URGENT: Let’s Keep Wisconsin’s Worker’s Compensation System the Best in the Nation!

On Behalf of | Feb 23, 2015 | Firm News

Wisconsin’s worker’s compensation system-established in 1911 and part of the “Wisconsin Idea” in politics-has been in place longer than any other in the country and is the envy of other states. The Governor’s Budget Bill (2015 SB 21) proposes major changes to the structure and substance of Wisconsin’s nationally-recognized worker’s compensation system. The proposal would remove the Worker’s Compensation Division from the Department of Workforce Development and then split up previously integrated components, with the adjudicatory functions (administrative law Judges) moving to the Office of Hearings and Appeals (in DOA) and the regulatory, customer service, and claims management functions going to the Office of the Commissioner of Insurance. Among other significant changes, Judges would be reduced to solely adjudicatory functions, no longer assisting with the law’s administration, and then cross-trained for other legal areas. The proposals also eliminate the requirement that compromise agreements be approved by ALJs. The proposed changes could have a hugely negative impact on Wisconsin:

1) Destabilizing effect on insurance carriers, employers, and taxpayers:

Worker’s compensation insurance is a major industry and employer in our state. Total premiums collected for worker’s compensation insurance were approximately 1.75 billion dollars in 2013. The system as a whole works well for all stakeholders. Workers generally receive timely benefits with excellent return to work rates. The system cost to employers is low, as employer premiums have been very stable (rising less than 2.35% on average in the past six years; less than inflation). Worker’s compensation insurance companies like to do business in our state because of the system’s stability and the corresponding ability to earn profits. Indeed, at the end of 2014, almost 300 insurance companies writing and competing for worker’s compensation insurance business here.

The worker’s compensation advisory council assists with the system’s stability. The council is comprised of representatives of labor, management, and the insurance industry, as well as medical provider liaisons. The council’s agreed-upon changes to the worker’s compensation law, which historically were approved by the legislature, allowed for continual effectiveness and efficiency.

The current budget proposal had no input from the advisory council or stakeholders. If the bill passes, the advisory council process is likely over. Without the council’s steadying process, Wisconsin could face substantial swings in its worker’s compensation law. Fluctuations in the law will have an immediate impact on the bottom line for insurers, employers, and medical providers. Insurance companies could avoid our state. Employers could face large swings and spikes in premium rate. Medical providers could see negative impacts on reimbursement rates.

2) Governmental overreach on a system supported by private business:

The current Worker’s Compensation Division (at DWD) is not funded by taxpayers; virtually the entire system is funded by assessments from worker’s compensation insurers and self-insured employers. Thus, private businesses fund the Division, including payment for judges, staff, IT costs, rent, etc. Along with its payments and the advisory council process, the insurance industry has helped shape the law into its current efficient form.

The Budget Bill suggests that the government has a better handle on the system than those private industries that craft and support it. The bill proposes no changes in the funding of the system-thus, the worker’s compensation insurance industry will be paying for a soon-to-be inefficient and greater litigious system. Presumably, the worker’s compensation insurance industry wants to fund staff and judges that have expertise in worker’s compensation-not those “cross-trained” in other areas. The industry should favor a coherent, integrated system for administering their claims.

Additionally, with a current system that uses virtually 0% taxpayer dollars, the Budget Bill proposal creates an increase in taxpayer costs. The cost of a “simple” physical move of personnel has to come from somewhere. There is a huge IT cost-likely in the millions-based on the current system and software of the worker’s compensation division.

3) Less efficiency = Increased claim costs = Increased premiums:

Based on independent studies, Wisconsin workers are paid more quickly and return to work sooner than virtually any other state. Wisconsin is in the top 10 for lowest cost per worker’s compensation claim. Wisconsin also has one of the lowest amounts of litigated injuries in the country-with almost 85% of cases resolved without dispute or attorney involvement. The studies indicate that credit for these positive outcomes is from the efficient administrative process and personnel at the current Division, who actively monitor claims and promote timely reporting and administrative resolution of disputes and concerns. For example, a Judge currently can hold an informal telephone conversation between an injured worker and an insurance company adjuster to resolve a dispute about the appropriate legal payment.

The current proposal is to split up this efficient administrative structure without any rational basis. The Judges would be spun off into an entirely new agency and separated from the other division personnel. Private settlements could occur without the valuable Judge oversight and protection. The efficiency of the administrative system is lost by splitting up the division, and increased litigation is a guarantee. (As an example, if I want to buy a hot dog, it seems blatantly inefficient to require purchase of hot dog in one place and then the bun in another).

Without division assistance or oversight, workers will seek counsel. Litigation will occur over previously-resolvable issues. Attorneys will litigate the validity of the private settlements. Increased litigation means increased claims costs, which means increased premiums for employers. The volume of increased litigation also could force the need for more employees at the new agencies.

We should maintain our place at the pinnacle of worker’s compensation systems and not look to poor analogies suggested from other states like Florida (comp law declared unconstitutional) or Texas (an opt out system, bringing in the possibility of civil litigation). The administration’s citation to Illinois’ structure is misplaced as Illinois arbitrators/judges are directly part of the state’s worker’s compensation state agency.

4) Negative impact on medical providers:

Medical cost payment is currently 2/3 of all payouts in worker’s compensation claims (in 2012, medical providers received almost $600 million total, while worker payments were about $275 million). Under current law, Judges review and approve all compromises, which serves to protect the interests of workers, medical providers, and group health carriers. The Judges make sure the bills are satisfied. Logic dictates that private settlements mean more claims will be closed-cost-shifting to medical providers. Insurers will attempt to settle claims early and for smaller sums of money (like in civil litigation). More closed claims means that medical bills and treatment that would have been covered within the 12 year statute of limitations by a worker’s compensation insurance company will now be shifted to the worker’s health insurance or none at all. Thus, medical providers will be accepting lower Medicaid/Medicare reimbursement rates for charges that should have been under worker’s compensation.

5) Cost-shifting of worker’s compensation system to taxpayers, via Medicaid/Medicare.

Just as the above, with the allowance for private settlements, we will see an exponential increase in claims being closed sooner than in the past. A closed claim immediately shifts the costs for future medical care to the worker’s own health insurance, including Medicaid and Medicare. There is no denying an increase in taxpayer-funded health care costs if the current proposal moves forward.

ACTION IS REQUIRED. Why “fix” a nationally-recognized system that is not broken? If you favor the continuation of Wisconsin’s worker’s compensation system, contact your Wisconsin legislators now.



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