Workers’ Compensation
Coordinating Council

Alert

  Published by the Workers' Compensation Coordinating Council 
83 Green Street, Bath, ME 04530

January 2010

 Misclassification, Independent Contractors and the WCB

L.D. 1456 (P.L. 2009, Ch. 452)

              From the WCB Website Home Page: On June 19, 2009, Governor Baldacci signed L.D. 1456 (P.L. 2009, Ch. 452) An Act to Ensure That Construction Workers Are Protected by Workers’ Compensation Insurance. This legislation seeks to ensure appropriate workers’ compensation insurance coverage for all individuals performing construction work on  construction sites. 

              P.L. 2009, Ch. 452 creates a conjunctive twelve (12) part test to determine whether or not an individual is an employee or a construction subcontractor.  The text of the new law can be found at  http://www.mainelegislature.org/legis/bills/bills_124th/chapters/PUBLIC452.asp. The law went into effect January 1, 2010.  To implement the law, the Board has adopted a new application that must be used when applying for a rebuttable presumption that an individual is a construction subcontractor.  The new application is available on-line at http://www.maine.gov/wcb/petitions/wcb-263.pdf.

              LD 1456, “An Act To Ensure That Construction Workers Are Protected by Workers’ Compensation Insurance” was a good example of how stakeholders can come together and create consensus.  Unfortunately, there has existed in the construction business a situation where many companies followed the law and paid unemployment insurance and workers’ compensation on their employees, but other companies have tried to duck such responsibilities.  In some cases, those companies that do not pay for workers’ compensation and UI can underbid those who do.   The goal of LD 1456 was to provide a level playing field for the construction industry by developing a 12 point test to define who is an employee and who is an independent contractor.    Initially the WCB testified in support of  a fiscal note to hire additional enforcement staff, but the Legislature’s Labor Committee did not think that was necessary and stripped it from the bill.

                 Each contractor who seeks independent status must apply annually for “Pre-Determination.”  If the WCB does not respond within 14 days, the person is granted independent status.  The number of requests has sky-rocketed in the past year or so but, because the new 12 point test for construction work is more difficult to meet than the current test in statute for all other types of independent contractors, it is likely to stabilize as many self-employed construction workers are either classified as employees or incorporate. Also, insurance companies are already acting as enforcers.

Misclassification Task Force: What is Next?

          Though LD 1456  only went into effect on January 1st of this year, there is already a bill before the Labor Committee to amend it by allowing the WCB to issue a “stop-work order” if a contractor knowingly misclassifies a worker (LD 1565 – An Act to Amend the Laws Governing the Knowing Misclassification of Construction Workers, sponsored by Rep. Martin, D-Eagle Lake).  Should the bill appear headed for passage, the WCB will likely suggest a significant fiscal note to hire enforcement personnel.  During an excellent discussion at the January 12, 2009 WCB meeting, WCB Board members noted a number of problems with this bill and will  not take a position when it comes before Labor Committee .

              The effort to re-classify workers as employees is a national one, and there  is a blue print available for states to follow.  At the same time the Maine bill addressing the construction industry was being debated, Governor Baldacci joined governors across the country in forming the Joint Enforcement Task Force on Employee Misclassification, charged with developing ways of improving communication and information sharing among public agencies, coordinating and strengthening enforcement mechanisms, increasing public awareness of the illegality of and harms inflicted by misclassification, working cooperatively with affected groups to disseminate information and improve methods of identifying and reporting potential violations, and making recommendations for regulatory or statutory changes that would strengthen enforcement efforts. Maine’s is comprised of numerous state agencies (Department of Labor, Workers’ Compensation Board, Bureau of Unemployment Compensation Department of Professional and Financial Regulation, the  Attorney General, Maine Human Rights Commission Maine Safety and Health Organization, Department of Transportation, etc.), and is strongly supported by labor unions.

              The focus of the Task Force up to this point has been on penalties.  Suggested enforcement language from other states includes rebuttable presumption, work stoppage and debarment.  The WCB website currently provides a means for anyone to find out if a particular company has workers comp coverage, and there is a hot line for reporting suspected or real violations. 

              The WCB staff has been eager to develop a Misclassification Enforcement Unit since early meetings of the Misclassification Task Force.  In March 2009, Paul Dionne delivered recommendations to the Task Force, recommending  5-6 additional staff for the WCB . Even as recently as a November 3, 2009 meeting, WCB staff was requesting support from the Task Force for a fiscal note from the Task Force.   A November 24, 2009 Flow Chart proposed Misclassification Unit of Two Management Analysts II, two paralegal, and two field investigators.  Maine employers would be assessed.

              There remain details that need to be addressed, but, once the any changes have been applied to the construction industry, other working groups may come under scrutiny such as taxi cab companies, hair salons, trucking companies, small shops, people doing piece work, etc..  It is important to note that many Maine businesses are small operations doing such work as cleaning, carpet installation and computer support, and they value their independence. They will feel the effect of additional insurance costs as they struggle to stay in business. 

Increased Staffing Postscript

              At the December 8, 2009 WCB meeting, Steve Minkowsky presented a memo entitled “LD 1456 Fiscal Note with Options, ” which was presented to the Task Force.  Those options ranged from maintaining the status quo to increasing staff (see above). Public discussion by the WCB board members acknowledged the inappropriateness of hiring more staff in times when the Governor is faced with dramatic cut backs in agencies funded by the General Fund.  Of course, the WCB is funded by assessments on employers, not the General Fund.  Should that lessen belt tightening by the WCB in these tough economic times?  It is up to the Task Force to decide what to recommend to the Legislature.

workers’ comp insurance for every worker.

Your editor thanks Kathleen Newman, Jim McGregor, Brian Parke, John O’Dea and Allan Muir for helping her to come to a better understanding of this complex issue.

WCB Briefs

              WCB Budget: At the November 10, 2009 WCB meeting,, Paul Dionne reported that he had instructed his staff that there were to be no requests in the Supplemental Budget on behalf of the Board.  At the same meeting, upon the recommendation of the Finance Committee of the WCB, $161,702 was moved from the Reserve Account to the Cash Account. The funds in the Reserve Account result from audit collections.  The WCB had estimated $1.8 million would come from audit collection, but the figure was closer to $1.6 million, and the amount had to be made up from the Reserve Account.

of IME doctors up to reduce the waiting time for evaluations.  Inman will be interviewing potential replacements for Dr. Shaw.

              Ingenix Contract:  at the November 24, 2009 WCB meeting, the Board voted to extend the contract for Eric Andersen of Ingenix beyond 12/31/09 to March 31, 2011 for an additional $36,700 to allow for further assistance with the data related to the adoption of a Facility Fee Schedule for Maine’s hospitals and Ambulatory Surgical Centers.  He will  also be taking the Board through the analytics again, a year later, so that the Board can take a look  at the process. 

              LD 1566 An Act Relating to the Membership of the Workers’ Compensation Board (sponsored by Rep. Butterfield) seeks to restrict members of the WCB from lobbying and further define service providers, two categories which already are prohibited in the statute. The language of the bill is so broad, it would have eliminated most current and past  Management members as well as  future candidates  who have adequate knowledge of workers comp to be able to participate in WCB discussions and decisions.  Executive director Dionne noted there has been good representation from MSEA, self insureds,  Synerent, etc. in the past. Despite a warning that opposition to the bill would offend the WCB committee of jurisdiction, the WCB voted 6-0-1 to oppose the bill.

WCB  Legislation

              The WCB is allowed to submit proposed legislative changes to the title 39-A in both the first and second sessions of the Legislature.  Five proposals were contemplated in October, but only two were submitted  in December. LD 1528 combines two of the original concepts.  (See below.)

              As reported in the September 2009 Alert, WCB staff had supported interest expressed by Labor Members of the WCB to submit legislation that would exempt the WCB from action taken with regard to the General Fund.  Clearer heads prevailed “in these tough economic times,” and, after two trial drafts, no such legislation was submitted.

              Travel expenses: the WCB has tried before to avoid the expense of going through the APA process every year, (for example using the current IRS rate)  but have been unsuccessful because the Attorney General’s office says that the APA process must be tied to a specific document.  A proposal to tie it to the State contract rate was also rejected.

LD 1528, An Act To Enhance Cooperation between the Workers' Compensation Board's Abuse Investigation Unit and Other State Agencies and To Ensure Equal Application of the Requirement To Obtain Coverage clarifies that the Workers' Compensation Board's abuse investigation unit may share information with other state agencies to enhance interagency efforts to ensure compliance with their respective laws and rules (a change to § 153.(5)).  This bill also ensures that the coverage penalties in the Maine Workers' Compensation Act of 1992 are applied in the same manner to all business entities including limited liability companies (a change to §324(3)(C)).

              LD 1529, An Act To Amend the Maine Workers' Compensation Act of 1992 Regarding Coordination of Benefits changes § 221(2)  Coordination of Benefits:  Legislation has been submitted that would prohibit insurance companies from taking an offset for life insurance that was converted to a lump-sum payment as a disability policy.  It is retroactive to all injuries including pending cases and cases on appeal.   In the Nichols case, such insurance was the result of collective bargaining, which had been the circumstance that convinced  Management Members of the WCB to support legislation  to prevent that happening again. Unfortunately, the language that was submitted made no reference to collective bargaining.   When this omission was pointed out at the December 15, 2009,  WCB meeting, Management members were advised they could testify before the Labor Committee when the bill came up.

Facility Fee Schedule

              The deadline for the WCB to vote on the Facility Fee Schedule has passed, and the proposed rules will have to go out through the APA process once more.  The WCB responded to concerns raised in the Public Comments and asked the actuary, Eric Andersen, to analyze additional data from the Maine Health Data Organization.   Staffing restraints have limited access to the data. Until the rules go through the APA process again, General Counsel, John Rohde, stated the parties will be subject to whatever is currently in Appendix 3 of Chapter 5, the Medical Fee Schedule, with regard to the CPT codes in place for specific services. There will be no Appendix 4 and 5, and the parties will have the option of lowering the amount by 5% if they pay an invoice within 30 days. This “rule” is currently in place with regard to “usual and customary” charges. (The Superior Court has already ruled the 5% discount does not constitute a fee schedule.) 

              Paul Dionne commented it was worth taking the time to do things right.

PI Data Base

              Jeffrey Kadison, the actuary hired by the WCB to determine the PI Threshold, had recommended that the WCB require employers to provide permanent impairment information on 3800 claims in the WCB data base over the past 10 years which should have recorded PI ratings but do not. (See the September 2009 Alert article, “More Work for Employers.”)  In October, the WCB was primed to send letters to all employers with claims on this list requiring them to retrieve and review these old, closed claims and report PI.  Since then, the WCB has had a pilot project with MEMIC and BIW before all employers are drawn in.  The premise has been that the employers failed to file the necessary information, but it errors at the WCB end have also been admitted. 

              Plaintiff attorneys Jim Case and Jim McAdam, regular attendees of the WCB meetings, are further insisting that the PI Data Base will not be complete until there are   PI assessments on all injured workers who are still working but have “permanent injuries.” Therein lie additional costs for employers on workers who are no longer receiving indemnity benefits and will not be settling their claims. 

September 2009

0% PI Law Suit Decided

   The WCCC does not look to enter into litigation with the WCB.  It is costly, and, win or lose, employers pay the bills for both sides.  However, with an uneven Board for nearly two years (2 Management and 3 Labor), the Management interests had no other option than litigation when the Executive Director voted with Labor in a  4-2 vote to adopt a PI threshold that included 0% Permanent Impairment (PI) ratings, resulting in a PI threshold of 11.8%.

        The case was argued for the Maine State Chamber, MCSI, and WCCC by Catherine Connors, with the law firm of  Pierce Atwood, in Kennebec County Superior Court in front of Justice Joseph Jabar on May 11, 2009.  In a  memorable metaphor to illustrate our position,  Ms. Connors argued that if one were trying to determine the average number of stripes on a zebra, why would one count horses?  Then Superior Court Justice, (now Maine Supreme Court Justice) Joseph Jabar, issued his decision on August 31, 2009.  In that decision, he referred to the 4th edition of the American Medical Association Guides, which states it is possible for a person to experience some permanent residual effects (i.e. permanent injuries) without having any permanent impairment.

   The last two paragraphs of his decision are as follows:

   “Consequently, the fact that some of the cases may involve some form of permanent injury does not mean that all of the 0% cases involve permanent impairment.

Remedy

   When an agency’s rule is invalidated as arbitrary and capricious pursuant to 5 M.R.S, §8058, the rule is set aside and declare [sic] invalid.  Because § 8058 is, in essence, a declaratory judgment action, an accompanying order to remand is inappropriate procedurally.  Accordingly, the court GRANTS plaintiffs’ motion for judgment on a stipulated record, and declares the Workers’ Compensation Board’s 2006 PI Threshold invalid.”

   At the September 22, 2009 WCB meeting, Paul Dionne joined Management in a 4-3 vote against having an appeal to the Maine Supreme Court.  This is very good news!

The Letter

   On July 2, 2009, WCCC Chair Peter Gore sent a letter to Paul Dionne, Executive Director of the WCB, outlining two areas of concern regarding the MAE Program and one with EDI, and requesting an opportunity for interested parties to meet with WCB staff and discuss them.  The concerns had been raised by numerous people who work “in the trenches” as claims managers.   The first two issues produced a firestorm of defenses in lieu of the requested meeting.  The third issue, involving EDI, was a  request for the Board to undertake  rule-making to make a particular field mandatory.  The Board reacted favorably to that request.

   As indicated, the first concern identified  was that the MAE program has come to require that time spent by injured workers going to medical appointments should be counted as lost time that can accrue and trigger a first full day of lost time and the filing of a First Report of Injury – even if the employee is paid for the  time spent  attending these medical appointments.   Employers contend the employee is not disabled, and it is the employer that loses productivity. In addition, tracking time in this manner was never a consideration for the Benchmark and Compliance group when it outlined how to account for partial days out of work.  Employers and insurers first got wind of this change when it was announced in the MAE News Special Edition – Audit Issues, in the winter of 2006.  It is interesting to note that this interpretation is not mentioned in the Forms Manual, which also never went through rule-making.  Regardless, MAE staff remains adamantly justified in their position.

   The second issue regards the proper paperwork for documenting a “Return to Work without Limits”.  In today’s economy, there are much fewer overtime opportunities.   There exist a class of injured workers that have average weekly wages (AWW) that were inflated with overtime.  Thus when they return to 40 hour weeks, they are not earning their AWW which included the overtime pay.  Are workers’ compensation benefits responsible for making up the difference when the employee is no longer disabled, but is not earning his/her AWW?  Must an employer submit a 21 Day Letter and pay three more weeks of compensation?  Could the employer and employee use Consent Between Employer and Employee (WCB-4A)?  These are legitimate questions and deserve discussion.

   With respect to the proper use of the WCB-4A, WCB Staff reported that there instances of abuse on the part of some employers.  Staff indicated that the form was always intended to be used only retroactively.  On page 41 of the 2004 Forms Manual, where the WCB-4A is listed as a form to use for Closure, there is no reference to retroactivity.  (On page 41 of the 2009 Forms Manual, the WCB-4A is no longer referenced as a tool for closure.) An alleged example of abuse was that an employer who, knowing that the injured worker was having surgery, had the WCB-4A used prospectively to end compensation a certain number of weeks after the surgery without regard for whether or not the doctor had released the employee back to work.  That example prompted the Labor members of the WCB to move for emergency rule-making to immediately eliminate the WCB-4A.  That example, if accurate, does not seem to be appropriate, but there are many other instances where the WCB-4A has been an appropriate closure tool.   Some Hearing Officers recommend it, and numerous plaintiff attorneys have agreed to it.  Regardless, readers of the Alert are warned to use the WCB-4A with care because it is going to be closely scrutinized in audits.

More Work for Employers

   What was the “Legislative Intent” when the PI Threshold concept was added to the comp reforms in § 213 at the 11th hour during the final negotiations on the statute in 1992?  The durational limit had been lowered to 5 years for people who had a work capacity but had not returned to work.  (As of August 17, 2009, the durational limit reached its maximum duration of 10 years.)  The stated reason for the PI section of 213 was to ensure that the class of most seriously injured people would not lose benefits.  For years, many understood that the 25/75 split in Section 213 was to apply to those people who were approaching, or had exceeded their durational limit.  PI assessments were gathered from settlement documents (WCB-10) where there is a blank  included to provide the PI assessment “if known.”  For the past year or so the WCB has required a PI assessment or a statement that there is no PI for all settlements.  That should improve the data base…but at what cost for employers?

   One unanswered question is, was the Legislative Intent that the 25/75 split between the classes of injured workers to be for those who were reaching the durational limit, or, as the current direction of the WCB staff now seems to be, for all lost time cases whether or not the injured workers have recovered and returned to work?  It is a critical question.

   Jeffrey Kadison, the actuary hired to determine the PI threshold, confirmed early on that the WCB data was inadequate.   Following the apparent direction of the WCB staff, he is looking to require employers to open and review 3,388 closed cases (of a potential 5,387 cases with inconsistent data in the WCB data base) in order to reconcile the amounts reported on the WCB-10’s and WCB-11’s.  However, in the instances of closed cases, there is no means to have a permanent

impairment assessment done.  There might be some value for employers who have ready access to closed cases that have not been put in storage to check to see whether they did, in fact, file both the WCB 10 and WCB 11, if for no other purpose of protecting themselves, as there has been no consideration that some of the inconsistencies in the data base might be the fault of the WCB recordkeeping.

   This sampling is MUCH larger than employers were asked to complete two years ago.  There was considerable cost to employers and insurers at that time for a much smaller sample (roughly 600 or so cases), and some were not able to comply with  the request.   

   In addition to reviewing 3,388 closed cases, plaintiff attorneys who regularly attend WCB meetings are encouraging the WCB to require that employers seek and pay for PI assessments on all lost time claims, even if the injured workers have recovered and returned to work…a requirement that could add millions to our comp system costs.  Thus increasing the pool of injured workers under consideration skews the original intent of the PI threshold by artificially lowering the threshold for extended benefit eligibility and potentially assuring that virtually all injured workers who are out of work for the maximum duration of ten years can expect lifetime benefits.

WCB Briefs

WCB Rule Chapters 1 and 3 (Electronic Proof-of-Coverage): the rule changes in regard to electronic proof of coverage went into effect on August 22, 2009.  UIAN is a mandatory field, but there is a grace period.  ( See January 2009 Alert.)

Board Rule Chapter 2: WCB Rule Chapter 2, regarding the 52-week extension of benefits went into effect on the 17th of August.  The durational limit is now at the maximum of 10 years.

Law Court Ruling (St. Mary’s Regional Medical Center v. Bath Iron Works, Corp.):  In the Law Court’s May 20, 2009, decision in the case of St. Mary’s Regional Medical Center v. Bath Iron Works, Corp, the Court ruled that, until the WCB promulgates a Facility Fee Schedule, the facility can charge their usual and customary charges regardless of what they actually accept in payment.  Even though most BIW cases are under the Longshore and Harbor Workers Act, which has its own fee schedule, doctors are allowed to request payment under the Maine Statute.   The resulting decision finds BIW paying nearly $70,000 more than they were initially billed under the Longshore schedule.  This is a disappointing decision, but is points out the ongoing problem of the WCB’s lack of a fee schedule for medical facilities. 

Maine WCB News and Notes, ENews Volume 1, issue 2 September 2009

   Paul Dionne, Executive Director of the WCCC, has just published a second newsletter, available  at http://www.maine.gov/wcb/departments/execdirnewsletters/index.htm. The lead  topic of this edition entitled “How About Some Good News!”  In that article, ED Paul Dionne indicates that the assessment on employers used to fund the WCB has been “reduced in these difficult economic times ” by taking money out of the Employment Rehabilitation Fund. Moreover, Dionne writes: “The current balance in the Fund is $2,876,415.  In light of the drop in frequency of cases and the penalties received from employers that do not have coverage, I am recommending that the Fund be reduced by the sum of $2,376,415 over the course of FY 2101 and FY 2011.  This would result in the reduction of the assessment to employers of $1,188,207 per fiscal year.”

   Dionne concludes:  The reduction in assessment of $3,050,000 is a direct benefit to employers of the State, and, in conjunction with the MEMIC dividend ($15 million) should have a powerful effect on the Maine economy.”

Proposal:  WCB Exempt from Directives to General Fund Agencies

      WCB is funded by an assessment on employers, not by the General Fund, making the WCB  one of a number of “dedicated funding” state agencies. The Labor members of the WCB and staff are proposing that the WCB budget should not be subject to the budget restrictions General Fund agencies.  This is  despite the fact that other state agencies who receive dedicated funding are subject to budget restrictions and legislative scrutiny.  The WCB avoided the 10% across the board budget reduction by proposing that the assessment on employers be reduced by $1 million which would be taken from the Rehabilitation Fund.  As presented by Paul Dionne, this is a huge gift to employers “in these tough economic times.”  However, this is actually a return of employer money collected from fines on employers. (Funds from the small number of death claims with no beneficiaries also go into this fund.)  The WCB budget remained unchanged despite massive reductions in other state departments and agencies  It is also a time when fewer claims are going  into the system because frequency of claims is down, businesses have closed, and there are many fewer employees.  Once the Employment Rehabilitation Fund is depleted, the assessment will rise again even if the budget remains at the same level. 

      Governor Baldacci has directed his cabinet agencies to prioritize their programs with an eye to additional reductions.  The five WCB agencies as outlined by ED Paul Dionne are: 1) Dispute Resolution Program; 2) Monitoring, Audit and Enforcement Program; 3) Worker Advocate Program; 4) Employment Rehabilitation Fund, and 5) Requests for Predetermination of Independent Contractor Status.   In response to the Governor’s request for agencies to cut programs, his recommendation is to cut 4 & 5.   The Employment Rehabilitation Fund continues to receive considerable funds from fines on employers, but that fund could be assigned to another program.  It is currently under Deputy Director of Medical and Rehabilitation Services, Betty Inman.  With the current attention to independent contractors, eliminating the Predetermination Program would delay what has been a political hot potato in the legislature over the past two sessions.

June 2009 Alert

Seven At Last!

It has been almost three years since the WCB had a full board of seven members.  In March, as reported in the most recent Alert, the Labor Committee confirmed two new Labor members of the board and one new Management member.  The WCB meeting was held as scheduled even though Management was still down a member.  Tragically, the two sides were even at the April 7, 2009 meeting because Bruce Roy, one of the two new Labor representatives, died unexpectedly at his home that morning.  The next week, Sophie Wilson, Town Manager for Brownville, stood her ground through a grueling confirmation hearing on April 15 in an effort to become the third Management member.  At issue was whether her being on the MMA Workers Compensation Fund Board of Trustees makes her a service provider.   [Of courses not!  Service providers are people hired by companies for services not performed by their employees such as medical specialists, attorneys, vocational rehabilitation counselors, etc.  The intent of the language in the statute was to have actual employers and employees on the board, not, for example, defense and plaintiff attorneys. Wilson’s role as a trustee is and extension of her employment and not a service for which she is compensated.]  Despite the concern expressed by some Labor committee members, she was recommended for confirmation by the committee in a 11-1 vote.

It took some time for Labor to identify another candidate, and, by the time Daniel Lawson confirmation hearing could take place, the 45 day limit after Wilson’s confirmation hearing had expired requiring her to go through the hearing a second time.    Despite your editor’s frustration, the process has produced excellent candidates, and Deb Friedman, of the Governor’s Office, is to be commended.  As Peter Gore, Chair of the WCCC, said when he testified in favor of Daniel Lawson’s confirmation, “All of the candidates seem to have the disposition and desire to move the system forward for both employers and employees.”

Daniel Lawson, a Monroe resident, is employed at Verso Paper in Bucksport. He has been an elected union officer for 19 of the 22 years he has worked at the mill. He has been a member of the United Steelworker’s Union (U.S.W.) Local 4-0261 for 14 years and currently serves as Local Vice President. He previously served the Town of Monroe in a number of capacities, including Selectman, Tax Assessor, member of the Planning Board of Appeals and is now a retired volunteer fireman. Lawson earned his undergraduate degree from Centralia College in Centralia, Washington.  He said of himself that he always tries to get as much information as he can, adheres to rules and the law, and is a team player.  

Sophie Wilson has been the Town Manager for Brownville for almost 9 years.  She graduated from the University of Maine at Orono and has a Master’s degree in Public Administration from the same university.  She is a member of numerous boards that relate to her multi-faceted responsibilities as the Town Manager of a town of 1260 residents.  When one Representative on the Labor Committee suggested that she resign from the Maine Municipal Association Workers’ Trust Fund Board of Directors, she replied she would not because she had made a commitment and was going to follow through.   She will be a thoughtful and committed member of the WCB.

When the seven people who now compose the Workers’ Comp Board finally start meeting, we look forward to improved discussions and decisions.

Sophie Wilson, Management Member, and Daniel Lawson, Labor Member, bring the WCB to its full complement of seven.

Lavoie v. Re-Harvest Law Court Decision

A Case Involving Discrimination

              The Maine Supreme Court has decided that, when an employer terminates the employee because he is unable to return to work at all, the employer is not guilty of discriminating against an injured employee under §353 of the Act, but this precedent may apply only to other cases with similar facts. 

              In Lavoie v. Re-Harvest, 2009 ME 50, Lavoie injured his back at work and could not perform his regular job or even a light duty assignment Re-Harvest designed specifically for him.  Re-Harvest voluntarily paid Lavoie total incapacity and medical benefits, but within four weeks after his injury, Re-Harvest terminated his employment (and his health insurance) and gave his job to another worker.  Lavoie remained incapacitated for a year, before returning to work elsewhere. 

              Lavoie filed a Petition to Remedy Discrimination (among other petitions), and HO Goodnough granted it, awarding Lavoie the cost of his health insurance and attorney’s fees.  HO Goodnough found that Re-Harvest had no specific written policy regarding termination of injured workers," and that at the time of termination "it was not yet known how long it would take the employee to recover a work capacity."  He found that the termination was discriminatory because it was based on Lavoie's "status as an injured worker unable to perform light duty work."  

              Re-Harvest appealed, and the Court vacated the Board's decision that the employee's termination was "rooted substantially or significantly in the employee's exercise of his rights under the Worker's Compensation Act."  The Court found that the Act does not "guarantee continued employment status to the employee who cannot work."  The Court agreed that the "proximity in time between the assertion of a claim for workers' compensation benefits and the adverse employment action may constitute circumstantial evidence of discriminatory intent," but if an employee cannot perform any work, and there is no evidence that is likely to change in the near future, the employer has no obligation to continue the employee's employment.  

              The Court also noted that Re-Harvest has fewer than 20 employees, that the employee did not file a Petition for Reinstatement (because he could not work), that the employee did not claim that he could return to work soon, and that the employee in fact remained out of work for a year.  The Court also noted, however, that other provisions of Maine and federal law might "allow a longer period of leave" before termination. 

              Employers are cautioned not to read too much into this decision.  The result in this case may have been different if it had involved a larger employer with more opportunity for finding suitable light-duty work for its injured employees, or if the employer had not paid worker's compensation benefits voluntarily, or if the employee’s doctor had suggested, or the employee had simply claimed, that he "expected to regain a work capacity soon."  We also recommend that employers establish appropriate written guidelines for termination of employees who cannot return to work following an injury, whether work-related or not.

WCCC Alert credits this article to Kevin Gillis, Tom Getchell, Mike Richards and Dan Gilligan at TROUBH HEISLER (780-6789).

