Possible Changes to Wisconsin’s Worker’s Compensation System?

On Behalf of | Feb 19, 2015 | Firm News

Today, from Dee Hall at the Wisconsin State Journal: “Changes Coming to Worker’s Compensation System?” :

Labor representatives and attorneys say they are concerned about a report that Gov. Scott Walker’s two-year budget plan will call for “drastic” changes in Wisconsin’s well-regarded system for compensating injured workers.

An unsigned memo authored by a person with knowledge of the potential changes to the worker’s compensation program states that the Walker administration plans to upend the current one-stop-shop for injured workers, employers and insurance companies by dividing responsibilities among agencies — changes the author said will “clearly have a negative impact on our stakeholders.”

The article continues with input from an insurance company claims director and an applicant’s attorney, who agree that the worker’s compensation system is working well at the current time. According to the article:

The cost of administering Wisconsin’s program is paid for by worker’s compensation insurers and self-insured employers who pay a yearly fee proportional to what they paid out in worker’s compensation benefits in the previous year. Taxpayers do not pay for the system, and any reorganization would not add or subtract from the 2015-17 budget’s bottom line.

Compensation is paid to injured workers regardless of who’s at fault, but in return, those workers cannot sue the employer for additional damages — such as pain and suffering — that go beyond the law’s limited benefits. Employers’ insurance premiums are generally based on size of payroll, risk of injury and past injury claims.

A 2013 study by the nonpartisan Worker’s Compensation Research Institute compared 16 states that handle 60 percent of all worker injury claims filed nationwide. It concluded that “compared to other states we looked at, Wisconsin’s costs were among the lowest,” said the study’s author, Sharon Belton.

Although medical costs in Wisconsin are higher than many other states, workers are back on the job faster. The result is that the median cost of a claim, including medical expenses and lost wages, was $7,118 in Wisconsin compared to the median among the study states of $8,973, said Belton.


This author echoes the sentiments of the article. There is no rational basis for altering the current structure of the worker’s compensation system. Some quick thoughts, based on information to date:

  • Currently the Worker’s Compensation Division resides within the Dept of Workforce Development. Worker’s compensation has a strong and lengthy history in our state, dating back to 1911 (when we were the first state to have a constitutional worker’s compensation system in the country!). We have an incredibly stable system that is the envy around the country. It is stable because of the structure of our system. The entire cost of the WC system is funded privately by assessments on worker’s compensation insurance companies and self-insureds (i.e., not state taxpayer money). Additionally, we have an Advisory Council process that is a group of invested stakeholders in the system that produce an agreed-upon bill, which has prevented our system from being subject to potential instability. (Stability in the system and premium structure is a huge issue for the insurance industry and employers).
  • The stability in the system is reflected by the huge amount of insurance companies that write insurance in our state-over 250 to my knowledge. That is a huge number compared to the rest of the country. Insurance companies write insurance here because of the system’s stability, which assists with known costs and allows known profits. Worker’s compensation is a profitable business in Wisconsin.
  • We understand that major substantive and structural changes to the worker’s compensation system currently are being proposed as part of the Governor’s upcoming budget bill. This information is comes from solid sources. Based on information we have received, the plan is to remove the Worker’s Compensation Division entirely from DWD, splitting some functions off to other agencies, while some hugely important functions of WC would just cease completely.
  • It appears the proposal is for the insurance bureau staff to go to Office of the Commissioner of Insurance (OCI). The worker’s compensation specialized ALJs would go to the Hearings and Appeals section at Department of Administration (DOA), removed from the worker’s compensation division (No information is known as to whether the move to DHA will include court reporters, scheduling staff, health cost dispute staff and administrative assistants who make up the remainder of the Bureau of Legal Services). Current claims management function in the WC Division – the claims staff, wage analysts, ADR personnel, the individuals that do all the worksheets- may or may not be retained, or where they would go if kept. We are hearing there may be a complete dismantling of the claims management unit.
  • Currently, approximately 85-90% of work injuries in Wisconsin are not litigated; this is in stark contrast to the rest of the country. The basis is that the Worker’s Compensation Division generally administers the worker’s compensation act. Elimination of the claims management function could be hugely detrimental. Insurance companies, self-insured employers absolutely rely on the Division in administering and paying claims. Without Division claims management, litigation is guaranteed to increase-with corresponding increase in insurance costs and premiums. In potential “benefit” in staff decrease will be unsustainable with the increased litigation of claims, even minor ones. I’m sure employers will not be happy with the increased premium costs.
  • If the Judges are moved to a new agency, it appears many of their valuable tasks/duties would be eliminated. If Judges schedule their own hearings, this could result in significant delay in obtaining hearing dates. It could also mean the removal of remote hearing locations. Currently, hearings are held all over the state, for the convenience of the stakeholders (employers, carriers, workers).
  • More importantly, this move of the Judges could mean an end to the statutory requirement that Judges approve and review all Compromises. Judges review all compromises, even in the 85-90% of non-litigated cases. That means insurance companies and unrepresented workers could privately settle claims-with no oversight. The potential for abuse, error, or miscommunication is apparent. The biggest issue is a shift of the liability for worker’s compensation medical expenses to the taxpayers, health insurance companies, and medical providers. As opposed to our 12 year statute of limitations, an inappropriate claims close out means that all future medical expenses are through the worker’s own sources-generally Medicaid/Medicare. The taxpayers are left covering the costs of these expenses that should be the responsibility of the worker’s compensation insurance company.
  • Also, the Division currently tries to protect the medical providers and health insurance carriers to make sure they are protected. A private settlement means no Division protection. We assume medical providers would like to hear about this potential change and the possibility that their bills wouldn’t be protected.
  • We can’t see any cost savings to the state here. The Division is not funded by state dollars. The agency move itself would create a very substantial one-time costs, with unknown ripple effects. These moves would increase the litigation in the system-something no stakeholder wants.
  • All this makes no sense to the stakeholders and customers in the system-insurers, employers, injured workers and medical providers. We are not aware that any stakeholders have been consulted on these changes. Wisconsin has one of the best worker’s compensation system in the country, a system that has functioned extremely well within DWD, and it could be dismantled. The current worker’s compensation system currently benefits its major players: insurance companies who profit from the sale of the insurance, employers with worker’s compensation insurance, and the injured workers who are provided benefits.



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