New Study Asks if Having a Lawyer Boosts Workers Comp Payments

Episode Notes

Transcript

Announcer:

Workers Comp Matters, the podcast dedicated to the laws, the landmark cases, and the people that make up the diverse world of workers compensation. Here are your hosts, Jud and Alan Pierce.

Judson Pierce:

Hello and welcome to another edition of Workers Comp Matters. This is Judson Pierce from Lovely Salem, Massachusetts. We are bringing you today an interesting study that was done recently by Workers’ Compensation Research Institute entitled Impact of Attorney Representation on Workers’ Compensation Payments with one of the authors, Dr. Bogdan Savych. He is here to discuss that article with us today. But before we introduce Dr. Savych, I’d like to turn it over to my co-host and good time friend and father and longtime partner, Alan Pierce.

Alan Pierce:

Yeah, good afternoon, Jud. Good afternoon Dr. Savych. It’s a pleasure to have you back. Bogdan has been a guest in the past on Workers Comp Matters and as have other researchers for the Workers’ Compensation Research Institute. They are a nonprofit that studies workers’ compensation generally and their reports, findings, seminars, annual meetings are used quite frequently in the workers’ compensation industry around the country by rate setters by other professionals that need their data in order to properly deal with the intricacies of the economics of workers’ compensation programs. So for that, we thank WCRI for being a research. And of course when a study such as this comes out that references attorneys and attorney involvement and of course they’re referencing primarily if not exclusively, the attorneys for injured workers as opposed to the attorneys who might be representing the employer or the insurer that has a certain relevance both to me and Judd as claimant attorneys, but also to the profession itself. So Bogdan, I want to thank you for being here to discuss your findings and the implications from your findings.

Dr. Bogdan Savych:

And thank you for having me here.

Alan Pierce:

So I guess I’d like to lead off with what prompted WCRI to study the impact of attorney representation in workers’ compensation cases.

Dr. Bogdan Savych:

WCR i’s mission is to provide the public with objective, credible, high quality research that’s relevant for policy debate on the performance of the workers’ compensation system. And the two main reasons for the study reflect this mission. First, we know that disputes that lead to attorney involvement are common in workers’ compensation. And this raises a question, what is the impact of attorney? It’s an important policy debate. It’s an important concern for many policymakers and stakeholders and people have strong opinions on both of the debate about the impact of attorneys, yet there is very little empirical evidence. And our second reason for starting this study was that we thought that we could provide a reliable answer to this empirical question of what is the impact of attorney on workers’ compensation on income replacement benefits? Specifically when you think about this question, it’s fairly challenging to examine because cases that end up with an attorney differ greatly from cases that end up without one. If you just compare indemnity payments to claimants that are represented and those that are not represented, you see a large difference. But it doesn’t mean that this difference reflects the impact of attorney.

Alan Pierce:

By the way, let me interrupt you there. Just for our audience, could you explain what indemnity benefits are? That’s a unique phrase that we understand, but the common person may not understand what indemnity benefits are in workers’ comp.

Dr. Bogdan Savych:

So indemnity benefits is income replacement benefits,

Alan Pierce:

The weekly disability check,

Dr. Bogdan Savych:

Yes. If workers are injured and they cannot go back to work, that’s the payments that they receive for their lost wages. Every state provides those benefits to the workers who are receiving, who have a workers’ compensation claim. And the idea for the study is that we wanted to look at this measure to see, well, does an attorney have an impact on on the income replacement benefits? But the issue is you cannot simply compare the two. Well, you have to think, well, some attorneys may, the difference may reflect just the fact that attorneys are really good at predicting who will have higher income benefits and who will not and choose to represent claimants who have probably more complex cases and higher income benefits. We wanted to use statistical methods to address these concerns. That’s why we decided to pursue this study.

Alan Pierce:

Had this ever been studied before, O, is this a unique venture into this area?

Dr. Bogdan Savych:

There were studies that were done before, but they primarily just compared cases with and without an attorney. And it’s very easy to imagine that those comparisons do not reflect the impact that attorney has, but rather the fact that attorneys represent cases that the more complex, so larger benefits benefit payments or larger income replacement benefits that workers receive when they’re represented doesn’t mean that that all reflects all of the efforts of attorneys. That’s the challenge that none of the studies before have addressed. So that’s why we wanted to come here from a different perspective using statistical method that help us address those concerns.

