Workers Comp Matters

Alternative Benefit Systems and the Future of Workers’ Compensation

Due to recent constitutional challenges to workers’ compensation in certain states, a nationwide debate among legal professionals has been ignited. How has this system evolved over time and in what ways might it change in the future?

In this episode of Workers Comp Matters, guest host Judson Pierce speaks with Workers Injury Law & Advocacy Group President Alan Pierce about the future of the American workers’ compensation system. Alan talks about the recent scrutiny that workers’ compensation has been under and how increased visibility has sparked a national conversation regarding the system’s effectiveness. He reflects on the 1911 enactment of state-based workers’ compensation systems and lists the safety-focused goals of the institution. Alan analyzes the federal government’s 1970s involvement in the system, mainly through the establishment of the Occupational Safety and Health Administration, and the national commission report issued in 1972 that broadened and increased benefit coverage. He explains how costs associated with the system eventually increased as benefits expanded and how this led to system reform in many states. Alan closes the interview by discussing the recent challenges to the constitutionality of the workers’ compensation system in some states and an investigation of the problems with employer established alternative benefit systems.

Alan S. Pierce has served as chairperson of the American Bar Association Workers’ Compensation Section and the Massachusetts Bar Association’s Section on Workers’ Compensation Law. He frequently lectures on workers’ compensation issues around the nation, and in 2007 became one of the first attorneys in the country to be inducted as a Fellow into the College of Workers’ Compensation Lawyers of the American Bar Association.

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View transcript

Workers Comp Matters

Alternative Benefit Systems and the Future of Workers’ Compensation

08/25/2016

Intro: This is Workers Comp Matters, hosted by attorney Alan S. Pierce, the only Legal Talk Network program that focuses entirely on the people and the law in workers’ compensation cases. Nationally recognized trial attorney, expert and author, Alan S. Pierce is a leader committed to making a difference with Workers Comp Matters.

Judson Pierce: Hello everyone. Thank you for tuning in. This is Judson Pierce and I am pleased to be subbing in today for Alan Pierce who happen to be our guest today, discussing the uncertain future of workers’ compensation. Before we get started, we would like to thank our sponsors, Case Pacer, Practice Management Software, dedicated to the busy trial attorney. To learn more, go to casepacer.com and PInow, find a local qualified private investigator anywhere in the United States, visit pinow.com to learn more.

Well, hello Alan.

Alan S. Pierce: Hey Jud.

Judson Pierce: Thank you for being here.

Alan S. Pierce: Well, it’s my pleasure, and thank you for substitute hosting.

Judson Pierce: Well, as my father, I’ve always wanted to interview you on a podcast, so this is making my dreams come true. You’ve been traveling the country this past year as President of the Workers’ Injury Law & Advocacy Group, discussing the current status of Workers’ Compensation Laws in the United States. Tells us what is the current status?

Alan S. Pierce: Yeah actually, I’ve been practicing workers’ comp for about 40 years or so, so I’ve seen varying, I would say, looking back on it, eras of workers’ comp, and I would say today, the last year or two, there has been more national attention on workers’ comp than I can remember in the last perhaps 40 years, and a lot of it has been critical of the current workers’ comp system. So, part of my duties this year as President of WILG, the Wokers Injury Law & Advocacy Group is we’ve been going around to the different states, especially states where there have been some significant difficulties in the workers’ comp system, and discussing these changes that have occurred and how we can best deal with them.

Judson Pierce: I’d like to take you back to the origins of workers’ comp in our country. I know you’ve studied a lot about this topic, and I understand that we have had workers’ compensation in various forms around our nation for over 100 years. Is that correct?

Alan S. Pierce: Yeah. Well, the first workers’ comp law that involved the states rather than the federal government was enacted in 1911, actually two or three states enacted workers’ comp in 1911, including Massachusetts, and certainly, over the next 10 or 15 years, pretty much every state in the country adopted workers’ comp. And just very briefly, workers’ comp was a system in which without regard to fault an injured worker received a percentage of his or her weekly pay and had their medical bills covered, so long as they were injured as a result of the work they were doing. And over the course of perhaps the first several decades, the workers’ compensation law evolved, and as it evolved, it changed, it broadened certain types of injures and diseases were added when workers’ comp first started. For example, occupational illnesses were not covered, it had to be a traumatic specific injury and a variety of other illnesses or injuries or diseases became covered as a result both of legislative changes and as a result of case law.

