8 Myths and Facts About Workers’ Compensation (August 2016)
The LexisNexis Legal Newsroom Workers’ Compensation Law has interviewed leading experts from different segments of the workers’ compensation industry to tell us some common myths and facts about workers’ compensation. Note that the myths listed below are set forth in random order and not in order of importance, since the degree of “importance” depends on the reader and his or her stake in the workers’ compensation system.
Myth #1: Safety professionals have no value added role in the work comp claims process.
Reality: Once a claim happens many organizations practice with the belief post claims works is all up to the in house claims contact and provider and claim services organizations. Some do not see any role for safety professionals in the claims management process. What part of the claim process should safety professionals focus on? Injuries in the workplace should have an accident investigation step. Safety professionals should periodically work with the claims team and pull a group of accident investigation reports and review the responses to “what happened” and see what the Supervisors/leads involved are saying to the “corrective action taken” section. With this integrated approach we can see if the forms/fields are not being fully completed, and if weak answers such as “we told employee to be more cautious” are the most common answer, this is an indicator of a quality control corrective action process in accident analysis instruction for the field. Supervisors/leads play a critical role in the claims management process and in the preventing accidents process and it all begins with understanding how to ask the right questions to get to the contributing factors of incidents for the purpose of sustained prevention. Become an integrated team of claims and safety as we are both managing the organization’s retained risk – its employees, facilities, operations, equipment, and vehicles – and our common goal is to prevent and control the risks/exposures and control costs and this is done through frequent communication and joint review/Quality Control Systems. Safety and Claims can play a major role in improving the profitability and success of an organization!
Lori A. Severson, CSP
Vice President, Senior Loss Control Consultant
Myth #2: Workers’ compensation is an employee benefit that is essentially just like any discretionary employee benefit.
Reality: Workers’ compensation is a substitute for tort damages and is not a discretionary employee welfare benefit. Virtually every other employee benefit—sick leave, vacation, uniform reimbursement—is a discretionary benefit that may be offered, or not, at the sole discretion of an employer. One way to keep the idea of a discretionary and non-discretionary benefit separated is to ask the simple question, could an employer suspend the benefit at will? Under ERISA, an employer may terminate or amend an employee welfare benefit (as very broadly defined) at will under the “Settlor Function Doctrine.” One of the great struggles in the workers’ compensation regime has been to set parameters of entitlement to workers’ compensation benefits. The reason this is such a difficult problem is that beneath the workers’ compensation statutory right is a (usually codified) common law tort right to a remedy. The strength of this tort right differs from state to state. It is very strong in Florida by virtue of the 1968 amendment of the Florida constitution, which explains why there have been so many constitutional challenges in that state. Underlying current challenges to the Oklahoma workers’ compensation system is heightened judicial scrutiny of legislative changes to workers’ compensation that ultimately impact the right of any person in the state to a remedy for personal injury. It is ultimately legally impossible to completely separate workers’ compensation from tort rights because they are both part of a larger all-encompassing right to a remedy for personal injury.
Michael C. Duff
Centennial Distinguished Professor of Law
University of Wyoming College of Law
Myth #3: All employees are covered by workers’ compensation.
Reality: In 14 states, employers of very small companies are exempt from carrying workers’ compensation coverage. This ranges from employers with 1 employee up to employers with 5 employees. Agricultural workers are not required to be covered by workers’ compensation in 17 states. Employers can still choose to obtain coverage voluntarily. In June 2016 the New Mexico Supreme Court found this provision of their workers’ compensation law to be unconstitutional. Coverage is not required for domestic workers in 26 states and in 5 states they are specifically excluded from coverage under the statutes meaning employer cannot even obtain coverage voluntarily. In Texas, workers’ compensation is completely voluntarily. Employers can opt out of workers’ compensation by notifying the state and their employees. Finally, many employees in the construction, agriculture, trucking and temporary staffing industries are incorrectly misclassified as independent contractors not allowing them the protections of workers’ compensation.
Vice President Communications & Strategic Analysis
St. Louis, MO
Myth #4: Employees stay out of work intentionally because they don’t want to go back to work.
