How’d we get to major workers’ comp reform in 2011? Major features of the new legislation Latest implementation information Practical considerations

1. Washington 2011 Workers’ Compensation Reforms What Employers Need to Know Kris Tefft General Counsel Gov’t Affairs Director July 27, 2011

3. Major features of the new legislation

4. Latest implementation information

5. Practical considerations1

7. Insolvency

8. Accident fund approx $300 million negative

9. Unsustainable outcomes

10. Approx 286 days average time loss duration

11. 1500-1800 permanent disability awards annually

12. $12 billion unfunded pension liability

13. Higher costs to employers, employees

14. Double-digit rate increases in 2011, 2012, and for the foreseeable future2

16. Labor & Industries attempted to broker business-labor agreement on changes in 2010-11

17. Despite stiff opposition from labor unions, claimants’ lawyers, a political consensus for reform emerged

18. Goals for reform:

19. Bend the future “cost curve” on pensions and long term disability

20. Incentivize faster return to work

21. Avoid double digit premium increases 3

23. Statewide Provider Network/COHE expansion (SSB 5801)

24. Settlement Option, Return-to-Work, and Disability System Changes (EHB 2123)

25. Other Policy Changes

26. Transparency in Rate Notices (SB 5278)

27. Workers’ Comp Program Admin Efficiencies (HB 1725)

28. Vocational Rehabilitation Pilot Changes (HB 1726)4

30. Requires the statewide expansion of the Centers of Occupational Health and Education (COHE)

31. Details:

32. Network development: L&I will establish network considering input from health care provider groups and system stakeholders5

34. Network providers must follow L&I coverage decisions and treatment guidelines and other appropriate national treatment guidelines

35. Network providers must be credentialed

36. Current malpractice insurance

37. No excessive previous malpractice judgments or settlements

38. No licensing or disciplinary action or loss of privileges

39. Privileges in at least one hospital for certain specialties

40. Credentialed by another health plan or alternative criteria where applicable. 6

42. Providers with excellent performance may qualify for an occupational health best practice tier within the network, entitling them to financial and other incentives

43. Details to be developed

44. Worker Choice of Provider

45. Injured workers have choice of provider in network

46. First visit for treatment may be with non-network provider7

48. Provider does not meet minimum standards

49. Pattern of low-quality care and risk of harm to patient

50. Otherwise, network contracts automatically renew

51. COHE

52. L&I will expand the COHE model statewide by 2015

53. L&I will use the COHE model for R&D of occupational health best practices for use in the provider network8

54. Statewide Provider Network – SB 5801 9 Source: Labor & Industries

56. First meeting July 28, 2001

57. Makeup: Members of Industrial Insurance Medical and Chiropractic Advisory Groups, representatives from business and labor organizations

58. Objective: Provide input on all aspects of implementation of SSB 5801

59. Standards, criteria, incentives, requirements, guidelines, etc.10

61. December, 2011 – Final initial set of rules on minimum standards, termination process for providers

62. January-December 2012 – Recruit and credential providers; begin pilot programs to incentivize new best practices

63. December, 2012 – Adopt rules establishing criteria and incentives for “second tier” providers

64. January, 2013 – Injured workers must receive care from network providers (1st visit notwithstanding)

65. January-June, 2013 – Recruit and enroll second tier providers; recommendations on new best practices

66. July 2013 – Begin financial and non-financial incentives for second tier providers

67. TBD: Work with self-insurers to implement utilization review11

69. December, 2012 – Issue RFP for new COHEs

70. July, 2013 – New COHE contracts begin

71. December, 2013 – Expand COHE access to 50% of injured workers

72. July, 2015 – Bring additional new COHEs online

73. December, 2015 – All injured workers statewide have access to COHEs12

75. Plan for January, 2013 roll-out

76. Ways to be involved in development:

77. Website for updates

78. http://www.lni.wa.gov/ClaimsIns/Providers/WhatsNew/NewsUpdates/default.asp

79. Convey information/concerns/ideas through employer representatives

80. Contact me (KrisT@AWB.org) 13

82. Washington Stay-at-Work Program

83. Occupational Disease Study

84. Offset of Prior Disability Awards for Pensioners

85. Suspension of Cost-of-Living Adjustments for 2012

86. Rainy Day Fund

87. Fraud Prevention Initiative

88. Claims Management Performance Audit

89. Safety and Health Investment Grants14

91. Applies to injured workers age 55 and over:

92. Starting January 1, 2015, age 53 and over

93. Starting January 1, 2016, age 50 and over

94. Allows settlement of all aspects of an allowed claim excluding medical benefits

95. Settlement award must be paid out according to a periodic payment schedule(structured settlement):

96. Up to six times state’s average monthly wage may be paid up front in a lump sum (approx. $24,000)

97. Periodic payments must be at least 25% but not more than 150% of the state’s average monthly wage (approx. $1,000 to $6,000)15

99. 180 days must elapse after order allowing claim becomes final and binding

100. L&I negotiates the state fund settlement. The parties are the worker, the employer, and the Department

101. Unless the employer’s experience rating is not affected, the employer cannot be found, are no longer in business, or fail to respond/decline participation in process

102. The parties to a self-insured settlement are the self-insured employer and worker

103. The self-insured employer negotiates the self-insured settlement, although an unrepresented worker may request assistance or participation of the injured worker ombudsman16

105. Unrepresented workers must have a settlement conference with an Industrial Appeals Judge (IAJ) who must approve or reject the settlement

106. The IAJ must determine whether the settlement is in the best interests of the worker, considering

107. Nature and extent of injuries/disabilities

108. Age and life expectancy

109. Other benefits worker is receiving

110. Marital or domestic partnership status

111. The IAJ forwards an order allowing settlement to the Board for final approval17

113. All benefits must be paid up to the date the agreement becomes final

114. All payments made under a settlement agreement must be reported to the Department as claim costs

115. Self-Insured employers may use third party administrator to disburse structured settlement payments

116. Claims closed by agreement may be reopened for medical treatment only under existing law

117. The Department must maintain copies of settlement agreements and furnish copies to any party negotiating a subsequent agreement on an allowed claim.18

119. Dispute Resolution:

120. Parties aggrieved by the failure of another party to comply with the agreement have 1 year from failure to petition Board for relief.