Labor Committee and Legislation 2009

              The Joint Committee on Labor for the 124th Maine Legislature has gone out of its way to enlist the opinions and to urge consensus among the interested parties for bills regarding workers’ compensation.  Most bills were either voted Ought Not to Pass or Unanimous Ought to Pass, thus avoiding floor debate.  Bills were paired together for the convenience of the parties.  In the pairing of LD 1384 (“Apportionment”) and LD 946 (“Grant”), it took three separate worksessions to find agreement, but, in the end, parties were satisfied.  The WCCC commends the Labor Committee and its leaders.

              The amendment to LD 946 clarified that earnings may be discontinued or reduced by the actual substantiated amount paid to the employee during the 21-day period if the employer files the evidence of payment with the Workers' Compensation Board for the time during which an employee was actually paid by the employer.  It was adopted by the House on May 26 and the Senate on May 28.

              The amendment to LD 1384 clarified  that there will be no reduction of an employee's entitlement to any workers' compensation benefits based on the lump sum settlement of a prior work-related injury.  It was adopted by the Senate on May 26 and the House on May 27.

WCB Eliminates One Hearing Officer

              At the February 10, 2008 WCB meeting, Paul Dionne reported that in 1999 there were 2,312 cases at the formal hearing; in 2001 it had risen to  2,725 cases.  For 2008, staff projected the number would be 1,776.  Since the number of cases has  decreased Paul recommended a reduction in the number of Hearing Officers, and noted  that Jonathan Sprague, of the Bangor office, had the least seniority; he was laid of June 13, 2009.  Hearing Officers Gary Green and Tom Pelletier will re-shuffle the case loads.  The number of disputed cases drives expenses at the WCB.  The budget should reflect this reduction.

WCCC, Maine Chamber, MCSI v. WCB

 Oral argument in the Chamber/WCCC/MCSI v. the Workers’ Comp Board  was held on May 11, 2009, at the Kennebec  County Court House before Justice Joseph Jabar.  Cathy Conners, who represents the WCCC and Maine Chamber,  made a clear presentation  on the use of 0% PI ratings.  Kevin Gillis (representing the Maine council of Self-Insureds)  supported  her on this point and argued, in addition, that the Board erred in rejecting the actuary's opinion on stacking.  They both made clear the problem with using the 0%  PI cases to adjust the percentage of PI that may entitle an injured worker to benefits beyond durational limits .  Of the cases reviewed, 85 were found to have PI, but 183 did not.  Some of the 183 did not even have permanent injury.  Still, all of the 183 cases were included in the Kadison calculations in which he included 0% PI’s (as directed by the majority of the WCB).  This new information further justified the legal action that these Management oriented organizations needed to take against the WCB.  It will be 2-3 months before there is a decision.

                                                  The 124th Legislature Completes its Work for 2009

        By the time this Alert goes to press, the First Session of the 124th Legislature will have adjourned.  Once again, it was a session full of critical issues, including closing a biennial budget gap of nearly $1.2 billion, passing a very controversial tax reform package, and a host of other issues.  From the perspective of the WCCC, this session was a positive one.  The Joint Standing Committee on Labor, which has jurisdiction over our comp system, was measured in its approach to the few measures submitted for their consideration.  Legislation impacting the so called “Grant” decision was finally approved and passed, and a proposal to eliminate the IME system was rejected by the committee.  In addition, although it took nearly all session, the workers’ comp board finally has a new cadre’ of members that provides both sides with a chance to move the system forward in a positive manner.

        The Labor Committee is to be commended for their hard work, and their willingness to allow stakeholders to work out their issues to mutual satisfaction.  The WCCC thanks Committee Chairs Sen. Troy Jackson (D-Aroostook) and Rep. John Tuttle (D-Sanford) for their leadership, as well as committee members  Sen. Stan Gerzofsky (D-Cumberland), Sen Peter Mills (R-Somerset), Rep. Herbert Clark (D-Millinocket), Rep. Timothy Driscroll (D-Westbrook), Rep. Anna Blodgett (D-Augusta), Rep. Steven Butterfield (D-Bangor), Rep. Paul Gilbert (D-Jay), Rep. Andre Cushing (R-Hampden), Rep. James Hamper (R-Oxford), Rep. Michael Thibodeau (R-Winterport), and Rep. Bruce Bickford (R-Auburn) for their hard works and the spirit of bipartisanship they exhibited throughout the past 6 months.

(Article by Peter Gore, Chair of the WCCC)

April 2009 Alert

WCB Appointments Drag On

                    The confirmation hearings for the governor’s five nominees for the Workers’ Comp Board were held on March 18, 2009.  One of the Management nominees withdrew  her name, so there will need to be an additional confirmation hearing. There will be new faces at the next WCB meeting, currently scheduled for  April 7, 2009.  The background information on the “new” board is listed in the order of the confirmations of the nominees.

                    Anthony Monfiletto III lives in Portland and works at Bath Iron Works where he is the Chairman of the Benefits Committee and the Health and Welfare Committee for Local S6. He has served on the WCB for 12 years, but the Resolve (LD 2318 in 2008) allowed the Governor to nominate one person from each side to provide continuity.  In this instance, the Resolve trumped the Statute, which limits board members to two four year terms. Monfiletto was appointed to his second term in 2001.

                    James Mingo lives in Holden, is a CPA and works for the University of Maine Alumni Association where he is responsible for all accounting and cash management of a multi-million dollar fundraising and membership organization.  He was appointed to his first term on the WCB in 2002. His financial experience has been helpful to the board.  He has earned the respect of Labor; in fact, an outgoing Labor member of the WCB spoke in support of his nomination.

                    Bruce Roy lives in Jay and works for Wausau Papers at the Otis Mill.  He is the Recording Secretary of USW Local 11 and is President of the Maine Labor Council of the USW.  He served as a Jay  Selectman and on the Board of Assessment Review and the Board of Directors of Franklin County Community Action Program.

                    Mitchell Sammons lives in Belgrade and is Vice President of Finance and Administration for the Sheridan Corporation in Fairfield.  He is a Colonel in the U.S. Air Force Auxiliary (Civil Air Patrol), is chairman of the Maine Chamber Workers’ Compensation Group Trust, and serves on the Boards of Directors of the Somerset County Economic Development Corporation, The Maine Coalition for Excellence in Education, and the Alliance for Maine’s Future. 

                    Ginette Rivard, of Caribou, is a licensed social worker employed by the Maine Department of Health and Human Services.  She is a Regional Supervisor of the Children’s Behavioral Health program at DHHS. She has served on the Madawaska Zoning Board of Appeals and the Battered Women’s Project.  She is Vice-President of MSEA-SEIU Local 1989 and has served on the Maine AFL/CIO Executive Board representing MSEA members.  While she has been registered as an Lobbyist Associate, she will not serve in that capacity once she is a member of the Workers’ Comp Board. 

              The candidates were approved unanimously by the Senate last week, and are now official WCB Directors.  It is expected that the Governor’s office will post the final management nominee shortly, and we look forward to having WCB meetings with a full complement of  both Labor and Management members.

Gary Koocher looks happy prior to his final meeting as a Management Member of the Workers’ Comp Board.  The WCCC sincerely thanks him for his dedicated, effective, and good-humored work in trying to maintain a balanced system in Maine  for both employers and employees.

Busy Time for Rule Making

Extension of Benefits to Full 520 Weeks

                            There are currently three sets of rules going through the APA Rulemaking Process for the WCB. The Public Hearing for the 5th and final 52 week extension, which will bring the duration of partial disability benefits up to 520 weeks, the maximum length of time envisioned by the statute, is on March 23, 2009. 

              Note: At the August 26, 2008, meeting of the WCB, Labor members of the WCB were quick to move o send the 52 week extension out to public comment, and the Management members voted with them.  However, after extensive discussion of the actuary’s recommendation that the Permanent Impairment Threshold be raised from the current threshold of 11.7% to 13% (or 13.5% if you do not factor in 0% ratings), Labor moved to table the motion to send that portion out to rulemaking, Paul Dionne voted with them, and tabled it has stayed. On February 2, 2009, the 4th 52 week extension of the duration of benefits became effective.  Partially disabled injured workers now may receive benefits up to 468 weeks.

Coordination of Benefits

              If Labor’s dominance of the WCB had not been sufficiently demonstrated for the past 2 years, the final official meeting  for the  outgoing WCB (2 Management, 3 Labor and 1 Executive Director on February 24, 2009) ended at an “all time low.”  In an apparent effort to accommodate an outgoing Labor Director, General Counsel, John Rohde, had drafted a rule which was not circulated to the board members prior to the meeting.  Moreover, the rule was not on the agenda.  The majority of the WCB (3 Labor Directors plus the Executive Director) voted the rule out to Public Comment over the protest of the Management Directors who requested that, as had been past practice, they be allowed the opportunity to discuss the rule with their constituents. 

              While there is probably need for a rule to support  § 221 Coordination of Benefits, it was the principal of sending an un-reviewed rule to Public Hearing that was objectionable.  Moreover, the proposed language needs improvement.

               The purpose of coordination of benefits is to preclude anyone from receiving a greater income because of the receipt of Social Security or retirement benefits along with workers’ compensation than they would have received had they continued to work.  The proposed rule deals with spreading out the offsets for workers’ comp in case of a lump sum settlement. 

              This topic had not previously come before the WCB, and the quality of the discussion did not compensate for the urgency of the vote. Executive Director Paul Dionne justified his vote by claiming that the current board understood the situation better than a future board.  Certainly outgoing Labor Director, Rodney Hiltz, who had resurrected a two year old law court decision, (Nichols v Sappi Paper) understood it, but Management Directors, at least, were seeing it for the first time.   Nichols was on the agenda, but one time payment was not an issue in Nichols, so General Counsel raised Foley v. Verizon, which was not on the agenda.  Since proposed rule making on this issue was not on the agenda, companies who had been involved in the cited lawsuits were not present at the meeting.

              The proposed language of the rule spreads out the offsets by dividing the lump sum settlement by the number of weeks of life expectancy of the injured worker.  The worker gets all of the money up front and can invest it, but the employer must wait 5, 10, 20 or more years for the full offset, and, given the time value of money, the offset has less monetary value.  

              When the rule comes back from Public Hearing for a vote, there  will be a new board. This 11th hour railroading took advantage of the imbalance of the WCB. It will take time for the business community to get together and come up with fairer language.  At least we can expect that there will be three Management members on board when meetings resume.

              The Public Hearing for this rule has not been announced.

Medical Fee Schedule

(based on material from John Lambert)

              The WCB worked with a Consensus Based Rule Making group for years.  Employers participated and were prepared to negotiate on some points, but the initial rule proposed by Eric Andersen of Ingenix, which the business community expressed concerns over for not going far enough to control medical costs,  did not change.   The good news is that, for the first time,  there will be a real  fee schedule (not just the current 5% discount program) for out patient care and ambulatory care. It will be based on the Medicare DRG system which should create some control over costs.   The WCCC continues to have some issues with the proposed rule.

                    Throughout the summer and fall, the staff and Mr. Anderson stated  that there proposed regulation was cost neutral: that they were replicating the status quo.  After getting the employer  proposal in October, this posture changed, pointing to the outlier process as a basis for savings. 

The Base Rate. 

              In March 2008, Mr. Anderson estimated the Inpatient Base Rate for Maine Workers' Compensation with a 40% discount to be $7,996.  In October, employers proposed that we use the Base Rate used in the federal OWCP program which was roughly $7,815.  As the rule is drafted, the Base Rate is  $8,923 --  almost 12% higher than the initial figure and 14% higher than what employers had proposed. It is unclear how this Base Rate compares with what is paid by 3rd party payors  because Ingenix never provided that  information. At least it is an improvement over what Ingenix identified as  Maine’s current baserate in March of 2008, which is $12, 764.

Critical Access Hospitals. Despite a ruling in September 2008 by Superior Court Justice Mills that a discount arrangement is not a medical fee schedule, the proposed rule does not address change the way rural hospitals currently bill.

Outpatient Fees.  Savings that should have resulted from data gathered from 3rd party payors have been passed by. The proposed baserate of $8,923 will not make up for this oversight. 

Outliers.  An outlier is an admission under the DRG system  for which the cost exceeds a threshold; beyond the threshold a more costly pricing system goes into effect.  In Medicare, if the facility charge exceeds $70,000, the outlier pricing process becomes applicable.  The WCB staff has proposed a threshold of $50,000 for Maine employers. Employers  had suggested $70,000, the same threshold as Medicare.  While the outlier concept saves employers from paying 95-100% of the full charges, the lower  threshold does not save employers as much as the higher one.  

Durable Medical Equipment and Implantables. 

Employers had  proposal that the 20% surcharge allowed on the costs of durable medical equipment and implantables would be capped at $250, but the staff was unwilling to do so and hence the surcharge remains uncapped for both durable medical equipment and implantables.

Usual and customary charge. 

The default position in the regulation is the same old usual and customary charge of the facility.  In other words, if the service that is the subject of the charge is not covered in the DRG schedule for any reason, employers are to pay the full charge.  Employers  had proposed that employers pay the usual and customary payment received by hospitals from private 3rd-party payors in the preceding six months. 

Preventable Mistakes.  Despite unofficial agreement  that Employers under Title 39-A were intended to be included in the payors who need not pay for treatment caused by preventable mistakes, the consensus based rulemaking group was not willing to include clarifying language in the rule, and employers were forced to go to the Legislature (LD 322) . Employers were concerned that, given the opportunity, a WCB hearing officer would  conclude that a Maine employer and or its workers comp  insurer is not the patient's insurer.  Fortunately the Committee on Health and Human Services saw the reasonableness of the request and voted Unanimous Ought to Pass.

LEGISLATION

One of the more onerous bills before the 124th Legislature is LD 617, An Act To Amend the Maine Workers’ Compensation Act of 1992 To Remove Independent Medical Examiners.

History of the IME System

(Based on material provided by Kevin Gillis)

              The Independent Examiner system first created by 1991 statute,  but it had no

time to mature because of the major reforms that followed in 1992.  The concept was carried over as §312 of the 1992 Act.  It took several contentious years for the WCB to develop rules for IME’s. The first examinations occurred in 1997.

              The bipartisan WCB promulgated a regulation in 1996 providing that a physician is not eligible to serve if the physician had examined the employee in question at the request of an employer or insurer in the last 52 weeks. The rule allowed  physicians  to remain eligible to perform IME’s even if they had examined other employees at the at the request of an employer or insurer.

              The system worked very well from 1997 to 2003. In 2003, the Law Court decided, in Lydon v. Sprinkler Services, that the WCB regulation was inconsistent with the statute, and that a physician was ineligible to serve as an independent examiner if the physician had examined "any" employee at the request of an employer or insurer in the last 52 weeks. This significantly reduced the number of physicians available to serve as independent examiners.

              The Legislature considered bills in 2005 and 2007 relating to the independent examiner system.  In 2005, the Legislature amended Section 312 to provide that the parties could agree to the appointment of an independent examiner not on the examiner panel, regardless of whether the physician had performed an examination at the request of an employer or insurer in the last 52 weeks, and that the findings of the examiner in that situation would not be binding on the parties, but would be required to be accepted by the hearing officer unless there is clear and convincing evidence to the contrary of the examiner's findings. This amendment was designed to increase the availability of independent examiners by encouraging agreement by the parties to appoint physicians not on the panel to fill this role.  It has not been effective because the parties rarely agree.             Also in 2005, the Legislature rejected a bill which would have restored the language of the overturned WCB regulation, which would have allowed a physician to serve as an independent examiner as long as the physician had not examined the employee involved at the request of an employer or insurer in the last 52 weeks. This bill would have significantly increased the number of examiners available, restoring the system to its pre-2003 status.

              In 2007, the Legislature rejected a bill which would have allowed a physician to serve as an independent examiner, if otherwise qualified, if the physician had not conducted 10 or more examinations at the request of employers and insurers in the past 52 weeks. This bill was another attempt to  increase the number of examiners available. Also in 2007, the Legislature rejected a bill that would have allowed the appointment of an independent examiner only when the parties agreed that an independent examiner should be appointed, removing the ability of one party to unilaterally request an examination. This bill would have virtually eliminated the system, and the Legislature rejected that result.

              In the past year, the WCB gathered a group of interested parties to work on improvements to the IME system, and they came up with viable suggestions.  However, in 2009, the legislation is to outright eliminate it.  The WCCC opposes this legislation. 

              The independent examiner system provides for truly objective, unbiased medical opinions on contested medical issues on which hearing officers can rely.  Independent examinations can be requested after unsuccessful mediation, and if requested promptly, should not cause undue delay in litigation. Delays occasioned by appointment of independent examiners could be further reduced by allowing requests for appointments to be made prior to mediation once a Notice of Controversy or a petition is filed.

              If the independent examiner system were removed, it would be replaced by a "battle of experts" and result in more litigation of medical issues through depositions of retained experts and treating physicians. The independent examiner system allows the parties to avoid litigation, to resolve litigation prior to conclusion, and to reduce the extent of litigation necessary to bring a case to a decision, thus saving time and expense. Not only would this be costly, but it would result in major delays. 

              Both representatives of employees and employers request the appointment of independent examiners; still, organized labor and its representative support elimination. The current hearing system, when viewed historically, is reasonably prompt, particularly considering that the overall volume of litigation has decreased. The availability of independent examinations has not caused hearings and decisions to be unreasonably delayed. While there has been testimony that the IME delays claim resolutions, other representatives of employees, including private attorneys and advocates, disagree, and prefer to have the option of requesting an appointment of an examiner available. Independent examiner systems continue to function well in other states, and to the extent that our system needs improvement, the focus should be on improving the system rather than eliminating it.

              At the Work Session on LD 617, the chairs of the Labor Committee requested that stakeholders meet and see if some commonality could be reached.  The committee requested WCB Executive Director Paul Dione pull together a representative from Labor, the Maine State Chamber of Commerce, a representative from the Maine Medical Association, and the bills sponsor, Sen. Stan Gerzofsky, to determine what if any consensus can be achieved on this issues,  The group plan to meet on April 9.

More Legislation

LD 176, An Act To Equitably Adjust the Workers’ Compensation Board’s Assessment, was voted out of committee Unanimous Ought to Pass,  It allows the WCB to credit insurers with overpayments made to the WCB because of over assessments.

LD 578, An Act Regarding Repayment of Subrogation or Lien Claims in Workers' Compensation Actions was voted out of the Labor Committee Unanimous Ought NOT to Pass.

LD 579: An Act To Provide Wraparound Medical Coverage in the Workers' Compensation System was voted out of the Labor Committee Unanimous Ought NOT to Pass.

LD 621, An Act Allowing Workers’ Compensation Benefits for Firefighters Who Contract Cancer:  The Occupational Disease portion of the statute covers this issue.  The Labor Committee vote has been tabled.

LD 620, An Act To Ensure the Workers' Compensation Board's Regulatory Oversight of the Maine Insurance Guaranty Association (MIGA) The purpose of MIGA is to provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers. LD 620  would provide authority for the WCB to penalize MIGA, which would be in addition to the regulatory authority of the Bureau of Insurance over MIGA. Maine is the only state which gives its WCB the authority to audit a guaranty association; in other states the regulatory authority is exclusively with the Bureau of Insurance.       MIGA representatives worked with WCB staff in an attempt to reach consensus.  Their issues were not included in the bill, which was drafted by WCB staff. The Board never voted on the bill and did not take an official position.  When asked at the Public Hearing, staff responded that the WCB had not opposed the bill.

              WCCC is concerned because of potential penalties on MIGA for not meeting the time schedule when they take over claims that are in disarray or without even having  the necessary paperwork in hand.  Also, MIGA covers several lines  of insurance.  If the funds allotted to workers’ comp are used up through assessments necessary to pay WCB fines and penalties, the assessments will spill over to other lines.  This should be of concern to anyone who buys any type of insurance. 

              WCB staff provided the Labor Committee with its audit findings from two years ago, but did not include MIGA’s response disputing those findings.  Based on those outdated findings, it appeared that the majority of the Labor Committee were reluctant to allow them the requested 45 day grace period.  

January 2009 WCCC Alert

What Happens to the WCB Board Members on March 1, 2009?

      At the December 9. 2008 WCB meeting, Management Member Gary Koocher inquired about the approaching legislated March 1, 2009 deadline for all current WCB board members to resign.  John Rohde, General Counsel for the WCB, confirmed that all of the Labor and Management members must resign leaving the Executive Director, Paul Dionne, to serve by himself.  The Resolve (LD 2318 in the 123rd) also requires the Governor to appoint 3 Management and 3 Labor representatives by February 1, 2009.  As reported in the October Alert, Labor had not turned in their required 12 names at the time of the Maine Senate’s confirmation session in September, so the Management side continued to be down a member.  As of January 13, 2009, the AFL/CIO still had not submitted names, but Paul Dionne was “confident they will submit them.”   By dragging their feet, the Labor side has succeeded in maintaining a numerical advantage that has served to their benefit for two years.

A Creative Solution to a 10% Reduction in WCB Budget

      Governor Baldacci ordered all departments to make a 10% cut in their budgets, but the WCB is not a General Fund agency, so Paul Dionne has pointed out that cutting the WCB budget by 10% would do nothing to help the General Fund.  In addition to a Reserve Account that is about to reach its max of $2.5 million, the WCB was reminded that they also have access to the Rehab Fund, also funded primarily by employers.  Since the WCB spends only $50,000 to $70,000 per year on Rehab plans, that fund has grown to $2 million! (Yes, between the Reserve account and the Rehab Fund, the WCB is holding more than $4 million.)  The Governor was receptive to the idea that $1 million from the Rehab Fund be used to offset the next assessment.  This was presented as giving Maine employers a break (by giving them credit for money they gave in the first place.)  The WCB tabled this idea, and there has been no vote, but if the $1 million is approved, the WCB would not have to cut its budget at all.

      The official vote on the WCB Budget occurred at a special meeting of the WCB on August 28, 2008.  At that time, they approved a budget of $10,446,994 for FY 2010 and $10,681,089 for FY 2011. Raises voted for state employees and their retirement funds are said to account for the increases.  In September, Governor Baldacci ordered all state agencies to make the 10% reduction.  Moving funds from an inflated account to offset employer’s assessments may lower what employers have to pay, but it is not a budget reduction, and it will lead to even greater assessments on those employers in the future who will have to take up the slack when revenue to the WCB will be lower due to diminishing payrolls.

Maine is Still a High Cost State

   The good news for states across the United States is that workers’ comp premiums have come down. In 2007, Paul Dionne reported to the Legislature that the advisory loss costs, the portion of workers' compensation insurance rates which cover the projected loss and loss adjustment

expenses, were, on average, 37 percent lower than they were at the time of the last major reform to the system in 1993. In 2007, NCCI decided not to file any change in the loss cost.

   In November of 2008, NCCI filed a loss cost rate reduction of 7.6%.  They credited the reduction to effective safety programs and return to work programs implemented here since 1992.  Maine employers should be very proud of their efforts in this area. Other states are also seeing reductions; so, even with this 7.6% reduction, Maine remains a high cost state.

      The 2008 Oregon Workers’ Compensation Premium Rate Ranking Summary found Maine to be the 6th most expensive state in the country.  Even after considering the 7.6% reduction, Maine would still be in the top quarter of states in terms of workers’ comp rates. The Actuarial & Technical Solutions ranked Maine the 16th highest. For Office & Clerical Maine is 11th highest and for wage replacement benefit costs place us 14th highest. These reports, added to the unique challenges of compliance with our comp statute in Maine, do not bode well for companies who are looking to bring businesses to or keep businesses in the state.

Assessment Refunds

       The WCB has proposed legislation (LD 176)  that would legalize their past practice of retaining overages and offsetting future assessments on employers.

      In the course of legislative discussion of the Governor’s Budget in 2007, employers, concerned about a pattern of over-assessments and the inability of the WCB to correctly identify money in the Reserve Account, requested an audit of the WCB to determine their method for developing a budget and the subsequent assessment on employers. The auditors limited their interviews to WCB staff and were convinced that the solution to the boards problems were 10 additional staff people!  Other audit recommendations resulted in improvements that included new accounting software, and establishing the Reserve Account as a separate line item.   Auditors pointed out that the WCB’s custom of retaining overages to offset future assessments was not in accordance with the language of the statute.

      The audit request in 2007 was because of over assessment; there was nothing said about the method of returning the funds.  For 2005 the WCB over collected $201,375. There was another over-assessment in 2006.   The WCB has returned $122,833 to Insurers and $78,536 to Self-Insureds.  The unintended consequence to this action was that  insurers were then directed to return multiple  miniscule amounts to their insureds.  The administrative costs associated with returning this money was far out of proportion to the returns.  MEMIC was allowed to include their returns (approximately $86,000) into their dividend refunds.  The remaining $110,000 was distributed among the other carriers.  Acadia Insurance returned their check to the WCB.  One suggestion from WCB to other insurers was to turn the money in to the State as unclaimed property. Self-insurers returned the money to their funds and will not be getting refunds in the future since their assessment method is more accurate.

      For a full year, insurers have sought a resolution to this problem.   In January 7, 2009 letter to insurers, Paul Dionne not only advised them to report to the WCB what they had done with the refund, but he also directed there be an administratively challenging  breakdown of the number of refunds that were equal or greater than $50 and the number that were below $50.  Their letters are due prior to February 15, 2009.

§312 Independent Medical Exams

      At the December 9, 2008 WCB meeting, the WCB voted to appoint Jeffrey Barkin, M. D., as a Board-certified Independent Medical Examiner to perform medical examinations in accordance with Section 312.  He would be the second psychiatrist on the list along with Dr. Lobozzo.

   The IME Subcommittee of the WCB is considering increasing the reimbursement for Section 312 examiners from $200 to $300 per hour and allowing them up to five hours (rather than 4) in which to conduct the examinations.  This change would come through rulemaking.  At this time, examiners can  seek a higher payment, if needed, for complex cases.

      Earlier this year, the WCB dropped Vincent Herzog from the list of §312 IME doctors because he was reported to have performed a §207 medical exam at the request of an employer.  When the dust cleared, the exam had been at the request of the employee, not the employer, but Herzog had already decided to move on.  Left in limbo are the cases before the Hearing Officers that include §312 IME reports by Herzog.  At the December 9 meeting, the IME Subcommittee (from the official minutes) “determined the Board confused the issue when it stepped in the last time, and have concluded it is best to let the cases work their way through the system.”

Psychological Permanent Impairment

The Maine Supreme Court has recently made two decisions confirming that psychological permanent impairment (PI) can be rated under the 4th edition of the AMA Guides to the Evaluation of Permanent Impairment.

       In Smart v. Department of Public Safety, the employee was a former state trooper who claimed a mental stress injury which aggravated his pre-existing mental disorders.  In 1998 he was awarded ongoing 70% partial incapacity benefits.  When the employer filed to terminate his benefits at the end of the durational limit, the employee claimed his psychological PI was above the threshold, and the durational limit did not apply.  The IME doctor found 45% PI according to the 2nd edition of the AMA Guides, because she did not find the 4th edition very helpful.  Hearing Officer Sprague adopted her opinion and decreed that the employer should continue to pay benefits. The employer appealed, arguing that the Board could not assign a numerical PI rating under the 4th edition of the AMA Guides. 

      In its recent Harvey decision, the Court ruled that a percentage PI rating is permissible for a mental condition caused by a physical injury.  In this case, the Court ruled that a percentage PI rating is also permissible for a mental stress injury, but it vacated the Board’s decision because the hearing officer adopted an IME opinion that was “inconsistent with the 4th edition of the AMA Guides.”  

      In both the Harvey and Smart decisions, the Law Court has made it clear that hearing officers are free to adopt psychological PI opinions rendered by treating or examining doctors and psychologists, as long as they are based on the AMA Guides 4th edition, even though the assignment of PI percentages for psychological conditions has questionable validity under the 4th edition.   Disputes over psychological PI ratings will now be won or lost based on the parties’ success in persuading these experts to change their opinions on this issue.