Reality: Employees often don’t come back to work because a company won’t offer them a transitional duty assignment while they recuperate. While some employees try to stay out of work, that’s most often not the case. In some situations, where an employer has only a few, narrow job classifications in their operation, there aren’t many transitional duty options; in these situations, the employer must “think outside the box” to locate jobs not obvious at first glance. A second factor, as reported in the RIMS benchmark survey, is only 21% of employers obtain the work restrictions for employees on the first medical visit. Without all the necessary information obtained on the FIRST medical visit, another medical visit has to be scheduled thus necessitating more time out of work and turning the claim into a lost time claim. Employees are motivated to come back to work because they have friends in the workforce, they need a steady daily routine, and they don’t want to become deconditioned while not working. In many cases, employees become depressed with the loss of their routine. In practice, the biggest factor of why employees stay out of work is the lack of preparation and flexibility by the employer. Employers are encouraged to create a transitional duty job bank to identify a variety of transitional duty jobs prior to injury, as well as to communicate with employees and medical providers to obtain restrictions on the first medical visit. Upon receiving the employee’s physical restrictions, the employer and employee work together to assign a position that can be completed safely and effectively. Employers should have the goal of returning 90% of employees within 0-4 days.
Rebecca Shafer, J.D.
President, Amaxx Risk Solutions, Inc.
Myth #5: Texas and Oklahoma opt out systems are the same.
Reality: One point that seems to be lost in the ongoing national debate over “Opt Out”, is that existing systems in Texas and Oklahoma have some similarity with each other, or are essentially the same. That is not correct. To be clear, in the Texas system workers’ compensation is not mandatory. Employers may subscribe, offer nothing or develop alternative protections. “Non-subscribers” face full and open liability for on the job injuries and illnesses. There is no exclusive remedy protection for them. Texas, therefore, is in fact better described as an “Opt In” state. Oklahoma Opt Out, on the other hand, is a system that allows employers to define their own injury management system, while retaining the liability protections of exclusive remedy. It should be considered that in a state such as Texas, where open liability exists, that those employers theoretically must establish more comprehensive alternative plans if they wish to avoid extensive litigation. The very existence of exclusive remedy protection in Oklahoma’s closed employer controlled system potentially removes that incentive. That is a significant difference between the two systems. Both proponents and opponents of the concept routinely blur the lines between the concepts, with the former often citing “twenty years” or more of “successful data” in support of Oklahoma’s less than 3-year-old system. This does not necessarily provide an accurate view of the two systems, and blurs the lines for those following the debate. The two systems should be independently discussed and compared, as they are at their very foundation entirely different.
President & CEO, WorkersCompensation.com LLC
Myth #6: Workers’ compensation is not “employment law.”Reality: On its face, that myth actually seems rather silly – of course workers’ compensation statutes are employment laws, just as the ADA, FMLA, Title VII, ERISA, unemployment are also employment law statutes (that happen to also touch on workers’ compensation issues on a regular basis). For companies over 50 employees, a significant majority of their workers’ compensation indemnity claims will also involve the FMLA, the ADA and a host of other statutes. Nonetheless, nearly everything that employers, insurers and their counsel do seems to contradict the notion that workers’ compensation is part of an employment law analysis. The vast majority of mid-size to large companies handle workers’ compensation as part of their risk management program. Larger companies have workers’ compensation claims managers or specialists that report to the risk manager. Those WC managers do not report to HR departments directly as risk management and human resources are typically separate departments. As a result, decisions made on workers’ compensation claims may be made without consulting human resources, and vice versa. From an insurance perspective, workers’ compensation and employment practices liability insurance (EPLI) are separate policies, administered by separate claims professionals, work with different counsel and often report to different contacts with the insured. Typically, workers’ compensation attorneys and employment law attorneys brand themselves differently demonstrating their focus in one category or the other. Everyone would agree that WC claims should not be analyzed in a vacuum –given that a valid decision under WC law could leave to an FMLA claim, a “correct” termination decision under an ADA analysis could dramatically increase WC exposure, etc. Still, risk and HR managers often don’t consult each other enough on WC decisions that overlap within their domains; WC & EPLI claims professionals often give advice to insureds on termination decisions that have other far-reaching implications; and, outside counsel focusing on their respective qualifications as WC or Employment counsel may not be as considerate of other effects that their advice may have. As such, companies, their insurers and counsel must not view workers’ compensation issues myopically. More and more cases involve WC, FMLA and ADA overlap and create nightmarish liabilities for the insureds. Employers must revisit the way that they handle workers’ compensation and HR claims, making sure that the relevant personnel involve each other in decision-making and making sure that their claims professionals and counsel are qualified to provide the opinions that they are asked.
Albert (Bert) B. Randall, Jr., Esq.
Franklin & Prokopik, PC
Myth #7: Federal laws, such as the Medicare Secondary Payer Act, will always preempt state law.