Judson Pierce:

Although attorney involvement suggests higher indemnity or lost time payments, what conclusions can we draw from this?

Dr. Bogdan Savych:

In our analysis look at a very narrow question about the impact of attorney involvement on identity payments. We had the benefit of a large sample of almost a million claims. It was more than seven days of lost time, which is sort of our proxy for looking at the claims that the experience lost time from work and receiving income benefits. And we actually find that, as you said, that attorney involvement increases the total indemnity benefits paid to workers by about $8,000. So it’s a valuable question to answer because it’s a starting point for better understanding the value that attorneys bring to a claim. What we don’t yet know is why do we see this result, right? Why do we see that cases that are represented by an attorney that the attorney actually adds the value to indemnity benefits and what does it mean for the system? We just don’t yet know. We offer several possible hypothesis, but to be able to say what it actually means, we need to do additional research and we hope to do that in the near future.

Judson Pierce:

Like your data suggests that when dealing with unrepresented workers, insurers do not always pay what they’re legally required to pay, such as things like reimbursement for mileage or transportation costs for medical treatment or scheduled losses for bodily function or disfigurement. Could that be one of the hypothesis?

Dr. Bogdan Savych:

So that’s a great hypothesis, right? That’s a great way to think about those issues. We don’t know the answer from this study. What we decided to do is to have a first step. We took a wide lens view of the workers’ compensation system examining only the identity payments that workers receive. You guys have much more experience thinking about what are the details yet, and hopefully we’ll be able to examine it in the future. But for now, I don’t yet know the answer to that question.

Alan Pierce:

And just to give our audience a frame of reference here, in terms you are looking at data from claims that there have been workers’ compensation payments made, attorneys get involved very frequently when a claim is denied, which would be if we didn’t get involved or didn’t pursue the claim, that wouldn’t even be a claim that you would study. So that to the extent that attorneys are able to recover benefits that really should have been paid to the injured worker, your data isn’t capturing all of the denied claims that are not pursued due to the inability of the injured worker to navigate the system themselves or that they just failed to hire an attorney to do it for them. So what if any impact might this have on your study if you have not capturing those claims that otherwise would never have been paid without attorney involvement?

Dr. Bogdan Savych:

So that’s a good question, right? So the analysis that we have focuses on claims where benefits have been paid. So at the end of the day, all of the claims in our are claims where compensability was accepted, meaning that either medical care was provided and workers receive payments for time off work. In prior studies, we saw that workers were more likely to be represented by an attorney when the claims were initially denied, but later accepted we find that the sample of claims that we have is representative of the overall sample claims in the workers’ compensation system. So that provides a really valuable look at what’s the impact of attorneys on the income replacement benefits.

Judson Pierce:

Alright, why don’t we take this opportunity to take a break when we come back, we’ll continue our interesting conversation with Dr. Bogdan Savych. We’ll be right back. We’re back with Dr. Savych before the break. We’re discussing ways in which attorneys and their involvement can impact indemnity. And you had indicated that it actually shows your study shows an increase of approximately $8,000 per claim. My question is, since insurance adjusters have attorneys generally and they have a detailed knowledge of the system, workers’ comp laws and procedures perhaps should not injured workers themselves also have the same type of legal knowledge on their side, especially where this area of law is quite complex.

Dr. Bogdan Savych:

In our study, we did not examine that specific question, but when listeners think about the role of attorneys in the system, they may wonder why an attorney may be needed for a claim. In our prior studies, we examined these questions in quite a few details. WCRI has done worker outcome surveys where we interviewed workers after they recovered from their injuries. And the results of the surveys show that the factors that are related to system complexity are strong predictors of whether workers will hire an attorney and other early A-W-C-R-I Studies show that attorney involvement rates vary widely across states, some with related to the system features that they have in a state complexity, how it easy to file a claim, how easy to deny a claim or how fast the claim is paid. In this study, we also find that the impact of attorney involvement varies widely by state.

State with higher attorney involvement. Rates tend to show a smaller average increase in indemnity payments due to attorneys. In contrast, if you look at states with lower attorney involvement rates in those states, attorneys tend to have a higher or larger impact on indemnity benefits when they are involved. So in my mind, this raises an important question for the future studies. One needs to wonder what are the system features that they’re contributing to whether attorneys are involved. This will require somewhat different evidence that we have right now, but that would be something to explore in the future.