       Stacking psychological conditions on top of physical impairments will undoubtedly lead to higher assessments and should be considered by the actuary when establishing the PI Threshold.

ABC Test – Independent Contractors

   The Legislature continues to struggle with the definition of an employee.  This is of interest to the WCB because it determines coverage issues. The  Maine Department of Labor has put a group together that includes the Department of Labor, the Attorney General’s Office, the Department of Administrative & Financial Services, the Workers’ Compensation Board and the Maine Unemployment Commission to come up with legislation  in 2010 that covers all of them and which applies the ABC test uniformly.

   In the meantime, Rep. Patrick Flood has sponsored LD 27 which is summarized thus, “Under current law, an employment relationship exists and unemployment insurance coverage is required unless all three parts of the so-called “ABC test" can be demonstrated. This bill limits application of the ABC test to situations in which the individual has performed services for a total of no less than 16 hours.”

Unemployment Identification Account Number (UIAN)

      The WCB is proceeding toward having Proof of Coverage (POC) reported electronically. This is without taking into consideration the challenges and expense to Insurers associated with the requirement.  Insurers have suggested to the Board some possible mutual solutions with limited success.  The WCB continues to maintain that the UIAN number will remain mandatory and that it is an important part of their data collection efforts. As of this writing, Maine is t

      he only National Council on Compensation Insurance (NCCI) reporting state to mandate this number. To add to the subject, the nationally recognized ACORD Form does not even contain a place to enter the information so agents are not prompted to obtain the UIAN when making arrangements for workers’ compensation coverage for their clients. The 14 day time period has been far too short for some entities to acquire the number and validate prior to reporting.  When reporting is delayed and the 14 day reporting deadline is missed by the carrier, a fine ultimately results. One of the challenges encountered by carriers is that new businesses receive temporary UIAN, and by the time it is reported to the WCB, it is rejected as inaccurate since the permanent number has been issued.  During the December 9, 2008 meeting, General Counsel John Rohde commented that the NCCI had suggested it would be best to keep the 14-day timeline, reject those POC reports that are incomplete, and send a letter advising the companies there is a 30-day grace period to provide the information before they are fined.  

October 2008 Alert

Management Names for WCB Submitted on Time

              The WCCC and the Maine State Chamber would like to thank all the employers who were willing to have their names submitted to the Governor’s Office for consideration for appointment as Management Members of the Workers’ Comp Board.  Peter Gore, of the Maine State Chamber, submitted three groups of four names each  to that office before the end of July as we had been directed.   LD 2318 ("Resolve, To Appoint Members to and Establish Terms for the Workers' Compensation Board") was quite clear in its direction to the Maine Chamber and AFL/CIO that twelve names were to be submitted to the Governor in July.  To our knowledge, as we go to print, the AFL/CIO has not submitted their names; the statute does not stipulate any repercussions.

              LD 2318 furthermore “requires the Governor to nominate, by February 1, 2009, 3 management representatives and 3 labor representatives to serve on the Workers' Compensation Board; requires incumbent members of the Workers' Compensation Board representing management and labor to resign their positions on the board effective no later March 1, 2009; establishes the conditions under which incumbent members of the board may be appointed under this resolve; and establishes the terms of the members appointed to the Workers' Compensation Board pursuant to this resolve.”

              There was an attempt in the late spring at the end of the legislative session, to fill the empty management slot.  However, the Senate shut down any Appointment Hearings due to time constraints, and that position remains unfilled.  All current members of the WCB will continue to serve until they are replaced. Since the Governor did not act in time to replace the Management member who resigned in the spring of 2007, the Labor side continues to have an advantage in numbers:  3 Labor, 2 Management, one Executive Director “tie breaker.”  The best that Management can do in a controversial vote is to hope that the Executive Director will vote with them and create, not break, a tie! 

                            WCB Yet to Act on 2008 PI Adjustment

                            In a June 27, 2008 report, Jeffrey Kadison of Practical Actuarial Solutions, made two recommendations to the WCB.  First, revise the PI Threshold from its current 11.8% to 13%.  Readers are reminded that the 11.8% threshold was not one of Kadison’s recommendations for the 2006 threshold.  Rather, it was  a figure arrived at arbitrarily by Labor and the Executive Director with a .1% nod at Stacking. As for the 13%, Kadison had actually found the threshold to be 13.5%, but deducted .5% for cases with 0% impairment because the majority of the WCB (Labor plus the Executive Director) voted to accept that precedent when making the 2006 adjustment.

                            Kadison found Maine’s frequency of workplace injuries to be, once again, below the national average and recommended that the duration of benefits for workers with partial impairment be extended from 412 weeks to 468 weeks.  This is one 52-week extension away from the statutorial cap of 520 weeks or 10 years of benefits.

At the August 26, 2008 WCB meeting, Labor separated the two recommendations and moved that the duration be increased by 52 weeks. The extension now goes to Rule-Making.  The motion to increase the PI threshold to 13% was tabled.  The WCCC has filed a lawsuit against the WCB over the inclusion of 0% PI’s in the rule for 2006.  The WCCC supports Kadison’s recommendation of 13.5%.

                            Paul Dionne has proposed a controversial solution for the §213 problem.  That is to set the PI Threshold at 12% for 5 years to allow time for adequate data gathering. 

Recent Law Court Decisions

5% Discount Does Not Constitute a Medical Fee Schedule

              After the Fernald v. Shaw’s Supermarkets/ Babine v. BIW Superior Court Decision (See July 2008 Alert), BIW petitioned judicial review by Superior Court to determine if the WCB’s 5% discount for prompt payments satisfies the statutory requirement that the WCB adopt “standards, schedules, or scales of maximum charges for medical facilities.” (The WCB has not promulgated such rules, but, under expert guidance from Eric Anderson of Ingenix, the WCB is  working towards one. A Consensus Based Rule Making Committee reached only partial consensus, but WCB staff will still be presenting a draft rule to the WCB. Lack of information from 3rd party payors is a problem since statute directs the WCB to consider what they pay.)

              In an August 8, 2008 decision, the Court ruled that the 5% discount does not establish a criterion “for measurement of the acceptability of charges for individual services and is not the standard contemplated by the statute.”  The decision concluded: “The case is remanded to the Workers’ Comp Board to comply with 39-A M.R.S §209 (1) (a) with regard to medical facilities.” The WCB has appealed the decision.

              Mariner v. A.P. Concrete  (Payments Pending Appeal)

                       The Maine Supreme Court has just issued a decision holding that benefits paid by provisional order are not paid pursuant to an "award of compensation" and do not create a "compensation payment scheme," so if the hearing officer's final decree discontinues benefits, the employer does not need to continue paying benefits pending further appeals by the employee.

                       The understanding had been that employers could not discontinue benefits until all appeals had been resolved. The Court analyzed the Act as a whole and determined that a provisional order is temporary and does not have the weight of a decision. Employers can discontinue benefits if the Hearing Officer so decrees even if the employee appeals the decision. 

Bona Fide Job Offer/ Work Search

              On September 9, 2008, the Law Court issued a decision in the case of  Dragoslav Avramovic v. R. C. Moore.  Hearing Officer  Collier had ruled that a job offer was not "bona fide" under 214(1)(A), and the Law Court affirmed the decision.    Expeditor, Inc. (a job placement company) had identified a job that the employee could do part time from his home. The Law Court noted that the hearing officer found that the job offered to the employee was not a bona fide offer of reasonable employment because the employer did not prove that the position offered is actually available in the competitive labor market.   Collier found that the employer presented insufficient evidence about the prospective employer, including the type of business it is; how long it has been in operation; how many employees it has hired through Expediter, Inc.; whether they keep their jobs beyond the training period; and the type of work the employee would be hired to perform.  The hearing officer stated: “Without some more specific information about his duties and how they relate to the company's business and the broader market I am unable to conclude that it is more likely than not that this specific job is a bona fide offer of reasonable employment.”

              A second part of the decision referred to an  earlier decision in the case of Monaghan v. Jordan’s Meats, in which the Court set out criteria for determining the adequacy of an injured worker’s work search.  The “Monaghan Factors” are:

(1) The number of inquiries made or applications submitted by an employee.

(2) Whether the search was undertaken in good faith.

(3) Whether the search was too restrictive.

(4) Whether the search was limited solely to employers who were not advertising available positions, or whether the employee also made appropriate use of classified ads or other employment resources in the search.

(5) Whether the search was targeted to work that the employee is capable of performing.

(6) Whether the employee over-emphasized work restrictions when applying for jobs.

(7) Whether the employee engaged in other efforts to find employment or increase prospects for employment.

(8) The employee's personal characteristics such as age, training, education, and work history.

(9) The size of the job market in the employee's geographic area.

                The case was remanded to the Hearing Officer to consider these “Monahan Factors.”

60 Summits

              Those of you who attended the 2007 Comp Summit at Sugarloaf heard Jennifer Christian, MD. speak of the 60 Summits. The 60 Summits project takes a grass-roots approach to “transforming North American disability benefits and workers’ compensation systems and the outcomes they produce.”  The goal is to involve all 50 states in the USA and the 10 provinces of Canada. The theme is:  “Preventing Needless Work Disability by Helping People Stay Employed.”  Clark Phinney of CMMC and Martha Mayo, Executive Director of the WCCC, are working with Dr. Christian on a meeting to determine whether or not it is feasible to have a Summit in Maine.  A Summit would convene workshops for people of good will who are key stakeholders – usually employers, healthcare providers, claims/benefits administrators and workers -- to allow them to focus on creating fresh thinking, action for change and systems improvements.  Some of you already may have received notices of a Feasibility Meeting.

               If you are intrigued by the prospects of this project and would like to participate in determining its feasibility in Maine, please contact Martha at mayo@gwi.net.

UIAN

              The Unemployment Insurance Account Number (UIAN) is not an issue for Maine’s self-insureds, but it is an issue for insurance companies and employers who obtain their workers’ comp insurance through insurance companies. 

              The International Association of Industrial Accident Boards (AIAIBC) has worked for years to develop formats to assist states in moving toward Electronic Data Interchange (EDI). In order to accommodate as many states as possible, there are more data elements for each release form than any one state will use.  The format serves as a guideline and has no regulatory authority.  Regulations are left to the states.  The UIAN is a data element included in both Release 3 for 1st Reports and Release 2.1 for Proof of Coverage (POC).  Most states require the Federal Employment Identification Number (FEIN), but the UIAN goes a level deeper and pinpoints the location of a company or chain that has numerous sites. Maine is the only state that has made the UIAN mandatory.

              In Maine, the UIAN is mandatory in both the First Report and POC. Both of these reports are under tight time deadlines.  If the UIAN is inaccurate or is not provided, the report is not accepted by the WCB, and the employer/insurer is subject to fines, and the payment of benefits (a problem if the claims was being denied.)  If the UIAN were required, rather than mandatory, the WCB would accept the report, and the employer/insurer would have additional time to provide the UIAN

              More than two years ago, a Consensus Based Rule-Making Group spent months of meetings during which it combed through hundreds of data elements to determine which ones applied to Maine’s First Report and whether they should be required or mandatory.  Unfortunately the group did not give adequate consideration to the UIAN when they agreed with staff’s recommendation that it be mandatory.  This decision has since been applied to POC. Unlike the FEIN, the UIAN number is not readily known by employers. Underwriters and agents are challenged since the UIAN is sometimes temporary and can change.  If it were to be the insurance agent's responsibility to provide the number, it should be noted that UIAN is not a field on the national Accord Application form used by agents. It is not considered an underwriting element.  Until recently, insurers were able to get the number from WCB staff, but at the June 10, 2008, WCB meeting, Paul Fortier reported that the Unemployment Insurance Tax people directed the WCB to stop providing it.  This has left insurers vulnerable. If it is inaccurate or not provided, the FROI is rejected and could result in a 14-day violation.  (It is our understanding that WCB staff is working to once again be able to provide the UIAN within Federal guidelines, but it is a manual process that slows down reporting.)

              The UIAN provides no advantage to the injured worker.  It has nothing to do with the prompt payment of benefits.  The FEIN identifies the employer. The value of the UIAN is to the WCB for data-gathering – and potential fines. The field should be required, not mandatory.  The WCB would still get the data.  This is a rule; it is not in the statute.  Rules can be changed, and this one should be!

WCCC Annual Meeting:  A Workshop on the WCCC – Past, Present and Future

Maine Motor Transport  /142 Whitten Road / Augusta

A Working Lunch -- November 19, 2008

Watch your email for more details. 

(If you are not receiving WCCC emails and would like to, email mayo@gwi.net.)

July 2008 Alert

Recent Supreme Court Decisions Disappointing

Babine & Fernald (“Usual and Customary Charges” /Payments)

   The Maine Supreme Court split 4-3 in deciding the case of Fernald  v. Shaw’s Supermarkets and Babine v. Bath Iron Works on May 8, 2008.  Shaw’s and BIW had maintained that Central Maine Orthopedics (CMO) charges were excessive because they were more than the amounts actually paid by other payors and the market rates.  The Court ruled that in effect, charges were what were charged and that employers were not allowed discovery of what was actually paid by other 3rd party payors.

   A major part of the problem is that the WCB has not established a fee schedule for medical facilities.  (The WCB has a fee schedule for professional services and is currently working on one for facilities.) CMO did admit that they gave discounts to organizations with high volume and to government programs.  However, CMO refused to provide information on what they accepted from other entities because, they argued, it was proprietary business information.  CMO stated that since it charges the same rate to everyone, the statute is satisfied even though it accepts less from some organizations and entities. The statute does direct the WCB to consider what is paid when they establish the fee schedule.

   Included in one of the dissenting opinions  was this statement:  “The heart of the parties’ dispute is a fundamental tenet of workers’ compensation law: employees, employers, and insurers must not be subjected to excessive charges for medical treatments.  The corollary is that medical care providers are entitled to be compensated for any non-excessive ‘usual and customary’ charges for reasonable and proper treatment.”  The Court did not consider the 5% discount for prompt payment within 30 days to be a fee schedule.  One of the dissenting judges acknowledged that making payments in such a time frame does not allow employers to explore the reasonableness of the fees.

   One dissenting judge wrote, “The Court’s decision allows health care facilities to dictate what employers must pay, even if those payments are well in excess of what other private third party payors pay for the same service.  Employers have the right to challenge and should be allowed to present evidence of what others pay.”  It was also noted that “usual and customary” was never defined in the statute.  There was reference to §209 1.A. of the statute (“the board shall consider maximum charges paid by private 3rd-party payors for similar services provided by health care providers in the State…”) as showing  Legislative intent to limit what health care providers are paid. 

   The judges pointed out that the parties should have used Utilization Review, a section of the statute that has not generally been considered to have an impact on cost except in the context of over treatment.  The decision is disappointing to employers.  Still, there is hope that the WCB will draft an acceptable Facility Fee Schedule.

Roy v. BIW

By Mike Richards of Troubh Heisler

   In Roy v. BIW, 2008 ME 94, the Maine Supreme Court held that Maine employers cannot suspend total incapacity benefits to an injured employee when he later becomes totally disabled by a non-work condition. Hearing Officer Knopf had granted Roy's Petition for Review on his 1987 and 1994 work injuries to his neck and back, awarding partial benefits at varying rates until he left work, and then total benefits for 9 more months.  At that point, he had became totally disabled by his non-work-related liver condition, so HO Knopf found he was not entitled to incapacity benefits after that, under 39-A M.R.S.A. §201(5):

Subsequent nonwork injuries.  If an employee suffers a nonwork-related injury or disease that is not causally connected to the previous compensable injury, the subsequent nonwork-related injury or disease is not compensable under this Act.

   Roy appealed HO Knopf's decision, and the Court, in a 4 to 3 split decision, overturned her ruling and ordered BIW to pay Roy ongoing total benefits.  The majority on the Court interpreted the statute to mean only that an employer should not have to pay additional benefits if a partially-disabled employee should become totally disabled by a non-work condition.  As the dissenters on the Court pointed out, however, the majority's decision seems to deviate from past Court decisions on this issue and to gut the independent intervening cause defense employers have used successfully over the past 20 years to reduce workers' comp incapacity benefits for workers who become disabled by nonwork injuries or conditions.

   Employees' attorneys will undoubtedly try to use this decision to their advantage, and defense attorneys will try to limit the adverse impact of Roy by interpreting it to apply only to cases in which an employee was already totally disabled by a work injury.  The Workers' Compensation Board should immediately recommend that the Legislature change the statute to reinstate the independent intervening cause defense in such cases.  If not, Maine workers' comp will just get more expensive, as it will be used to replace the other non-WC disability benefits these employees should be getting instead. 

Update Marie Wilson v. Bath Iron Works  (see April 2008 Alert)

      In this case, the hearing officer concluded that the claim was not barred because the 2 year statute of limitations did not begin to run until the first report of injury was filed.  The employee had reported a gradual injury to her feet in 2000, but did not lose time nor submit a medical bill for payment until she was anticipating surgery in 2004.  The Court affirmed the hearing officer’s decision. 

   Some companies already submit medical only claims electronically, and it may not be much of a burden for others.  The bigger problem lies at the receiving end:  the WCB would have to mail notices to an estimated additional 700,000 claims --a significant burden the staff.  Executive Director Paul Dionne has scheduled meetings for some of his senior staff and selected representatives of the AFL/CIO, insurers, and employers.

Traveling Expenses from New Mexico for Hardship Case

              An injured worker with a partial work capacity has requested that the board review her case under § 213(1) to consider an extension of her benefits due to extreme financial hardship.  The claimant has moved to New Mexico to live with family. John Rohde, General Counsel for the WCB, referred to Section 315, which says an employer/insurer is only responsible for paying transportation and reasonable mileage for travel within the State, and to and from the hearing. Management members initially moved to pay travel expenses within the State, but Labor members prevailed with an amendment to the motion to pay up to $800 for airfare in addition to the in-state expenses.   Paul Dionne voted with the Labor members, and the amended motion passed 4-2.

100 Most Costly Claims

      Kathy Schultz, of the MAE staff, made an excellent presentation on the “100 Most Costly Claims” at the June 12, 2008 WCB meeting.  A similar study was done in 2002 on the 100 Most Costly Claims in Maine from 1994-1998. This second study reviewed a second five-year period (1999-2003).  Some very interesting facts emerged. 

   Claim costs are going up.  From 1999-2003, the average cost of the most costly claims was $546,274; in the earlier study, it was $388,650. The average cost of all other claims in the current study was $21,286. 

   Claim frequency is related to the amount of time on the job.  In both categories, 30-32% of the claimants had  been on the job for less than a year and they accounted for 30% of the costs to the system. 

   There were 2088 Lump Sum Settlements from 1999-2003:

         0-$5,000                 234      11.2%

         $5,001-$10,000      204        9.8%

         $10,001-$50,000     980      46.9%

         $50,001-$100,000   411      19.7%

         $100,001 +                259      12.4%

   In the earlier study, 76 of the 91 (84%) files had been closed via a lump sum settlement. No structured settlements were noted. In the recent study, 66 of the 100 (66%) claims had been closed via a lump sum settlement; 42 were lump sum and 24 (37%) were via a structured settlement.  There were fewer settlements with a significant number of structured settlements.

   When the 1999-2003 dollars were converted to 1994-1998 dollars there is an:

                            80.6% increase in Medical Payments

                            49.2% increase in Indemnity Payments

                            40.4% increase in ER Legal Payments

                            19.1% decrease in Other Payments

                            00.3% decrease in Settlement Payments.

   What this means: The Most Costly 100 Claims represent less than one tenth of one percent of all claims yet represent nearly 9 percent of all costs associated with indemnity claims. Employers and Insurers in Maine should take note that three out of every ten indemnity injuries and three out of every ten dollars spent on indemnity injuries are spent on employees who have worked at their jobs for less than one year.

Schultz concluded:

A review of the most costly claims in Maine is an interesting collection of data that offers more questions to be asked than answers.  The two studies do indicate that some things have changed in the intervening five years and some things have remained remarkably the same.  The cost dynamics that appear to have changed are that costs are increasing more than can be explained by any cost of living factor.  Medical costs are increasing as are indemnity benefits.  The hundred most costly claims are remaining open for a longer period in the second study than in the first study.  Why this is happening is not identified, but remains an important question for further study.  The demographics of the two populations of the hundred most costly claims are remarkably similar for both of the samples.  No significant change in age or gender was observable.  There was a slight shift in the average cost of a claim when examined by age.  The  average PI rating for the later period declined from the first study period.

   Schultz also posed 31 questions that require further research. 

Note: The sources of “100 Most Costly Claims” were a Power Point presentation to the Workers’ Comp Board (WCB) on June 10, 2008 and a detailed supporting  report by Kathleen  Schultz.

WCB Budget

   At the May 13, 2008 WCB meeting, Richard Dunn, Deputy Director of Business Services, noted staff was proposing an assessment rate of 2.10% which is less than the year before ( 2.11%) and remarked that the Board is proposing to reduce the assessment by $1,650,000 which is based on anticipated collections from audits and salary savings which gives the Board an assessment of $8,350,000.  The proposed budget included $150,000 to build up the reserves.  Management member Gary Koocher moved to “reduce  the reserve account by $1,000,000 to $500,000 which is 2 ½ times greater that it’s ever needed to be tapped into.” Labor member Rodney Hiltz disagreed.  He stated that the Reserve has been developed through the budget to protect the agency, to handle inflationary issue.  He added, “If you want to eliminate the assessment cap, we might consider.”  Paul Dionne called the motion excessive and that it would harm inured workers.  He did state, however, that he would be willing to engage in a discussion of the reserve in the next budget. ) (The Board, by statute, has the ability to retain 25% of its operating budget in a reserve account, so the Labor member of the pointed out the Budget Committee could have recommended even more than it did.) The motion to accept the budget subcommittee’s recommendation to reduce the FY09 assessment from  $10,000,000 TO $8,350,000 and require staff to adopt an assessment rate for insureds of 2.10% based on an FY09 estimated insured market of  $235,000,000 and to raise  $3,405,174 from self-insureds passed 4-2.

April 2008 Alert

Board Functionality

The Workers’ Compensation Board over-collected $201,375 in assessments used to fund the WCB from employers for Fiscal Year 2005. §154.6 of the Workers’ Compensation statute directs that any amount of money that exceeds the maximum assessment by more than 10% “must be refunded to those who paid the assessment.”  The self-insurers paid 39% of the assessment and received checks totaling $78,536 back from the WCB.  The Insurers paid 61% and received checks totaling $122,833 from the WCB. Executive Director of the WCB, Paul Dionne, directed both the insureds and self insureds to return the money to the individuals employers or turn it over to the State as unclaimed property. 

It was not difficult for the self insureds to get their money into their trust funds, but the administrative cost and burden for insurers of writing and mailing thousands of checks for less than $1.00 raised concerns.   Insurance companies, with the support from the business community, sought relief. 

The problem regarding the return of the over-collection had been noticed by the firm that conducted this winter’s independent audit of the board. (see “WCB Audit” below).They brought the issue to the attention of the Labor Committee on February 11, 2008.  After the presentation, WCB staff was to draft legislation in an attempt to remedy the situation.  A meeting was scheduled for 8 AM prior to the WCB  meeting the next morning to review the draft.  The Labor members of the WCB who had attended the session before the knew about the meeting, but no one invited any Management members of the WCB.  The proposed changes to §154.6 included language to make substantial changes to the board’s ability to maintain a reserve fund, proposing to eliminate the 10% threshold currently in place that triggers a refund to employers as well as requiring the Board’s to return money collected from assessments above  the overall that 10% threshold.  Additionally, it included language authorizing the WCB to maintain a Reserve Fund totaling 25% of their budget without any refund limitations.  It did  contain language to solve the immediate problem for the insurers, but linked it to the passage of the reserve fund language. Management members saw the material for the first time during the regular February 12, 2008, WCB meeting.

Labor members of the WCB, in an apparent effort to further pad the WCB’s reserves, delayed the following meeting on February 26, 2008 for nearly an hour and a half while drafting their own language.  When they finally showed up in the meeting room, the Management members had left to return to their regular employment. 

There have been other years when the WCB over-collected assessment targets, but, in the past, the WCB followed staff recommendations and credited insurers and self-insurers in the next assessment.

Statutory adjustments were felt to be the best method for addressing the concerns of the carriers, but that  late in the Legislative Session, this could  only happen if the Governor submitted a bill to do so.  The Governor has made it clear that he will only submit workers’ compensation legislation with unanimous support of the WCB. 

While there was a good bit of discussion behind the scenes leading up to the March 11, 2008, WCB meeting, there was no indication that there could be unanimity.  No legislative language was put on the table at that meeting.  Thus, the problem continues to  persist. 

Once again the Workers’ Compensation Board has been caught in a stalemate.  Since the structure of the board was changed to give the executive director the tie-breaking vote, issues have been “resolved.”  The necessity of a unanimous vote stripped away the veneer of a functioning board. Is the WCB really a board of one with 6 advisors?  (Make that five:  the management side has been down one active member for a year and a half, and there will be no more Gubernatorial appointments this session.) Was Paul Dionne’s interpretation of the statute accurate?  What can be done to assure that the Labor and Management members of the board will work to reach consensus on issues of even greater importance in the future?

Should Self-Insureds Be Reimbursed for Overpayments?

The recent challenge for insurers’ regarding  the return of over assessments to their insureds has highlighted the fact that the surplus results from overpayments by insurers.  The manner by which self-insureds are assessed does not result in overpayments because it is a fixed amount based on losses for the previous year. Insurers are billed on the basis of a percentage of anticipated premium.  The auditors recommended that insurers also  be assessed based on losses, but that approach would result in significant administrative challenges for  insurers. That solution aside, if the statute language changes, it might be reasonable to have the over-assessments credited  only to the insurers.

Audit of the WCB

In the March 2007 Alert, we reported on LD 449, the Governor’s Biennial budget bill, which included the WCB budget.  Paul Dionne, Executive Director of the WCB, had reported to the Legislature at that time that the, “…proposed legislation would eliminate the artificial cap and allow the Board to develop a budget based on the needs of the system.”  In other words, without a budget cap, the WCB could budget whatever they felt they needed, and then seek Legislative approval.  As you may recall, there was testimony a year ago before the Appropriations Committee that the WCB had consistently collected money above the 10% leeway and that they were unable to report just how much was in reserves at any given time.

In the course of seeking approval for the WCB budget, The Appropriations Committee recommended that there be a financial audit of the WCB.  (See March 2007 Alert.)   At that time, we reported,

“The Labor Committee held the Work Session on March 5, 2007, and they came up with a bi-partisan compromise:  They did not recommend removing the cap, but they will still meet the budget needs and there is to be an independent audit.  They recommended that for now the cap of $8,525,000 stays, but it goes to $10 million for FY’09.  Also, they allotted $40,000 for an audit.  Utilizing the audit results, and by following the WCB’s performance, the Labor Committee will look back each year after FY ’09 to see if an additional $40,000 should be added to the cap.  The Labor Committee has reported this unanimous compromise back to Appropriations.  The audit could be completed by the end of the session.”

The WCB wrote the RFP and hired the CPA firm of Blake, Hurley, McCallum & Conley, who delivered their report in January of this year.  The audit covered how the funds were assessed and tracked, but it did not show how the money was spent.  The promise to management members of the WCB that auditors would attend a WCB meeting and answer some questions went by the board when, instead, the auditors’ presentation was given to the Labor Committee.

