their agenda. The active left was a considerable thorn in Bismarck's side, particularly given his need for a stable home front while pursuing foreign empire-building. He resorted to straightforward political oppression, and in 1875, he outlawed the Social Democratic Party.
But Bismarck was shrewd. While suppressing the institutions of his socialist opponents, he maintained the loyalty of the common Prussian by co-opting key features of their agenda. The most important of these was a system of social insurance. His first foray into the field was through the Employers' Liability Law of 1871, providing limited social protection to workers in certain factories, quarries, railroads, and mines.
Later, and far more importantly, Bismarck pushed through Workers' Accident Insurance in 1884 creating the first modern system of workers' compensation. This was followed over the next few years by Public Pension Insurance providing a stipend for workers incapacitated due to non-job related illnesses and Public Aid providing a safety net for those who were never able to work due to disability.
The system as a whole valued the active worker; the greatest benefits were granted to job-related injuries and medical care and rehabilitation were covered. The state-administered Prussian system also established an important precedent: it was regarded as an "exclusive remedy" to the problem of workers' compensation, employers under the system could not be sued through the civil courts by employees.
The Prussian system has served as a basic model for the social insurance programs of a variety of countries including the United States. It is worth noting that the complex nature of modern workers' compensation law has been present almost from the start. Indeed, the dark writings of Franz Kafka were partly inspired by his job as a minor functionary in the arcane machinery of the workers' compensation board in (then Prussian) Prague just after the turn of the century
Workers' Compensation Spreads:
Other western nations gradually began to accept the notion that modern industrial society required some form of mandated workers' insurance. As early as 1880, the British Prime Minister William Gladstone pushed through the Employer's Liability Act. This abolished the old common-law defenses in theory, but it did not establish a "no-fault" system. A proof of negligence on the part of the employer was necessary for the employee to collect. Most importantly, "right to die" contracts in which workers renounce their right to sue for injury were still legal and widely used by English industry. Thus, the 1880 law had little effect.
The Workers' Compensation Act was proposed in Parliament in 1893 and was largely equivalent to the 1884 Prussian law in establishing a "no-fault" doctrine of compensation. Unlike the German model, it did not fully rely on state administration. Instead the "Friendly Societies" which had organized various forms of private disability insurance for workers for many years were relied upon to provide the insurance itself.
Nevertheless, the Act encountered staunch opposition from manufacturing interests in Parliament, and the House of Lords delayed its passage by attempts to add language which would have made "right to die" contracts a permissible means of circumventing the entire system. Finally, the Act was passed in 1897 after a four-year legislative struggle.
Workers' Compensation in the United States:
The winds of change were slower across the Atlantic. Populist sentiment for organized workers movements began to grow in the first decade of the 20th century. Social change was heralded by the literary "muck-rakers" movement, a group of authors who, while often uninspired in their literary craftsmanship, passionately wrote about the plight of the common man in modern industrial society.
Most famous among these was Upton Sinclair, socialist author of The Jungle, a novel detailing the horrors experienced by a Lithuanian immigrant working in the Chicago slaughterhouses.
Critical acclaim was lacking. A Time Magazine critic once said of him, "Of the many millions of words Sinclair wrote, few are the right ones in the right order." Despite his limited skills, The Jungle proved immensely popular, full of compelling and graphic passages such as:
"(The fertilizer workers') particular trouble was that they fell into the vats; and when they were fished out, there was never enough of them to be worth exhibiting, - sometimes they would be overlooked for days, till all but the bones of them had gone out to the world as Durham's Pure Leaf Lard!"
Mr. Sinclair's immediate goals were not realized. In the short term, the swell of public opinion in the book's wake led not to legislation aimed at improving workers' conditions, but to the Food and Drug Act of 1906 and the Meat Inspection Act of 1906, both primary milestones in the evolution of the Civil War-era Bureau of Chemistry into the modern Food and Drug Administration.
Nevertheless, a reform-minded public did gradually come to demand changes in workers' benefits. As early as 1893, the Department of Labor prepared a report by J. G. Brooks on the topic Compulsory Insurance in Germany. Congress passed the Employers' Liability Acts of 1906 and 1908, softening the common-law doctrine of contributory negligence. Failed or limited efforts to pass comprehensive workers' compensation acts were attempted in New York (1898), Maryland (1902), Massachusetts (1908), and Montana (1909). At the federal level, sentiment for modern workers' compensation ranged a few years ahead of the state legislatures, but the matter was generally considered best left to the states. The federal government did regulate interstate commerce, however, and what is arguably the first compensation system in America was proposed by President Taft and put into law in 1908 to cover those workers involved in interstate trade.
