There are few stakeholders in the system who would refute the headline of this article. As we grapple with the things we dislike about the workers’ compensation system, outside forces are chipping away at our bronze coating and creating new standards for adjusters and industry stakeholders. Is our hate for the system or contentment with the status quo overshadowing our understanding of the new exposure? Can we ask the tough questions that will force us to change from within and result in new performance standards?
From a historical perspective, the workers’ compensation system has operated on an autonomous, self-fulfilling island: Employees are injured; we provide them with lost wages, medical treatment and — hopefully — they return to work. If not, we litigate, agitate, and give injured employees monetary settlements to go away quietly. Throughout this process, we drag employers kicking and screaming to the end goal of closing the file.
On the surface, it appears that we do the same things over and over again with varied results. In reality, outside forces are chipping away at the status quo, so while we sit in our comfort zone, there is a growing interrelationship between state workers’ compensation and federal laws. This new relationship and challenging environment will require that we change the way we communicate with policyholders, define their exposures, educate adjusters, and manage claims.
Should the workers’ compensation industry create "performance solutions" that offer policyholders real-world solutions to the changing landscape? Or are we content to rely on the fact that most employers do not trust the system and prefer to dislike workers’ compensation rather than embrace our solutions?
How do we define the challenges faced in today’s economic environment and identify ways to help employers understand the new exposures? Can we simultaneously educate adjusters to become value-added solution providers versus the "evil" insurance carrier telling policyholders what to do?
Chipping Away
There was a time when our daily routine encompassed paying or denying benefits and/or litigating and settling files. In today’s landscape, we have to contend with Medicare Set-Asides, the Equal Employment Opportunity Commission (EEOC), state legislators, the Occupational Health and Safety Administration (OSHA), and state judges whose rulings are methodically eroding the status quo.
For example, in the case Boston Gourmet Pizza v. Childers, an Indiana Court of Appeals ruled that Boston’s Gourmet Pizza must pay for gastric bypass or weight-loss surgery, even if the employee was overweight at hire. The court ruled that post-accident weight gain and potential surgical failure justified paying for the weight-loss surgery.
Around the country, at the other end of this argument, are adjusters who must diligently explain to policyholders why it’s not a good idea to litigate or fight treating physicians who request authorization for weight-loss surgery, especially if the case is similar to Childers.
As the economy went into freefall and employers refused to entertain requests for light-duty jobs, the EEOC stepped up enforcement of Federal Leave and Disability Laws, ushering in a new exposure and financial wrinkle for employers that may not understand how easy it is to create the link between workers’ compensation and disability protection.
The case that brought this to the forefront was John Brava/EEOC vs. Sears Roebuck. The EEOC settled the largest Americans with Disabilities Act (ADA) suit against Sears, which had arisen out of a workers’ compensation claim. According to the EEOC, Sears failed to offer light duty or accommodate injured employees when they attempted to return to work. The settlement was set at $6.2 million.
As a warning to all the employers out there who said, "We have no light duty," before evaluating their exposures, this case clearly delineates the link between workers’ compensation and the ADA. In today’s litigious environment, employers need to understand that injuries create avenues for employment litigation. Under the guise of the workers’ compensation claim, a plaintiff attorney can gain access to all of the information they need to build a solid employment litigation file. Employers incorrectly assume that the workers’ compensation system will protect them from ADA litigation, but it will not. In fact, the workers’ compensation system does little to explain the exposure and it will not provide employers with a defense for inadequate ADA policies. The two systems are independent and, in this case, co-dependent on each other. It’s unfortunate for Sears that they were selected to bring home this message for other employers.
In another example, the Oregon Court of Appeals dealt us another dose of reality in Indegard v. Georgia Pacific Corporation. The court ruled that Georgia Pacific’s use of physical capacity evaluations (PCE) or functional capacity evaluations (FCE) violated the Americans with Disabilities Act. The test was conducted to determine an employee’s ability to return to the pre-injury job. Unfortunately, the result also was used to terminate an employee.
Prudent adjusters are wondering: Can we continue to use the FCE to identify malingering injured employees or to determine if an employee can do the pre-injury job? What happens if an adjuster completes an FCE and provides the results to the employer and they decide to use it to terminate the injured employee? How does this affect a case and carrier liability?
The Problem of Medicare
As adjusters resolved that the best claim management was settlement, they had a momentary memory lapse and forgot that a giant elephant joined the settlement team: Medicare.
Medicare has mandated that we address future exposure and deposit adequate funds to protect the system. This amounts to a systematic and totally legal transfer of revenue from employers and the workers’ compensation system to the Federal coffers. As I sat at a mediation recently debating Medicare Set-Asides with an attorney who does not practice workers’ compensation, I realized that the final territory that we held as sacred ground had been infiltrated, and there was nothing we could do to move the litigation process forward without considering the "what if’s?"
- What if the employee qualifies for Medicare?
- What if she decides on medical treatment for this injured body part and what if I forget to give Medicare enough money to cover the exposure?
- What if we deposit this money to Medicare and the claimant miraculously recovers? Do we get a refund?
- What if the folks who come up with these rules actually talked to adjusters who are on the front lines? Would we have a better system?
