Why Does Everybody Hate Workers' Comp?

On the surface, it appears 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' comp 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. Among the questions we need to ask:

o Should the workers' comp industry create "performance solutions" that offer policyholders real-world answers to the changing landscape? Or are we content to rely on the fact most employers don't trust the system and prefer to dislike workers' comp rather than embrace our solutions?

o How do we define the challenges faced in today's economic environment and identify ways to help employers understand the new exposures?

o Can we educate adjusters to become value-added solution providers versus the "evil" insurance carrier telling policyholders what to do?

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, state legislators, the Occupational Health and Safety Administration, and state judges whose rulings methodically erode 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 said post-accident weight gain and potential surgical failure justified paying for the 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 who may not understand how easy it is to create the link between workers' comp 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 suit against Sears, which had arisen out of a workers' comp 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' comp 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' comp 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' comp system will protect them from ADA litigation, but it will not! In fact, workers' comp 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 others.

In another example, the Oregon Court of Appeals dealt us another dose of reality in Indegard v. Georgia Pacific Corp. The court ruled that Georgia Pacific's use of physical capacity evaluations or functional capacity evaluations violated ADA. 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 functional capacity evaluations 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?

MEDICARE PROBLEMS

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–which 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' comp system to federal coffers. As I sat at a mediation recently debating Medicare set-asides with an attorney who does not practice workers' comp law, I realized 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?"

o What if the employee qualifies for Medicare?

o What if they decide on medical treatment for an injured body part, and what if I forget to give Medicare enough money to cover the exposure?

o What if we deposit this money to Medicare and the claimant miraculously recovers? Do we get a refund?

o 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 National Council on Compensation Insurance "2009 State of the Line" report moved the short-term view of the workers' comp market from "optimistic" to "guarded," and advised that the long-term outlook was "cautionary."

Simultaneously, states grappling with budget shortages took the view that they should increase or decrease workers' comp 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 says employers are underreporting injuries, and they are going to step up enforcement so they can find those missing injuries. On one hand, 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 an employee who has a major injury and 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 injury report.

So as we settled back into our comfort zone, we reflected on the workers' comp cost drivers and 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' comp is not settlements but medical treatment and prescription benefits–the cost to treat the injury itself.

According to 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.

We also have to evaluate how the new federal reform law, increasing access to health care for millions, will impact how we deliver and pay for medical treatment for work-related injuries and illnesses.

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' comp," 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 we need to consider when attempting to engage employers and improve performance:

o Getting To Know You.

We cannot change how stakeholders perceive the workers' comp system without defining their exposures and creating solutions they can embrace. The primary tenet of effective communication is to understand who we're communicating with, what their challenges are, and to find 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 we have to get to know employers better so we can find the most effective way to deliver our solutions.

o Leverage The Environment.

The evolving exposure to employment litigation can be used as a key business strategy to get employers to change how 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, there would be no need to complain about the management of the claim file or the settlement we have to pay to the injured employee, or anything else in the workers' comp system, because there would be virtually no accidents."

o Support And Train Adjusters To Communicate In Real-Time.

In workers' comp, 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.

o 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.

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' comp benefits.

There are already discussions underway in the U.S. 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.

Margaret Spence, CWC, RMPE, is the president and CEO of Douglas Claims & Risk Consultants Inc., based in Boca Raton, Fla. She can be reach at 561-795-3036 or via e-mail at Margaret@margaretspence.com.

This article first appeared in Claims, part of Summit Business Media's Property & Casualty Magazine Group, which includes National Underwriter.