Unlike Europe, the decentralized nature of labor regulation in the United States provided a key additional obstacle delaying implementation of the laws. As in England, many manufacturers were ready for change provided it included tort relief, but they strongly objected to state-by-state regulation. It would, they appropriately argued, create an uneven playing field for unregulated competitors in neighboring jurisdictions. In the most telling example, phosphorus match manufacturers brazenly testified before Congress that, despite the widespread problem of "phossy jaw" poisoning in their workers, they were unwilling to invest in alternative compounds unless the law in all states mandated it. In 1910, this problem led to a special conference in Chicago attended by representatives of the industrial states to outline a uniform set of guidelines for compensation law.
The first comprehensive workers' compensation law was finally passed shortly thereafter in Wisconsin in 1911. Nine other states passed regulations that year, followed by thirty-six others before the decade was out. The final state to pass workers' compensation legislation was Mississippi in 1948.
The response of the medical community was lukewarm at best, particularly from the young but subspecialty of orthopedics. The noted shoulder specialist Codman decried workers' compensation statutes with their regulated physicians' fees as part of "the great effort which the majority is making to socialize the medical profession." To put his views in some perspective, he also objected to public parks, mass transit, municipal piers, regulation of interstate commerce, and even public hospitals.
The attitudes of medical professionals changed dramatically in the 1930's, however, when Social Security Disability Insurance was created to insure those who could not work due to infirmities that were not work-related. This vast expansion of the need for physician involvement and evaluation proved very lucrative. The American Medical Association quickly published the popular Guides to the Evaluation of Permanent Impairment, which has been through multiple editions since. As managed care has come to play a greater role in the health care system, many physicians have come to realize that compensation evaluations represent a stable and high-paying source of income.
Structure of the U.S. Workers' Compensation System
The various workers' compensation statutes in America are all modeled loosely after the original Prussian system. The central tenet is that of "no-fault" insurance; industrial accidents are accepted as a fact of life and the system exists to deal with their financial consequences in as expeditious a manner as possible. Employers participating in the system have the notable benefit of tort exemption for injuries covered by workers' compensation. Employees can sue third parties who may be responsible for their on-the-job injuries, but any proceeds from such suits must first go to reimburse their employer's compensation insurance carrier.
All American workers' compensation schemes are fully employer-funded either by the purchase of commercial insurance or setting up a self-insurance account. In their original form, however, most state compensation acts made employer participation "optional." Because they also often precluded the use of the common-law defenses if participation was declined, the vast majority of employers have historically participated, and approximately 80% of the work force is currently covered under compensation schemes. Most states have exclusion criteria for small firms and, most significantly, for domestic and agricultural workers.
As a general rule, claims are handled by legislatively created state compensation boards, although decisions can be appealed to the state court system. In five exceptions, Wyoming, Tennessee, New Mexico, Alabama, and Louisiana, claims are taken directly to the courts, but special state agencies exist to assist the processing of claims. The definition of compensable injury has gradually evolved over the years. Although it was once interpreted to mean a sudden industrial accident, in recent years most states have added language to include occupational exposures and overuse syndromes. The Kentucky law currently defines "injury" as "any work-related harmful change in the human condition.
A distinction is made between "impairment," a medical definition of the degree of loss of anatomy or function of a body part or system, and "disability," a legal definition of the degree to which an employee's impairment limits his ability to perform work. Some states due continue to have "schedules" for certain injuries, however, which directly correlate the loss of certain anatomical parts to amounts of compensation. For instance, the loss of a thumb in South Dakota entitles the worker to fifty weeks of compensation regardless of his disability6.
In general, compensation is paid both in the form of wage-replacement (usually at about two-thirds salary) for the period of total disability and in the form of lump-sum payments for any residual permanent partial disability. Employers also must pay for the workers' medical and rehabilitation costs. Many employers quite aggressively pursue rehabilitation and pay for services such as work-hardening programs that are not required by the letter of the law. They have found these to be highly cost-effective given that the outcome if the worker fails to return to work could be permanent total disability payments for life.