Judson Pierce:

Follow up question, why is it that higher involvement in of attorneys means lesser and lower involvement of attorneys mean higher payments? What’s the reasoning behind that? Is it because the higher involvement of attorneys means that more cases are processes and some of those cases happen to be lesser indemnity cases?

Dr. Bogdan Savych:

So that’s one of the possible explanations.

Judson Pierce:

Okay.

Dr. Bogdan Savych:

If you look at the list of states that we have, some of the states where small percent of claims have an attorney, it means that attorneys are involved in the most complex cases. But in the state system where attorneys that are involved in many cases, you also have many sort of marginal cases that where maybe it’s not a big case,

Alan Pierce:

But

Dr. Bogdan Savych:

The system is designed so that attorneys are just involved in many more cases in their state.

Judson Pierce:

And for the audience, you examined 31 states, is that right? I believe that’s correct. And it was over a course of about 12, 13 years.

Dr. Bogdan Savych:

Yeah, we started our data covers from 2012 to 2019 and we have 36 months maturity data, meaning we have at least 36 months of post-injury experience to be able to identify the effects.

Judson Pierce:

Why not all 50? Was there a reason behind just doing 31?

Dr. Bogdan Savych:

We focus on the states where we have representative data on workers’ compensation claims.

Alan Pierce:

These are representative states that you can extrapolate that you are capturing rural and heavy industrial and farming and different types of economies that you can easily replicate the 50 state experience by selecting the 31 or number of states that a can provide you the data but are representative of the other 19 that you might be missing.

Dr. Bogdan Savych:

Yeah, so the 31 states that we, I include in our analysis, they actually capture more than 80% of the indemnity and medical benefits paid in the workers’ compensation system. So they reflect all different types of geographies. We have western state, we have eastern states, we have more rural states, we have more urban areas. So it reflects variety of experiences that states have that workers have across the country.

Alan Pierce:

One of the things that I wanted to have you address would be perhaps something a casual listener to this podcast or a casual reader of your study might erroneously assume that if the average indemnity payment is higher in a case with an attorney involvement than it is in a case without attorney involvement, does that mean that the attorney’s fees are being st siphoned off from benefits that otherwise would’ve been paid to the injured worker or do they represent something different? Are you able to answer that question that the attorney fees are otherwise would’ve been monies paid to the injured worker?

Dr. Bogdan Savych:

It’s a very interesting question. In our analysis we looked at overall indemnity payments that workers receive. We do not have information on how much of that money goes to pay for the attorneys. And it’s a somewhat challenging question to examine because attorney fees vary quite a bit across states. So you have to take into account state specific factors that are relevant in those estimates.

Alan Pierce:

Yeah, so I guess the point I’m trying to make is that one should not just simply look at the fact that a case with an attorney involvement may be more costly than a case without attorney involvement because there are so many other factors there that might answer the question of why these payments are higher. These are maybe reluctant insurers to pay the benefits. Maybe as I get mentioned before, cases that were denied or medical services that were denied or a dispute about whether somebody is totally disabled or partially disabled, something where you would need the attorney’s expertise in representing the injured worker who probably could not navigate this complex world of workers’ comp themselves. Would that be a fair sort of summary of how I’m looking at this?

Dr. Bogdan Savych:

It’s a fair representation of the many details that come into the measures that we examined, right? We are looking at the identity benefits that the workers has received. These measures reflect many things that can happen on the claim. We will keep it for the future studies to go more in details how the claim develops, what’s so special about claim with or without an attorney, how they change over time, what specifically attorneys are involved in because those are details that are very important to be able to say what’s the value that attorneys may bring to injured workers? That’s the things that people have to always have in their mind when they’re thinking about attorney involvement in the state workers’ compensation system.

Alan Pierce:

Exactly. In fact, I’m so happy that you answered the question with that last phrase about the value of attorney involvement because of course we see it from our end. We’re going to take our final break and we’ll come back in a couple of minutes to conclude our conversation with Dr. Bargen Savych. We’ll be right back

Judson Pierce:

And we’re back for our last segment of this program, Dr. Savych, what future areas are going to be studied by WCRI that have come from this particular study?