The auditors recommended increasing the WCB staff by 11 positions:  one deputy staff attorney and four paralegals for the Worker Advocate Program and four additional auditors, an audit manager, and a Deputy General Counsel for the MAE program.   They wrote, “WCB staff represented to us throughout our engagement that these programs need additional staff in order to function as intended by the legislation.  We found their presentations to be convincing and compelling.  We agree with staff that more resources are needed to fulfill unmet statutory requirement.”  (emphasis added)  The auditors made no effort to talk with the public users of the system or any directors of the WCB.

The auditors recognized that the costs to the insurers for refunding nominal amounts to their insureds would exceed the amounts due to them.  (That issue has not yet been resolved.)  They concluded that, as currently maintained, the WCB and DAFS records could not be reconciled.  They also recommended a number of changes that the WCB has implemented or is working to implement without any changes to the statute.   For example, there will be stricter control over cash receipts.  There is to be more professional accounting software.  The Reserve Account will be a separate line item rather than part of the Cash Account so that the actual amount in the Reserve will be identifiable.  [If the WCB can now determine just how much is currently in the Reserve Account, there has been no public announcement.]

Fortunately, in light of the State budget shortfalls, Executive Director Paul Dionne has recommended that the WCB wait for a change in the general economic climate in Maine before all of the auditors’ recommendations are implemented.  Noting that the WCB funding does not come from the General Fund, and that it would bring “employment opportunities” in State Government, the Labor members of the WCB have made a case for immediate implementation of all the auditors’ recommendations. 

Ingenix has Recommendations Regarding WCB Medical Fee Schedule

At the March 25, 2008 WCB meeting, Eric Anderson, Senior Project Analyst of Ingenix, made a two hour, 50 slide presentation to the WCB.  Ingenix is a health care information and research company that provides clinical and cost management solutions. The complexity of the challenge of setting medical fee schedules is not unique to Maine, and Ingenix’s experience with numerous other states has vastly improved the range of data now available to the WCB.  The brief summary that follows is meant to give readers a taste of what was presented but is, by no means, a thorough report.

A Consensus Based Rule Making group meet in 2005 in an effort to bring together the stakeholders and reach consensus on the missing pieces to the WCB Medical Fee Schedule.   The group was set up to include interested parties such as hospitals, osteopaths, physical therapists, chiropractors, pharmaceuticals, ambulatory surgery, employers, the Maine State Chamber of Commerce, the AFL-CIO, MEMIC, and the Maine Council of Self-Insureds.  Unfortunately, but not surprisingly, the group was unable to reach consensus. 

In the meantime, the WCB became the focus of a lawsuit based on the lack of a statutorily mandated medical fee schedule, including a hospital fee schedule (both in patient and out patient )  and fees for ambulatory surgical units.

Anderson reported that all states are struggling with medical fee schedules, and there is no universal solution.  Workers’ Compensation medical costs generally account for no more that 3-5% of all hospital claims.  Many of the payors (Medicare and insurers ) have negotiated discounts, but these discounts have given hospitals incentive to raise charges faster than actual costs so that they can give those discounts!  Some have suggested that large insurers and self insured groups also go for discounts.  However, since comp represents a very small portion of any hospital’s business, without volume there is little leverage for negotiating a volume discount.  (Anderson included a chart of inpatient volumes for Maine hospitals for 2005.)

There was great interest in a slide entitled, “Inpatient baserate comparisons.”  Baserates are similar to the conversion factor currently used in Maine’s medical fee schedule.  The slide confirmed that the Maine WC system functions with a much higher baserate ($12,764) than the National unadjusted Medicare rate of $4,964.  Maine Medicare rates are higher than the national average ($5,936 with no outliers and an estimated $6,880 with outliers.)  In fact, if Maine workers’ comp were based on a 40% discount, it would be $7,996, and 175% of the national adjusted rate would be $8,687.  Mississippi doubles the Medicare rate for a baserate of $8,904.  

Anderson is very familiar with approaches of other states. He stated that a “modified Medicare approach” (175% for Maine) appears to hold the best promise for the WCB along with additional rules to cover issues that are significant in Maine such as “Outliers” and “Implantables.”

Medicare has done a great deal of work with fee schedules, and it makes sense to use their findings rather than to reinvent the wheel.  In addition, Ingenix, along with the WCB, needs consider the statutorial language of §209.3: “Limitation on reimbursement.  In order to qualify for reimbursement for health care services provided to employee under this Title, health care providers providing individual health care service and courses of treatment may not charge more for the services or courses of treatment for employees than is charged to private 3rd-party payors for similar services or courses of treatment.” 

The next step is to bring the Consensus Group together.  Whether they reach consensus, or not, WCB staff has made it clear there will be draft rules presented to the WCB that would then proceed through the APA process. 

Advice to Employers on Filing First Reports on “Med Only” Claims

Article by Steve Moriarty of Norman, Hanson and DeTroy

             The Law Court has ruled that a claim is not barred by the statute of limitations if more than two years passes between the date of injury and the triggering of the statutory duty to file a first report.  In Wilson v. Bath Iron Works, 2008 ME 47 (March 18, 2008), the Board determined that the employee had sustained a gradual injury to her foot on July 1, 2000.  No expenses were ever paid on account of the injury, and there was no lost time from work until the spring of 2004.  A Petition for Award was filed on May 4, 2004, and a first report was filed shortly afterward.  Although the Hearing Officer initially ruled in BIW’s favor, she ultimately held in findings of fact that the statute of limitations did not begin to run until the first report was filed and that accordingly the claim was not barred.

             An employer is not required to file a first report until it has knowledge that an injury has caused an employee to lose a day’s work.  Previously both the Court and the Appellate Division of the former Workers’ Compensation Commission had held that the statute of limitations expires two years from the date of injury if no duty to file a first report arises in the meantime.  However, in 1999 §306 was amended to provide that “a petition brought under this Act is barred unless filed within two years after the date of injury or the date the employee’s employer files a first report of injury as required in section 303, whichever is later”.  (Emphasis added.)  The phrase “whichever is later” was a new addition to the statute and the Court held that its prior decision in Joyce v. S. D. Warren Company, 2000 ME 163, 759 A.2d 712, as well as the decisions of the Appellate Division, are no longer controlling.  In interpreting the statute as amended in 1999, the Court essentially held that it was immaterial that the employer was not required to file a first report until nearly four years had passed since the date of injury.  Therefore, because the employee’s petition was filed within two years of the filing of the first report, it was not barred by the statute of limitations. 

             In cases involving no lost time from work in which medical benefits have been paid, the payment of a medical benefit will automatically invoke the six year statute of limitations under §306(2).  Paradoxically, however, the statute does not require the filing of a first report in a “med only” claim, and, under the Wilson rationale, the statute will not begin to run until a first report is filed.  This presents employers with an obvious dilemma in “med only” cases, and it is recommended that first reports be filed electronically with the Board nevertheless in order to initiate the running of the limitations period.  It is understood that the Board will accept all electronic filings, and in fact the Board is actively considering a rule change which would require the filing of a first report in “med only” cases.  Employers may best protect themselves against stale claims by filing first reports even when not required by the statute.        

Majority of WCB Seeks to Double Per Diem

LD 2127 "An Act To Increase the Per Diem for Members of the Workers' Compensation Board" was a Board initiated bill approved 4-2, with Management members dissenting.   On February 22, 2008, the Labor Committee gave the bill a unanimous ‘ought not to pass” recommendation. The current per diem for the WCB is $100 per day; LD 2127 would have increased that to $200 per day.   The per diem for Legislators is $55, and that is the usual per diem for boards.   (The bill to increase the per diem for the Board of Environmental Protection and the Maine Land Use Regulation Commission from $55 to $100 has divided reports from the Natural Resources Committee. The majority report is for $100 plus expenses including the luncheon allowance for legislators, and the Minority Report is $55 plus the same expenses.)  A study of the length of meetings reported in the official WCB minutes for 2007 revealed that they varied from 28 minutes to three hours and 41 minutes in length.  The average length of a meeting in 2007 was 1 hour and 32 minutes.   Executive Director Paul Dionne announced at a recent WCB meeting that he plans to provide comment to OPEGA (The Office of Program Evaluation and Government Accountability) that the per diem for individuals who sit on the WCB is insufficient.

Gabree Chosen as Senior Staff Attorney

The WCB has chosen Gary Gabree, whose law office has been in Bath,  as the new Senior Staff Attorney. He will be responsible for oversight of the Worker Advocates.  He has considerable litigation experience in the field of workers’ compensation.  He served as a contract employee in that position this past summer.   He was the unanimous choice of the Personnel Committee of the WCB, and the Board voted unanimously for him at the February 26, 2008 WCB meeting.

.

In Workers’ Compensation, lately, the action is on the east side of the Kennebec.

(Will Spring ever come???)

January 2008 Alert

Governor's Order of Financial Curtailment Does Not Affect WCB

  In the words of Paul Dionne, Executive Director of the WCB: “General Fund Agencies have been notified of the curtailments and cuts in their departments. The Workers' Compensation Board is funded through an assessment paid by Employers of the State and is not directly impacted by the curtailment order. However, we will maintain direct contact with the Department of Administrative and Financial Services as this matter evolves and as the Supplemental Budget is developed. It is a challenging time for State Government and in my comments at the Cabinet meeting this morning I applauded the Governor for his leadership during these difficult times!”

PI Threshold Goes to Rulemaking

  Actuary Jeffrey Kadison delivered his original report for the 2006 threshold for PI in April of 2007; he recommended lowering the PI threshold from the current 13.4% to 12. 5%. After months of identifying, acquiring and reviewing a 20% sampling of the 3600 claims with 0% PI in the WCB database (at the request of the Labor members of the board), the WCB provided Kadison with some additional information. In December, Kadison, as requested by WCB staff, presented a new report with three alternatives for the threshold (12%, 12.5% and 12.9%). Kadison determined that stacking had only the minor impact of .3%. Labor took the position that stacking no longer has any impact at all, and, in turn, recommended sending out to public comment a proposed 11.7% PI. The motion was approved, with Executive Director Paul Dionne in support despite the fact that it was not one of the actuary's alternatives; the two management representatives voted against the motion.

The WCCC is convinced that stacking has a far greater impact than .3% found by the actuary, and that it is a mistake to dismiss the mature claim years in the system where the 75/25 threshold is more like 15% and 16%. Claims with no impairment definitely should not be included. We also have heard that the new 6 th Edition will rank many back claims as 12% PI. This is a very complex topic, and public testimony will be challenging. The impact on the cost of claims from a threshold that is too low will be significant.

Benchmark for Prompt Filing of 1 st Reports

  The WCB delayed its recommendation for an 85% benchmark for the prompt filing of First Reports until the December 4, 2007 meeting. (The September Alert inaccurately reported that it had been passed with the other increased benchmarks in the August.) The result was the same. Staff dismissed employer concerns that two large entities with high compliance rates currently skew the successes of the industry. Many companies can now look forward being targeted for not meeting the benchmark, and thus will be open to possible fines and penalties. While Board staff has given time to EDI issues related to 1 st Reports, problems still exist. Hopefully employers will not be fined because of technical glitches at the WCB.

WCCC Annual Meeting November 8, 2007

15 Years Since the Reforms

Senator John Martin, one of only a handful of current legislators who was also serving during the reforms 15 years ago, led off the power packed meeting. Of the failed four by four board he said, “We created a four by four board and let them go at it.” He commented that the tiebreaker has made a difference, also noted that in another agency with a tie-breaker “there might as well have been no one else there.” He said “It is too easy for companies to drag a case out when the employee has to rely on a Worker Advocate.” He did concede, however, that, now that Worker Advocates are trained attorneys, they are better qualified. He sees the purpose of MAE program is to make injured workers whole without legislation but rather by penalizing insurers for their claims practices. Based on one-sided anecdotes, Martin noted partisanship. He hinted at the need for COLA. (“Inflation impacts everyone. We need to provide for it in long term benefits.”) Fifteen years ago, “There was turmoil then that hurt the state image, employers, employees and the work force.” He concluded that the State has come a long way and is in far better shape.

  The next speaker, John Lambert, spoke on “Death by 1,000 Cuts.” According to Lambert there has been a slow erosion of the successes of 1992. His company's modification factor is down, but rates are up. He predicts duration will get to 520 weeks. Lambert believes that the 25/75% threshold for PI should be based on the most developed years, and that the board's inclusion of zero % PI's in the calculation could drive the threshold down as low as 7%. The MAE program is increasing administrative costs (sometime additional staff) for companies in their efforts to comply. An error of $197 resulted in a $54,000 fine. Currently workers' comp rates are overshadowed by health care costs: a company can pay more per month in health care than for a year of workers' comp. Still, comp is a major business expense. MEMIC's presence has reduced insurance pressure. Insurers do not have to take bad risks because those risks fall to MEMIC. He concluded, “We have had substantial successes, but it is eroding.”

  Paul Sighinolfi spoke on “Changes to Benefits and Costs” as they relate to duration and permanent impairment. The historical perspective goes back to 1915, when there was a benefit cap. In 1985 Permanent Impairment was linked directly to loss of an anatomical member. Questionable Hearing Officer decisions are impacting benefit levels. There are currently two cases at the Maine Supreme Court that offer a glimmer of hope regarding the quality of Hearing Officer Decisions. In one case the HO allowed methods beyond the statute for determining PI. In the other, the Hearing Officer made findings beyond the Findings in order to arrive at his decision. The trend toward range of motion (ROM) rather than Diagnosis Related Evaluations (DRE) as well as inclusion of psychological impairments are also driving up PI assessments while the threshold is being lowered.

  Bob Crosby of Acadia spoke on “How Adjusters have Adjusted to the Past 15 Years.” Those in the trenches have had to learn about 21 Day Suspension letters, counting partial days in the 7-day waiting period, and adhering to the 14 Day Rule. He articulated adjusters' frustration with the overuse of significant by doctors. Utilization Review (UR) has gone by the board. As for the Medical Fee schedule, he said, “When you are charged $8 or $9 for a Tylenol, and your only break is a 5% discount if you pay early, it is not a good deal!” Adjusting has become more about procedures than actual adjusting. A significant portion of time is spent checking off boxes. As a result of EDI, his company is looking to hire a full time employee for EDI compliance and reconciliation. This is driving up overhead. Technical glitches related to acceptance of an EDI submission and the 14 Day rule can result in huge fines even when the hard copy paperwork was done in advance. Crosby credited the $100 fines to employers by the MAE Program for late filings for helping to improve their compliance with early reporting of injuries. However he sees a disconnect between what has been accomplished and the increase in fines and penalties. “It's like being fined $7,000 for going 57 mph in a 55 mph zone.”

Speakers at the WCCC Annual Meeting: L-R Steve Moriarty , Kevin Gillis , Bob Crosby, Laura Backus Hall, Peter Gore, John Lambert, Jim Case, Paul Sighinolfi

The Labor Perspective . As one might have expected, Jim Case, the attorney for the AFL/CIO had a different take on the past 15 years. There was too much litigation in 1992, so to make up for the removal of attorneys, the Legislature increased oversight and administration to be sure that the system worked right. In response to complaints by earlier speakers about the administrative burdens from the MAE program, he said, “The egregious outliers have been discovered. It is MAE's job to find the outliers and create standards to reduce litigation.” Case commented that the benefits and access to the system are now inadequate, and that Labor is shifting their focus to the national level to develop national standards so states will no longer have to compete.

  Steve Moriarty spoke on “Dispute Resolution Evolution.” According to WCB statistics, Troubleshooters and Mediators are screening out major issues. Mediation is sometimes an exercise in futility, but one has to go through the motions. The mandated questions for Discovery are superficial and inadequate. In civil cases, there are no surprises. However, in workers comp there are unitary hearings where sides hear issues for the first time and do not have time to react. Allowing both sides to agree on an IME doctor is not solving the IME backlog. Still, he is surprised that Hearing Officers do not suggest IME exams, and that Worker Advocates tend to request written opinions from the treating doctor rather than an IME. There should be some sort of Appellate review. The Appellate Board was abolished in 1992; the Maine Supreme Court is reluctant to take appeals. Only a Hearing Officer is allowed to appeal his/her own decision to the WCB, but the WCB is not structured to deal with a high volume, and board members are no substitute for appellate review by fellow attorneys. A panel of HO's would make the individual HO's more accountable and would build consensus for the agency. He agreed with Crosby before him on UR : it is “a dead letter of unfulfilled promises.”

  At this point, Jim Case asked the group about the high positive statistics for the Troubleshooters. It was the opinion of those present that it was just a matter of time (usually to receive medical information), not the effort of the Troubleshooters that drove their positive statistics.

  Kevin Gillis spoke on “The Administration and Governance of the WCB.” He pointed out that the WCB is an administrative agency, but it also has a Board of Directors. Prior to 1992, the commissioners were appointed by the Governor and funded by the General Fund. Now they are funded by the employers. He thinks Management was asleep at the switch when it came to the 14 day rule. Chairmanship of the BOD moved back and forth between Labor and management until the Board was restructured. The major issues at the board have been 52 week extension decisions and Hearing Officer reappointments. In 2003 the board became dysfunctional over the removal of certain Hearing officers. Eventually the Law Court ruled that their terms had expired. Now the HO's have 7 year terms, and they are an experienced group with much less turnover than the commissioners.

  Laura Backus Hall presented NCCI statistics on Loss Costs and Rate Filings . She noted that across the country there have been safety improvements, and claim frequency is going down. There are increases in indemnity severity and medical benefits. Maine mirrors the national picture with premiums. The 2006 Oregon WC Premium Rate Ranking summary found Maine to be 44 th highest out of 51 states. Actuarial and Technical Solutions found Maine to rank 29 th out of 45 in comparative costs for Manufacturing Classes; in terms of clerical classes, Maine rises to 36 th out of 45. Maine is 25 th out of 50 for Average Statutory Benefit Provisions. However, For Actual Average Indemnity Benefits per employee per year, (the cost being spread over all employees whether they are injured or not), Maine rises to 35 th out of 46. Interestingly for medical benefits in this same study, Maine is 20 th out of 46 which brings the average benefit ranking for both indemnity and medical to 30 th out of 46. Go to https://www.ncci.com/ncci/media/pdf/SAF_ME.pdf for more information on Laura's presentation. NCCI sees a voluntary lost cost change of -2.2% for Maine in 2008. However, Hall predicts this will change when the duration goes up and the threshold goes down.

  The final speaker was Peter Gore, Chair of the WCCC, who spoke on “The Employers' Perspective.” While costs are down, not all businesses have benefited. Small businesses still pay too much. A positive development of the reforms is that businesses seem to have gotten the safety message. There are more than 100 licensed carriers in Maine , but only a handful write workers' comp, thus there is less competition. It was not until 1997 that the legislature worked on comp again. The Worker Advocate Program and MAE program were compromises that arose out of “prevail” legislation submitted that year. Ten years after the reform, the Kotch (Stacking) legislation became a referendum on comp reforms. When the smoke cleared, there were legislative casualties, and since then legislators have shied away from the return to rancor.

  Gore agreed with Case: “Jim is right – prior to the tie breaker, either side could block the process. But policy making and relationships broke down. The presence of a tie-breaker guarantees that there will always be motion. Issues are going to proceed through the system.” However, the WCB has lost focus. Employers are customers, too, and from a customer service perspective, the WCB (especially the staff) is failing the business community. Gore said, “Decisions feel more like retribution than customer service. We are no longer a partner, but rather an entity to be audited, monitored and punished.” As an example, Gore cited the recent changes to a variety of benchmarks and compliance standards. When the business community pointed out statistics to lawmakers to show they were doing the right thing and meeting or equaling existing benchmarks, staff became determined to increase the benchmarks. It felt like punishment. Gore said many in the employer community feel that the relationship between WCB Staff and the business community has broken down. “We are the enemy,” said Gore, “There needs to be a better way to make the relationship work. All we are asking for is that the business community be perceived as a consumer. We pay the bills, which does not mean we should get our way all the time, but we should at least be a partner.”

October 2007 WCCC Alert

WORKERS' COMPENSATION COORDINATING COUNCIL

ANNUAL MEETING / SEMINAR

1992-2007 

"15 years Since the Workers' Compensation Reforms of 1992:

Where are We Today, and How Far Have We Come?"

9 AM through Lunch    Thursday, November 8, 2007

Maine Maritime Museum, Bath , Maine  

Cost: $35.00

Register before November 2, 2007, for a high powered review

of the last 15 years of workers' compensation in Maine .  

Registration table on November 8, 2007 opens at 8:30 AM.

Presentations start promptly at 9 AM.

The Legislative Prospective Then and Now           The Honorable John L. Martin, Maine State Senate

“Death by 1,000 Cuts”                                          John Lambert, Lambert Coffin

Changes to Benefits and Costs                              Paul Sighinolfi, Rudman & Winchell

How Adjusters have Adjusted to the Reforms       Bob Crosby, Acadia Insurance

The Labor Perspective                                          James Case, McTeague, Higbee, Case, Cohen,Whitney & Toker

Dispute Resolution Evolution                                 Steve Moriarty, Norman, Hanson & DeTroy

Administration and Governance of the WCB         Kevin Gillis, Esquire, Troubh Heisler

The National Perspective                                      Gary Koocher, Worker's Comp Board Director

Loss Costs and Rate Filings                                  Laura Backus Hall, National Council Compensation Insurers (NCCI)

The Business Community's Take on 15 Years       Peter Gore, Maine State Chamber

LUNCH Catered by Simply Elegant

(Registration entitles you to tour the museum after the event.)

REGISTRATION FORM

WCCC ANNUAL MEETING / SEMINAR FOR EMPLOYERS

Thursday, November 8, 2007

9 AM through Lunch Maine Maritime Museum, Bath , Maine

Name (s) ___________________________________

Company ___________________________________   

Address _________________________________________________________________

email _________________________   Telephone ______________________  

PLEASE INCLUDE A CHECK FOR $35 / PERSON PAYABLE TO

“WORKERS COMPENSATION COORDINATING COUNCIL” OR “WCCC.”

MAIL TO : MARTHA F. H. MAYO, WCCC, 83 GREEN ST. BATH , ME 04530

Register by November 2, 2007

Direct inquiries to mayo@gwi.net

Luncheon Catered by Simply Elegant

Registration entitles you to admission to the Maritime Museum ,

so plan for some time in the afternoon.

Directions to Maritime Museum:

http://www.mainemaritimemuseum.org/about/hours_and_directions.php

Corrections from the September 2007 Alert

Wal-Mart Watch

In the September Alert , we referred to “Wal-Mart Watch” as a Wal-Mart Company newsletter . It is not a company newsletter. It is a newsletter produced by a group states its mission on the web as “A national campaign to reveal the harmful impact of walmart on American families and demand reform of their business practices.” The article reported on the MAE Program audit of Wal-Mart.

Benchmark on First Reports

In the September Alert , we reported that the WCB had voted to establish a benchmark of 85% for the filing of 1st Reports within 14 days. The motion for this benchmark was tabled “until the next meeting” at the August 14, 2007 meeting and has not been taken off the table.

The Maine Maritime Museum is 1.2 miles south of

Bath Iron Works on Washington Street .

WCCC Alert September 2007

WCB Increases Compliance Benchmarks

  The WCB voted 4-1 to increase compliance benchmarks on August 28, 2007. Gary Koocher, the only Management member present at the meeting, cast the dissenting vote. What were originally presented as “Industry Standard Recommended Benchmarks,” after being challenged, were renamed to “Recommended Benchmarks.” The former terminology implied to some that there is a national industry standard. There is no such standard. In fact, Maine is leading the pack, and the performance of Maine employers also sets the standard for other states. The recommended benchmarks will serve as the new benchmarks in spite of recommendations to the contrary by a hand picked working group that had been called together by WCB staff.

  The WCCC recognizes the importance of timely reporting of injuries. Likewise, injured workers should be paid promptly. The WCB automatically fines employers for late reports, and there are penalties for late payments as well. The monthly reconciliation reports have for years shown the WCB those employers who are well below the original benchmarks. It is appropriate for the WCB to provide training and overisght to these companies.

  The benchmarks, however, are an industry average. Several large companies have excellent compliance and raise the overall average. The working group mentioned above had suggested that a more accurate industry average would be obtained by not counting these large companies. Those who do not meet the average are already obvious to the WCB. What, then, is the purpose of raising the benchmarks? Labor recommended that all benchmarks be 100% so that “we can strive for perfection.” A 100% compliance rate is unrealistic for employers, and the implementation of such a benchmark by the WCB would be punitively setting employers up to fail.

  WCCC does not agree with the WCB that public input at the board meeting obviated bringing this group back together. The benchmarks were developed in 1999 by the Benchmark and Compliance group, which was made up of industry representatives including the AFL/CIO. The WCCC is very disappointed that this group was not again asked for its input prior to the boards adoption of the new standards.

   WCB staff has done a website study of other states that have benchmarks in place. The WCCC is in the process of further research. Regardless, it was made clear at the August 14, 2007 meeting that staff and Labor were adopting these new benchmarks in retribution for employers and the industry for speaking before the legislature regarding the success businesses and carriers had made in meeting previous benchmarks. The new benchmarks are:

  Initial Indemnity Payments moves from 80% to 87%.

  Initial Indemnity MOP filing moves from 75% to 85%.

  The benchmark for Lost Time First reports of injuries is established at 85%.

  The benchmark for initial NOC filings is established at 90%.

  WCB staff did a study of state websites to compare Maine to other states in terms of benchmarks and presented a summary of the 9 other states that seem to be similar. This is a great start for seeing how Maine stacks up with other states, but there are major differences in the definitions and terms. For example, Oregon has a 90% timeliness standard for acceptance or denial of a claim, but adjusters there have 60 days, not 14 days as in Maine ! The WCCC plans to find out more about benchmarks in other states.

MAE

  Wal-Mart's June, 2007 publication called “Wal-Mart Watch” an article states the Workers' Compensation Board has an outstanding compliance program and that as a result of the program and their work with the Monitoring, Audit & Enforcement Program that they have been able to improve their claims handling practices. With Wal-Mart well established in all 50 states, there can be no other conclusion than that Maine is unique in their experiences.

  “With no states possessing the same rigorous reporting requirements as Maine , it is difficult to quantify the numbers of employees who find that there on-the-job injury is only a precursor to a lengthy and frustrating claims process with Wal-Mart. To the state's credit, the success of Maine 's workers' compensation system has shown the impact that a well constructed monitoring and enforcement program can have. In Maine , Wal-Mart has improved its compliance and has actively worked with the state to continue its improvement.”

   The MAE program audit of Wal-Mart revealed both confusion about what is expected and problems with claims handling. The company is currently working under a Corrective Action Plan and being followed by the Bureau of Insurance to ensure their continued improvement.

  This is how the MAE program should work. Companies that do not meet the benchmarks are targeted for audits. Ideally a constructive education process should help them to meet the benchmarks. The current benchmarks already show the outliers, but the WCB wants to target more companies, so they have increased the benchmarks. The industry average exceeds the past benchmarks in every category, but certain companies like MEMIC and Bath Iron Works have such high ratings, that they pull up the average.

Comment Summary on Rule 2: PI Data Gathering

  The Public Comment period has ended for comments on Rule 2 regarding the collection of permanent impairment data. The WCB has until November 15, 2007, to adopt or amend the proposed language. After that date, the APA process must start all over. General Counsel John Rohde presented the summary of public comments to the WCB on August 14, 2007. Commentators pointed out that the term case is used several ways in the rule and needs to be more clearly defined. If every lost time case (and even, possibly, medical only cases) require a PI assessment, the financial impact to the system will be significant. Commentators also pointed out other inconsistencies in the rule and two of them offered extensive alternative language. The WCB has a good deal to discuss before making its final decision. While the WCCC supports gathering information regarding permanent impairment, we believe that a Consensus Based Rule Making group could come up with language that would satisfy all parties.

