Thursday, November 16, 2017

Staffing, Compensation, and Opt Out (4)

People are talking about workers' compensation, perhaps more today than ever. This is the fourth in an 11-post series (links to the others are at the end of this post), that attempts to overview various perspectives heard from system observers and participants. The point is that discussion is good, and if this series generates debate and interaction, all the better.

Staffing and training of the workers’ compensation professions 

There is a perception of difficulty in recruiting and retaining staff for workers’ compensation. As an industry, workers’ compensation is faced with many challenges: e.g. complexity, frequency of litigation, and regulatory constraints. Some perceive these challenges as disincentive for professionals to enter, or remain in, this field. That may affect a spectrum of professions including claims adjusting, medical, risk management, and vocational rehabilitation.

If workers’ compensation is more complex than other segments of the insurance industry, there is concern that talent will be consistently drained from this field. As expertise and talent migrates to other segments of the insurance market, workers’ compensation is challenged with persistent turnover rates and burnout. 

Similarly, there are perceptions regarding service providers, including medical doctors, disinclined to participate in the workers’ compensation systems. Because of other issues involved in work accidents, discussed herein, medical care providers are called upon to make difficult decisions regarding complex issues such as causation and contribution.

Causation referring to whether an alleged work event resulted in the need for medical care and/or activity constraints; contribution instead referring to the quantification of causation, i.e. how much of the need for care and/or activity restraint is related to the alleged work event.

A medical care provider allocating resources and time may be disinclined to provide treatment for work injuries. This may be driven in some jurisdictions by fee schedules or similar reimbursement constraints that render other business/care more lucrative. In other instances, providers may be discouraged by the regulatory complexity (various reporting, forms, etc.) or the litigious nature of workers’ compensation. 

The perceived net result is that recruiting and retention of professionals in this field is difficult; thus, recruiting and training are persistent and represent a significant financial expense. Similarly, an absence of continuity and experience is perceived as potentially contributing to performance of professionals. It is possible that performance is degraded by lack of specific workers’ compensation expertise and by distraction of recruiting and training. Those providing services are perhaps persistently challenged by regulatory and legal instability, pervasive litigiousness, and complexity. Coincidentally, these challenges may contribute to discouraging recruitment and retention.

The concern is essentially that there is a perception of a cyclical decline in the longevity and expertise of providers and employees willing to work in these difficult systems.

Permanent partial compensation 

This is a concern related in part to the benefit sufficiency issue. There is a general concern as to the sufficiency of benefits that compensate for the permanent effects of a work injury. In a broader context, however, there is concern about the ancillary effects of compensation for permanent injury. 

In 2015, advocacy groups highlighted distinctions and differences in state worker’s compensation systems. A major focus was the disparity between states in compensation for the lasting (permanent) effects of work injuries. These disparities result from a variety of factors, and comprehension may be elusive. 

A fundamental at the core of disparity lies in determining what loss is compensated. In American workers’ compensation there are essentially two schools, “disability” and “impairment.” The former refers to the factual impact of injury, that is, the ability to work and any constraints thereon. Ability to work is irrelevant to the latter, impairment, which is not a vocational construct but a medical one. Impairment is an expression of physiological dysfunction as a result of illness or injury.

Each of these concepts faces challenges both in logic and practicality. A system that compensates “impairment” may provide significant permanent benefits to an individual that has returned to work following an injury, with no diminution in wages or wage-earning capacity. Critics fault this process for providing compensation where there is no demonstrable effect on earnings. Advocates of this process cite simplicity, efficiency and consistency as justifications. In impairment-based systems, guides (publications generated by committees of medical experts, cataloguing the extent to which various conditions or effects restrict anatomical function) are consulted, impairment rating(s) assigned, and payments calculated thereon.

In a “disability” system, impairment is minimally relevant or irrelevant. The critical point in disability is how injury affects employability or employment. If the effects of an injury diminish employment, then the systems compensate for diminution of earnings. Critics fault this system for discouraging return-to-work (those who return to work receive no permanent benefits and may perceive themselves “shorted” by the system), and view the process as more labor intensive and subject to factual disputes (which may encourage or require litigation. 

Either of these foundations may contribute to the litigious nature of workers’ compensation. In “impairment,” advocates may drive workers to different physicians or specialties in an effort to enhance the impairment and thus the damages. In a “disability” system, the same behavior can occur, but would be focused on work restrictions (functional activity constraints) enhancement instead of impairment. 

Beyond this foundational distinction, there remain other concerns. In the event that vocational ability is relevant (“disability”), systems’ legal or regulatory specificity regarding return-to-work may be relevant. In measuring, a state may find relevance in whether an injured worker can return to her/his former employment (specific) or “any” employment (unlimited). 

Whether permanent benefits are limited in duration (disability) or extent (impairment), limitation is common in various systems. Either system may affect inequities among various individual injured workers. Inequities, or perceptions, drive emotional perceptions and conclusions about the systems, fairness, and justice. 

Opt-out movement

Workers’ compensation is a mutual renunciation of common law rights. Both employers and employees have given up rights and enjoyed benefits by participation in these systems. Primarily, employees gain the right to more immediate benefits without resort to litigation. The benefits are more certain, and in most instances are not subject to reduction based upon the employees fault.

In some jurisdictions, tort damages may be obviated completely if an injured party is in any part responsible, called “contributory negligence.” There is a related legal construct called “assumption of the risk” that might be similarly employed. In other jurisdictions, the injured party’s responsibility is used to reduce damages due, in pro-rata share with the fault. Thus a party 50% responsible for her/his own injuries might only be allowed to recover the other 50% of the determined damages from the injury.

The primary benefit to employers is similar. The more certain measure of benefits that benefits employees also provides employers with predictability. And, though the employer loses the damage limitation defenses such as comparative negligence, it also avoids the uncertainty, delay and expense of the tort litigation system, as well as avoidance of various damages mentioned above. 

Since the 1990s, various systems have allowed employers to enjoy the benefits of workers’ compensation law, without participating in the jurisdiction’s workers’ compensation system. These statutory constructs allow certain employers to “opt out” of a particular system and instead to administer a parallel system of its own. Generally, such allowances were referred to as “carve-out” systems, and the employer was allowed to do so only if subject to a collective bargaining agreement; thus only with the acquiescence, if not participation, of the employees. As of 2013, according to workers’ compensation scholar Hon. David Torrey of Pennsylvania, twelve states (California, Florida, Hawaii, Illinois, Kentucky, Massachusetts, Maryland, Maine, Minnesota, Nevada, New York, and Pennsylvania) afforded employers this “carve-out” option. This group includes some of the largest workers’ compensation systems in the country, including California, Florida, and New York.

Additionally, the second most populous jurisdiction in the country, Texas, does not mandate participation in its workers’ compensation system. Texas’ voluntary process can accurately be called an “opt-in” system, in which employers may obtain the benefits of workers’ compensation by volunteering to participate and providing benefit coverage for its employees. 

In 2013, Oklahoma’s legislature expanded upon the decades-old “carve-out” construct, extending the ability to “opt-out” to any employer, regardless of participation in collective bargaining. Following passage of that provision, a number of Oklahoma employers did opt-out and provided alternative benefit plans purportedly under that legal construct of ERISA (The Employee Retirement Income Security Act of 1974.). In the years following, proponents of the “Oklahoma Opt Out” attempted unsuccessfully to modify the law in Tennessee and South Carolina to afford a similar option to employers. 

Many critics oppose the “Oklahoma opt-out” concept in general terms, though there were various reasons expressed. The Summit did not discuss the existence or effect of the various collective-bargaining dependent opt-outs already in existence.