One special case that most states have now come to recognize is that of the "second injury." In Oklahoma in the 1920's, a one-eyed worker lost his remaining eye in an industrial accident. His employer was forced by the compensation board to pay not for the loss of a single eye, but for total permanent disability given the patient's blindness. Immediately, virtually all the one-eyed, one-armed, and one-legged workers in the state were deemed by their employers to represent unnecessary risks and were fired. To solve this dilemma, most states have now created "second injury funds" run by the government which all the private insurers pay into. These are used to make up the difference when a second injury proves incapacitating only because of a prior injury to another body part. Although their cost is relatively minimal and they initially appear to be a minor detail, second injury funds are absolutely critical in maintaining the employability of amputees.
Modernization of the U.S. Workers' Compensation System:
The basic structure of the American workers' compensation system has remained unchanged throughout the century and is, overall, a success in the eyes of employers and employees alike. Only in the last five years have major changes in the landscape of workers' compensation law begun to appear.
The primary instrument of change has been the Americans With Disabilities Act of 1990, one of the central pieces of legislation to emerge from the Bush Administration. The ADA actually represents a dramatic expansion of a much earlier law, Section 504 of the Rehabilitation Act of 1973. Section 504 required government programs, contractors, and any entity receiving federal funding to make their facilities accessible to the handicapped. Its language was relatively restrictive, and the law applied only when persons were excluded from a program or employment "solely" because of their disability.
The ADA was the result of a massive campaign to improve the employability of the disabled in America. It met with resounding legislative success; there were only 6 no votes in the Senate and 28 in the House. Unlike Section 504, the ADA encompasses all of the American workplace, not just that fraction associated with the federal government. It also contains language that allows much broader judicial freedom in interpretation.
The ADA requires that employers make "reasonable accommodation" for workers with disabilities, but no legal standards for the definition of "reasonable" are provided. A precedent does exist for accommodating workers' with special needs: a series of rulings has mandated that employers need accommodate employees religious wishes (Sabbath day off, wearing of religious clothing, etc.) only if the cost is minimal and the accommodation would not significantly disrupt the central business enterprise. Some state disability laws placed specific monetary caps on the amount employers could be required to spend to accommodate individual workers. By avoiding this kind of more specific language, many employers fear the ADA has created an environment in which the costs of employing disabled workers are highly unpredictable8.
The new law is fuzzy, too, in its definition of disability. Traditional government policy toward the disabled focused on three groups: the legally blind (numbering 400,000), the deaf (numbering 1.7 million), and the absolute wheelchair-bound (numbering 720,000). From these relatively small numbers, to reach the commonly cited figure that one-in-six Americans (approximately 43 million) are disabled requires the inclusion of a large number of less immobilizing physical impairments and mental disabilities. Indeed, mental illness alone creates significant confusion. The DSM as first published contained just over 100 disorders; it now contains three times that number.
For the employer, simply knowing whether or not a potential employee has a disability is often difficult. The ADA severely restricts employers' access to prior medical records before an offer of employment is made. Incidentally, these provisions have been successfully used by physicians to prevent state medical boards and hospitals from obtaining records indicating prior drug or alcohol addiction.
These gray areas of the ADA have been used by entrepreneurial lawyers to apply the law to areas removed from its original intended scope. Relatively few suits under the ADA have related to hiring discrimination. A substantial number allege discrimination against those who are already employed, and many allege disabilities acquired on the job. Thus, by a subtle shift in wording and emphasis, the ADA is seen by some lawyers as an opportunity to circumvent or augment the settlements their clients would reach through traditional workers' compensation. The most commonly cited disability in employment-related suits filed under the ADA is back pain (19% of the total), followed by compressive neuropathy and similar neurologic disorders (12%), and mental illness (12%). Only 8% of complaints have come from the wheelchair-bound and 3% from the deaf or blind8.
In one celebrated Texas case, a worker for the Santa Fe Railroad was awarded a $305,000 workers' compensation settlement for permanent total disability based on physicians' testimony that he would never be able to work again after his work-related back injury. Eight days after his settlement, he filed suit under the ADA claiming he was wrongfully terminated due to a disability and should be rehired with accommodation. Although the case was thrown out, this apparent legal double jeopardy highlights the legitimate fear of employers that the tort relief that is such a central feature of workers' compensation law is in danger of slowly being eroded.