Dr. Bogdan Savych:

We view this study as a starting point to a broader effort to better understand the role of attorneys in the workers’ compensation system. For the study, we chose to focus on a very narrow question, but the value that they provide is that we use this novel approach to examine in this question. So fundamentally when I think about the paper, it’s a methodological paper. We try to use this new tool and we show that actually it is working for us to use this tool to answer the questions that are very important. Next is we want to expand the analysis into other dimensions where attorneys are involved and to look at how dispute resolution systems varies across states to look at what the value the attorneys might be bringing to very specific case beyond the indemnity benefits because it made good other components of claim that some of them were raised earlier here in this podcast. So that’s our agenda for the future that we hope to work on.

Alan Pierce:

And by the way, I’m just thinking that the role of an attorney in so far as a workers’ compensation case in certain situations may lead to an increase of a positive benefit to the workers’ comp insure you might want to say that’s counterintuitive. How could an attorney representing an injured worker, injured worker actually injured save money for the workers’ comp insurer as opposed to costing them more? And I’ll give you two examples. One is an attorney representing an injured worker. What Judd and I do and what our firm does and what most, if not all workers’ comp firms do is we identify other sources of benefits that our clients might be entitled to. For example, there could be a third party that was negligent in causing the injury and if we enforce that liability and get a recovery for our client, the workers’ comp insurance company gets paid back all the indemnity and all the medical benefits that they have paid out of that third party recovery.

So there’s one instance where an attorney involvement can recover monies to the insurance company. Another one might be where we will apply for our client for social security disability and once they are awarded Social Security disability, that can be some savings to the workers’ comp insurer if there’s a reverse offset or something of that ilk. There’s another area where if we identify our client as a veteran of the armed services and had a service connected disability and is injured on the job, the insurance company in many states, if not all states that have second injury funds, can recover monies back from the second injury fund to offset the cost of that claim. So that an attorney involvement representing an injured worker not only I think has a positive impact for our clients, but in many cases has a positive impact for the payer of those benefits, the workers’ comp carrier. So I’m pontificating a little bit about that, but what I’d like to leave you with this question, Dr. Savych, is you’ve listed quite a bit of resources, what I would call, I guess footnotes to your study, and they’re quite extensive. Did you interview any injured workers or injured workers’ attorneys in coming up with any of your data?

Dr. Bogdan Savych:

Well, for our analysis, we actually spoke to representatives of injured workers. We spoke to system adjudicators judges in some states, and just to give a perspective on whether the results were getting a consistent with their experiences, it’s as helpful for us to get away from sitting in our cubicles writing a study. It’s helpful to us to hear perspective from people like yourself about what these results mean. And we did incorporate some of those issues in the discussion to provide a different perspective on the numbers that we see. Right. Ultimately, it’s a heavily methodological paper, but we try to incorporate as much as possible viewpoints from representatives of the system, from different stakeholders in the system for what these numbers might mean.

Alan Pierce:

And I know you did because you actually reached out to me and you referenced a couple of, one of our earlier podcasts and an article I wrote about the top 10 list of why injured workers get attorneys. So I want our listeners to know that this study, even though there’s a lot of charts, graphs, and math, I know it’s always hard to get the human element in any type of methodological research study, but I’m happy that you did that. And to the extent that the claimant bar our injured workers or even the defense bar can be incorporated in your future studies, I would encourage you to continue to go down that path because sometimes the real world experience tells us things that can’t be captured simply by statistical analysis.

Dr. Bogdan Savych:

And thank you. And for us as a researchers, it was very valuable exercise to go through. Also provides a perspective that we don’t always have when we just look at the data.

Judson Pierce:

For those of you who would like more information about this study and to read it in its full volume of interesting statistics and analysis, you may visit www.crinet.orginet.org. And the study is free for members and for non-members. You can access it for a very nominal fee.

Alan Pierce:

Thank you for being another guest again on our show and for bringing into the world of workers’ comp, the important work that WCRI does, whether we always agree or agree with everything that you say do or published. But one thing we agree upon is that you have the tools, the resources, and the expertise to be able to look into a very detailed, complex system and try to make some sense of it for those of us who deal with it on a day-to-day basis. So thank you for being a guest and thank you to our listeners for tuning in, and we look forward to having you or other researchers from WCRI in the future as we continue to reap the benefit of the work that you do. So thank you and to our listeners, go out and make it a day that matters. Thank you for tuning in. Bye-Bye.

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