Public Hearings Yet to be Scheduled

  As reported in the June 2007 Alert , Actuary Jeffrey Kadison has recommended a 52 week extension (of benefits). The Public Hearing is yet to be set, but, since the extension is based on a national comparison, it is valuable to consider the impact of waiting periods on frequency. Cases which do not exceed the waiting period are not counted in frequency. Maine has a 7 day waiting period; all things being equal, our frequency would logically be lower than a state with a 3 day waiting period. The WCCC has learned that, of 46 jurisdictions, 21 have a 3 day waiting period; 4 have a 5 day waiting period; 20 have a 7 day waiting period; and 1 has an 8 day waiting period. Since the concept of waiting periods was not permitted to be included in the RFP, Jeffrey Kadison did not consider it. Regardless of the whether or not Maine 's duration is extended another 52 weeks, Maine should celebrate the decreased frequency of injuries. In 2003 there were 1,657 injured workers per 100,000 total workers and that for subsequent years the number has dropped from 1,459 to 1,399, and then to 1,267 for 2006.

Also awaiting a Public Hearing date is WCB DRAFT RULE CHAPTER 12, SECTION 6 regarding the record of proceedings in Lump Sum Settlements. The proposed language reads, “ When making findings pursuant to 39-A M.R.S.A. § 352 (3)(A) relating to the release of an employer's liability for future medical expenses, Hearing Officers shall make a determination regarding expected future medical costs related to the injury.”

   Medical Fee Schedule : The WCB has contracted with Ingenix to prepare recommendations to them regarding a Hospital Fee Schedule. WCB staff predicts it will go to Public Hearing by the end of the year. The WCB July 24, 2007 minutes reflect that Ingenix plans to contact some of the people who sat on the Consensus-Based Rulemaking Group that previously, and unsuccessfully, discussed the Medical Fee Schedule as this process moves forward.

Recent Law Court Decisions

  The Maine Supreme Court has recently issued several decisions impacting workers' compensation law in Maine .

  In Trottier v. Messer and Brady , 2007 ME 64, the Court reiterated that the later employer's apportionment claim is only as good as the employee's claim against the earlier employer. Trottier injured his back at Messer in 1991 and his knee at Brady in 2002. Although the Board found Messer responsible for 80% of Trottier's incapacity, Messer's pre-injury wage in 1991 was lower than Trottier's current earnings in 2004. Because apportionment rights are based on subrogation of the employee's rights, just as Messer owed no benefits directly to Trottier, so Messer owed no apportionment reimbursement to Brady. Clearly, the right of apportionment is limited by the passage of time and the general increase in wages.

  In Monaghan v. Jordan's Meats , 2007 ME 100, the Court provided a list of criteria for evaluating employees' work searches in workers' compensation cases . Monaghan claimed total compensation benefits based on her physical restrictions and her work search, which listed 147 employer contacts. The employer submitted a labor market survey showing 50 suitable jobs available to her and a stable labor market. The Board found her work search to be unpersuasive because many of her employer contacts were not hiring and awarded only partial benefits. The employee appealed, arguing that the Court should adopt a rule that 25 unsuccessful work search contacts alone should entitle an employee to 100% benefits.

  The Court refused to adopt such a rule and reaffirmed that the purpose of work search evidence is to demonstrate the unavailability of suitable work, compiled a list of factors that the Board should consider in evaluating work search evidence, and remanded the case back to the Board. These “ Monaghan factors” will now be the standard by which all future work searches are measured.

  In Nichols v. S.D. Warren/sappi , 2007 ME 103, the Court issued a decision establishing that offsets under 39-A MRSA §221 are allowed for lump-sum disability payments made from a packaged group insurance policy . The employer was paying Nichols total disability WC benefits. The employer's group insurance policy included both life and disability coverage and allowed permanently and totally disabled employees to cash in their life insurance. Ms. Nichols chose to do so, receiving $58,000 in a lump sum.

  The employer sought Board approval of the offset, but the employee argued that the disability benefit was actually paid out of the employee's life insurance (for which no offset is allowed). The Board ruled that the payment was made under the disability component of the life insurance policy and was therefore a “disability” payment subject to the offset, allowing the employer to take a “vacation” from its WC payments until the amount they saved exceeded the after-tax portion of the $58,000 payment.

  The Court upheld the Board's decision, holding that “the term ‘disability insurance policy' [in §221] includes payment pursuant to a disability feature in a policy providing multiple coverages.” Now that the law in this area has been settled, employers can take offsets for such payments by filing MOPs rather than petitions.

The WCCC thanks Mike Richards of Troubh Heisler for providing the information in this article.

WCCC 2007 Annual Meeting

November 8, 2007

Maine Maritime Museum, Bath

1992-2007 *15 Years * What Has Changed?

Mark your calendars for the WCCC Annual Meeting

8:30 through lunch at the Maine Maritime Museum in Bath

on November 8, 2007.

Plans are to provide a variety of perspectives

on the last 15 years in the Maine Workers ' Comp system.

(Bureau of Insurance on the changes in the market, rate filings, etc;

the Legislative Perspective; a review of law changes;

the Workers ' Comp Board experience; the adjusters ' perspective;

the employers ' perspective; and the national perspective.)

Registration forms available now on our website, www.wcccmaine.org

June 2007

Preliminary Recommendation: 52 More Weeks

Jeffrey P. Kadison is a highly respected actuary with the firm Practical Actuarial Solutions. His two year contract with the Workers' Compensation Board (WCB) involves two aspects of § 213: Duration of Benefits and setting of the PI Threshold.

Kadison has preliminarily recommended that, for the first time since 2000, the maximum duration of benefits be extended by 52 weeks to 416 weeks. In accordance with the statute, he based his determination that Maine 's frequency was very slightly below the national average by reviewing NCCI's “Annual Statistical Bulletin – 2006 Edition.” He determined that the Maine claim frequency is lower than the countrywide average (after adjustment to a unified industry mix) by 0.5%. Because the margin was so slight for Maine 's frequency's being under the national average, Kadison also studied Bureau of Labor Standard's (BLS) data for 2002, 2003 and 2004. In a very detailed report, he found Maine 's average based on weighted BLS data to be 10.3% below the national average. This gave him confidence in recommending a 52 week extension.

In making his recommendation, Kadison did not consider the impact of a seven day waiting period.

As for his assignment to set an accurate Permanent Impairment Threshold, several months ago, Kadison suggested that employers provide medical records on settled cases that showed 0% PI in the WCB data base to better determine if there really was any permanent impairment for the injured workers. After developing a method to guarantee anonymity, many employers provided the WCB with the requested data. The exercise was quite revealing for employers, who found a significant portion of the “settled cases” were still open, and that the information being sought had already been provided to the Board on the required forms. It is clear that some portion of the Board data, at least, is unreliable. Employers also noted that there were a significant number of cases that could be stacked. Kadison's decision on the PI threshold should come early in the summer.

Both the 52 Week Extension and the PI threshold will be subject to APA Rulemaking. Employers should watch for the date of the Public Hearing and the deadline for written comments.

Ingenix RFP Winner for Medical Fee Schedule

The Hospital Fee Schedule Committee of the WCB interviewed four companies that responded to the Board's Request for Proposal regarding the development and implementation of a fee schedule for Maine 's hospitals; they unanimously recommended hiring Ingenix to assist the Board with the project. The contract with Ingenix is for $100,000. The money is to come from either the WCB “All Other” Account or possibly the Reserve Account.

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Betty Inman, Deputy Director of Medical and Rehabilitation Services, reported that Ingenix has worked with a number of other states who have implemented various fee schedules. They have dealt with in-patient/out-patient services, ambulatory services and surgical procedures. Inman contacted three other states for which Ingenix has done work. One of these had a project very similar to Maine 's project. Ingenix was instrumental in assisting them with obtaining data maintained by insurance carriers and Medicare and also helped them produce and distribute their fee schedule. The other states found Ingenix to be reliable, available, efficient, easily understood, and fiscally responsible.

Other proposals ranged from $26,000 to $250,000. The WCB voted unanimously to hire Ingenix at the May 8, 2007 meeting. The WCB will be entering into a standard State of Maine contract with Ingenix based on the language of the RFP.

At the May 22, 2007 meeting, WCB Staff suggested that the Board might take advantage of the expertise of Ingenix to comment on Maine 's Conversion Factor of 60 in relation to other states, but Jim Case, Attorney for the AFL/CIO, and Labor members of the board argued strongly for the status quo , and the idea was dropped.

Proposed Changes to PI Data Collection Rules Costly and Unnecessary

The Public Hearing on changes to Chapter 2 (Section 213) §3.2 and 3.3 (Collection of PI Data) will be July 9, 2007 at 9 AM in the Deering Building . While it is important for the WCB to gather accurate information about PI assessments, the proposed rules will make the process burdensome. Employers should be prepared to testify either by letter or in person. Written comments should be submitted to John Rohde, General Counsel for the WCB, by 5 PM on July 19, 2007.

As reported in the March 2007 WCCC Alert , the changes to § 3.2 are as follows: “All Hearing Officers must obtain a permanent impairment rating prior to approving a lump sum settlement in cay case involving permanent injury. The permanent impairment rating shall be written on the WCB-10. Before approving a lump sum settlement, all Hearing Officers shall obtain either a permanent impairment rating or a report from a qualified health care provider establishing that there is no permanent injury. Either the permanent impairment rating or a finding that there is no permanent injury shall be written on the WCB-10. ”

§3.3 changes are as follows: “A case involves “permanent injury” if any qualified health care provider has indicated that the employee's limitations are likely permanent unless the parties agree that there is no permanent impairment or that the employee has reached maximum medical improvement . Once this determination has been made the employee may seek employer/insurer shall submit a permanent impairment assessment.”

According to this proposed rule, any injury that has reach maximum medical recovery is a permanent injury and must have a PI assessment. Past practice has been that data for determining the 25/75% threshold for lifetime benefits has been gathered from cases that have been litigated and/or lump sum settled. Litigated cases account for a small percentage of all workers' compensation cases. Requiring a PI assessment on all lost time cases will dramatically increase the number of these assessments.

The WCCC is very concerned at costs associated with having a PI assessment for virtually every lost time case. The desired outcome for every injury is that the worker fully recovers. If an injured worker fully recovers from a laceration or a strain or a broken bone, he/she has reached

Maximum Medical Improvement! There is no need for the time and expense of having an exam to determine that there is no permanent impairment. It is the observation of the WCCC that many Lump Sum Settlements involve more than one Date of Injury and might include cases with total recovery. This rule change would require a special exam for each and every date of injury.

If employers think the requirements of the proposed rule changes is burdensome, they need to be heard at the Public Hearing or by submitting written testimony to John Rohde, General Counsel of the WCB. by July 19, 2007.

Summary of Legislation in the First Session

   There was a concerted effort among the Republicans and Democrats on the Labor Committee to compromise this year. Most bills came out of committee either Unanimous Ought to Pass (with or without amendments) or Unanimous Ought Not to Pass.

  The WCB itself proposed several successful pieces of legislation. (LD 41) Section 360 (Penalties) decisions are final agency action subject to appeal to the Superior Court whether or not a penalty is imposed. (LD 136) The WCB can call in the Attorney General's office or private counsel to enforce penalties. Also, (LD 1861) fines for non-payment of medical bills go to the medical provider (if the bill was submitted by certified mail) or the injured worker, if the injured worker paid the bill, rather than to the WCB. (WCB minutes state that such penalties only occur about five times a year.) LD 1439 resulted in an additional $161,249 for the Worker Advocate Program. LD 1862, also a WCB bill, adds registered domestic partners to the list of individuals who may waive workers' compensation coverage in certain circumstances; it was voted Ought to Pass as Amended, but it has not yet been reported out of the Labor Committee.

  The WCB portion of the Governor's Budget (Section LL of LD 499) was front page news in the March Alert; the numbers remain the same. Central to the bill is an independent audit of the Workers' Comp Board. The Appropriations Committee decided that the WCB will draft the RFP for an auditor; Rebecca Wyke, Commissioner of the Department of Administration and Financial Services (DAFS) must approve the RFP. Wyke will also approve the final contract.

  The Judicial Committee voted LD 1027, the clarification in the definition of mental or physical disability, Ought to Pass as Amended, but it has not been reported out of the committee.

Significant Changes to the Statute

  (LD 1259) In Occupational Disease claims, the average weekly wage is from the Date of Injury (the date when the worker realized he/she was injured) rather than the date of the last exposure. This is prospective only.

  (LD 1327) In Fatality cases, the surviving spouse is guaranteed 500 weeks of compensation after the death of the worker. This applies only to prospective claims.

  (LD 1107) The maximum penalty under § 359(2) for a pattern of questionable workers' compensation claims-handling techniques or repeated unreasonably contested claims is $25,000 (not $100,000 as originally proposed.) Also the statute language changes from “shall” to “may” so that the MAE Program will not feel obligated to charge the maximum fine.

Ought Not to Pass

(LD 522)The proposed legislation to require posting of proof of workers' compensation coverage at all construction sites, which would have required additional MAE staff for oversight

(LD 1438, LD 1493) Both of the bills to eliminate “double dipping” as a result of the Grant Decision

(LD 1546) The proposal that an injury must be reported within 24 hours

(LD 689) A bill that would require 10% of reimbursements to MaineCare to be sent to the employee's attorney

(LD 933) An effort to eliminate the duplication of having employers pay for DOL Safety Programs when the company or insurer has an in house program.

Requested Carry Over Bills

  Suggested improvements to the IME system were initially rejected, but, after impassioned testimony by Senator Lisa Marrache, MD, LD 1585 was carried over.

  It is unclear why there has been a request for carry over LD 125, that asks the Labor Committee to consider reviewing the closed case of Joseph Greenier. Reviewing a closed claim would be a bad precedent.

  LD 1275 creates a construction contractor certification process. Certificates, once granted, would remain in effect for 2 years (unless suspended, revoked or canceled). The certificate would constitute a waiver, for the 2 year period, of all rights and benefits under the Act unless the person obtains coverage. Discussions could continue in the short session.

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March 2007

Labor Committee Finds Bi-Partisan Compromise on WCB Budget Language

  Of the early bills printed for the 123 rd Session of the Legislature, probably the most sobering bill regarding the Workers' Comp Board is LD 499, the Governor's budget. PART LL of this massive document changed the maximum assessment on employers for the WCB from $8,525,000 to an assessment level for each fiscal year that is sufficient to fund the allocation approved by the Legislature for that fiscal year for the Workers' Compensation Board.

The report from Paul Dionne, Executive Director of the WCB, to the Legislature explains, “Proposed legislation would eliminate the artificial cap and allow the Board to develop a budget based on the needs of the system.” In other words, the WCB could budget whatever they feel they need, and then seek Legislative approval.

  A Public Hearing was held on March 1, 2007 on Part LL of LD 499 in front of the Appropriations and Labor Committees. Paul Dionne, Executive Director of the WCB, and WCB staff presented narrative testimony, along with charts and graphs justifying that the legislature should approve eliminating the cap, so that a budget could be developed to cover all the needs of the WCB. He presented his case that the WCB was a lean and efficient agency. Legislators were interested in knowing just how much is in reserves; staff hoped to have an accurate figure by May 1, 2007. (The WCB has budgeted $1.7 million of the reserves for FY'07 and plans another $1 million for FY'08. The reserves will soon not be able to keep up with the demand, and, without reserves to depend on, the board cannot spend beyond the amount raised through the assessment process, and capped at the current amount of $8.5 million)

  John Lambert, representing the WCCC, pointed out that the agency does not own the money beyond the 10% cap, and they have already collected $200,000 over 10% for 2006. The target (assessment rate) is only an estimate; the employer community remains concerned with the actual amount of money collected in both the assessment and reserve accounts. It appears to employers that the WCB regularly collects much more than what it needs to stay within the cap. He presented charts that raised questions about a number of budgetary issues.

  Bruce Gerrity, representing the Maine Auto Dealers Association and the American Insurance Association, asked that there be in independent audit of the WCB to see if any progress has been made since the 2000 Berry , Dunn, McNiel and Parker audit.

  The Labor committee held the Work Session on March 5, 2007, and they came up with a bi-partisan compromise: they did not recommend removing the cap, but they will still meet the budget needs, and there is to be an independent audit. They recommended that for now the cap of $8,525,000 stays, but it goes to $10 million for FY'09. Also, they allotted $40,000 for an audit. Utilizing the audit results, and by following the WCB's performance, the Labor committee will look back each year after FY'09 to see if an additional $400,000 should be added to the cap. The Labor Committee has reported this unanimous compromise back to Appropriations. The audit could be completed by the end of the session.

Governor Baldacci Appoints §312/§213 Committee

  Section 312 (IME's) and Section 213 (Duration of Benefits and Permanent Impairment (PI) Threshold) have been sticking points for the Workers' Comp Board for years. It took almost 3 years for the Board to work out the initial implementation of the §312 IME system. Today, due to several factors, the IME system is slowing down the Dispute Resolutions Process. The efforts by actuaries over the years to determine the very critical PI threshold have been plagued with insufficient and unreliable data from the Workers' Comp Board. A lot rests on this threshold for both employers and employees.

  At the February 13, 2007, WCB meeting, Paul Dionne announced that Governor Baldacci has made a move to seek solutions in these areas by appointing a committee that is to include James Case for the AFL/CIO, John Leonard of MEMIC, Joe Edwards for the Self Insured Employers, Eric Cioppa of the Bureau of Insurance, William Thornton of Acadia Insurance for the insurance market, Dana Connors from the Maine Chamber of Commerce, and Paul Dionne, Executive Director of the WCB. The committee first meets March 23, 2007.

  This announcement came as a surprise to Labor members of the WCB who were reluctant to abdicate the Board's power to “outside activists.” Paul Dionne soothed Labor's concern that Labor was outnumbered on the committee by pointing out that there would be no recommendations without consensus. The Governor could submit legislation based on the recommendations of the committee.

§ 213 Data Struggle Continues

  § 213 reads “Effective January 1, 1998 and every other January 1st thereafter, the board, using an independent actuarial review based upon actuarially sound data and methodology, must adjust the 15% impairment threshold established in subsection 1 so that 25% of all cases with permanent impairment will be expected to exceed the threshold and 75% of all cases with permanent impairment will be expected to be less than the threshold.”

  Does 0% PI mean there is permanent impairment? (no) Should 0% PI's be averaged into the PI ratings to determine the PI Threshold? (no) Therefore, injured workers with no permanent impairment (0%) should not be considered in determining the threshold.

  Logical though this conclusion might be for a “reasonable person,” it is not the direction being taken by all of the WCB. There are 3600 settled cases on record at the WCB for which the PI is 0%. Both plaintiff and defense attorneys who attend WCB meetings agreed that occasionally both sides would agree upon % PI to move the case toward settlement. In some instances, it was because the assumed PI is clearly below the threshold; in other cases, it may have been above the threshold, but the injured worker wanted to settle rather than receive ongoing benefits. In most instances, 0% means there was no PI -- just as it reported. In an effort to consider the “true PI” of these 3600 cases, the actuary, Jeffrey Kadison, suggested reviewing a 10% sampling of the files from the settled claims.

  The first attempt was to look at the WCB records, but they had been purged and had little definitive to provide. Kadison then suggested insurers/employers be asked to produce the medical records for a 10% sampling. Insurers and employers have been asked to retrieve 720 cases (double the 10% figure of 360 to get a full sampling). In accordance with Kadison's suggestion, James MacAdam, a plaintiff attorney, and Paul Sighinolfi, an attorney hired by the WCCC, were then to review the files to see if there is any evidence of PI that might be considered by Kadison when he determines the threshold.

  Employers recognize the value of producing reliable data, but hey have very serious concerns about privacy issues. They have also questioned the WCB's statutorial references for turning over files on these adjudicated, settled cases. The WCCC is trying to figure out a way for employers to provide the information without violating privacy rights and not turning their files over to the WCB.

  Even though Kadison has expressed reluctance to consider cases with 0% PI as cases having any permanent disability, at the insistence of the Labor members of the WCB, Kadison ran the numbers to include all 3600 claims that were settled with 0% PI. The resulting 25/75 threshold dropped to between 7 and 9%. However, his report did not take stacking into consideration. Labor members of the WCB have taken this report very seriously. They have taken the position that if it is not mandatory for the employers to produce the files, then Kadison should use the 3600 zeros, and the correct threshold is 8%.

  The struggle goes on.

Change in the IME Rules

  The WCB has proposed changes to their rules in Chapter 2 §3 2. and 3. “Collection of Permanent Impairment Data.”

  The proposed changes for §3.2: “All Hearing Officers must obtain a permanent impairment rating prior to approving a lump sum settlement in cay case involving permanent injury. The permanent impairment rating shall be written on the WCB-10. Before approving a lump sum settlement, all Hearing Officers shall obtain either a permanent impairment rating or a report from a qualified health care provider establishing that there is no permanent injury. Either the permanent impairment rating or a finding that there is no permanent injury shall be written on the WCB-10. ”

§3.3 changes: A case involves “permanent injury” if any qualified health care provider has indicated that the employee's limitations are likely permanent unless the parties agree that there is no permanent impairment or that the employee has reached maximum medical improvement . Once this determination has been made the employee may seek employer/insurer shall submit a permanent impairment assessment.

  A plaintiff attorney, in attendance at the meeting was able to insert the change between the employee may and the employer shall . He also inserted or the employee is at MMI . The WCB voted 4-2 to send the proposed rule changes (including the proposed amendments) out to Public Comment.

  The WCCC is very concerned at costs associated with having a PI assessment for virtually every lost time case. The employer community needs to participate in the Public Hearing whenever it is scheduled! The WCCC will notify you of the Public Hearing via an email alert.

Legislation 2007

As of March 15, 2007, there are 20 bills that relate to workers' compensation. Space does not permit details on all of these bills, but an updated list is now available on www.wcccmaine.org . Click the Legislation button on the left. Your editor will do her best to keep this list updated.

Annual Report on the Status of the Maine Workers' Compensation System

   The 2006 section of the WCB section on Dispute Resolution concludes (as the first paragraph did for 2005):

“An increase of cases and the termination of two hearing officers, pursuant to D'Amato v. Sappi Paper , have resulted in higher case loads and an increase in the time at formal hearing… The Board currently has a full complement of hearing officers (9). The statistics for 2006 show improvement, however. Cases pending at Mediation as of December 31, 2006 are down 15% from the year before. There were 29% fewer filings at Mediations with a corresponding 28% fewer Dispositions. The average time in Mediation has increased by two days. There were 17% fewer cases pending at Formal Hearing on December 31, 2006 than a year before. Filings at Formal were down 8%, and dispositions were down 4%. The Average Months taken for Formal Hearing Decision is the same at 11.7 months.

  “As in 2006, the Lydon v. Sprinkler Systems case, which reduced the number of IME doctors from 30 to 14 doctors is the culprit because it takes so long for IME's to take place. This year there is talk of legislation to improve the IME process.”

   The MAE section reported that there were 586 fewer Lost Time First Reports in 2005 than 2004. That the insurance industry had achieved the highest compliance in Initial Indemnity Payments to date (86.12% over the Benchmark, and that the industry exceeded the benchmark for filing Memoranda of Payment within 17 days by 9%.

  It is interesting to note that numbers improve, but the budget goes up and up.

Workers' Compensation Coordinating Council Alert

Editor: Martha F. H. Mayo

Phone: (207) 443-5834 Fax: (207) 443-5867 email mayo@gwi.net

WCCC Web Site: www.wcccmaine.org

December 2006

Budget Concerns Prompt WCCC Freedom of Information Act Request

On September 9, 2006, the Workers' Comp Board (WCB) meeting room at the Deering Building was filled with more than 50 very concerned employers. At issue was the budgeting process of the WCB. The ever-increasing bottom line and questions about the use of the reserve account drew serious questions from those in attendance. During the last budget cycle, approximately two years ago, when there was still a 4X4 board, two Labor and two Management members of the WCB spent several meetings working through the budget with the General Counsel, the Deputy Director of Business Services and the Executive Director of the WCB. They came to a compromise that eliminated five positions and raised the assessment. It was hailed as a non- contentious process. This time around the budget was done by staff, and board members did not have a significant seat at the table. The Budget Sub Committee was brought into the process as the budget submission deadline from the Governor's Office was near. In order to get a better handle on the exact budget submission, the Management members of the WBC asked for additional time and information prior to its submission to the Dept. of Administrative and Financial Services.

To Paul Dionne's apparent surprise, the State granted the Management members' request for an extension. Still, supporting financial information was not produced promptly, and numbers in various other reports were inconsistent. Because the tracking of the assessment is inadequate, there is a perception that the WCB is raising more than 10% beyond the cap. In addition, there seems to be a misunderstanding of what a reserve is and how it should be accounted for. It certainly should not be treated as a cash account balance, as the Deputy Director of Financial Services at the WCB indicated it was being treated If the assessment “market” is underestimated, the payments could exceed the projection, and the reserve would thus grow. Reserves should be used for emergencies, not daily operational expenses. Employers well versed in their own business's approach to budgeting raised excellent questions that, even up to this printing, are yet to be answered. One thing is clear, however: spending the reserves as part of the usual administrative expenses is a way around the assessment cap that will only lead to higher built-in costs each year.

  Perhaps because the WCB is considered immaterial to the overall State financial positions since it is funded by employers rather than the General Fund, auditors for the State did not spend time testing WCB balances and transactions. Employers have suggested that the agency have a complete independent financial audit.

  Employers need to appreciate the financial expertise that the current Management members of the WCB bring to the plate. Until the balance in the state legislature shifts, however, it is likely the current financial practices at the WCB will continue. The WCCC has filed a Freedom of Information Act Request to obtain and be able to review support documents regarding, among other things, the total amount of money collected each year and a complete accounting of the WCB reserve fund balance.

Employers have done their part to meet the EDI requirements of the WCB. It has taken a lot of money. There is no sign of increased efficiencies from the WCB side. There are fewer claims and fewer contested claims, yet budget projections still increase. Any money saved in one area is re-allocated to other areas, leaving employers who are footing the WCB bill, without financial relief. There are many legitimate questions to be answered.

WCCC Files Amicus Brief in Babine v. BIW

On July 11, 2006, the Workers Compensation Board (WCB) voted 4-3 (Executive Director Paul Dionne voting with Labor) to take on a combined §320 review of Babine v. BIW and Fernald v. Shaw's Supermarkets in which the Hearing Officer ruled that employers must pay whatever is billed for ambulatory surgical procedures. This problem would not exist if the WCB had met its nearly 12 year obligation to develop a comprehensive medical fee schedule. Ironically, on August 22, 2006, the WCB voted 4-3 (Executive Director Paul Dionne again voting with Labor) to accept an updated medical fee schedule that is still silent on hospital fees, ambulatory care and pharmaceutical fees.

Hearing Officer Goodnough requested a §320 review of his decision because the case involved an issue of significance to the operations of the workers' compensation system. Central Maine Orthopedics has a list of customary charges that are applied to all payors. What is not available is information on how much less they accept from some of those payors. What is known is that Workers' Comp payors pay the full amount. The board was asked to determine whether a provider is entitled to receive as payment its usual and customary charge .

On November 28, 2006, Paul Dionne recused himself from the § 320 deliberations because he is on the board of Central Maine Health Care and would have a conflict of interest. After a 35 minute deliberation, the motion to affirm Goodnough's decision failed 3-3.