Massachusetts historically has had a low rate of workplace-related injury compared to neighboring states and the national average. It also has one of the lowest workers’ compensation reimbursement schedules. One estimate suggests that physicians in Massachusetts are paid up to 40% less than the national average for treating workers’ compensation claims.
Prior to the passage of the Health Care Reform Act, more than 20 times as many emergency department (ED) visits were billed to workers’ compensation as were inpatient visits—an annual average of 85,000 ED visits versus 3,500 inpatient visits. After reform, the number of ED visits dropped by 7.2%.
Beginning in 2005, workplace claim rates steadily declined, according to a study by the RAND Corp. Between 2005 and 2009, claims dropped 16.7%, and workers’ compensation hospital costs dropped between 5% and 10%. Several factors—some of which may be related to the 2006 Health Care Reform Act—contributed to these decreases.
Research has found a significant association between being insured and the frequency of workers’ compensation claims. Patients who incur a workplace-related injury are more likely to file a claim with their newly acquired and mandated insurance rather than make a workers’ compensation claim. Thus, the number of workers’ compensation claims declined 4% after reform. Among patients who were identified as “high-cost” because they had conditions that historically placed a greater burden on insurance, the number of workers’ compensation claims declined by 6%.
One direct change resulting from PPACA is the Black Lung Benefits Act, which will facilitate the filing of claims and obtaining of benefits for coal workers who are injured. Understanding other changes to workers’ compensation under PPACA, however, is largely speculative at this point and depends on a variety of factors. These factors include specific cost shifts in the system, the success of coverage expansions, and benefits changes enacted under the law.
Some predictions can be made, however, in supporting the opposing notions that workers’ compensation costs may either increase or decrease by using Massachusetts as an example and considering that the Massachusetts Health Care Reform Act and PPACA share many similar provisions.
Some studies have shown that working Americans who lack insurance are more likely to seek coverage under workers’ compensation statutes. The decrease in the number of uninsured Americans could prompt cost shifts—reducing costs in the workers’ compensation system as more Americans use their normal health insurance to cover injuries stemming from work—similar to those seen in Massachusetts.
Furthermore, increasing access to care under PPACA and expanding preventive services and wellness initiatives should make the overall working population healthier. This could potentially decrease both the prevalence of comorbidities such as smoking, diabetes, and obesity and the number of workers’ compensation claims.
Fraud can also be decreased by potentially deterring uninsured employees from using workers’ compensation for nonoccupational injuries or preexisting conditions because the individual mandate requires enrollment in a health insurance plan. Therefore, treatment of these conditions will not drain workers’ compensation resources. Further trickle-down effects from tax rebates to the pharmaceutical industry will allow greater access to generic drugs for patients, which may enable these patients to treat their preexisting conditions without needing to use the workers’ compensation system for care.
In addition, although workers’ compensation insurers historically have provided higher reimbursements than Medicare, some states couple their workers’ compensation fee schedules to Medicare’s. Lowering Medicare fee schedules may affect reimbursements under workers’ compensation insurance, resulting in limiting coverage payouts.
With shifts to global payment systems and greater regulations on premium increases, workers’ compensation costs may decrease if pilot programs enacted under PPACA spill over into the workers’ compensation sector. Finally, increased coordination of benefits and new reporting standards called for under PPACA may affect workers’ compensation as well, decreasing costs by reducing administrative and overhead spending.
On the other hand, however, PPACA could increase workers’ compensation costs over time. For example, PPACA may strain primary care services, resulting in longer wait times for treatment for patients with occupational injuries. Changes in the supply of available physicians in certain disciplines—such as a projected shortage of primary care physicians—may make it more difficult for occupationally injured workers to find an available physician. This may adversely increase workers’ compensation costs by increasing the time spent away from work as employees wait to see a physician.
With a reduction in Medicare (and in some states Medicaid) reimbursement for surgeries, imaging, and other procedures, providers may seek to deliver more services to work comp patients to make up for lost income. Thus we may see more surgeries and related hospital/facility care, more scans, more tests and injections and implants and pumps. This will lead to more expense for comp payers, and will likely be a reduction in the quality of care: delivering services that are not needed, even if they are performed at a high standard, reduces the overall quality of care.
Most economists agree that PPACA will likely increase insurance costs nationally, and because the workers’ compensation system does not include copayments or deductibles and employers must bear these costs, the influx of patients in the workers’ compensation system may increase.
