At the 2015 Comp Laude Gala in Burbank, CA, David DePaolo, President and CEO of WorkCompCentral presented his thoughts on the state of the workers’ compensation industry.
Dave feels the fundamental purpose of workers’ compensation is to make it affordable for an employer to take care of it’s injured workers and to provide security to injured workers to protect their lives in the case of a workplace accident. There is a constant evaluation of the costs vs the benefits under workers’ compensation.
Over time, the costs to provide workers’ compensation benefits has consistently increased relative to the amount of benefits provided. Much of this has to do with all the additional tools that are now involved in claims management including case management, bill review, utilization review and other cost control measures that themselves have a cost.
For example, the Independent Medical Review (IMR) process has added $50 million in costs to the California workers’ compensation system. It remains to be seen if there is a corresponding decrease in medical costs associated this increase in administrative expenses.
Litigation is also an expense cost driver. There is always the question about the return on investment to pay for something or dispute it. Some feel it is important to fight certain things on principle regardless of costs while others focus more on the pure financials of paying vs disputing. There is no question that litigation is a significant cost driver in California with over 75% of the system costs tied to claims with attorney representation. 2/3 of IMR requests involved claims with attorney representation.
One big question is whether workers’ compensation is still providing good value to both employers and injured workers. In 1972 a Federal commission issued a report which recommended certain minimum benefit standards for state workers’ compensation systems. This led to a series of reforms in the 1970s and 80s which increased benefits. However, reforms in the late 90s and 2000s tended to decrease benefits to the point now that very few states meet even five of the recommendations from the Federal commission. This decrease in benefits and changes to causation thresholds is leading to people around the nation questioning whether workers’ compensation is still fulfilling the grand bargain to injured workers.
These questions are leading to constitutional challenges around the nation on whether workers’ compensation is still a grand bargain for injured workers. There are currently four cases before the Florida Supreme Court questioning whether workers’ compensation is still constitutional under state law for a variety of reasons. There is significant potential that at least part of the Florida statutes could be tossed out on constitutional grounds. There are also ongoing constitutional challenges to workers’ compensation statutes in Oklahoma, Pennsylvania, Louisiana, and California.
When you look back at the original grand bargain, the focus was traumatic industrial accidents. Things like occupational diseases, cumulative trauma and the contribution of co-morbid conditions to disability were not contemplated. Employers also express concern about the grand bargain of workers’ compensation when what is considered a compensable workers compensation claim has expanded significantly over time.
The original grand bargain focused on prompt, timely and adequate medical care and sufficient wage protection for injured workers in exchange for exclusive remedy protections for employers.
Workers’ compensation is getting increased media attention these days from sources such a ProPublica which have highlighted the shortcomings of the system. This is leading to increased political pressure to take a critical look at workers’ compensation to ensure it is still serving it’s intended purpose.
Dave chose one word to describe the current state of the workers’ compensation in the United States. That word is MISTRUST.
Unfortunately, the entire workers’ compensation system is now built around mistrust. Employers do not trust that injured workers’ are being truthful about work injuries. Workers do not trust that insurance companies have their best interests in mind. Businesses do not trust that the government is adequately protecting their interests and the interests of their injured workers, which is one of the driving forces behind the opt-out movement. Physicians have been indited for millions of dollars of fraud and abuse. Employers have been indited for fraudulently under-reporting payroll and for intentionally misclassifying their workers as independent contractors to avoid workers’ compensation costs.
The challenge before the workers’ compensation community is to rebuild the trust that has been lost. It is up to the professionals in this industry to take steps to build up this trust. It is up to regulators to create controls so that those that cheat and abuse the system can be stopped. We have a great opportunity to increase awareness about the positive aspects of workers’ compensation. We need to be highlighting our successes and admit to our failures.