The Maine Workers' Compensation Act of 1992 directed the WCB to adopt rules to “ ensure appropriate limitations on the cost of health care services.” These rules were to establish “Standards, schedules or scales of maximum charges for individual services, procedures or courses of treatment. In establishing these standards, schedules or scales, the board shall consider maximum charges paid by private 3rd-party payors for similar services provided by health care providers in the State and shall consult with organizations representing health care providers and other appropriate groups.” Section 209.1.A goes on, “The standards must be adjusted annually to reflect any appropriate changes in levels of reimbursement. The standards apply to hospital costs and health care providers and must be in effect no later than January 1, 1993 .” For a little over a year, starting in 2004, the WCB invited representatives of hospitals, pharmaceuticals and out patient clinics, as well as employer and carrier represetnatives, to participate in Consensus Based Rule Making. No consensus was reached. On August 22, 2006, the board voted 4-3 to update the Medical Fee Schedule even though it still did not include hospitals, pharmaceuticals and ambulatory care.

The option of a 5% discount on hospital bills that are paid within 30 days does not meet the standard outlined in the statute. WCB staff has made minimal progress toward completing its Medical Fee Schedule. Betty Inman, Deputy Director of Medical/ Rehabilitation Services has attended a conference on the subject and is seeking advice from Illinois and IAIABC (International Association of Industrial Accident Boards and Commissions). The plan is to collect data, analyze it, compare it to other states, and come up with a “cost neutral” fee schedule. Executive Director, Paul Dionne, has proposed hiring an expert to advise the WCB on the Medical Fee Schedule. He has said he hopes for something that is balanced between not having employers pay too much and injured workers still having access to treatment.

The WCCC believes that the Legislature did not mean for employers to pay more for health care than third party payors such as Anthem and other health care providers. Bath Iron Works has filed a law suit asking the Law Court to direct the WCB to complete the Medical Fee Schedule.

Law Court Decisions

There have been several recent Law Court decisions about which employers should be aware.

Prompt Reporting of Injuries Undermined

On November 17, 2006, the Law Court denied a request for an appellate review of Shaver v. Poland Spring . Going forward, employers will have a difficult time requiring prompt reporting of injuries. (See September 2006 WCCC Alert .)

Date Injured Worker Claims Injury is Work-Related

In the case of Pratt & Whitney v. WCB , the employer knew that an employee was injured two months before the employee claimed it to be work-related. Once notified that the employee considered the injury to be work related, the employer immediately filed a First Report, but the WCB fined the employer $100 for filing it “late.” Superior Court Justice Paul Fritzsche overturned the fine and also suggested that the WCB consider amending its First Report from to avoid this problem in the future. Employers are reminded that Box 42 should be interpreted to mean not merely the date that the employer was notified of an injury but, in fact, the date that the employer was notified the injury was work related. Similarly, Box 43 should be filled in as the day the employer was notified the employee was claiming to be out of work for a worker's comp injury. Box 20b is similar in the Notice of Controversy.

PI Stacking

The case of Bisco v. S. D. Warren involves the concept of stacking permanent impairment ratings for workplace injuries. The stacking concept is well known to law firms that specialize in workers' comp, but Bisco has brought stacking to the attention of attorneys with broader based practices. The court ruled: “Bisco, the employee, bore the burden of raising the issue of whether permanent impairment from unrelated injuries should be stacked for the purpose of obviating the durational cap…. The employer then bears the ultimate burden of proving that it is entitled to discontinue benefits.” The court decided that Hearing Officer Jerome had applied too high a standard when she looked to Bisco to convince her that permanent impairment from the unrelated injuries should be stacked. It was enough for the employee to produce evidence. It was then up to the employer to demonstrate by a preponderance of the evidence that, in this case, the 1999 injury did not aggravate or accelerate the 1995 injury. The Law Court in Bisco shifted the burden of proof from the employee to employer in permanent impairment stacking cases. It is now much easier for employees to benefit from stacking permanent impairment ratings.

“Coming and Going”

Finally, there is the very important decision involving liability for travel, and what constitutes “on the clock” for an employee. In Spencer v. VIP , Justin Laliberte, an hourly employee of VIP, volunteered to help set up a promotional show for VIP. He was given $25, in part to cover his expenses. On his way home, he crossed the centerline and tragically crashed into the Spencer family car. Mrs. Spencer died, and her child and husband were injured. Mr. Spencer, on behalf of himself, his child and his late wife, initiated legal action, seeking damages against VIP. His case was dismissed under a summary judgment ruling. In their ruling, the Law Court vacated the summary judgment and allowed the lawsuit to proceed. The majority decision considered that Laliberte was paid $25, that VIP paid him workers' comp, and that the traveling occurred just before and just after he completed his tasks.

Judge Levy joined Judges Saufley in his written dissent. “The decision of the court today may ultimately cause employers to become the insurer for all harm caused on the highways by their employees while driving to work. It puts Maine out of step with tort law across the country.” These judges felt it was inappropriate for such a precedent to be set by the court; rather, they recommended the legislative process during which costs and risks could have been debated. Saufley further wrote: “We should apply the law that exists today: a person who is going to or coming from work is responsible for his or her own actions…. He was not under the control of VIP… Laliberte was done with work for the day. He was not acting on behalf of his employer, and his allegedly negligent conduct was outside the contours of any employment relationship with VIP.”

Work with Actuary

Jeffrey Kadison of Practical Actuarial Solutions has been working on §213 recommendations for more than six months. His conclusion that there be no additional year added to the duration of benefits came early on and was uncontested. As the time for the 2007 work draws near, he is close to his final recommendation on the Permanent Impairment (PI) threshold. It has been a grueling process of questions and counter questions. The WCB established a sub committee comprised of one Labor (Tony Monfiletto) and one Management member (John Cooney) of the board plus two attorneys, Paul Sighinolfi for Management , and James McAdam for Labor. The two attorneys provided Kadison with answers to a number of questions that helped him to better interpret the available information.

It appears that it was a very productive meeting and resulted in a number of agreements and a plan for more accurately determining the PI threshold. It was pointed out that many of the 0% PI ratings were agreed upon for convenience in cases where there really was PI. It is recommended that the WCB will no longer collect 0% PI ratings. Attorney McAdam recommended that, when an injured worker returns to work, the discontinuance include information on amputations, permanent limits, etc . Both McAdam and Sighonolfi will work separately to review 10% of the 3600 claims that reported 0% PI to see if the WCB files contain any information that would indicate there was, in fact, PI.

WCB data has been inaccurate and inadequate. Mr. Kadison is committed not only to make the best actuarial decision he can, but also to help the WCB have improved data for the future.

Oregon WC Premium Rate Ranking

The recently published Oregon WC Premium Rate Ranking for 2006 finds that Maine 's costs have risen again. Last year, Maine was in 13 th position, but the most recent rating puts Maine in 8 th position. See http://www4.cbs.state.or.us/ex/imd/reports/rpt/index.cfm?fuseaction=version_view&version_tk=177730&ProgID=FEARA012

September 2006

Employers be on Notice: WCB Expects Major Budget Increases

  Despite the unified position of the Management Members of the Workers Comp Board (WCB), the majority (Labor members and Executive Director Paul Dionne) voted August 8, 2006 for a financial order to take additional funds for operations from the reserve account. The current proposed budget figures (FY 08: $9,810,160; FY09: $10,052,372) that will be submitted to Commissioner Rebecca Wyke at the Department of Administrative and Financial Services (DAFS) in September are above the Assessment Cap of $8,565,000 and depend on more funds from the reserve account. WCB staff has suggested submitting legislation that will solve “chronic budgetary problems” by moving from an assessment cap determined by the Legislature to a “unified current services budget.”

  State Agencies funded by the General Fund now operate under the system of a “unified current services budget.” This means that their future budgets are based on their past expenditures. If there are unusual and unavoidable expenditures beyond the budget, agencies are allowed to petition for more money. Unlike the WCB, state agencies funded by the General Fund have been subject to across the board cutbacks and a freeze on hiring. The Workers' Comp Board is funded by an assessment on employers, not the General Fund, so they were not impacted by the across the board cutbacks. Also, every request for hiring at the WCB has been granted by the State. This year the majority of the WCB board has voted to take more than one million dollars from the reserve account to meet their expenses. Should they be successful with anticipated legislation to allow a unified current services budget, those additional expenditures will increase their base for later budgets.

The regularly approved 3% raises for state employees are not to be included in the unified current service budgeting. Rather, they are in the category of circumstances over which the agencies have “no control” and result in budget increases to keep the agencies going. The result is an increased expenditure base for the next budget year, and so the base gets increased, and the cycle goes on.

The reasoning of the Labor members and Executive Director of the WCB is that this new budgeting approach is the way to get rid of the “uncertainty” of the current cap, which can only be changed by a vote of the Legislature, and to have a system that readily allows for regular increases. When Management members objected to the financial order from the Reserve Account to pay for operational costs, the Labor members and Paul Dionne accused them of instituting a policy that would have staff reductions every time there was an increase in pay to keep the overall budget neutral. Management members of the board have asked to see the savings from EDI and urge greater efficiencies in the work processes at the WCB.

Jobs eliminated by EDI have been assigned to other divisions of the WCB; there have been no savings! Both the Worker Advocate and MAE Programs are poised to increase their staffs and significantly increase assessments on employers.

Hold on to your pocketbooks, employers! The WCB is not run like a business. If you are concerned and can attend a special WCB budget meeting on September 6, 2006, please do so.

Medical Fee Rules Pass Again with

NO Medical Fees for Hospitals, Ambulatory Care or Pharmaceuticals

  The 1993 WC Statute directed the new WCB to adopt rules that establish medical fees for individual services, procedures or courses of treatment including hospital costs by January 1, 1993. The statute directs, “the board shall consider maximum charges paid by private 3rd-party payors.” The Board has failed to do so. Supported by Medical Providers who are looking out for their bottom line, Paul Dionne and the Labor members of the WCB voted acceptance of the rules regarding Medical Fees even though they do not meet the requirement of the statute. What is more, they voted additional non medical costs so that an injured worker who travels 80 miles or more one way is entitled to up to $120 to stay overnight! Until a portion of the vote was reconsidered, the WCB had also voted 4-3 that an injured worker was entitled to a meal every time he/she has a doctor or therapy appointment. That was amended to having had to drive 50 miles to an appointment.

  Management members opposed the motions and insisted that the WCB resume its efforts to establish the needed portions of the Fee Schedule.

Fresh Start and Blue Ribbon

(WC Retro Continued from previous Aler t )

The first installment of the workers' comp retrospective ended as carriers were realizing the only way they could stop subsidizing workers' comp in Maine was to withdraw from the workers' comp market, and Joe Edwards took over as Superintendent of Insurance .

  In 1987, 100 of 110 workers' comp carriers filed to leave the state in a two month period. This lead to panic among employers because workers comp is a requirement to do business, and lack of coverage would put employers out of business. The Legislature was called into Special Session to deal with the loss of carriers. Even though the Legislature was generally content with having high benefits for employers and low rates for employers with insurers carrying the burden, the Labor and Banking and Insurance Committees knew they had to create legislation or the carriers would all leave.

  Gov. McKernan established the a committee which included Susan Collins, Bruce Gerrity, Roger Mallar and Joe DiGiovanni of the insurance industry; this committee developed Fresh Start. Four ideas drove Fresh Start: (1) de-populate the assigned risk pool which included 98% of employers; (2) get costs under control by having adequate rates; (3) get employers to acknowledge the real cost of benefits; and (4) eliminate the assessment based on voluntary market premium that covered the residual market deficits and was a disincentive to write voluntary business . Insurers and employers would have to pay off the old debt. Going forward, if the loss was greater than the premium, the insurers got to surcharge employers if there was a good faith effort to depopulate the residual market.

  In the first year after Fresh Start, Superintendent Joe Edwards raised the rates 25% with the understanding that more rate increases were needed. This worried employers; slow rate increases worried insurers; and injured workers were worried about loss of benefits. The Banking and Insurance Committee did not receive the Fresh Start proposal well. However the proposal did pass because Gov. McKernan took a firm stand on fixing the system. There were still problems. The 400 weeks plus maximum medical improvement (MMI) benefit duration was not working as intended. Carriers mistrusted the market and did not want to return. Joe Edwards displayed his effectiveness as Superintendent of Insurance by convincing the larger insurance companies to return. Truthfully neither insurers, employers nor employees trusted the system, but it limped along.

  By 1991, Maine was back in super crisis mode. A group of business and union people, later referred to as the Pink Ribbon Commission, was formed on its own initiative and presented a package during the legislative session. They were recommending that Maine model a new system after the one in Michigan . (Actuarial studies later concluded the Michigan system would be more costly than the current system in Maine .) Gov. McKiernan wanted the system fixed and reached an agreement with Legislative Leadership to form the Blue Ribbon Commission. It had four members: Governor McKernan picked Richard Dalhbeck and Harvey Picker; Speaker John Martin picked Emilien Lévesque; and Senate President Charlie Pray picked Bill Hathaway.

  The Blue Ribbon Commission report and proposed legislation covered four major areas: (1) bring benefits down closer to country wide average benefits; (2) deregulate the market with respect to rates; (3) replace the residual market (assigned risk plan) with an assessable domestic mutual insurance company (MEMIC); and (4) change the administration of the workers compensation system

  The major benefit and cost issues were the duration of benefits for partial incapacity benefits, the maximum weekly benefits, and that employers/insurers were required to pay the employees' legal fees if the employee “prevailed”. The 1992 legislation limited the maximum duration of permanent partial claims to 260 weeks for injuries with permanent impairment less than 15%. Other changes were the change from 66 2/3 of gross wages to 80% of spendable wages, reduction of the maximum benefit to 90% of the SAWW, removable of escalation (annual increases) for permanent total and death cases, increase of the waiting period to 7 days from 3 days, and the requirement that each party pay its own legal fees.

  The insurance rate market was deregulated to encourage insurers to return, to prevent rate and employer cost suppression that had contributed to Maine 's problems for over 10 years, and to allow competition to control premium costs. The creation of MEMIC was to permit Maine employers to take control of the insurance mechanism for those employers not able to obtain coverage elsewhere, to improve loss control and claim management, and to avoid a state fund. Administrative changes included replacement of the Workers' Compensation Commission with a four labor- four management Workers' Compensation Board and to replace the Commissioners with new Hearing Officers.

  Maine went forward with a new statute.

This article is based on information from Bruce Gerrity, Judy Plummer, Richard Johnson, and Abby Holman.

SAVE the DATE (Or Register Now!)

WCCC Annual Meeting/ Seminar

Thursday, October 5, 2006, 9 AM through Lunch

Maine Maritime Museum, 243 Washington Street , Bath

Tentative Topics

Registration and Networking (Registration starts at 8:30)

Welcome and Update from the WCCC (Peter Gore, Chair)

Year in Review by Management Members of the WCB

Campaign Efforts by Alliance for Maine 's Future (Tony Payne)

Year in Review from the Labor Perspective (Jim Case, Attorney for AFL/CIO)

Gubernatorial Candidates Barbara Merrill, Pat LaMarche and Chandler Woodcock

(at press time, Gov. Baldacci had not responded to our invitation.)

LUNCH

(Registration entitles you to tour the museum during breaks or after the event.)

Registration closes September 28, 2006.

Registration Form on the WCCC website: www.wcccmaine.org

Mail with check for $35 made out to “WCCC” to

Martha, F. H. Mayo, WCCC, 83 Green Street , Bath , ME 04530

Workers' Compensation Alert Editor: Martha F. H. Mayo

Phone: (207) 443-5834 Fax: (207)443-5867 email: mayo@gwi.net

Check WCCC Web Site: www.wcccmaine.org

WCCC Alert

June 2006

Actuarial Report: No Extension of Duration/ PI Threshold TBD

   Jeffrey Kadison is a conscientious actuary who is working hard for the WCB. In a March 16, 2006 draft report to the WCB, he advised Board members that this year the new data shows Maine 's claim frequency is 14.8% greater than the countrywide average and that benefits should not be extended. He then adjusted for industry mix and found Maine 's claim frequency to be 6.9% higher than the countrywide average. He noted the margin is narrowing because the employment distribution in Maine appears more hazardous than the countrywide average. The countrywide frequency is dropping also, but at a slower rate. Therefore the duration of claims with partial disability will remain at 364 weeks.

  Kadison has yet to make his final report on the permanent impairment threshold. In the March 16, 2006, report, he recommended that the threshold be lowered from 13.4% to 12.5%. This raised numerous questions from the employer community, which has been bracing itself for the impact of cases with stacked impairment ratings. Other issues such as the trend toward using Range of Motion (ROM) rather than Disability Related Evaluations (DRE) will drive up permanent impairment ratings for the back injuries. The possible shift from the 4 th Edition of the AMA Guides for Permanent Impairment will allow psychological impairments in the mix. The impact the anticipated shift to the 6 th Edition will raise ratings in some areas and lower others.   

  Both Labor and Management have submitted questions for Kadison's consideration as he continues to work toward establishing a threshold. He will return to the Workers' Comp Board at their June 27, 2006 meeting. Readers of the Alert are encouraged to attend this meeting, which is scheduled to start at 9:30 AM at Central Office of the Workers' Compensation Board.

Assessment FY 2007

  The Budget Subcommittee recommended, and the entire board approved, reducing the assessment from $8, 525,000 to $8, 275,000 for FY07 and to require the staff to use an assessment rate for insured of 1.86% on an FY 2007 estimated insured market of $261,000,000 and to raise $3,425,523 from self insureds. The “reduction” in the FY 2007 assessment of $250,000 (from a potential $8,525,000 to $8,275,000) is not a function of fiscal restraint. Rather, it takes into account the WCB's option to use funds from the Reserve Account and apply them to the next year's budget rather than returning them to employers. Another factor is that premium growth is increasing at a greater rate than the amount that the Legislature has allowed the WCB to assess. In fact, the budget to accompany this assessment has neither been completed nor approved. The WCB has already used the Reserve Account this year to cover under-funded expenses in the All Other and Personnel Services accounts for fiscal year 2006. The Worker Advocate and MAE programs are already positioning themselves for significant increases in staff. Rest assured, costs are going up!

Medical Fee Schedule Rulemaking

  Public comments on the proposed rules for the Medical Fee Schedule close Monday, June 12, 2006. The current WCB rules for Medical Fees include procedural terminology (CPT) codes from the 2002 edition of the American Medical Association (AMA) manual. There have been numerous new CPT codes since then, and, if a procedure does not have an accepted code, the employer must pay 100% of usual and customary fees. There is some additional language change in the rule.

•  Inpatient is defined to be when the injured worker has been officially admitted to the hospital by physician order.

•  If a health care provider has billed at a fee above the scheduled maximum allowable payment, the insurer may use the lower fee in the schedule, but “the insurer shall not change CPT codes on a bill”!

•  Reports for modifier codes for such circumstances as Prolonged Evaluation and Management Services, Unusual Procedural Service, Unusual Anesthesia, and Unrelated Evaluation and Management Services by the Same Physician During a Post Operative Period are no longer required.

•  The employer would pay Travel Related expenses including mileage at the IRS rate, actual costs up to $120 per night for overnight (if the injured worker has traveled more than 150 miles), up to $6.00 for breakfast and/or lunch and $16.00 for dinner, and tolls. (Tolls only require a receipt!). As written, there is a tremendous cost impact since there is no mileage threshold to qualify for a meal. The WCCC is testifying that there be a qualification of 80 miles distance as there is in Chapter 14 of the WCB rules for examinations for people with claims of Occupational Disease.

•  The conversion factor of 60 is in writing for the first time: employers continue to pay much more than commercial insurance.

MAE Newsletters

  Read your MAE newsletters carefully. They outline the way the MAE program will approach your company when it is audited, and you may be surprised at some of their declarations. For example, according to the MAE newsletter, you may not put an injured worker on fixed partial using a WCB-4 (Memorandum of Payment). Also, contrary to the language of the statute, all medical bills on undisputed claims must be paid within 30 days regardless of whether or not you received them via certified mail. Lack of compliance with the way the MAE program wants things done will result in penalties. Is this “Rulemaking by Newsletter”??

EDI Reporting of Notices of Denial/ Controversy

All Notices of Denial must be filed via EDI by July 1, 2006. A new WCB –9 form has been approved to record the current information in printed form for the employers and injured workers.

Shaver v. Poland Springs

  A Section 320 review of Shaver v. Poland Springs will take place on July 11, 2006. Laura Lee Klein, Senior Staff Attorney for the WCB, represents Robert M. Shaver in his claim that Poland Springs Bottling discriminated against him for not immediately reporting his workers' comp claim as required in the company policy. Robert Piampiano represents Poland Springs. Allan Muir has filed a Brief of Amicus Curiae on behalf of the Maine State Chamber of Commerce, the Workers' Compensation Coordinating Council, and the Maine Council of Self-Insureds. James MacAdam has also filed a Brief of Amicus Curiae . According to the statute, “The review must be on the record and on written briefs only.”

Workers' Comp in Maine – A Retrospective.

  The following article, based on an interview done by Martha Mayo with Harold Pachios, is the first in a series of two articles in the WCCC Alert on the history of workers' compensation from 1981 to the reforms of 1992. Bruce Gerrity also contributed some information. Their experience is from the insurance companies' perspective.

In 1981 , the National Council for Compensation Insurance, Inc. (NCCI) approached Harold Pachios' firm, Preti Flaherty Beliveau Pachios & Haley, because workers' comp costs were rising for insurance companies, and there had been no rate increases. According to Pachios, John Martin, then Speaker of the Maine House, had led the increase in benefits in the 1970's. In 1981, costs were increasing in Maine faster than any other state, but there were no corresponding rate increases. The Chamber and Labor opposed any rate increases. Pachios filed a double-digit rate increase, at that time, with Superintendent of Insurance Ted Briggs, who acknowledged the need for a rate increase but who felt his hands were tied by the statute which said that, to be granted, any rate increase request had to hit the amount right on the nose. There was no increase.

In 1982 , Pachios approached Briggs and challenged his interpretation. He warned that refusal to increase the insurance rates could cause the system to collapse, but Briggs held firm. Harold also went to John Martin and asked him to clarify the statute through legislation. According to Pachios, Martin had no incentive to change the system because employees were benefiting and employers did not have to pay the cost.

In 1983-1984 , Pachios/NCCI filed a more modest request for a rate increase. It was “much less than what was needed.” At this point, the Public Advocate became involved in an attempt to stop the increase. In 1984 -85, the Public Advocate actuary actually recommended a decrease in the rates at a time when NCCI found a rate inadequacy of 50%! Legislation rolled back the rates by 8%, allowed no rate increases for 1985 and 1996 and limited the increase in 1987 to 10%.

In 1985 , Liberty , which had about 40% of Maine 's market, had voluntarily written a large private employer on a retro plan, which meant that if, at the end of the year, Liberty determined they had not been paid enough money for the experience, they could send the company another bill. It is important to remember that at this time, 80% of the market could not get an insurer to cover them voluntarily and were in the Assigned Pool. That Pool's rates were frozen, so there was an incentive to get into the Pool. To qualify, a company had to have two applications for insurance rejected. The company in question had brokers in New York ask, and subsequently receive, the prerequisite declinations; thus the company was allowed to join the general mad dash to the pool. Ironically, the company's servicing carrier was, once again, Liberty , and the rates were totally inadequate for their experience.   Pachios filed a complaint with the Superintendent. He stated the system was unfair and asked for proposed legislation that would allow for a retro plan in the Pool for large employers. The Superintendent saw no problem with the Liberty situation; the Legislature killed the bill. Throughout the early and mid 1980's, according to Pachios, there was an alliance with Labor and the business community because they had the same interest (no rate increases). According to Pachios, employers did not mind the increase in benefits because they were not paying for them. Pachios said that Martin realized they could give high benefits, and the employers wouldn't have to pay. Once employers had to pay, they opposed benefit increases. Liberty called, “Foul!” and declared the situation to be an unfair taking and unconstitutional.

In 1986-87 , NCCI, Liberty , and other carriers sued the Superintendent and the State of Maine for unconstitutional taking. If insurers were forced to write insurance, then they were entitled to a fair return. Don Alexander, Superior Court judge, wrote in his decision of May 14, 1987, that he agreed that carriers were receiving an inadequate rate of return, which could constitute an unconstitutional taking except that they did not have to stay in the Maine market. Only licensed carriers were required to participate in the assigned risk plan. The decision was appealed and lost; the carriers got the message: if you don't want to bear the burden of subsidizing workers comp in Maine , leave. At this point, Joe Edwards took over as Superintendent of Insurance. He faced a deficit of more than half a billion dollars that had resulted from the actions of the legislature, the Superintendent, and Public Advocates.       [ continued in next issue of the Alert !]

Save the Date!

WCCC Annual Meeting

Morning through Lunch October 5, 2006

Maine Maritime Museum, Bath , Maine

We will invite the Gubernatorial Candidates

and have other topics related to workers' compensation.

Attendees will have passes to the Museum and can witness first hand the progress on the evocation of the 6 masted schooner, the Wyoming , the largest commercial wooden sailing vessel ever built .

Editor: Martha F. H. Mayo

Website: www.wcccmaine.org     (207) 443-5834

March 2006

Amicus Request Receives Unfriendly Reception

(or, It's a Question of Timing)

  This past October, Hearing Officer Glen Goudnough requested a § 320 review on a case identified as Shaver v. Poland Springs Bottling Company . Poland Springs had a personnel policy in place requiring employees to report injuries immediately or be dismissed. Mr. Shaver did not immediately report his knee injury and was dismissed. HO Goodnough found that the policy was facially neutral in its application, and that it served a legitimate business purpose in identifying injuries and potentially dangerous situations.

However, while Goodnough determined that the termination decision was not substantially rooted in the exercise of the Employee's rights under the Maine Workers' Compensation Act, he also requested a § 320 review by the Workers Comp Board. Management members, not wanting to see the WCB get in the business of setting personnel policies for companies, voted against the review, but Labor, viewing the situation as an issue of discrimination for reporting an injury, carried the votes with Executive Director Dionne voting with the., The case is to go through a § 320 review in the coming months.

  Early in the process, Attorney Jim Case, a regular attendee at the WCB who represents the AFL-CIO, explained to Board members that an entity filing an amicus brief is normally referred to as a “Friend of the Court” and is someone who believes they have a relevant perspective and knowledge, or information that they feel is important to the case and might be able to help the board members make an informed decision. Paul Dionne spoke of the value of the WCB's receiving as much information as possible to make their decision.

  Attorney James Macadam was the first to present a request to file an amicus brief to the board. He did this on his own, without a client. Gary Koocher commented for the record, “The Management Caucus would like to unanimously support this motion and we do so as a precedent-setting situation so that in the future any party, including an attorney, can submit an amicus brief at any time.” Labor Member Rod Hiltz commented back, also for the record, “Gary Koocher's statement goes beyond the scope of the motion on the table since the statement implies the Board is setting a precedent by voting in favor of the motion and should be voiced as a motion or an amendment to the motion and what Gary Koocher just said means absolutely nothing to this Board.” Despite Macadam's tangential involvement with the case, the WCB granted his request.

  At a later meeting, the Board reviewed a request by Attorney Allan Muir, who represented the WCCC, Maine Council of Self-Insureds and the Maine State Chamber. It was understood the AFL-CIO was also submitting a request, but Jim Case was not present at the time. Labor moved to grant the anticipated AFL amicus request but was silent on the WCCC request. The motion passed 6-0. Then, when Management moved to grant the Muir request, the matter of timing became obvious. Senior Staff Attorney, Laura Lee Klein, who is representing Shaver, had had no objection to Macadam's brief, but she did object to Muir's because the connection with the case was not clear to her. The Labor members of the WCB supported her and voted against it. Since one Management member was not present, the motion failed.

  Management member Koocher said for the record, “I would like to thank the Labor members of this Board for demonstrating far beyond any ability that I possibly have their unmitigated and consistent lack of acting in good faith.”