Judson Pierce: Tell us why the federal government chose to let the states handle that?

Alan S. Pierce: Well, it always was a state based system. Other than something like Social Security, which obviously came into existence many years later, under later administrations, workers’ comp was a state by state system of benefits, and it always remained that way.

The federal government got involved in the early 70s, because it became apparent after perhaps the first 50 or 60 years of workers’ comp that in many states the workers’ comp system wasn’t delivering the type of benefits in a fair and efficient manner that it was designed to do. For example, when the workers’ comp law was first enacted in New York, the Supreme Court said that the workers’ comp laws must provide significant benefits to the injured workers. And when we got into the 1960s and early 1970s, many states’ benefits were not significant.

So the federal government got involved, at that time, primarily through the establishment of OSHA, the Occupational Safety and Health Act under President Nixon. Not only did they focus on workers’ safety, but they created a commission to study state workers’ comp laws.

(00:04:57)

And essentially the commission adopted perhaps 19 or 20 essential recommendations and indicated to the various states that these recommendations had to be put in place with the thread of potentially a federal takeover of workers’ comp, which nobody wanted, it’s what they have eliminated the private sector or insurance and substituted the federal government.

So, as a result of the national commission and the report that issued in 1972, state by state across the country, workers’ compensation laws were broadened, benefits were increased, coverage was broadened, and more people qualified for workers’ comp, and the benefits were more speedily administered and more fairly administered.

Judson Pierce: So, what happened after that period of time, that sort of 70s and 80s time? Did the businesses in insurance industry say, enough is enough, we think that we are now paying too much?

Alan S. Pierce: No, it’s not so much that the industry thought they were paying too much. This is what happens. workers’ comp never was really a very high priced line item on an employer’s budget. Benefits were low, medical costs were low, and the cost of workers’ comp insurance wasn’t very significant. As benefits broadened, and of course, as medical care started to escalate, and as states tried to catch up with many years of insignificant or less than adequate benefits, we saw that the first wave of what we would call workers’ comp reform resulted in changes much for the better for injured workers across the board.

As the impact of that took place, premiums did start to rise, costs started to increase, medical cost across the board, never mind in work injuries but just generally, we all know what’s happened with medical care in this country, started to increase, and as a result, a lot of states then went through a second period of workers’ comp reform. Those of us on the claimant side or the plaintiff side, call it a deform, but through the 70s, 80s and perhaps into the early 90s, workers’ comp expanded, beginning perhaps in the early 90s, right up to now, we’ve seen whatever legislative changes that have taken place around the country basically have been for a reduction in workers’ comp benefits primarily for the reasons of controlling premiums, bringing premiums down, and that generally is what happens in workers’ comp.

The system is designed to operate in a balanced state. You charge a fair premium and provide fair benefits, but as we know, it’s very difficult to achieve balance, and when conditions are imbalance, either benefits are too high or costs are too high, then somebody takes action. Even a state legislature for example and as a result of the political process, legislatures then respond to whatever that crisis may be, and benefits change. So, we’ve seen perhaps in the last 20 years a reduction in benefits, and we’ve also seen some other activities that have occurred that have changed the dynamic and calls into question whether workers’ comp benefits now are fair.

Judson Pierce: Yeah, the constitutionality of them has been questioned. I know in Florida, there was a case that actually talked about that.

Alan S. Pierce: Yeah, there were several cases in Florida, the Westphal case, the Castellanos case. These are cases in which claimants have taken a position that because the Florida law, for example, has reduced benefits such as access to attorneys by limiting at the role of claimant’s attorneys to charge a fair fee, or by reducing duration of benefits such as partial disability, and by the way, the same issue arose in Utah, the same issue arose in Oklahoma. The Supreme Courts in those three states in a variety of different rulings have come down and said that the so called quid pro quo, the Grand Bargain, the significant benefits are no longer available, and therefore, there was a serious question as to whether the workers’ compensation statute in these three states or parts of the statute are constitutional. So that in those three states, and there are similar issues in other states that people are challenging the adequacy of the benefits.

