Tag Archives: workers compensation

Taking a New Look at the ‘Grand Bargain’

Workers’ compensation was established more than 100 years ago as a “grand bargain” between employers and labor. Injured workers gave up their right to sue employers in civil court for workplace injuries, making workers’ compensation the “exclusive remedy” for such injuries. In exchange, injured workers received statutory benefits in a no-fault system. Over time, we have seen a number of different challenges to this grand bargain.

Is Exclusive Remedy Exclusive?

The answer to this question is clearly no. Nearly every state has a very narrow statutory exception to exclusive remedy if the injury was caused by an “intentional act” of the employer. Some states have a lower threshold if it is determined that the employer’s actions were “substantially certain” to cause injury. In both of these cases, lawsuits filed by injured workers against their employer rarely succeed, and most suits do not survive past summary judgment.

However, there are many other ways in which the exclusive remedy of workers’ compensation can be circumvented. These include:

  • Statutory Exceptions – New York employers in the building trades are still exposed to civil litigation in addition to workers’ compensation under the Scaffold Law. This allows workers in the construction industry to file suit against their employer if the injury arose from an “elevation-related hazard.” New York is currently the only state that still has such legislation in place, with Illinois repealing its Structural Work Act in 1995.
  • Third-Party-Over Actions – Some states allow civil litigation surrounding a work injury under a third-party-over action. In such cases, the employee sues a third party for contributing to the injury and then the third party brings in the employer on a contributory negligence action. For example, if an accident involves machinery, the machine manufacturer can bring the employer into the suit, alleging that it trained employees inadequately, that the machine was not properly maintained or that it was modified by the employer.
  • Dual Capacity Suits – Dual capacity suits allow the employee to sue the employer as supplier of a product, provider of a service or owner of premises. For example, if a worker is injured using a machine manufactured by the employer, some states allow that injured employee to file suit against the employer based on its negligence as the manufacturer.
  • RICO Suits – Filing claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) is a more recent method to attempt to avoid exclusive remedy protections. This federal law was originally designed to fight organized crime. In Michigan, Colorado and Arizona, the courts allowed injured workers to pursue a RICO complaint against their employer on the grounds that the employer “conspired” to deny medical treatment to injured workers by limiting physician referrals and prescribing practices and exercising undue influence over treating physicians.
  • Constitutional Challenges – Constitutional challenges are the latest avenue for attempting to circumvent exclusive remedy protections. There was much attention given to the Padgett case in Florida, where a judge ruled that the workers’ compensation statutes were unconstitutional because statutory changes that reduced benefits to workers and raised thresholds of compensability had eroded the “grand bargain” to the point that it was no longer valid. This case was reversed on appeal because of a technicality, so the higher courts never ruled on the merits of the argument.

Is No Fault Really No Fault?

Again, the answer is clearly no. Many states allow for a workers’ compensation claim to be disputed if it is proven that the injured worker was intoxicated at the time of the accident. In addition, some states allow for a reduction in benefits if the accident occurred because the worker violated a safety rule, such as not following lock-out/tag-out procedures or not using protective gear.

Unintended Consequences of Statutory Change and Litigation

Courts in Missouri, Illinois and Pennsylvania have ruled that, if a work injury is excluded under the workers’ compensation statutes, the employee can bring a civil suit against the employer. The courts are hesitant to provide no means for an injured worker to pursue compensation, so when statutory language is tightened up and certain conditions are excluded from workers’ compensation coverage it opens the door for potential civil action.

This issues also arises when the workers’ compensation claim is denied because the worker is not in “course and scope” of employment. If the worker falls on the employer’s premises, and the employer denies the claim under workers’ compensation, then the employee can sue under civil liability.

Not All Workers Are Protected

In many states, there are workers who are not required to be covered under workers’ compensation. In 14 states, smaller employers with five employees or fewer do not have to secure coverage. In 17 states, there is no legal requirement for coverage of agricultural workers. Finally, half the states do not require coverage for domestic workers, and five states specifically exclude coverage for these employees.

Opt-Out Legislation

Opt-out legislation, by its very nature, allows for an option to the grand bargain of traditional workers’ compensation. What many do not realize is that workers’ compensation has always been optional in Texas. Both employers and workers can choose to opt out of the workers’ compensation system and, instead, be subject to civil litigation in the event of employee injuries.

Oklahoma now allows employers an “option” to traditional workers’ compensation. Plans must be approved by the state and must provide the same level of benefits as workers’ compensation. Such plans provide employers greater control over choice of medical providers.

Opt-out legislation is currently being considered in Tennessee and South Carolina, and it is likely that similar legislation will be introduced in additional states in the future.

Causation Thresholds

There is significant variation among states in the threshold for a condition to result in a compensable workers’ compensation claim. In Tennessee, the injury must “primarily arise” from work (50% or greater). However, in California and Illinois, if the work is a contributing factor (1% or greater), the employer is responsible for that condition under workers’ compensation. Employers argue that these low causation thresholds undermine the grand bargain by greatly expanding what is considered a workers’ compensation injury.