  Later in the meeting, Jim Case arrived and called a Labor caucus. The vote was reconsidered and this time the motion to allow Muir's amicus brief passed 6-0. There are to be three amicus briefs for the § 320 Review which will happen in another month.

WCB Briefs

Budget Shortfall : The Budget Subcommittee of the WCB learned on February 28, 2006, that there is an expected budget shortfall for the agency. The proposed solution is to dip into the $800,000 reserve account. Apparently the funding anticipated for the Lump Sum Settlement study will not materialize. All signs point toward a significant increase in the budget and subsequent assessment on employers for FY 07-08. Board members of this committee are watching this issue closely.

LD 1817: An Act to Protect Social Security Numbers : The WCB has watched this bill with great interest. Originally the bill was drafted to change rather loose use of social security numbers by the University and Community College systems. At one point, however, there was talk of an amendment to make them no longer public record. This would have applied to such agencies as the Workers' Comp Board. Such a prohibition would have greatly complicated WCB procedures from the copying files to a key element of EDI. The post secondary schools are already working to assign student identification numbers to use instead of the social security numbers, so hopefully the WCB (and subsequently employers) will not be impacted.

Dispute Resolution Process / IME's : Paul Dionne reported that many numbers for the Dispute Resolution Process are positive and explained that there were 2,088 assignments in 2005 and 2,266 dispositions during that time, which indicates that the hearing officers are managing their caseloads efficiently. Resolution time frames at Formal Hearing have improved from 10.2 months to 9.6 months. However, inadequate numbers of IME Doctors continues to slow down the process.

New WC Poster : Steve Minkowsky recently displayed the new workers' compensation poster which informs non-English speaking people that interpreters are available for Spanish, Portuguese, Italian, French, Korean, Japanese, Chinese, Russian, Polish, Somali, Persian, Arabic and Vietnamese and the most-recent version of the ADA language. He also noted the Board will be modifying its other forms, over time, to include the same language.

LD 1715 , which elevates the WCB Agency Technical Officer (ATO) to the position of Deputy Director of Information Management , is moving through the legislative system. Paul Fortier will be that Deputy Director.

Another § 320 Review Request : Jonathan Sprague requested a § 320 Board review in the case of Johnson v. S.D. Warren . He requested clarification on whether only a psychiatrist or other mental health specialist (not a physiatrist as was the case with Johnson) would be qualified to render PI assessments on work-related injuries involving mental or emotional permanent impairment. The case presented two substantial issues: the role of psychological permanent impairment in the Maine Statute, and whether or not a medical expert has the authority to render permanent impairment ratings on injuries outside of their specialty. In this instance, the motion for a §320 review failed 3-3 when Paul Dionne voted with the two Management members of the board.

Did You Know?

  Washington is the only state in the country where workers contribute to the cost of workers' compensation premiums. Washington workers contribute more than 26% of total premium cost. This means that employers in Washington get a particularly good deal on industrial insurance. Washington , in all of the recent objective studies (the 2004 Oregon Rate Study and the 1998 WA Industrial Insurance Performance Audit) is recognized as a low-cost state. The Oregon study doesn't even account for the 26% employee contribution, so the employer costs rank even lower.

Worker Advocate Program

  Senior Staff Attorney Laura Lee Klein reported on the current status of the Worker Advocate Program at the January 10, 2006 WCB meeting. The program is fully staffed at this time, but there has been significant turnover in recent years. One of her goals is to maintain the employees in the Worker Advocate Program, whom she described as “good people that are committed and that bring with them a significant amount of institutional knowledge and experience with workers' compensation claimants.”

  Klein is seeking solutions for the strain on the advocates because of their caseload. One of her ideas is to have a moratorium of two weeks, per year, in which the advocates would not be required to attend mediations and formal hearings. They currently attend approximately 15 mediations every other week and this leaves them very little time to do intake work because they are preparing for mediations and formal hearings. (She indicated she would do her best to make sure this did not impact the rest of the WCB staff such as the Mediators.)

  Klein is also considering implementing a career ladder of some type that will give employees something to work towards. Ms. Klein stated the Board also needs to consider the wages set for advocates who make substantially less than they would in the private sector; she stated that high turnover in the program is affecting morale. Restrictions on over time pay further impact the Advocates. Klein would like to see them have the option of overtime. She would also like to see legislation that would add more staff to the program.

  Most of Klein's proposed solutions come with a price tag. The WCCC has alternate suggestions for lowering the burden on Advocates such as screening unwarranted, or inappropriate cases. Also, in the case of workers' comp discrimination cases, collection of attorneys fees are permitted, so injured workers need not rely on Advocates in such cases.

Actuary is at Work -- Is the Money in the Bank?

  Labor has been heard to argue that increases in duration of benefits (§ 213.4) will not add cost to the system because the money has already been collected. In part, they are correct. In anticipation of reaching 520 weeks of duration, insurance companies adopted 2.7% escrow accounts. The escrow amount covers the contingency that the Section 213 maximum benefit duration will be extended from 364 weeks to 520 weeks for injuries that occur in policy year 2006. If the extension does not occur, insured employers will receive refunds . If the benefit duration extension does occur, the premiums will be retained by the insurers and paid out to injured workers. Any increase in duration will have a direct impact on self-insured employers who have not set aside any such accounts.

  In accordance with the directives of Section 213 of the Workers' Compensation Statute, every year the WCB hires an actuary to determine if the frequency of claims in Maine is above or below the national average. If it is below the national average, the duration of benefits for people who are partially disabled is extended an additional 52 weeks. In 1993, the benefit duration started at 260 weeks. The first actuarial study occurred after the first five years, and in 1999 and 2000, the benefits were extended. Benefit duration has not been extended since 2000; the current duration of benefits is 364 weeks. The next actuarial study is due in the spring of 2006.

Medical Costs

(from the Insurance Information Institute Website )

  According to a 2005 report from the National Council on Compensation Insurance (NCCI), the medical care portion of lost-time claims — claims serious enough to require time off work — increased by an estimated 10.5 percent in 2004. The average change for the eight-year period, 1996-2003, was 9.3 percent, compared with 3.9 percent over the period 1991 to 1995. Workers compensation medical care costs have increased much faster than the medical consumer price index in part due to the increased use of newer, more expensive prescription drugs to treat injured workers and a significant increase in the cost and utilization of hospital services, particularly for critical care and the use of MRIs. A study by Liberty Mutual Insurance Cos. found that the average prescription costs workers compensation insurers roughly 75 percent more than the same medication costs a group health plan. Workers compensation lost-time claim frequency is still decreasing. Over the period, 1990-2003, the cumulative change was 42 percent, with a decline in 2004 estimated at 3.4 percent.

Fifth Edition, To Be or Not to Be

  Through Resolve 2005, Ch. 53, the Legislature directed the WCB to consider adopting the Fifth Edition of the American Medical Association's Guides to the Evaluation of Permanent Impairment. Joan Kirkpatrick, Jim Mingo, Jim Case, Allan Muir, Paul Dionne and Betty Inman comprised the study committee. They reported three options to the Legislature. (1) Retain the 4 th Edition of the Guides. (2) Hire a health care provider (or providers) to determine the difference in rating between the 4 th and 5 th editions for specific injuries. Then, hire an actuary to determine, based on the health care provider's report, whether the permanent impairment threshold needs to be adjusted, and, if so, to what extent. (3) Adopt the 5 th Edition and closely track the subsequent impairment ratings; then adjust the PI Threshold after a suitable period of time.

  No action has been taken on the report. It should be noted the 6 th Edition is in process.

December 2005

EDI Consensus-Based Rulemaking Committee

  WCCC is pleased to report that implementation of EDI has taken a positive turn. In early September, the Workers' Comp Board (WCB) reconvened the Consensus Based Rulemaking Committee to deliberate the issues that were raised regarding the migration to electronic filing. This committee will make recommendations to the WCB on how best to proceed. While there was apparent reluctance on the part of some board members to extend the deadlines, Staff pointed out that when the rules were promulgated, the Board and workers' compensation community were not aware of the problems that would arise with respect to programming. The board voted to extend the deadline for filing NOC's to July 1, 2006 or earlier if parties are ready. Paul Fortier, Deputy Director of Information Services, has expressed his preference that implementation be phased in and has a list of companies that would go on line in April, May and June. The WCB still needs to approve any recommendations.

  EDI Consensus-Based Rulemaking Committee provides an opportunity for the WCB staff and the workers' compensation community to work cooperatively. General Counsel John Rohde is doing a good job running the meetings. It took three meetings to get through line-by-line discussions of the data elements for complete and partial claim denials. However, with respect to payments, and the complex and varied options to make payments under the Maine system, it is expected that it will take significantly more time to discuss all of the line items on the IAIABC Release III as they apply or do not apply to the Maine requirements. We are fortunate that George Poulin, with Liberty Mutual is serving on the committee. He served on the IAIABC committee that developed Release III is very familiar with the challenges other states have had in implementing this reporting tool. The employer community expects that a reasonable timetable will be set for payments based on the experience with denials.

NOC Pilot Project

  The NOC Pilot Project was approved by the WCB on June 17, 2003. That motion allowed the collection of data which included percentages of Notices of Controversy (NOC) to Memoranda of Payment in the first 14 days. Because the information was gathered without any type of context, its presence has been controversial for insurers and employers and at the WCB. The WCB approved motion limited the project to data gathered in 2004. The Pilot Project ended with the completion of study of 2004 data, but there has been no report of what it accomplished. Steve Minkowski, Director of Claims Administration, did comment on NOC numbers in the 2004 Annual Report. The percentage of total Lost-time First Reports that were NOC'd (denied) was 20.53%; however many employees with lost time claims returned to work within 7 days and were not due any wage loss payments. Therefore MAE staff calculated a rate of NOC's in cases when compensation was actually due at 41.49% based on the total number of NOC's. The latter option paints employers in a more negative light and may not be totally accurate since some of the denied lost time claims have no indemnity owed. Employers have a right to deny claims, and often do so because they do not have the time to determine if a claim is compensable. Many of the claims are paid by the 44 th day (§ 205.3: the day on which $50 / day penalties kick in if there has not been a NOC). Employers have requested that, if the WCB is going to publish information about the percentages of NOC's, the WCB should also provide information about claims that accepted by the 44 th day. Employers are concerned that information about initial NOC's will be misunderstood and used unfairly against them. Without any type of programmatic context, simply measuring NOC's without developing an underlying understanding of

why and when claims are NOC'ed in our system caused some level of concern among management members. This concern resulted in a split vote on November 22, 2005, with a majority of the WCB voting to include percentages of NOC's in future Compliance Reports.

Does this Case Impact on the Workers' Comp System?

  The WCB voted 4-3 to review Shaver v. Poland Spring for its potential impact on the workers' comp system under § 320. Section 320 authorizes the Board to review a hearing officer decision, if the decision involves an issue that is of significance to the operation of the workers' compensation system . Hearing Officer Glen Goodnough found that the employer did not discriminate against the employee for asserting a claim under this Act. It was hearing officer Goodnough who requested the § 320 Review. Poland Springs' policy since 2002 is that all accidents must be reported immediately to a Department Resource; failure to report accidents will be grounds for dismissal. Mr. Shaver claimed to have fallen on his left knee on Sunday, January 18, 2004, but it was not until the next day, when trying to kneel, he experienced pain and reported the injury. Poland Springs terminated him for failure to immediately report the injury. It was not the first time an employee had been terminated under this policy, and Shaver had been at a company-wide meeting within the week where the policy was again extensively reviewed. The Management members voted against the review; the Executive Director and Labor Members voted to review.

Goals and Objectives for WCB Departments in 2006

(Adapted from the Minutes of the September 27, 2005 WCB Meeting at Sugarloaf)

  WCB senior staff members have set significant goals for 2006.

  The Business Office's main goal is to ascertain the best way to deal with the budget shortfall for the next biennium, which is projected to be $1.2 million, and how to fund the shortfall. As a result of the Governor's consolidation of the State's accounting and personnel functions, Richard Dunn, Deputy Director of Business Services, expects to work closely with the Department of Administrative & Financial Services on which duties will be handled by the Board and which by DAFS. One WCB employee has already been transferred to DAFS.

  Steve Minkowsky, Deputy Director of Benefits Administration, reported that the MAE Program is hoping to expand its reconciliation and compliance reports to include additional performance measurements such as the timely-filing of Wage Statements. The MAE Program will be hiring a third auditor to assist the Audit Department in reducing the Board's seven-year audit cycle to a five-year audit cycle. He would also like to expand the scope of audits to other areas such as unreasonably contested cases, employers with no recorded coverage, and unreasonably denied claims identified through Annual Compliance reports. Minkowsky plans to schedule education and training workshops for system users on claims administration, workers' compensation laws, rules and regulations and hopes to request more Corrective Action Plans and Consent Decrees for agreed-upon cases of non-compliance.

The MAE Program is looking at filing more Complaints for Penalties with the Abuse Investigation Unit for ongoing non-compliance and forwarding cases dealing with questionable claims handling practices and/or willful violations of the Act to the Superintendent of Insurance for further action. In terms of penalties paid, Minkowsky noted there are some coverage situations where it has costs less to pay a penalty than to pay the premium on a workers' compensation policy. Maine 's employers have paid approximately a half-million dollars in fines; injured workers were entitled to about 50% of that amount. [Note: Noticeably absent from this list of future goals and objectives, is an increase in number of the investigations concerning complaints from insurers or employers, when employee fraud is suspected.]

  Senior Staff Attorney Laura Klein, has reported to Paul Dionne on the goals and objectives for the Worker Advocate Program. Ms. Klein's main focus will be providing legal training and standards for protocols, that can be applied uniformly to the Worker Advocate Program. Assistant General Counsel McNitt is helping Ms. Klein with this new training program. Klein will continue working with Frank Richards, Assistant to the Executive Director, to develop a measurement tool that effectively and efficiently determine what is taking place within the Worker Advocate Program on a monthly basis. She will also work with Paul Fortier on an automated cost analysis for the program.

  Paul Fortier, the Deputy Director of Information Management, has electronic filings as a primary goal and objective. Mr. Fortier has been working diligently with system users to get them on line and remarked that the task has been a difficult one because of the Board's limited resources in its computer department. Mr. Fortier is working on a process for automating penalty impositions under Sec. 360(1) as well as an automated case management program for the Worker Advocate Program. He expects to complete the analysis phase of the program shortly and to receive a report in the near future concerning what areas need to be covered in the program. Since Fortier is more or less a one-man show, back up resources are critical if he is not available in areas such as sending and receiving error reports.

  General Counsel Rohde will continue to work with the Board on legislative matters. There were no workers' compensation bills carried over to the Second Regular Session of the 121 st Legislature, but two carry over resolves (the 5 th Edition and a fraud unit for the Bureau of Insurance ) could result in legislation. Mr. Rohde anticipates significant rulemaking in the upcoming year -- Chapter 2 with respect to the 2004 and 2005 extension of the permanent impairment threshold, Chapter 3 as it relates to revising the rule dealing with electronic filings, Chapter 4 regarding the proposed amendments being compiled by the Board's hearing officers, Chapter 5 on the updated CPT Codes in the Board's Medical Fee Schedule and an amendment to the mileage reimbursement rate in the Fee Schedule, and Chapter 7 if the Board adopts the fifth edition of the AMA Guide on Permanent Impairment.

  Betty Inman, Deputy Director of Medical and Rehabilitation Services, plans to increase the number of healthcare providers performing independent medical examinations under § 312 of Title 39-A. The list currently contains the names of 19 physicians qualified to perform the exams. Inman converses periodically with the Maine Medical Association regarding the availability of new doctors to perform the examinations and continues to advertise for examiners who have not performed a § 207 examination in the past year. She has discussed the possibility of increasing the rate allowed for § 312 examinations and changing the rule to no longer require physicians to have an active treating practice to allow those physicians that are semi-retired to apply for the position. She also recommends more flexibility with respect to depositions because some physicians are not interested in becoming an IME doctors because of the time required for depositions. [Note: Dr. Eric Muca, a podiatrist, was added to the IME list on 10/25/05. Dr. Mitchell K. Ross's resignation was effective the day before.]

Inman will be updating the Medical Fee Schedule to incorporate the 2005 CPT Codes. She anticipates maintaining the dispute resolution timeframes at Troubleshooting and Mediation and will work to improve the operating procedures. She also wants to improve the Board's vocational rehabilitation process and plans to clarify the application procedures as it relates to suitability, objections and referrals to formal hearing.

New Procedure at the WCB

   The concept of the WCB being a one-man board with six advisors is a very sensitive subject these days. After the Management members presented a motion to, Paul Dionne, Executive Director and “tie-breaker” on the Workers' Comp Board, as well as the entire board for consideration, at the November 22, 2005 meeting, an apparently new procedure emerged concerning proposed motions. According to Dionne, all potentially controversial motions must be presented to all members of the board prior to the meeting so that there can be adequate discussion. Dionne commented, “If we are to be a mature board, issues need to be discussed at length.” This procedure applied to Managements' proposed legislation to disallow “double dipping,” but it did not apply quite as much to Labor's motion to include percentages of NOC's in all future Quarterly and Annual Reports. Dionne abstained from voting when it came time to consider the legislation…effectively killing the motion and any chance to reverse the “Grant” decision this session. However, he reversed his position when it came time to consider the previously unannounced motion concerning NOC reporting, and voted in favor of the proposal.

WCCC Annual Meeting

  The WCCC held a successful Annual Meeting on October 27, 2005 at the Maine Maritime Museum in Bath . The centerpiece of the program was a panel discussion among three legislators and three employers. Sen. Peter Mills, Sen. Phillip Bartlett and Rep. William Smith spoke as legislators. Employers were Scott Vaitones of MSAD #40, Jan Johnson of Johnson & Jordan , and Richard Merk of Hancock Lumber Company. John Lambert, Esq. was the moderator. Employers were able to present some of their concerns to influential legislators. There seemed to be agreement that there will be no major changes to the comp system in the immediate future. One unresolved issue is the appointment process for Workers' Comp Board members.

  James Case, an attorney with the firm of McTeague, Higbee, Case, Cohen, Whitney, and Toker, and counsel to the Maine AFL/CIO, was next on the agenda as he presented the Labor perspective on workers' comp issues to a very interested audience. Management members of the WCB rounded out the program. Gary Koocher recounted the past year at the WCB and made his points with an appropriate mix of humor. John Cooney also added his perspective. Attendees were positive about the meeting and were impressed with the venue.

Workers' Compensation Alert

Editor: Martha F. H. Mayo

Phone: (207) 443-5834 Fax: (207)443-5867 email mayo@gwi,net

WCCC Web Site: www.wcccmaine.org

September 2005

How to Best Accomplish the Transition to EDI

Now It's MOP's and NOC's .

      The challenges of mandatory Electronic Data Interchange (EDI) continue for employers and insurance companies as the Workers' Compensation Board (WCB) moves forward with the next phase of this project.

      Companies using Maine 's proprietary system for the transmission of First Reports of Injury (FROI's) have been on line since January 1, 2005. This was the choice for employers who do business only within the state. Other companies in Maine who also handle workers' comp claims in other states as well as in Maine opted for the International Association of Industrial Accident Board and Commissions' (IAIABC) Release 3 format. In either case, the WCB mandated compliance by carriers and employers by July 1, 2005. The Board agreed to suspend penalties for the first month while employers work their way through a trial period with real data.

Employers and insurers have worked diligently to comply with this deadline, even though the readiness of the WCB actually to accept the electronic first reports has been questionable. In some cases, the lack of flexibility by the WCB has caused heartburn for some companies. For example, programmed for years by the date stamping tradition of the Workers' Comp Board (“If we don't have it, you didn't send it.”), one insurance company was very concerned that the acknowledgement piece from the Workers' Comp Board was not functioning until at least a month later and chose to not transmit their reports until they had proof that they had been received. From the WCB staff perspective, the problem lay with the company. Another company, anxious to have 100% compliance, doubled filed reports by fax as well as EDI and was fined for filing late because the electronic system rejected the electronic filing as a duplicate to the one that had been manually entered from the fax . In another case, an EDI filing was missing required data, and, when it was subsequently accepted, the filing was deemed to be late, and the company was fined.

      Chapter 3 Form Filing rules clearly note that the acceptable formats are “(1) the State of Maine Proprietary EDI format and (2) the International Association of Industrial Accident Board and Commissions (IAIABC) enhanced Release 03 01 Flat-File Format.” Yet, recently, the WCB has decided that, going forward, even those companies who invested in the Maine Proprietary system and have been using it for as many as seven years , must switch to IAIABC . Thus, not only is the next deadline a double challenge because it is for both Memoranda of Payment (MOP's) and Notices of Controversy (NOC's), now the Board is forcing the majority of employers into the new and untested world of the IAIABC Release 3.

      The WCB “kindly arranged” for interested companies to pay to have IAIABC experts from out of state come to Maine to explain to technical staffs in what is required. Company reps who attended that meeting report that fitting the information provided in our current NOC and MOP forms is akin to fitting a square peg in a round hole. The IAIABC format is a finely tuned data gathering system that is “not interested” in forms. It offers its own codes for NOC's, for example, and they do not include some of the reasons for claim controversy currently carried on the Maine form. Neither is there the option for written explanations that are common in our system. Since the information included or not included on our current forms often becomes a springboard for litigation, employers should be very concerned about the implications of these differences.

      It is generally accepted that transition to electronic filing in any area requires considerable cost as well as ample time to work out glitches (sufficient time to migrate to an electronic data interchange program). The original deadline for filing NOC's was extended from July 1, 2005 and piggybacked with the filing of (MOP's) to January 1, 2006. WCB staff is confident that the State will meet the deadline, but the data elements of the MOP's and NOC's are more complicated than the FROI's, and employers are going to need their own time after the WCB is ready.

      Ultimately, there is much to be gained from EDI, and employers have consistently said that as long as the process and the timeliness made sense, and they could be assured that costs would be kept to a minimum, they were not opposed to a conversion from paper to electronic filing. (Paper forms would still have to be filed with the employer and injured worker, however.) It would be productive if both the employer/ insurer and the Workers' Comp Board acknowledge responsibility and work cooperatively to correct the issues. Employers look to the Workers' Comp Board to manage the process and to help them over the inevitable hurdles while allowing a reasonable amount of time to accomplish what needs to be done. In the recent edition of MAE News (Monitor, Audit and Enforcement Program of the WCB), we read,” This is an evolutionary process so we encourage your understanding, patience and cooperation as we implement the new program.” May “understanding, patience and cooperation” be a two way street.

§ 213 Returns to Public Comment

      At the June 7, 2005 WCB meeting, the Directors voted unanimously to accept a friendly amendment regarding the minutes of the May 17, 2005 meeting to read, “ Mr. Kadison, referring to page 1 of his 2004 report, state he is recommending that the permanent impairment threshold be revised from 13.2% to 13.4% as of 1-1-04 and that benefits under §213 not be extended by 52 weeks on 1-4-04 or 1-1-05.” The Public Forum was on June 27, 2005. At the August 9, 2005 WCB meeting, Assistant General Counsel, Jan McNitt reported that one of the public commentators pointed “drafting errors” in both §2.4 and 2.5. The sections read in part, “The 260 week limitation … shall not be extended for 52 week on January 1, 2004 (and 2005) because the frequency of such cases involving the payment of benefits under § 21 or §213 is no greater than the national average….” As written, the sentences are confusing and contrary to the actuarial report and board discussions and earlier votes. She recommended eliminating the no's and proceeding with implementation of the rule, but four of the board members voted to send the corrected language back to Public Comment. No date has been set for the second Public Hearing.

State Budget Issues

      In the face of Governor Baldacci's Consolidation of Five Key Areas Within State Government, the WCB has argued for Paul Fortier, WCB Agency Technology Officer (ATO) to stay within the WCB and not become part of the IT consolidation even though Chief Technology Officer (Richard Thompson) has supervisory responsibility for all information technology positions within State Government. The WCB was also able to protect its headcount (110) because it is not funded by the General Fund and because it could opt to make a payment (5% of its budget) from the Employment Rehabilitation Fund. The WCB also considered raising the assessment by 5% to meet the Governor's requirements.

WCB Meetings on Different Tuesdays

      In recent years, the WCB has met on the 1 st and 3 rd Tuesdays of each month, but for the next year, the meetings will be on the 2 nd and 4 th Tuesdays. Mark your calendars accordingly! The board and staff always notice when people other than the “usual suspects” attend.

Medical Fee Schedule Rules to Public Comment

      A year ago, Betty Inman, Deputy Director of Medical/Rehabilitation Services, tried to update the 2002 CPT codes in use by employers in the state, but the Board delayed the implementation for the Consensus Based Rule Making Committee to consider issues that affect medical costs. The committee met for a year and discussed including such areas as hospital outpatient, ambulatory care, and pharmaceutical costs in the fee schedule. They also discussed lowering the conversion factor from 60. Unfortunately, they could not reach consensus. (The study committee related to LD 916, “An Act To Amend the Workers' Compensation Medical Fee Schedule to Include Hospital Fees” was not funded.) On July 12, 2005, there was general agreement that Inman's request for updating the CPT codes should be met. Labor member Joan Kirkpatrick suggested further changes when she “Moved to send the proposed changes to Chapter 5 out for Public Comments with the following amendments: (1) to change the mileage reimbursement rated from 26 cents a mile to the amount allowed by the Internal Revenue Serve; (2) to change the hotel room rate from $45.00 per night to “actual costs or a maximum of $120.00 per night” and (3) to remove the reference to 80 miles for meal reimbursement.” After considerable discussion, the motion passed 4-3 with the Management members opposed. No date has been set for the Public Hearing.

WCB Briefs

• Laura Lee Klein started her employment as Senior Staff Attorney, Advocate Program on July 25, 2005. She replaced Tony Pavarada in the same position. After she completes her training, she will be located in the Bangor office. Klein is a graduate of the University of Maine and Northeastern University . She clerked for one year for the Honorable Paul L. Rudman of the Maine Supreme Judicial Court , practiced as a health law attorney in Philadelphia , and practiced Litigation and Dispute Resolution at Eaton Peabody in Bangor .
• Five mediators have filed a petition with the Maine Labor Relations Board requesting that they be removed from the Collective Bargaining Unit as a result of the fair share issue with respect to payments to the Maine State Employees Association. Apparently when the class was created, it was determined that they would be in the Collective Bargaining Unit, and currently they have Union representation even though they are hired by the Board.

Committee on 5 th Edition

      In response to Chapter 53 (Resolve, Directing the Workers' Compensation Board To Consider Adoption of the "Guides to the Evaluation of Permanent Impairment," 5th Edition, in Assessing Workers' Compensation Injuries) the WCB has appointed a committee to study the effect of adopting the 5 th Edition of the AMA Guide for Determining Permanent Impairment. Board members Jim Mingo and Joan Kirkpartrick will join Allan Muir and Jim Case and staff person Betty Inman in these important deliberations. The Board will ask NCCI to do a cost analysis comparing specific sections of the 5 th Edition to the 4 th Edition. A shift to the Range of Motion (ROM) from the Diagnosis Related Evaluation (DRE) as well as inclusion of psychological issues and pain and suffering are bound to drive up the permanent impairment ratings. The WCCC has testified that if the Board adopts the 5 th Edition, they should also have a new actuarial study to determine a reasonable threshold.

SAVE the DATE (Or Register Now!)

