An article in NPR yesterday reports that “Ten ranking Democrats on key Senate and House committees are urging the Labor Department to respond to a ‘pattern of detrimental changes in state workers’ compensation laws' that have reduced protections and benefits for injured workers over the past decade.” The letter, addressed to Labor Secretary Thomas Perez, cited the well known investigation by NPR and ProPublica, “which found that 33 states have cut workers’ comp benefits, made it more difficult to qualify or given employers more control over medical care decisions.” It also referenced NPR/ProPublica stories published last week that highlighted the weaknesses and wide coverage lapses of the “Opt Out” concept in Texas and Oklahoma.

The letter is signed by Bernie Sanders, Democratic presidential candidate and ranking minority member of the Senate Budget Committee, Patty Murray, D-Washington, the ranking member of the Senate Labor Committee, Bobby Scott, D-Virginia, the ranking member of the House Workforce Committee, and seven other senior Democrats on House and Senate Budget, Finance, Employment, Workforce, Ways and Means, and Social Security Committees. In it they tell the Labor Department that “State workers’ compensation laws are no longer providing adequate levels of support and compensation for workers injured on the job,” and “The race to the bottom now appears to be nearly bottomless…”

This should not be a surprise to anyone. Some of us have been openly talking about the possibility of federal intervention in workers' compensation for the past year. This letter by no means indicates that it is becoming a reality, but the drums of reform are beating a little louder now as a result. The reality of the Feds doing something to regulate or standardize comp is very real indeed.

And that is not necessarily a good thing for injured workers – the people in whose name the effort would be made.

It is no secret I am a fiscal conservative; a “small government” kind of guy. I merely mention it here so that my bias is on the table for all to consider. While some outside the industry believe that Federal intervention would be a good thing for those workers in the system, I wholeheartedly disagree.

First and foremost, workers' compensation is and has always been a state, and to a lesser degree, regional affair. Salaries are different across the nation. Cost of living varies widely from region to region. Even cultures, including those related to work, differ greatly from area to area. “One size fits all” doesn't work for harnesses, goggles and other safety gear; there is no reason to believe it will work any better for a Federal safety net.

Secondly, I point to other programs currently spearheaded by the Federal government that are inextricably linked to the workers' comp industry, and ask myself, “Do they run as they should?” Is the Social Security Disability System the model of efficiency and fiscal integrity we think it should be? Additionally, we cannot overlook the seamless competence with which CMS has managed the MSA process for the industry. Intervention proponents would be wise to recognize that a number of years ago it was the extreme confusion and indecision surrounding MSA reporting and approval requirements that virtually shut down settlement processes, denying many injured workers the financial and mental closure they sought for many, many months. Not to mention, when all is said and done, once the complex machinations of the MSA process is complete, in some 95% of the cases we give the money back to the guy we were trying to protect ourselves from, and expect them to be compliant with the Orwellian reporting requirements (not to mention the new ICD-10's).

I suppose it is not that difficult – if the injured worker is a Theoretical Physicist. 

The performance of other areas of the Federal Government do not assuage my concerns regarding the potential effectiveness of a Federalized workers' compensation system. We will spend more than $87 Billion this year for the Department of Education, up from $14 Billion in 1980, yet we have seen no appreciable overall improvement in student test scores over that time. The US Department of Energy was established in 1977, in part to help free our country of it's dependence on foreign oil. That dependency continued to increase for over 30 years. It is only in the last few years we have started to gain that independence, thanks mostly to fracking on largely private lands (the Feds have been closing many public lands previously open to exploration). We will spend almost $10 Billion on the Department of Energy this year. 

And of course, I would be remiss if I did not suggest we tool on down to the US Post Office and ask them how their Federal workers' compensation program is doing….

Some of the people clamoring for Federal oversight do not, in my opinion, understand the fundamentals of workers' comp. Our system is supposed to be a safety net; one that provides medical treatment and basic financial benefits. It was not, and is not, intended to be a 100% wage replacement plan, and frankly, I hope it never is. Workers' compensation should be a program that encourages a return to work. It should not incentivize people to remain off the job. To that end, particularly for those who are not catastrophically injured, the lower benefits people complain about should serve a clear message. Get better. Get back to work.

That is not to say our industry does not have flaws. We absolutely do. We are overly complex, more focused on procedure than results. We are vendor centric, diverting resources and energy in support of the machine, and away from the people the machine was intended to serve. We also have some culpability in the SSDI mess, as we are a prominent feeder system to that program. We need to stop that by completely revamping our attitude and focus away from claims management towards that of recovery and return.

A Federal intervention will only add complexity, confusion and additional delay. The MSA scenario should be a warning for us all.

And companies who are now choosing to “Opt Out”, largely to closed, secretive and unverifiable coverage schemes, are only highlighting the disparities and vulnerabilities of the greater system. 

Indeed, as the NPR article states, “Federal intervention may also come as the result of the “opt out” movement in Texas and Oklahoma, in which employers shun heavily-regulated workers’ comp and are permitted to write and administer their own largely-unregulated workplace injury plans.” In a statement to NPR and ProPublica last August, the Labor Department said it is “studying” the claims that ERISA governs opt-out plans. The department told the publications that “The department is interested in ensuring that worker rights and benefits are protected”.

As for the letter from congressional representatives, the Labor Department said the agency “shares the concerns. Every year injured workers and their families are bearing more and more of the cost of workplace injuries and illnesses.” It said it would review the letter and work “with stakeholders to find real solutions”.

This story will continue to develop. I would point out that, on the labor front, we currently have an activist administration with a limited shelf life. It is entirely possible that regulatory action under the Executive branch could impact our industry over the next 12 months. Make no mistake, Opt Out is less a threat to our system than it is a symptom of our internal problems; but the way it is being crafted and deployed will attract the attention of those in Washington. The final result may just be, as the congressional letter and NPR article allude, that the push for Opt Out might end up being the straw that broke the regulatory camels back.



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