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Posted On: Jun. 29, 1997 12:00 AM CST

Many states continue to fine-tune their workers compensation statutes, while only a handful of states have passed major reform packages in recent legislative sessions.

A few of those states-Kentucky, Ohio and Oklahoma-in the past year adopted major workers comp system reforms, while some others-Colorado, Connecticut, Maine and Massachusetts-faced efforts to undercut previously enacted reforms.

Most states, though, have continued to focus on general workers comp system changes.

For example, in multiple states legislation was introduced to abolish second-injury funds and to establish premium credits for drug-free workplaces. In addition, managed care proposals-which can affect workers comp medical care-have been advanced in several states.

Still, the degree of legislative activity on workers compensation issues is not great as it was a few years ago when workers comp rates were soaring in many states.

"We are now in a period of relative stability," said Bruce Wood, assistant general counsel with the American Insurance Assn. in Washington.

"It is not surprising that in an environment of rate decreases that there is less interest and less pressure to further reduce costs," Mr. Wood said. "It doesn't mean that there aren't problems with those workers comp systems that need to be addressed, it just means costs have aligned-however temporarily-with the employer community's willingness to pay."

"The bills this year are smaller-literally and figuratively," said Nancy Schroeder, director of workers compensation for the National Assn. of Independent Insurers in Des Plaines, Ill.

She noted a few exceptions to that trend, including Ohio, which passed some major changes; Indiana; Kentucky, which enacted changes in late 1996; and unsuccessful proposals in Oklahoma.

Three northeastern states-Connecticut, Maine and Massachusetts-essentially staved off isolated efforts to undercut previous reforms.

"Bills that seem to have the most life are those that affect attorneys' fees," Ms. Schroeder said.

However, "there was virtually no gain that the trial bar made this year," said the AIA's Mr. Wood.

Other unsuccessful legislative efforts, he said, included efforts to reinstate a broad cost of living adjustment in Connecticut and to give workers more say in choosing treating physicians in Maine.

"The memories of the workers compensation financial crisis in recent years are still pretty fresh, and I believe those memories serve to give legislatures pause in moving ahead to undo what was enacted to restabilize workers comp systems in recent years," Mr. Wood said.

One movement gaining support nationally is the trend to abolish second-injury funds, which the AIA also is lobbying to eliminate.

Legislatures in Florida and Nebraska this year voted to abolish such funds. Second-injury funds were developed in the early 1900s to encourage employers to hire disabled workers by providing them economic relief if the worker had a second injury rendering him or her totally disabled.

The Florida and Nebraska actions bring to 10 the number of states that have passed such legislation in recent years, Mr. Wood said. The other eight states are: Alabama, Colorado, Connecticut, Kansas, Kentucky, Minnesota, New Mexico and Utah.

In addition, Delaware passed legislation this year that would allow self-insured employers, such as Wilmington-based E.I. du Pont de Nemours & Co., to opt out of the second-injury fund, Mr. Wood said.

The trend of abolishing second-injury funds concerns the AFL-CIO, however.

"I don't think the argument that the Americans with Disabilities Act made second-injury funds obsolete has any basis in fact," said James Ellenberger, assistant director for the union's department of occupational safety and health in Washington.

Such funds have been "misused and abused" by employers and insurers that "like dumping their problem cases on a second-injury fund, but no one likes paying for it," Mr. Ellenberger said. Supporters of abolishing such funds "are really transferring risk back on an injured person with a disability," he said. This is "real transparent" and "despicable," he said.

Another trend seen in several states is adoption of laws encouraging drug-free workplaces, often by allowing insurers to provide workers comp premium credits to employers (BI, June 2).

This year, Mississippi and Virginia passed laws mandating premium credits and Georgia and Tennessee expanded their programs, Ms. Schroeder said.

While employers and legislators tend to favor the programs, the NAII has some concerns about whether actual savings from the programs are going to match the discounts insurers are required to provide, she said.

Insurers are also concerned about the indirect, negative impact that anti-managed care legislation may have on workers compensation.

"The general anti-managed care environment will erode acceptance generally of controls on workers comp medical care delivery through managed care networks," the AIA's Mr. Wood said.

That could make workers comp medical care more expensive and reduce insurers' ability to manage claims, he said.

In addition, legislative proposals designed to increase the privacy of medical records may particularly hamper workers comp insurers if states begin adopting legislation that would apply to comp cases, Mr. Wood said. "From the property/casualty industry's viewpoint, these would be antithetical to evaluating claims, protecting against fraud and carrying on the business of insurance," he said.

From labor's perspective, dubious trends in recent workers comp legislation include growth in the number of states restricting compensation for repetitive stress cases and states using only American Medical Assn. impairment guidelines to determine compensation.

In addition, Mr. Ellenberger is cautious about praising what he called "low benefit states" when they significantly increase benefits, as Indiana did this year. "Are these gains or are we making long overdue corrections?" he asks.

Following is a roundup of the states' workers comp legislative activity, based on reports by Business Insurance staff and coordinated by Senior Editor Meg Fletcher: (continued in Part 2.)