The Insurance Journal has published a summary of benchmarking research on the state of Hawaii from the Workers Compensation Research Institute (WCRI). The Cambridge MA think tank found many things to like in the Hawaii system, and a few areas of concern. We'd like to link you to the full report, but WCRI reports are generally not available to the non-paying public. Too bad, because it's always interesting material.
A high proportion of claims in Hawaii involve lost time. Among the 19 states with a three-day waiting period, Hawaii had the highest proportion of incurred indemnity claims per 100,000 workers — 46 percent compared to the 19-state median of 29 percent (policy year 2000, the most recent data available). I wonder if this high rate is related to another finding of the study: The time to first payment in Hawaii was noticeably faster than 39 other jurisdictions. When you combine the "quick trigger" of a three day waiting period with rapid initial payment, you quickly cross into that murky zone where people are being paid not to work. It's the right thing to do, but it may also create "moral hazards" for people who really hate their jobs. And if you prefer fishing to work, what better state could you live in?
Most American workers must either prove that their conditions are work related or they will collect no benefits at all. Millions lack basic health insurance, and millions more lack disability insurance. It's workers comp or nothing. Hawaii has come up with its own state-mandated "twenty four hour coverage" program. This involves two related programs: non-occupational temporary disability insurance (TDI) and prepaid health care (PHC) insurance programs. While the compensability of a claim is being determined, a worker can file for non-occupational TDI and is entitled to 58 percent of her/his average weekly wage for up to 26 weeks. Under the PHC program, employers must provide health care benefits to eligible employees. In combination, these two programs help mitigate the impact on workers of delays in receiving workers' compensation benefits while compensability is in dispute. Hawaii is way ahead of most states in this area.
Hawaii has by no means perfected their workers comp program There are problems on both sides: Business representatives are critical of the high cost of premiums, fraud, mental stress claims and hearing delays. On the other hand, worker representatives expressed concern about rule changes promulgated by the Department of Labor and Industrial Relations to adopt evidence-based treatment guidelines. By focusing on work-related causation, some claims will be forced out of the system. (There may still be coverage, however, under the above mentioned TDI and PHC.)
Here are some of WCRI's other findings:
*Two features combine to produce a "user-friendly" hearing process in Hawaii. First, the process is issue specific and requires no special preparation other than the exchange of reports. Second, hearings are informal, held by hearing officers, who are usually not attorneys. In roughly one-half of the hearings, a claims adjuster represents the insurer or self-insurer; in roughly 45 percent of initial hearings, the worker chooses to be unrepresented or is assisted by a union representative. This results in less work for the attorneys, but less friction usually translates into lower costs. (Our attorney readers, naturally enough, will question whether the worker is adequately represented in this process.)
*The dispute resolution process is relatively fast. In 2004, the state-wide average interval from the request for a hearing to a hearing and decision was 162 days (5.3 months). This interval was shorter than in seven of nine other states WCRI has studied in the past ten years for which comparable data were available.
Hawaii used to be ranked among the lower cost states. But an alert reader (see Mike's comment below) points to more recent rankings, which show Hawaii moving up into the more expensive tier. The quick-trigger compensability and the generous benefits may be catching up with them. This evolving situation reminds us that comp is rarely static: what worked yesterday may not work tomorrow. Comp involves a delicate balancing act that requires constant fine tuning. If Hawaii is serious about bringing a "continuous improvement" discipline to their comp problem, if they want to turn the tide on rising costs, the Insider is willing to help. Our bags are packed and we're ready to leave on short notice. We have to admit that the prospect of consulting in Hawaii is just a bit more inviting than some of the more remote locations we've visited over the past 20 years. Comp issues may be universal, but some problem settings are more compelling than others...