Adding to the injury management challenges, the 2009 National Council on Compensation Insurance (NCCI) annual "State of the Line" workers’ compensation market report moved the short-term view of the workers’ compensation line from "optimistic" to "guarded," and advised that the long-term outlook for workers’ compensation was "cautionary." Simultaneously, states grappling with budget shortages took the view that they should increase or decrease workers’ compensation rates, depending on the rose-colored glasses they were looking through. Insurers looked around and said it was time to find new markets in an ever-shrinking landscape and cut staff. So, for the first time in recent memory, insurance carriers laid off adjusters.
As we paused to take a deep breath, the Occupational Health and Safety Administration (OSHA) says employers are under-reporting injuries and they are going to step up enforcement so they can find those missing injuries. On one hand, the NCCI says injury counts are declining and the Bureau of Labor Statistics says injuries are at a historic low, but OSHA says, "Hold on guys — there is stuff out there that you don’t know about." OSHA may be correct that employers are not reporting everything, but do we really need any more injury notices? Do they really think that an employee who has a major injury, who’s getting the run-around from their employers doesn’t watch television? They know how to hire attorneys who are more than willing to file the first report of injury.
So as we settled back into our comfort zone, we reflected on the workers’ compensation cost drivers and we asked, "Why can’t we just put a cap on all that ails the system?" The final light bulb went on and we admitted that the big bad plaintiff attorney was not the root of all evil. What’s actually driving the cost of workers’ compensation is not settlements, but medical treatment and prescription benefits — the cost to treat the injury itself. According to the NCCI, medical payments account for more than 50 percent of total injury cost. This is driven by medical severity and increased utilization. Although we have made strides in reducing costs, it may not be enough in the long term scheme of things. We also have to evaluate how initiatives to increase access to health care will impact how we deliver and pay for medical treatment.
Somewhere in the mix of all of this are insurance agents, risk managers, and policyholders demanding that adjusters navigate the outside forces and fix the "problem injuries" without increasing their bottom-line costs. When adjusters fail to satisfy the demands of the monster we call "workers’ compensation," blame is directed to the adjuster and, vicariously, to their insurance carriers. The hate cycle starts all over again.
Performance Solutions
We have to find ways to ask tough questions about how we manage injuries and create solutions that address our internal shortcomings as well as the intervening forces changing the dynamics of injury management. There are four factors that we need to consider when attempting to engage employers and improve performance:
Getting to Know You. We cannot change how stakeholders perceive the workers’ compensation system without defining their exposures and creating solutions that they can embrace. The primary tenet of effective communication is to understand who we’re communicating with, what their challenges are, and finding ways to appeal to them. Frankly, plaintiff attorneys do a much better job of defining and setting the tone for our industry than we do of showing the positive things we do every day. The point is this: We have to get to know employers better so we can find the most effective way to deliver our solutions.
Leverage the environment. The evolving exposure to employment litigation can be used as a key business strategy to get employers to change the way they do business. For the first time in years, employers are keenly focused on their bottom lines, so this is the time to send them a critical message: injury prevention costs less than injury management. Let’s be bold and send employers this message:
"Dear Employer: We really appreciate your premium payments, but we would like to ask you to do something for us: Add a little more money to your injury-prevention and safety-training budget. Hire employees who can do the essential functions of the job. Train them to do the job safely, make sure your supervisors supervise, and instill safety every day. If you did these things really well, then there would be no need to complain about the management of the claim file or the settlement that we have to pay to the injured employee or anything else in the workers’ comp system, because there would be virtually no accidents."
Support and train adjusters to communicate in real-time. In workers’ compensation, employers are inclined to look for answers when they need to take action or make immediate decisions. This is known as the knee-jerk effect. Insurance carriers that have excellent communication procedures use a global team approach to preempt this cycle. They add underwriting, safety, loss control, case management, field adjusters, litigators, and insurance agents to the adjusters’ team so they can identify exposures before they become major issues. Adjusters can be a key source to get up-to-date information to and from employers. To facilitate this approach, we have to look beyond the claim process and create a team that is focused on proactive education of employers.
Develop a consistent approach to injury management. Our team — physicians, injured employees, litigators, employers, and the insurance stakeholders who administer the process — have never reconciled to operate on the same island, even when we share a common exposure. In order to rein in all that ails the system, we have to find ways to improve access to medical treatment. Our focus has to shift to quality early intervention and diagnosis, which means we must improve how we deliver workers’ compensation benefits. There are already discussions underway in the House of Representatives to appoint a National Commission on Workers’ Compensation to study or evaluate our benefit delivery system. The last study, conducted in 1972, found that we delivered "inequitable and inadequate" services. Currently, the National Association of Insurance Commissioners has a group studying this same topic. Are we going to wait for people who are not in the day-to-day trenches to tell us that we need to change what we are doing and dictate what that change should look like?
Simply stated, performance solutions allow us to effectively manage injuries despite the internal and external forces bent on toppling the workers’ comp system. The job of managing injuries has become considerably more difficult, and the trend will apparently continue for the foreseeable future. Half the battle of tackling change is to recognize that we have issues that can be corrected and being prepared to change them for the better.