WCCC Annual Meeting/ Seminar

Thursday, October 27, 2005, 9 AM through Lunch

Maine Maritime Museum, 243 Washington Street , Bath

Tentative Topics

The Management Members: To Give Them Our Attention and Support

Interactive Panel with Key Legislators in Leadership and on the Labor Committee :

“The State of Workers ' Comp in Maine Today”

Hot Issues in WC Today (EDI, Hospital Fees, 5 th Edition AMA Guide

(Your suggestions are welcome)

(Attendees will have the opportunity to go through the Museum during break or after the meeting.)

Registration Fee: $35

Registration Form on the website: www.wcccmaine.org (link to form between the Home and Alert buttons to the left)

Mail with check made out to “WCCC” to

Martha, F. H. Mayo, WCCC, 83 Green Street , Bath , ME 04530

Workers' Compensation Alert Editor: Martha F. H. Mayo

Phone: (207) 443-5834 Fax: (207)443-5867 email: mayo@gwi.net

Check WCCC Web Site: www.wcccmaine.org

WCCC Alert

June 2005

Actuary Recommends NO Extensions for 2004 and 2005

PI Threshold to Increase from 13.2% to 13.4%

      Jeffrey Kadison, of Practical Actuarial Solutions, impressed both Labor and Management with his thoroughness. While previous actuaries have concluded Industrial Mix couldn't be done, it appears he figured a way to do it. He agonized over countrywide and sought the confirmation of the Workers' Comp Board that NCCI data should be used even though it draws from only 37 states and only 40% of the workers in the country. Other options were to use Bureau of Labor Standards data or a combination of the two.

      Pat McTeague, who was representing the AFL-CIO at the board meeting during which Kadison posed his questions, said that the Blue Ribbon Panel was most likely referring to NCCI data and not OSHA's figures for frequency. McTeague said the Panel wanted to take into account an adjustment for the data gathered by the Maine Bureau of Labor Standards (BLS) because of the different occupations and industries within Maine in order to arrive at the self-insured data, which is about 50% of the workers' compensation market. However, the Legislature consciously decided to exclude self-insured data because the information is confidential and privileged under the law. Management and Labor members of the WCB were united in their opinion that Kadison should use just NCCI data in determining Maine 's position relative to frequency because it is what is in the statute rather than trying to mix in BLS.

      Kadison produced reports in draft form on May 9, 2005. On May 17, he presented his entire report to the Workers' Comp Board. His direct and thorough responses to all questions posed by board members and Jim Case, attorney for the AFL-CIO, seemed to satisfy all parties. He recommended that the Permanent Impairment Threshold should be revised slightly upward to 13.4% from its current 13.2%. Also, he recommended no extension of benefits for either 2004 or 2005 under §213. The duration of benefits remain capped at a duration of 364 weeks.

      Based on NCCI's Annual Statistical Bulletin, the claim frequency in Maine is greater than the country wide claim frequency by 27.5%. In order to consider unified industrial mix , Kadison did use BLS data. He calculated claim frequency by class and state based on 560 classes and weighted the averages by considering the claim frequency by class and the percent of payroll in each class for each state compared to Maine . He adjusted to a unified industry mix by dividing the weighted average using the payroll percents for the specific state by the weighted average using the payroll percents for Maine . An industry mix factor greater than 1.000 implies that Maine has a higher than average level of hazard in its insured employment base.

      Thus, taking into account the unified industrial mix, Maine 's position dropped from 27.5% over the countrywide average for 2005 to 15.8%. As for 2004, the claim frequency in Maine is greater than the countrywide average by 13.3%. Adjusted by Industry Mix, Maine 's frequency dropped to 7.3%, but was still above the national average.

      The WCB voted unanimously to send the amended rules out for Public Hearing. The WCCC will participate in the Public Hearings. Please direct any questions or concerns that you have on this issue to Martha Mayo ( mayo@gwi.net ) or Peter Gore ( pgore@mainechamber.org ).

WCB Extends July 1, 2005 Deadline for Electronic Filing of NOC's

  On April 19, 2005 the Workers' Compensation Board (WCB) of Directors awarded a blanket waiver to extend the mandate for the electronic filing of the Notice of Controversy (WCB-9) form from July 1, 2005 to January 1, 2006. At the same time, however, the WCB announced its decision that all employers must use the IAIABC format for reporting MOP's and NOC's even though they are submitting their First Reports in the Workers' Comp Board Proprietary reporting format. Fortier explained that the AIAIBC layout is the same for payments, denials, changes in benefits, and the semi-annual report. Each report just looks for different elements. Fortier said, “It's just a delivery method.”

  Release III for First Reports, will start testing in a couple of weeks with ROES, Inc. and Bridium, (service providers for insurance companies who have waivers on using Release III.) It is important to note that the July 1, 2005 deadline still holds for the use of Release III for First Reports.

  Contact Paul Fortier at 287-3818 or paul.fortier@maine.gov if you have questions.

WCB Appointments

      The appointment process of the WCB Board members did not go as smoothly as had been anticipated. On March 2, Paul Dionne sailed through the Confirmation Hearing before the Labor Committee to be appointed Executive Director for the WCB. The Labor Committee praised Joan Fitzpatrick, Rodney Hilts, and Tony Monfiletto for “sticking to their core values.” They interviewed Glen Burroughs, another BIW employee, to replace Monfiletto, who has already served two full terms. The situation was different, however, once the Management members came up for consideration Hiltz, actually testified in favor of Jim Mingo, one of the Management caucus appointees. However, Labor Committee members had sharp questions for John Cooney and Gary Koocher. They misconstrued one of Cooney's answers and the following week discussed that he be eliminated from the WCB. At the 11 th hour, the Governor withdrew all six nominations. Tony Monfiletto and the other five board members who were eligible for a second term continue to serve on the WCB until new nominations are submitted by the governor.

The WCCC is deeply appreciative of all 12 highly qualified people who were willing to have their names put forward for consideration by the Governor as appointees to the WCB. It is not an easy job. Cooney, Koocher and Mingo serve us well. We thank them very much. Until Governor Baldacci asks the Maine Chamber and the AFL-CIO to recruit 12 names once again, the same six members will continue to serve.

FY 2006 Assessment

  Budget : John Cooney reported for FY 2006 assessment calculation (put together by the new Deputy Director of Business Services, Dick Dunn) reduces the assessment from $8,525,00 to $8,165,000. The WCB voted unanimously to direct the staff to use an assessment rate of 1.9% on an FY206 estimated insured market of $255,000,000 and to raise $3,307,282 from self insureds.

14 Day Rule

  A recent consolidated decree upheld the WCB's authority to create the 14 Day Rule. There was one dissenting opinion that it was beyond the authority of the WCB to adopt the rule. There is no reference to the requirement to pay a claim or file a Notice of Controversy within 14 days in the Maine Statute. Some have theorized that fewer claims would be denied if the period to make a decision were longer than 14 days. Such a change is within the authority of the WCB.

WCB Personnel Briefs

Audit Manager of the WCB : Kimberlee Barriere is the new Audit Manager of the Workers' Compensation Board. She has an extensive background in financial auditing and quality control in the medical claims management field. She has an MS Degree in Accounting and a BS in Business Administration. She is managing the Audit Division of the Office of Monitoring, Audit and Enforcement. Her responsibilities include scheduling and conducting compliance audits, representing the Audit Division in public, and supervising the Audit staff. Her goals are to reduce audit cycle time - currently 7 years down to 5 years or less; to increase oversight and improve compliance for out of state companies; to increase coordination with Monitoring, self-audit activity, etc.; and to leverage technology (website, automated workpapers, etc.) to increase compliance and reduce inconvenience to the audited entity. Kimberlee's office is in Augusta . (207) 287-7031.

Assistant General Counsel: Janice McNitt replaced Tim Collier as Assistant General Counsel. Her former position with the WCB was as a Worker Advocate. A graduate of Boston College Law School , McNitt has a strong interest in conservation and has provided legal services to the elderly. She is working with the Attorney General's Counsel to develop criteria for what types of cases should be referred to that office for the criminal prosecution. There are only about 20 fraud petitions per year and only 10 of those turn out to be fraud. 99% of fraud petitions are from employers. There are both civil and criminal penalties for both coverage and fraud. WCB plans to refer in the near future the case of an employer that refuses to pay penalties and still does not have coverage for his employers.  

New Chair of Unemployment Insurance Commission: Tony Pavarada, who has supervised the Worker Advocate Program since the program began in 1997, is leaving the WCB to become the Chairman of the Unemployment Insurance Commission. Paul Dionne, Executive Director of the WCB, praised his good work and said “He will be missed.” Pavarada is proud that he helped to make the program competitive in that it represents people in a professional manner. He said that Worker Advocates present cases before the Hearing Officers in the best possible light, and they help injured workers.

State of Maine Consolidation Plan : The WCB will most likely lose two positions in the area of Personnel and Budget as a result of Governor Baldacci's plan to consolidate key areas within state government.

IME Doctors

  The WCB has voted to add Garrett Martin, MD, an orthopedic surgeon, to the IME list. He specializes in adult reconstruction of the hip, shoulder and knee and has an active practice in Bangor . Prior to his appointment, the only orthopedic specialists on the list were in Portland and York, so injured workers from Northern Maine had excessively long drives just to get to their appointments. Dr. Martin recently returned to Maine and has done no § 207 exams. The WCB voted to remove Dennis White, DO, as an IME doctor because he has left the state. There are now 22 independent medical examiners, but Dr .Paul Genova, a psychiatrist in Portland , is not accepting assignments and is on medical leave. T here is still a backlog.

     The Legislature did not support LD 881, a proposal to expand the number of doctors eligible to become IME doctors. The bill would have allowed a doctor to perform IME's on any injured workers whom he/she had not previously examined. Passage of this bill would have done much to eliminate the current backlog of cases awaiting IME's so that injured workers would not have to wait as long.

       The Labor Committee unanimously supported LD 302, which lowers the standard for the Hearing Officers' acceptance of the medical examiner's findings in cases where both sides agree on a doctor who might be off the list from binding ( requiring their acceptance) to clear and convincing. Proponents argued that this bill will solve the backlog by making parties more willing to agree on an IME doctor who has performed some § 207 exams. Time will tell. If the backlog persists at the start of the 123rd Session, perhaps the solution supported by the WCCC will also receive legislative support.

COLA Bill has Support of House and Senate

  LD 1476, a bill to provide annual Cost of Living Adjustments for injured workers on Permanent Total disability, passed in an 18-16 vote in the Senate and is currently tabled in the House. We know from history that COLA is a huge cost driver. Even though there are not many people currently in the category of Permanent Total, availability of COLA will entice people to litigate to be covered under § 212 rather than §213. An even greater concern is that the next time the legislature would find it easier to recommend COLA be applied in other categories as well. The WCB's motion to support LD 1476 failed 3-4 when Paul Dionne voted with Management. If LD 1476 passes in both the House and the Senate, it will be up to Governor Baldacci to decide if he will sign it into law.

2004 Third Quarter Compliance Report

  Steve Minkowsky, Deputy Director of Benefit Administration, has presented the Third Quarter Compliance Report (July 1, 2004 to September 30, 2004) to the WCB. There is a slight improvement in the filing of Lost Time First Report forms. The Board's received 347 fewer claim filings during the third quarter of 2004 than 2003; correspondingly, fewer MOP's have been filed. Initial Indemnity payment filings are down 2%. However 83.33% of timely initial Indemnity benefits within 14 days is a drop of two percent. For the third quarter, the filing distribution of initial indemnity NOCs appears in the Board's compliance reports.

Workers' Compensation Alert Editor: Martha F. H. Mayo

Phone: (207) 443-5834 Fax: (207)443-5867 email: mayo@gwi.net

Check WCCC Web Site: www.wcccmaine.org

for updates on legislation.

March 2005: Governor Appoints WCB Board Members

Governor Baldacci re-appointed all six current Workers' Comp Board members who were eligible for re-appointment:   Gary Koocher, John Cooney, Jim Mingo, Rodney Hiltz, Joan Fitzpatrick, and Paul Dionne (acting Executive Director).   The seventh, Anthony Monfiletto, had served two full terms and is not eligible for re-appointment.   Glen Burroughs, a BIW employee from Lewiston, has been appointed in Tony's place. Except for changing from an eight to a seven person board, the composition of the board would remain pretty much   the same as it was before the legislation went into effect.

PL 2003 Chapter 608 established that the eight member board (four from Labor, four from Management) be reduced to a seven member board by eliminating those board members on each side   who had served the longest and adding the Executive Director as tie-breaker. This law was enacted last spring, and the seven member board met for the first time on April 20, 2004.    Both Labor and Management were to submit 12 names (4 names per position) to the Governor's office by the end of August 2004.   The Maine Chamber submitted an excellent list of 12 strong candidates.   The WCCC appreciates the willingness of all twelve candidates to commit their time and expertise to this important issue for employers and employees in our state.  

Since the last time any new board members were approved, the committee of jurisdiction has shifted from State and Local to Labor.   Hearings for these appointments were on March 2, 2005.   Testimony was heard on all appointments, but for some reason the vote was delayed until noon on March 10, 2005.   The Senate must give final approval.

De-allocation / Appropriation of   Fringe Benefit Accoun ts

The Part D portion of the governor's budget in the 121 st session of the legislature read in part: “ Sec. D-2. Calculation and transfer. Notwithstanding any other provision of law, the State Budget Officer shall calculate the amount of savings in Part B, section 1 that applies against each General Fund account for all departments and agencies from savings in the cost of health insurance and shall transfer the amounts by financial order upon the approval of the Governor. These transfers are considered adjustments to appropriations in fiscal years 2003-04 and 2004-05. The State Budget Officer shall provide the joint standing committee of the Legislature having jurisdiction over appropriations and financial affairs a report of the transferred amounts no later than January 15, 2005.”  

At the February 15 WCB meeting, Paul Dionne spoke of an announcement on January 14 to   de-allocate / appropriate excess funds in   fringe benefit accounts.   As a result, the state took cash from the WCB account and put it in the General Fund.   This money had been funded by an assessment on employers, not from taxes, yet it went to the General Fund.   In the future, we hope the WCB will budget more carefully so that employers are not over-assessed.

EDI

Chapter 4 of the Rules of the Workers' Comp Board maintains the following.    “Electronic data interchange” or “EDI” means the computer-to-computer exchange of business transactions in a standardized electronic format. Acceptable formats are (1) the State of Maine Proprietary EDI Format, and (2) an International Association of Industrial Accident Boards and Commissions (IAIABC) enhanced Release III Flat-File Format.   (1)All First Reports of Injury (WCB-1) involving a day or more of lost time shall be filed with the Board by EDI not later than January 1, 2005. (2) All Notices of Controversy (WCB-9) shall be filed with the Board by EDI not later than July 1, 2005 (3)   All Memoranda of Payment (WCB-3) shall be filed with the Board by EDI not later than January 1, 2006.

The Board, at its discretion by majority vote of its membership, may grant an employer, insurer or third-party administrator a waiver of the filing requirements of this section if the employer, insurer or third-party administrator establishes to the satisfaction of the Board that compliance with these requirements would cause undue hardship.

Employers who are using the proprietary method are now on line for submission of First Reports.   The board agreed on a two month moratorium on fines.   The IAIABC Release III format is preferable for employers /insurers who file workers' comp claims in other states besides Maine.   That format has not been released, and the WCB is not ready to receive it, but   employers are required to request a waiver anyway.   Labor members of the board have been loath to grant waivers even though Paul Fortier, Agency Technology Officer, has publically stated that the WCB is not ready to receive reports via IAIABC Release III.

In the meantime, the clock is ticking down for the next deadline: by July 1, all NOC's must   be filed electronically.   The six month lead time is now only four months and could be even less.   This unreasonable burden on employers / insurers could be rectified if the WCB would amend Chapter 4 to give employers a deadline of six months after the WCB is prepared to receive the reports both through the proprietary method and Release III.  

Compliance should be a two way street.   How well is the board complying with its own deadlines?   The WCB needs to amend its rules to make the deadlines realistic and fair to both employers and itself.

The MAE Program at Work

The MAE (Monitor, Audit, Enforce) program is scrutinizing one of the largest employers in the state.   This national company has requested a waiver for the filing of First Reports.   The board has refused to grant them a waiver based on the reports of their claims handling practices.    The company has certainly experienced some growing pains as it adjusts to the workers' comp system of Maine.   To correct fines for late filings of First Reports, this company started filing more Notices of Controversy (NOC's) in an effort to meet the 14 day deadline for filing. Then, in 2004, the MAE program started tracking NOC's.   It then found the company to be filing NOC's on   lost time claims at twice the rate of the industry.   At the February 15 WCB meeting, an attorney for the company outlined how the company planned to reduce the number of   their NOC's.  

The company must show improvement in identified areas by the filing of the compliance report for the first quarter of 2005.   There is no way they can correct their performance on the next compliance report (the 4 th quarter of 2004) because those statistics are already history.

This story is of interest to the WCCC because our members have expressed frustration over   many of the same   situations which lead to the filing of   NOC's :   the claimant does not or has not sought medical treatment; the claimant does not return to work the day following an injury due to a regularly scheduled day off; the claimant quits; it is not clear whether or not the claimant has made a claim for workers' comp.   The 14 Day Rule results in NOC's because the employer does not have adequate time to investigate the claim before making a commitment to pay, and the 21 Day Suspension method for stopping payments if one makes a mistake is drawn out and cumbersome.

The MAE staff made several excellent recommendations to this company.   The company needs improved and ongoing training for all levels of store management.   They need to standardize procedures for reporting claims and for informing their employees about what is expected of them.   Their management needs to work with local medical providers about return to work options and importance.   Many of our WCCC member companies have embraced these basic principles.   This situation serves as a reminder of their value.  

Legislation 2005 (16 LD's to Date)

  LD 54 :   An Act To Reduce Workers' Compensation Costs for Small Business Employers .   This bill would allow employers with 6 or fewer employees to opt out of workers' comp, carry a $100,000 liability policy per employer, and provide health insurance through Dirigo Health or a similar policy.   The WCCC opposed this bill because such policies are not currently available in Maine, and health care policies do not cover work injuries.   The Labor Committee voted Ought Not to Pass.

LD 97 An Act To Terminate Payments to the Maine Workers' Compensation Residual Market Pool from the Maine Insurance Guaranty Association.  

LD 302 : An Act To Encourage Parties To Agree to the Selection of Independent Medical Examiners in Workers' Compensation Cases The WCCC supports this bill but does not think it will solve the problem of the backlog of IME's.   LD 881 is the better solution;   would allow doctors who had done 207 exams on some employees but not the one in question to perform IME's.   The Labor Committee voted Ought to Pass and will consider LD 881 when it comes up.

LD 322 : An Act To Amend the Process for Review of Hearing Officer Decisions by the Workers' Compensation Board.   The WCCC supported this bill.   The Labor Committee voted Ought to Pass.

LD 346 : An Act To Amend Group Insurance Funding Requirements   The WCCC has no objection to this bill.

LD 540 : An Act To Clarify the Rate of Interest on Awards for Workers' Compensation Benefits   The WCCC opposed   this bill.   There is a 1% ($3 million) impact on the system because of interest newly applied to medical bills.   The Labor Committee voted Ought Not to Pass.

LD 568: An Act To Eliminate the Minimum Premium for Workers' Compensation Insurance The WCCC is investigating the implications of this bill.

LD 573 : An Act To Generate Savings in the Unemployment Compensation Fund.   This bill will complicate the lump sum process.

LD 770 : An Act To Provide Disclosure Related to Workers' Compensation Insurance   The WCCC is investigating the implications of this bill.

(No Public Hearings have been scheduled for bills after LD 568.)

LD 809 :   An Act To Facilitate Testimony in Workers' Compensation Proceedings   This bill allows Nurse Practitioners to be included in the list of medical providers who are allowed to submit sworn written testimony.

LD 878:   An Act to Allow Assignment of Workers' Compensation Payments to 3 rd Parties Providing Income Protection Benefits.

LD 879 :   An Act to Ensure Equity in Appeals of Workers' Compensation Cases.

LD 881: An Act to Amend the Maine Workers' Compensation Act of 1992 to Facilitate Timely Independent Medical Exams and Benefit Payments.    The WCCC supports this bill.

LD 916: An Act To Amend the Workers' Compensation Medical Fee Schedule To Include Hospital Charges/ LD 996 : Resolve, Establishing the Commission To Study Medical Expenses Under the Maine Workers' Compensation Act of 1992:   These two bills focus on the very high and rising costs of medical care.   WCCC supports control of medical costs.

December 2004

Published by the Workers' Compensation Coordinating Council
83 Green Street , Bath , ME 04530

Majority of WCB Votes in Favor of “Double Dipping”

  Should an injured worker who has returned to work for a different employer and may be earning more money that the average weekly wage benefit for that same injury continue to receive workers' comp indemnity benefits? The logical answer would be “No.” However, the Law Court decided on July 25, 2003 (Grant v. CMP) that the current language in §205 (9) allows injured workers to collect both their new wages and workers/ comp until the employer files a 21 Day suspension (if appropriate) or goes through the Dispute Resolution Process (approximately 8 months). This has been dubbed “double dipping” by the employer community and a source of great concern since the decision was rendered.

  The WCB staff drafted legislation to correct the current language and allow employers to suspend or reduce benefits immediately. Benefits would be reinstated if the work should end. Such a change seemed to be more than appropriate.

  To counter Management concerns, the Labor members of the WCB added language to provide that injured workers who returned to work for the same employer would also be automatically reinstated on workers' comp for whatever reason they may go of out work (lay-off, resignation and firings included).

  Despite Management protests, a 4-2 vote on November 16, 2004, this bill was authorized for submission to the legislature. The employer community brought the potential financial exposure of this bill to the attention of Paul Dionne, Executive Director and tie-breaker for the WCB. Despite having voted in favor of submitting this legislation, Dionne called an emergency meeting of the WCB on November 30, 2005 to reconsider this vote. At this meeting, Labor moved to withdraw the legislation, but, at the same time, have the Board officially notify the Labor Committee and the Legislature that the WCB opposes any changes to § 205 (9). Management members made it clear they could not vote to condone double dipping by injured workers. There was no doubt that Labor plans to oppose any efforts to overturn Grant v. CMP.

Paul Dionne explained that he had heard concerns that the WCB proposed legislation would have a huge financial impact on the system and employer premiums. However, Dionne indicated that, from a financial standpoint, he finds Grant to be less of an issue than the issue created by Labor's proposal .

   Dionne rationalized that the Grant decision was over a year ago, and he has heard of little impact on the system. He also said the Board could change its position in the future. Therefore, he supported the Labor position of leaving §205 (9) as is. The amendment to have the Board officially notify the Labor Committee and the Legislature that the Board opposes any legislation to undo Grant passed 4-3. The amended motion to withdraw the legislation voted on at the November 16, 2004 meeting regarding § 205 (9) passed 4-3 with Paul Dionne and the Labor members of the WCB tacitly supporting double dipping.

Submit First Reports via EDI by January 1, 2005 or Face Penalties

Employers and their insurance companies have two options for complying with the WCB mandate that all First Reports of Injury will be filed electronically by January 1, 2005. The WCB has its own proprietary system, which covers 75% of the cases in Maine . Companies that file reports in other states as well as Maine would probably prefer to use the IAIABC Release III program. Since that system is still being finalysed, companies who plan to use it need to file a waiver. Contact Paul Fortier (207) 287-3818 or paul.fortier@state.me.us . To date, most companies that have requested a waiver have been given six months to come into compliance. Readers of the Alert should know that there is very little sympathy from either the WCB staff or the Labor members of the WCB for employers as they reach this landmark date because “They (the employers) have had plenty of notice.”

After January 1, 2005, non EDI filings will be considered late, and the employer will be fined unless the insurer/employer has been granted a waiver. The primary thrust from the WCB staff appears to be how and when penalties will be applied rather than how to assure a smooth transition to a radically different way of submitting First Reports. The WCB appears confident that they will be ready to receive the reports by January 1, 2005 via Release III, but this does not allow for testing period. Also, as far as we know, there is no implementation guide. As anyone with a computer knows, new programs need time to work out any bugs, and the necessary technicians are not always readily available when problems are encountered.

The Board spent the better part of two meetings discussing this issue and struggling with a variety of questions. For instance, what happens if after January 1, 2005, an entity files a paper report? (answer: Non-EDI filings will be considered late until they are filed via EDI, because that is the only method that the Board has approved to accept First Reports.) If an entity files via paper, would the report be “filed” or not? (answer: Probably not. It takes an electronically filed report to trigger the Dispute Resolution Process.) While the employer is paying fines for late filings, the employee is blocked from pursuing his/her benefits.

At one point in the discussion, a Labor member of the board insisted that the statute put the responsibility to file electronically directly on the employer, not the insurance company. This would turn current practice on its head. MEMIC, one of the largest carriers in the State, files, on behalf of their employers, all of the First Reports. Many employers, particularly small businesses, do not have the systems in place to comply with the EDI mandate. The burden to file a First Report is the employer's, but the employer shifts that burden to the insurance carrier under the insurance contract. The Board has accepted all filings by insurance carriers for a number of years. Hopefully, this will continue.

There have to be at least one exception to the EDI mandate. Employees sometimes file their own first reports and will not have a means to file electronically, so there should be a way to accept some paper filings under some circumstances.

While 75% of Maine 's employers/insurers utilize Maine 's Proprietary system, which is ready the Board will allow no phase in of EDI because they feel the employers have had plenty of notice. A mass mailing was made in June notifying the community that this rule was effective 01/01/2005. “They have received more than enough notice.” Paul Fortier worked up questions for companies requesting waivers. They need to attach a list of all of their clients.

While not endorsed by the WCCC, there is one way to achieve EDI through a program developed by Bridium. Follow this link to the Web site https://www.wcirs.net .  The ID is DEMO; the password is DEMO. This is a fee for service site that will allow you to enter the needed data into the screen, print a hard copy of the report, and electronically file it with the state.  If your carrier or Third Party Administrator is a Bridium customer handling Maine claims, they will probably be able to supply this site to you. This way the data will be properly mapped and reported to their systems and then reported to the state with the appropriate Claims Number.  Once the acknowledgement is received from the Maine WCB, it will be recorded on the carriers system as proof that the case was reported.  

The WCCC fully supports the ultimate advantages of filing reports electronically, but we would like to see the emphasis from the Workers' Comp Board be one of support and encouragement for both employers as well as employees.

Employment news at the WCB

Mike Stovall, who has been serving as a temporary Hearing Officer, was hired as a permanent Hearing Officer beginning January 1, 2005 for a term of three years. Timothy Collier, the current Assistant General Counsel, was hired as a permanent Hearing Officer beginning January 1, 2005 for a term of three years. Richard Dunn's temporary term is to continue until December 31, 2004 when he will assume the role of the Deputy Director of Business Services. Garry Greene, Glen Goodnough, Sue Jerome and Thomas Pelletier were all appointed to terms of 7 additional years after their reviews by the Executive Director and Personnel Committee.

Kimberlee Barrieres started work at the WCB on September 20, 2004 as an Auditor II in the MAE program.

WCB Board Member Candidates

PL 2003 Chapter 608 established that the eight member board (four from Labor, four from Management) be reduced to a three member board by eliminating those board member who had served the longest – or whose reappointment was the most overdue. In both instances, Management member Dave Gauvin qualified, but, for Labor, Tony Monfiletto had served the longest, but it was Pat Lemaire who was eliminated after 3 years because her reappointment was overdue. In February 2005, the Governor was to appoint a new board.

In preparation for that event, both Labor and Management were to submit 12 names (4 names per position) to the Governor's office by the end of August 2004. Management names were submitted timely, but, at the time of this newsletter, WCCC staff has no knowledge of submissions by Labor. What are the consequences? As long as Labor does not meet its responsibility, will the current board continue to serve? The WCCC very much appreciates the willingness of the twelve management people who were willing to have their names put forward.