121. Board can impose penalty of 25% of the unpaid settlement amount for non-compliance

122. Employers who use the settlement process to harass or coerce any party can be expelled from retrospective ratings groups or decertified from self-insurance

123. Attorney’s fees for settlement agreement services are capped at 15% of the settlement amount19

125. In 2015, 2019, and 2023, the Department must contract for an independent study of the quality and effectiveness of the program, and utilization and outcome for workers20

127. Board of Industrial Insurance Appeals is beginning rulemaking

128. Rules likely complete by late 2011, early 201221

130. L&I negotiates the settlements

131. Employer must approve

132. For retrospective ratings groups/administrators:

133. Review contractual language to determine group’s right to serve as employer member’s authorized representative in settlement negotiations/approval

134. For self-insureds:

135. Work with TPAs/counsel to develop protocols for negotiations, likely cases for settlement, communication with workers, risk avoidance, etc.22

137. Applies to state fund employers

138. Provides a subsidy to employers who bring injured worker back to light duty or transitional work

139. Pays up to 50% of wages for up to 66 days within a two-year period

140. Also offers reimbursement for training materials, clothing, or tools and equipment up to specified maximums23

142. The Department will create a separate account for payment of subsidies, funded by assessments on employers, one-half of which may be collected from workers

143. The Department’s actuaries project that the program will contribute to an overall reduction in Accident Fund premiums that exceeds the amount of the assessment24

145. Agency is developing necessary forms and applications

146. Program is available now – Until forms are available:

147. If you have worker in transitional/light duty work:

148. Keep health care provider documentation

149. Receipts for tools/clothing/instruction or

150. Payroll records

151. Apply for reimbursement when forms become available

152. Contact info: 866-406-2482, PublicAffairs@lni.wa.gov25

154. The frequency and severity of occupational disease claims

155. The impact of occupational disease on long term disability and pension trends

156. The statutory definition of occupational disease and its comparison to other states and jurisdictions, and

157. The statute of limitation for filing occupational disease claims and its comparison to other states and jurisdictions

158. The Workers’ Comp Advisory Committee recommends the researcher

159. The study report is due back December 1, 201226

161. Applies to pensions awarded on or after July 1, 2011

162. When PPD benefits are paid out over time, interest on the unpaid balance will no longer be included in the payment

163. Applies to workers injured on or after June 15, 201127

165. There is no “catch-up” of the unpaid COLA

166. The scheduling of the first COLA payment to an injured worker is delayed until the second July 1 following an injury28

168. Any excess in assets above 110% of liabilities is transferred to the fund, up to a maximum of 130% of liabilities

169. The fund may be used to:

170. Reduce a rate increase

171. Aid businesses in recovering from or during economic recessions

172. Cure insolvencies in the trust fund

173. The Workers’ Comp Advisory Committee must appoint a Finance Subcommittee to make recommendations to fund maximum to the Legislature by December 1, 201129

175. Participate in a national information exchange with other workers’ comp insurers

176. Increase public awareness of employer, worker, and provider fraud issues and how to report

177. Establish criteria for periodic review of pension recipients as to disability and employability

178. Identify provider billing patterns to target abusive practices

179. The activities must include approaches to prevent, educate, and ensure compliance30

181. Fairness and timeliness of decision-making

182. Timeliness, responsiveness, and accuracy of communications

183. Efficiency of claims management organization and service delivery model

184. Analyze retro versus non-retro claims management

185. JLARC is to make recommendations for administrative and legislative changes to improve the system

186. Report due June 30, 2015, with progress reports December 1, 2012 and 201331

188. The Department is authorized to provide funding from the Medical Aid fund for grants addressing:

189. Prevention of workplace injuries, illnesses and fatalities

190. Creation of early return to work programs

191. Reduction of long-term disability through cooperation of employers and employees or their representatives

192. Funds must be distributed:

193. At least 25% for innovative return-to-work programs

194. At least 25% for small-business specific needs

195. At least 50% for injury/illness prevention 32

196. Projected Cost Savings of Major Reforms 33 Source: Governor’s Office

198. Workers compensation rate notices must clearly identify all programs/services financed by premiums or assessments, including programs not related to workers’ compensation.

199. HB 1725, Administrative Efficiencies

200. Allows notices and orders other than claim closure to be sent electronically on request

201. Allows payment by an employer for direct primary care services without disqualifying the employer from participating in a retrospective rating plan.

202. HB 1726, Vocational Rehabilitation Pilot Clarifications

203. Statutory pensioners may receive vocational services if the services will substantially improve the worker's quality of life or ability to function in an employment setting but they are not eligible for “option 2” (partial claim settlement).

204. Ability to reopen a claim after an “option 2” election is clarified.

205. Timelines for choosing vocational benefits and providing valid job offers to workers eligible for vocational benefits are changed.34

206. 35 For More Information Kris Tefft KrisT@awb.org