Obamacare & Trends in WC: Dispute Resolution
Mediation is a time-honored method of resolving disputed claims—and workers’ compensation is no stranger to its use. However, the frequency with which it has been exercised, and the degree to which adjudicative bodies have deferred decision-making and instead required parties to submit to alternate dispute resolution methodologies, has exploded in recent years.
Of course mediation allows the parties to participate in how their case will be resolved, rather than turning over the entire decision-making process to another. A mediation session provides adequate time to narrow issues, focus the parties on the strengths and weaknesses of their particular claims, and develop options for resolution. One of mediation’s most crucial contributions is bringing about the psychological framework to allow a claim to be resolved, rather than drawing more lines in the sand of sometimes intractable litigation. Significant savings in terms of time as well as expense can be appreciated through the mediation (rather than litigation) process.
Michigan provides an example of the new momentum that mediation has gained throughout the nation as particularly applicable in workers’ compensation matters. Recently enacted legislation in that state—in December 2011, to be specific—requires that all claims filed with the agency administering such claims “shall be set for mediation or hearing, as applicable,” and further that “if the agency or the Michigan administrative hearing system determines that a case may be resolved by mediation, the case may be mediated by the parties (and) if the matter is not resolved by the mediation, the case shall be set for hearing.”
Similarly, North Carolina’s Industrial Commission has since the adoption of automatic referral procedures in 1996-97 sent an Order for Mediated Settlement Conference to all parties with the acknowledgement of the claim’s filing. Montana similarly has a Mediation Unit within its Workers’ Compensation Claims Assistance Bureau, which provides a mandatory alternate method to resolve disputed claims prior to involving the Workers’ Compensation Court.
Georgia, on the other hand, has a dedicated “Alternate Dispute Resolution Unit” under the state’s Workers’ Compensation Board, charged with resolving certain types of disputes without the necessity of a formal hearing. Such issues include requests for change of physician, disputes about payment of medical bills, what constitutes “suitable employment” in compensable claims, disputes regarding attorneys’ fees, average weekly wage disputes, and determining the amount of permanent partial disability benefits payable.
California may, in fact, be the most aggressive jurisdiction of all when it comes to the use of alternate dispute resolution mechanisms. In the Golden State, the workers’ compensation system has become so overloaded that labor and management have been authorized to and have agreed to use a far-reaching and encompassing process to bypass the adjudicative system. As designed, the new ADR initiative will be achieved by using provisions of California Labor Code section 3201.7 and other relevant laws to establish a Labor-Management Trust; employer safety groups injury and accident prevention; an exclusive list of medical providers, evaluators, vocational rehabilitation and retraining programs; and an exclusive list of other providers, including ambulance, radiology, hospitals, inpatient and outpatient facilities, and other vendors that are needed to effectively implement the program.
Obamacare & Trends in WC: Immigration Laws
Alabama joined South Carolina and Arizona on September 1, 2011, by adopting new immigration laws some media outlets have described as “the most hateful piece of immigration legislation ever crafted,” prompting attacks by both religious groups and the U.S. Department of Justice. The impact of these laws on workers’ compensation systems will be significant, and go to such fundamental issues as whether there can even be an employer/employee relationship between an undocumented worker and his putative employer, and whether an undocumented worker can contract with an attorney for legal representation in his claim or even enter into a compromise settlement of his claim. The arguments for and against such laws essentially boil down to whether one believes that strengthening immigration laws to exclude illegal workers from entitlement to benefits would incentivize employers to hire illegal immigrant workers, if doing so would avoid the risk of workers’ compensation liability.
An exemplar case for this line of reasoning was the South Carolina Supreme Court’s decision in the case of Curiel v. Environmental Management Services, 655 S.E.2d 482 (2007), which held an illegal immigrant worker was entitled to workers’ compensation benefits, because to hold otherwise “would mean unscrupulous employers could hire undocumented workers without the burden of insuring them, a consequence that would encourage rather than discourage the hiring of illegal workers.”
Various challenges to these newly adopted state immigration laws are presently winding their way through the court system. No one at this point can necessarily predict the ultimate outcome. It is clear, however, that the present administration in Washington has made this issue a priority in this election year.
It is obvious that the world (as we knew it) no longer exists. But is the new reality a better place, or merely a different one? Only time will tell, but one thing is for certain: We have not seen the last of these changes to our practice environment. Only those practitioners able and willing to adapt to change are destined to succeed and prosper in its wake.
Posts