Reality: Insurance carriers often fund whatever CMS recommends in its voluntary WCMSA approval process because they believe that ultimately CMS will win any future disputes given that the MSP is federal law and will supersede state law. In reality, it is the underlying state law that creates the obligation to pay for related medical expenses that triggers the Medicare exclusion. But for compensability under the state workers’ compensation law, Medicare would be the primary payer. An example of this playing out in court is Caldera v. Insurance Company of the State of Pennsylvania [2012 U.S. Dist. LEXIS 12888]. In that case, Plaintiff’s workers’ compensation claim was administratively closed and undisputed until he finally obtained representation several years later. The parties eventually entered into an agreed judgment stipulating liability back to the original date of loss and the carrier paid out the missed indemnity but refused to reimburse the medical treatment paid by Medicare during that period. Plaintiff brought an MSP private cause of action and although appearing to be an ideal MSP situation, the Texas District Court and 5th Circuit Court of Appeals both found that the payments made by Medicare were not subject to reimbursement under Texas workers’ compensation law because proper prior authorization was not obtained. So despite Medicare having made payments demonstrated to be the responsibility of another, state law did not require reimbursement and was not superseded by the MSP to force the primary payer to reimburse anyway. Other recent cases also demonstrated that the MSP is not the hammer CMS would like us to believe it is. In Stanley v. Hamorski & Erie Insurance [2016 U.S. Dist. LEXIS 58859], plaintiff brought a claim in state court to enforce an insurance settlement under a Pennsylvania law requiring payment within 20 days of execution of a settlement agreement. Erie obviously failed to make timely payment due to MSP issues and moved to remove the case to federal court claiming the MSP was entitled to complete preemption of the Pennsylvania statute. The federal court disagreed and remanded the case back to state court, finding “nothing in the MSPA or the Medicare statute demonstrates that the MSPA completely pre-empts state law and therefore the removal of this action was improper.” And in July 2016, the District Court for the Southern District of Florida remanded three cases removed by defendants due to MSP involvement back to state court because the plaintiff only pled breach of contract state law [see Claims v. Direct Gen. Ins. Co. (2016 U.S. Dist. LEXIS 91611), Claims v. Liberty Mut. Fire Ins. Co. (2016 U.S. Dist. LEXIS 91612) and MSPA Claims 1, LLC v. Allstate Property and Casualty Insurance Company (Case No. 16-cv-20443-RNS)]. While the MSP mandates that Medicare Advantage is a secondary payer and entitled to reimbursement when a primary payer is responsible, the MSP is unclear as to how Congress intended MAOs to pursue recoveries under the Act. Although federal courts have interpreted the MSP to allow MAOs to bring MSP suits, the plaintiff made a tactical decision to only plead state law claims due to several defeats in similar federal court proceedings for failing to demonstrate responsibility. But while the MAO may certainly seek reimbursement under only state law, the double damages requested are only available under the MSP and it remains to be seen if it the state court will award them. So while the MSP was involved in all of these cases, its presence did nothing to completely preempt the state law issues present. The MSP does not create compensability and does not dictate jurisdiction. It is important for parties to insurance settlements to understand this fact rather than make expensive assumptions that CMS will prevail in any situation.
Jennifer C. Jordan, Esq.
MEDVAL, LLC, a CompAlliance™ Company
Hunt Valley, MD
Myth #8: Workers’ compensation is costly to employers.
Reality: This myth is somewhat surprising when one considers that workers’ compensation was intended to be, and is, a shield to protect employers from law suits which exposed them to the true cost of work place injuries. The National Academy of Social Insurance estimates that the cost of Workers’ Compensation in 2013 was 98c per hundred dollars of covered wages. Since higher wages do not usually count as “covered wages”, the actual percentage of payroll cost is much smaller. Of this “cost” approximately half represents payments to medical providers, so it simply is an accounting change from the group health insurance column to the workers compensation heath column. Consequently the cost to employers for payments to injured workers is less than ½ of a percent of payroll. The national average weekly wage is $703.00 per week, so the cost of indemnity benefits to workers would average around $3.50 a week. This is much less than the cost of FICA, Medicare or health insurance and represents a relatively minor cost to employers, and this rate has fallen by nearly 6% since 2009. The cost of workers compensation thus is relatively trivial particularly when it is recalled that it is an insurance shield that almost fully insulates employers from law suits and the actual cost of injuries occurring at work.
Stephen C. Embry, Esq.
Embry and Neusner
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