Judson Pierce: Well, the problem that I see from that description is that then it would be — the exclusive remedy would go away. The injured worker would have perhaps a right under Tort Law to bring a claim for an accident, because the constitutionality of the comp system has been deemed to be inadequate, and we would be back to where we were in the teens to 20s with people having to wait years for jury trial and pay lawyers thousands and thousands of dollars to represent them in a case, and the employers would have litigation costs that were greater than what they have now, and we’d be back to where were a 100 years ago.

(00:09:59)

Alan S. Pierce: Well, that actually has been the thread of this that — and that is what the Supreme Court has said in some of these cases is that the abolition of the Civil or Tort remedy goes hand in hand with significant benefits under the workers’ comp system, and once it is determined that the benefits are no longer significant then the Tort Immunity may disappear. So that is the threat that is happening.

Right now Oklahoma and Florida, their states have to address these recent decisions and either bring their workers’ comp Statute into conformity or face the prospect that will go back to the old system, which I don’t think anybody wants. So that’s one of the problems. The other problem has been and we have discussed this another episodes of workers’ comp matters here in Legal Talk Network.

There is another attack on workers’ comp. I am going to use the term that is generally used, it’s opt-out, this is a mechanism by which employers are allowed to remove themselves from the workers’ comp system by setting up what they call an Alternative Employer Benefits System where they can – they the employers can devise their own system of benefits, delivery of benefits and adjudication of those benefits outside of the State workers’ comp system. That has been tried in Oklahoma, it’s in effect in Texas, more as an opt-in system; in other words, employers are not required to have workers’ comp in Texas, they can voluntarily provide it and it’s being proposed in various other States, and that is probably the single-most central threat to workers’ comp is this so-called Alternative Employer Benefit Plan.

Judson Pierce: That sounds a lot to me like forced arbitration writers when you as a consumer might be buying something and signing an agreement stating that if there was problem with what you purchase it would be handled in a forced arbitration way and you would lose your rights to some benefits?

Alan Pierce: Well, actually in a sense, yes, because virtually every State workers’ comp system has a State Board whether it’s an Industrial Accident Board or Commission and they resolve any disputes. Under the so-called alternative employer benefit plans, the employer can set up an internal arbitration process by which the employer can select the Arbitrator or the Arbitration Panel, and if there is a disagreement there is no evidentiary hearing from the determination of the Arbitrator but the injured worker would be forced to file a suit under the ERISA Statute in Federal Court where the case would be decided on technical and legal grounds, and that’s a subject of a whole another show.

But, yeah, the theory is somewhat similar that the employer gains exclusive control and there is no State oversight, and the problem I see it, is that as a hundred years have gone by people have lost sight of the initial focus of workers’ compensation, just the very title is workers’ compensation, it is supposed be a fair, equitable system by which workers are compensated for their injuries. Proponents of opt-out do not call it Workers’ Compensation, they call it an Alternative Employer Benefit Plan and workers’ comp is not an employer benefit plan; employer benefit plans might be vacation, 401(k)s all sorts of infringed benefits that the employer can select and dictate as it sees fit, and by classifying workers’ compensation as yet another employer benefit plan, I think is a fundamental disconnect here.

Judson Pierce: We are going to take a short break and we’ll be back in just a few moments with Alan Pierce on the Legal Talk network.

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(00:15:02)

Judson Pierce: Now Alan, what is the chances and likelihood of possibly having a new National Commission as we had in 1972?

Alan S. Pierce: Well, let’s put it this way, that concept is under active discussion, whether it will happen or not, it depends on a couple of things, how long this discussion lasts and what’s going to happen in November. We are definitely going to have a new President, we are going to have a new administration. We will likely have new Cabinet officers including a Secretary of Labor, but over this past year there have been at least three so-called national summits or national conversations that either have taken place or will be taking place in which various representatives of all the different stakeholders in the workers’ comp system, employers, insurers, injured workers, attorneys, medical providers, vocational providers go right down the line, have been meeting to discuss all of these issues and among these discussions has been is the time right that there should be another National Commission to take an overview of where we are and where we are going.