Conclusion

As workers’ compensation has evolved, there have been many exceptions to the original premise behind the “grand bargain.” The courts have continued to allow exceptions to exclusive remedy and expanded causation standards. Statutory reforms have also resulted in classifications of employees and work conditions that are excluded from workers’ compensation. These trends are expected to continue.

Redefining Success

Redefining Success in Workers’ Comp

As is often said, beauty is in the eye of the beholder. To me, that means your personal context colors your perspective; similar people can look at similar circumstances and reach dissimilar conclusions. In workers’ comp, that axiom applies to “success.”

Various stakeholders define success differently. To an injured worker, success could be regaining health to his or her pre-injury state while building a retirement nest egg. To a treating physician, success could be restoring health to the patient at a fair price. To an employer, success could be the quick and safe return to work of a colleague that does not raise its workers’ comp premiums. To a carrier or third-party administrator (TPA), success could be the proper management of a claim that yields a satisfied customer while maximizing profit. To an attorney representing the injured worker, success could be maximizing the financial payoff for the client and the law firm. To a vendor (pharmacy benefit manager, bill review, utilization review, transportation/translation or surveillance company), success could be providing services that provide recognized value to a customer.

In some cases, the definition of success can be both positive (appropriate services for a fair price) and negative (maintaining the revenue stream through means that might be inconsistent with “appropriate services” or “fair prices”). It is the business conundrum in workers’ comp – how to balance the need to provide appropriate services with the need to stay financially viable in a system that sometimes rewards the latter more than the former.

Let’s simplify what true success is for workers’ comp: restoring the health of the injured worker and settling the claim efficiently.

Realistically, the worker might not be restored fully to pre-injury health, but regaining as much as possible is certainly the goal. When it comes to managing chronic pain that will likely never completely go away, good treatment can be inadvertently sabotaged by issues of tolerance, dependence and addiction. The prescription drug abuse epidemic illustrates that the outcome of overtreatment and inappropriate treatment can often create more problems than it resolves.

For those who have received inappropriate treatment with sub-optimal results, success may be less about a full return to health and more about a return to some level of function. That could be something as simple as taking 500 steps a day (thewalkingsite.com offers guidelines for 10,000 steps a day). Maybe return to work is no longer viable, so success is now more about being a meaningful member of family and community. Maybe detoxification is appropriate, but abstinence is not attainable, so finding a lower number and dosage of appropriate drugs is success. For those stuck in a cycle of victimization, low self-esteem and poor socioeconomic circumstances, perhaps success is more about acquiring skills to properly cope with pain and change (and life in general).

In other words, maybe success is a lot simpler than we think – if the injured worker wins by regaining health and function, then everyone else wins too.

When to Use a Nurse-Triage Program?

How many claims justify using a nurse-triage program? This is a good question that seems simple but actually can be answered in many ways.

How Much You Spend on Claims Matters More Than How Many There Are

Here is a rule of thumb based on our experience over many years: most insureds who have 100 or more claims per year find triage to be justifiable by any measure, regardless of their industry or state. The savings from avoiding unnecessary claims and from improving in-network utilization far outweigh the cost of the triage call.

Many organizations with fewer than 100 claims also find triage to be financially justifiable. Here’s an example. If an insured has 24 claims a year averaging $2,000 each, it would spend $48,000. Even a mediocre triage service could help avoid 25% of claims, saving $12,000. (A top triage service could save almost twice as much!) The 24 triage calls would cost less than $2,400, yielding a net savings after triage fees of $9,600. In actuality, many claims cost much more than $2,000 each, meaning the triage service would save even more than $9,600, and additional savings in claims administration fees and productivity are also often realized.

The determining factor in cost justification is usually what an insured spends on claims, rather than its number of claims. High claims costs justify triage faster.

Other Considerations:

– Those that are self-insured realize the savings from triage immediately. Even on referrals that become claims, good triage providers improve in-network utilization, generating savings on medical fees. Top-tier triage providers also direct referrals to the right level of care (e.g. an occupational health clinic vs. an emergency room), generating additional savings.

– Employers in fully insured programs may think that they cannot benefit from triage because they incur the cost but the savings accrue to their carrier. In fact, employers save in several ways, though it takes time. Here is one example: Employers improve their experience modifier, which significantly lowers their premium cost in the future.

– Some insureds in time-sensitive industries with specialty jobs calculate that triage’s ability to help keep workers on the job is worth more than the claims savings.

– One of the most important considerations is the medical outcome – call it the “human factor.” The best triage service is focused on getting the right care for the injured employee. Sometimes, that means early identification of a serious condition or an unrecognized risk, and making a referral that creates a claim because it’s the right thing to do for the injured employee.

Bottom line: Insureds can justify triage in a variety of ways, not just by cost or claims count. The quality and consistency of the triage provider is a key factor, too – poor triage risks poor clinical outcomes, disgruntled employees and extra costs.