March 6, 2007

Will Comp Reform Cross the Delaware?

Workers Compensation in Delaware is expensive. According to the Oregon rankings, Delaware has moved from the seventh highest cost state in 2005 to number three in 2006. With reforms well under way in the second highest cost state of California, the only obstacle between Delaware and a (dubious) number one ranking is Alaska. Oh well, they're almost # 1! You won't find the state's chamber of commerce touting this particular distinction.

A glance at the rates for some basic occupations underlines the state's problem: Carpentry - shop only (class # 2892) runs $17.44 per $100 of payroll, the highest rate in the nation. Machine shop (3632) is $9.11, compared to $3.67 in neighboring Maryland. (Where would you choose to operate your machine shop?) Even the penny ante class of office and clerical (8810) runs $0.89, nearly the triple the rate in Maryland and over five times the Massachusett's rate of $0.16. These costs add up, minute by minute, day by day, as employers struggle to do business in Delaware.

Courting Disaster?
Before we analyze the macro conditions that have led to this crisis in Delaware, let's take a quick look at a recent state supreme court case that illustrates one of the problems, the absence of managed care. Shirley Smith worked in the shipping department of James Thompson & Co. She injured her back in August of 2002. Suffering from a herniated disc, she declined surgery and treated conservatively while collecting temporary total benefits.

In September of 2004, she told her doctor that she needed money, so he released her for light duty. She worked for one month at a new employer and was then laid off. In January of 2005, she asked her doctor for support in applying for Medicaid and food stamps, so the doctor totally disabled her for six to twelve months (even though there was no change in her medical condition). At the same time, Smith petitioned for resumption of her indemnity benefits under workers comp. She lost at the hearing level and at the appeals court. The Delaware Supreme Court, however, found in her favor.

In other words: in January of 2005 Smith was capable of light duty. Nonethless, her doctor totally disabled her (apparently to help her secure benefits of one kind or another). There were no objective medical findings to back up the doctor's recommendations. Here is how the doctor explained his actions:

I believe she is capable of modified duty work. But since we were approaching the case in a different way all together that we wanted to get a surgical opinion, I wanted her to be off of work so she could address her scenario. If surgery is not an option, I would have her go back to work.

If you can figure out what this grammatically challenged doctor is trying to say, good for you. (Every once in a while I like to address my own scenario, but it's usually at my own expense.) The state supreme court ruled that despite the absence of objective medical findings, the simple fact that the doctor put her out of work - and did so in what the court calls "good faith" - is in itself grounds for reinstating the comp benefits.

Which brings us back to the place we began: Delaware is a very expensive state for workers compensation.

Needed Reforms
Delaware needs to revise its workers comp statute. And no, we do not recommend the Missouri model, which simply clobbers injured workers at every turn. Prudent reform is balanced and fair, exacting some price from all the parties involved and relentlessly focused on the goal of keeping people productive.

In abbreviated form, here is what Delaware needs to do:
1. Implement a managed care program, with some modest control of the treatment path in the hands of insurers and employers.
2. Implement rate setting, so that health providers are reimbursed at reasonable (as opposed to "usual and customary") rates.
3. Open the door to independent medical exams (which would have been extremely useful in the Smith case). Currently, for reasons I could not determine, you can be fined $500 every time you refer to an "independent medical exam" in a medical document.(Section 2343 of the comp statute)
4. Incentivize return-to-work programs. Set the expectation for all employers that they work with injured workers and their doctors to return employees to productive employment as soon as possible.
5. Revise the time table for compensability. Currently, injuries are compensable after the third lost day (a quick trigger, but acceptable). However, the benefits are retroactive to the first lost day once day seven is reached. This is the quickest compensability trigger of its kind in the country and inevitably fosters a "disability" culture. Retroactivity should occur only after two or even three full weeks of disability.

Delaware's Low Point
As Delaware approaches the top of the list for workers comp costs, the pressure for reform will build. Let's hope they do it the right way. Delaware is no ordinary state. According to Wikipedia, they used to be noted for having the nation's lowest high point: that is, their highest elevation was lower than that of any other state. Alas, they have fallen to number two in this regard, to Florida, which claimed the number one spot when its highest point fell into a sinkhole below the 442 feet elevation.

Well, number one is not necessarily where you want to be, especially when it comes to the absence of elevations - and the cost of workers compensation.

| 2 Comments

2 Comments

Amen on the need for medical management.

Delaware did pass a reform bill in January of this year; see http://www.insurancejournal.com/news/east/2007/01/18/76015.htm

Some reports said that the reforms could save employers from 15 to 21 percent of current costs.

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About this Entry

This page contains a single entry by Jon Coppelman published on March 6, 2007 1:56 PM.

Massachusetts: Once more into the rate filing breach was the previous entry in this blog.

Thar She Blows: Humanitarian Concerns in New Bedford Raids is the next entry in this blog.

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