So I don’t think it’s out of the question that will either see a new federally sponsored National Commission or we may see these various stakeholders coalescing around perhaps one or two central groups to study this and bring out some recommendations internally without bringing the Federal Government involved.

Judson Pierce: Have there been any reports in the media to inform the public generally over the last couple of years of these changes that you’ve seen nationally?

Alan S. Pierce: Yeah, over the last year or two especially National Public Radio and ProPublica have commissioned a series of articles dealing with the workers’ compensation system.

In addition, OSHA, which was the mechanism by which the National Commission started back in 1972, last Spring, the Spring of 2015, issued a report on cost shifting, how much costs that really belong to workers’ comp insurance have been shifted over to other sources either Private Health Insurance or Medicare or Medicaid, and in addition, a group of senators and representatives have written a very strongly worded letter to the Secretary of Labor, Rudy Perez, indicating that there is a growing crisis in workers’ compensation.

So as a result of all of these, these investigative reports, the OSHA report, the letter from Congress to the Secretary of Labor, there has been an increasing focus on workers’ comp leading to these conversations. IAIABC, which is the International Association of Industrial Accident Boards and Commissions has held a national conversation and that continues this summer of 2016, the Roscoe Pound Civil Justice Institute in September of 2016 will be holding another national conversation and there was another group that formed and met in Dallas in April of 2016, and all of these groups are studying where we are and where we are going to go.

And among the other issues here, is of course, we have the Affordable Care Act, the so-called Obamacare and whether that is going to serve as a model for some type of single-payer system of medical coverage that will greatly impact workers’ comp.

So we are in what I think is a new era, a third era. We had the first era that was pre-1972, we had the second so-called modern era, that post-1972, and now, as we are in the early stages of the 21st Century, we have a changing workforce, we have a changing economy, we don’t have as many factories as we had, we have new types of employments, we have new economies, new models for healthcare delivery and all of these things are stretching the workers’ comp system and how we adapt to it, remains to be seen.

Judson Pierce: And shifting the cost burden as well, I mean, workers’ compensation though a benefit for workers is a benefit to employers, is a benefit to the general community at large, is it not?

Alan S. Pierce: It should be, I mean, a perfectly designed system an injured worker would get prompt adequate medical care and would be able to recover and get back to work. What we have seen is that in order to keep premiums down we now have medical treatment guidelines, we have evidence-based medicine, we have Utilization Review, and while I’m not suggesting that injured workers and their medical providers have a blank check that they get every test and every treatment, but I think that the pendulum has gone a little too far the other way.

So there is an awful lot of needless litigation over what is or what isn’t affective medical treatment, we’re looking at evidence-based models, which sound nice, but basically we call them cookie-cutter, a cookbook medicine where the decisions are made based upon what the average treatment should be, and as a result injured workers are getting delayed treatment, the rates for reimbursement to doctors are low that doctors and hospitals would rather bill private insurance than bill workers’ comp insurance, and as a result costs are being shifted, injured workers are not getting prompt care, disability is extended, costs go up, and it’s just not a healthy system.

(00:20:11)

Judson Pierce: Well, I thoroughly enjoyed this program, I’d like to thank our guest, Alan Pierce, for allowing me to host and be in your seat. You’ve given us a lot of information for us to think about, about the future of workers’ compensation in this country.

Alan S. Pierce: Thank you Jud. It’s my pleasure to be on the show.

Judson Pierce: And I would like to thank all of you for listening. My name is Judson Pierce. Thank you to Legal Talk Network for producing this program and have a great day.

Outro: Thanks for listening to Workers Comp Matters today on the Legal Talk Network, hosted by attorney Alan S. Pierce. Will we try to make a difference at Workers Comp legal cases for people injured at work? Be sure to listen to other Workers Comp Matters shows on the Legal Talk Network, your only choice for legal talk.