Workers’ Comp Systems Getting Stricter

Montana has long had a workers’ comp problem. Its labor force is injured far more frequently and at greater expense to employers than is typical around the country. Part of that stems from the jobs people do in Montana — drilling for oil and working in mines. But part of it has been the system itself. A prominent national study , released last fall, singled out Montana’s as the most expensive workers’ compensation system in the United States  — with premiums 163 percent higher than the national median.

“We had businesses just up and walking across the border to Idaho and North Dakota,” says state Representative Scott Reichner, the sponsor of an overhaul package that was signed into law in April. “It was killing us. Lawyers push the envelope and make the system looser and looser and next thing you know we’re covering everybody for everything.”

In March, the Montana Supreme Court upheld a Workers’ Compensation Court award involving a man who smoked marijuana on the job at a tourist attraction before feeding — and subsequently being mauled by — a grizzly bear. The state is footing approximately $35,000 in medical bills because, in the words of the court, bears are “equal opportunity maulers,” even though the decision to smoke pot around them was “ill-advised to say the least and mind-bogglingly stupid to say the most.” 

Since the Montana system was revised in April, however, the effects have been dramatic. Insurers in the state have lowered premiums by 20 percent, and a further reduction of 10 to 15 percent is expected within the next five years. The new law shortens the period in which workers can receive medical benefits, and specifies which doctors they can see and how well those doctors are compensated. If an employee is injured on a break while away from the workplace, the employer is no longer likely to be on the hook for lost wages and medical expenses.

Unique programs

State workers’ comp systems in America have little in common. “Workers’ compensation is a state-run program with no federal standards and almost no federal involvement,” says John Burton, a professor emeritus at Rutgers University who has studied the subject for more than 40 years. “There’s an enormous amount of variation in who is eligible and the level and type of health care that must be provided.”

Burton chaired the National Commission on State Workmen’s Compensation Laws in the early 1970s, which concluded that federal standards might be necessary. Many states increased benefits for injured workers in the years that followed in the hopes of fending off federal intervention.

But since the 1990s, states have been moving in the other direction — tightening eligibility in response to rising medical costs. This year, legislatures in Illinois, North Carolina, Oklahoma, Kansas and Washington State, like the one in Montana, made significant changes aimed at cutting costs and demonstrating a more business-friendly climate. “It’s not that if you’re in the system, you’ve seen a weekly benefit cut,” Burton says. “It’s that many states have made it harder to get any benefits at all.”

Every state but Texas requires employers to provide some workers’ comp insurance for their employees, and many large companies self-insure, paying injured workers themselves according to the standards in state law. In Ohio, North Dakota, Washington and Wyoming, the only alternative to self-insurance is to enroll in a state-run plan. About 20 other states allow employers to either enroll in a state plan or carry private insurance. In the remaining states, purchasing insurance through a private carrier is the only option other than self-insurance.

Medical benefits reviewed

Montana’s legislation was widely supported but involved significant compromise from labor, doctors, lawyers, business groups and insurance companies. “When you bring a consensus team together, if at the end of the day all sides are squealing like they’ve been bit by a dog, then you know you’ve got it just about right,” Governor Brian Schweitzer said in an interview with Stateline . 

The governor was himself among the squealers. Schweitzer, a Democrat, was never fully comfortable with eliminating ongoing “permanent partial” benefits for workers with certain minor injuries. He vetoed a provision that would have excluded tips from workers’ income calculations for wage replacement. Still, when all was said and done, Schweitzer reports, “I said ‘Eureka!’ We’ve got it.”

Some of Montana’s most significant and controversial changes pertain to the way medicine is practiced. Medical benefits are now capped at five years except when extensions are granted by a review panel of doctors. The idea is that 90 percent of injured workers reach “maximum medical improvement” within five years and shouldn’t be able to rely on workers’ comp as their primary form of medical care indefinitely. The 10 percent who require ongoing care related to their injuries may go before a medical review board to argue for two-year extensions.

Doctors and hospitals are seeing their medical fee schedules frozen, and are being asked to follow uniform treatment guidelines and file additional paperwork. Injured workers are limited in their choice of physician; insurance companies can refer them to a doctor of the company’s choosing if they disapprove of the original selection.

Some doctors say they felt they were being attacked by legislators during the process. “I am personally offended by the concept that we somehow drive this,” Chris Mack, a neurosurgeon from Missoula, told legislators in one heated exchange. The impression is that “we order inappropriate tests, we ask patients to come and see us, and we schedule them for routine visits so that we can bill.” Mack says none of this was the case.

Injured in Illinois

While Montana was changing its law, Illinois was reducing medical fee schedules for doctors and hospitals and changing a number of standards and processes after a bizarre set of scandals and circumstance gave the issue a boost in political momentum.

The CEO of industrial manufacturer Caterpillar, a major Illinois employer, cited high workers’ comp costs in a widely publicized letter to the governor in which he threatened to take his firm out of the state. National rankings called out the Illinois system as the third most expensive in the country. And then a scandal broke at Menard Correctional Facility, where more than half of all workers have claimed an on-the-job injury, costing the state almost $10 million in payouts over the last three years.

Many of the workers in question have said that repeatedly unlocking cell doors has caused carpal tunnel syndrome, a claim that arbitrators have often rewarded with large payouts. Capping awards for carpal tunnel was among the changes in this year’s legislation. “That scandal kept bubbling in the papers for months and months, and ultimately succeeded in moving workers’ compensation from the back burner to the front burner and keeping it there,” says Peter Burton, of the National Council on Compensation Insurance.

Oklahoma completely rewrote its workers’ comp law this legislative session, in part to the benefit of workers. Changes were geared toward lowering costs but also toward getting legitimate medical claims approved more quickly, says state Representative Daniel Sullivan, the bill’s sponsor. Medical care that follows treatment guidelines can move forward now with less of a hassle for injured workers. In the past, an employer or insurance carrier in Oklahoma could delay access to any medical procedure by challenging the need for care in Workers’ Compensation Court. “We’re trying to eliminate some of the unnecessary aggravation in the system for everyone involved,” Sullivan says.

Other changes relate to the qualifications of independent medical examiners, whose determinations are used by the Workers’ Compensation Court to make decisions about contested claims. Those examiners are now required to be medical doctors or doctors of osteopathy, and to specialize in the injuries they are diagnosing. Before, says Sullivan, “We had chiropractors writing reports on psychological overlay and opining on things they knew nothing about.”