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When comprehensive workers compensation reforms are introduced in state legislatures, the process of enacting those initiatives often becomes an exercise in futility.
Not only are state legislators faced with understanding and deciding complicated issues, such as impairment ratings for workers with permanent partial disabilities, but they also face a barrage of interest groups, which through their size, clout and money try to influence decisions.
As a result, many workers comp reforms that are introduced to reduce loss costs and save employers and the system money end up either shelved or as little more than watered-down, hammered-out compromises among various interest groups.
This situation was felt most acutely between 1990 and 1995, when many states were attempting to pass comprehensive workers comp reform measures.
Despite the contentious battles that inevitably ensued, some states were successful at passing meaningful reform.
Workers comp reform is one of the "top five issues legislators love to hate," said John B. Lennes Jr., vp and director of workers compensation for the Schaumburg, Ill.-based Alliance of American Insurers.
"One of the problems with comp is there are so many contrasting and conflicting opinions from lobbying groups that the legislature can come away dizzy," said Mr. Lennes, former Minnesota commissioner of labor and industry. The truth is "almost no one is completely wrong."
Bruce Wood, assistant general counsel for the American Insurance Assn. in Washington, agrees.
"The process of reforming a workers compensation law is a Herculean task that legislators and governors don't look forward to because of the political division that debate inevitably produces," Mr. Wood said. "The most meaningful reforms to reduce costs came about after extensive debate and two to three separate reform enactments," Mr. Wood said.
In the case of Tennessee, one key to passing meaningful workers comp reform in 1996 after failing to do so in 1992 may have come as a result of a gift restriction law passed in 1995.
The Campaign Contribution Limits and Lobbying Reform Act contains two ethics provisions, explained state Rep. Matthew Kisber, D-Jackson, who sponsored the legislation. First, it prohibits legislators and government officials from raising, soliciting or accepting political contributions while the General Assembly is in session; second, it restricts the ability of lobbyists to give and legislators to receive gifts.
Those provisions had a "significant impact" in passing workers comp and other reforms in the state because it "separates policymaking from politicking," Rep. Kisber said.
He points out, however, that the biggest reason behind successfully enacting workers comp reform in Tennessee was new efforts used to examine the issue.
In 1995, an ad-hoc legislative committee, divided evenly between state senators and representatives, was formed to examine the state's workers comp system and to come up with reform initiatives. The committee, which Rep. Kisber co-chaired, met several times over the summer and held open discussions with various interest groups.
"No person was denied the opportunity to be heard," Rep. Kisber said.
Among the reforms the committee proposed which were later enacted: Insurers were required to use loss-cost rates rather than fully developed rates, which take into account losses and other expenses; the rate-approval process was streamlined; employers with poor loss experience were required to pay higher residual market premiums; benefit review conferences were required in some cases; safety was enhanced; and fraud rules were tightened for all participants in the system (BI, May 6, 1996).
"I think a great deal of the success we had in passing workers comp reforms was due to the process we used to go about examining the issue," Rep. Kisber said. "Before, all efforts were compromises hammered out between interest groups."
At the same time, "The passage of the legislation was less difficult because of the restrictions placed on gifts and campaign contributions," he added.
The first loss-cost filings after the reforms were enacted resulted in an 8% rate decrease, and a pending filing would result in a 3% rate drop beginning in January 1998, noted Dale Sims, assistant to the state treasurer in Nashville, Tenn.
Wisconsin also enjoys some of the lowest workers comp premium rates in the nation.
Like Tennessee's ad-hoc legislative committee, Wisconsin's workers comp advisory council is behind the state's legislative reform efforts.
The advisory council, made up of five employer representatives and five employee representatives, meets monthly for two to three hours at a time to discuss Wisconsin's workers comp system, explained Bill G. Smith, state director of the National Federation of Independent Business in Madison, Wis.
Every two years, the council creates a reform package and proposes it to the state Legislature. When the bill leaves the council, it is an "unwritten rule" that once it hits the Legislature, it cannot be amended, Mr. Smith said.
Workers comp reform in Wisconsin is "a product of negotiation," he added. "Anyone can go to the council. The meetings are open. They are very public and accessible. That's its strength."
"As long as we keep the lawyers and legislators out of the council process, we'll do well," Mr. Smith continued.
If it were the other way around and the Legislature was introducing the bills, he said it "would be a very long, drawn out, painful process."
It took the Legislature from February until early October to pass a state budget, Mr. Smith noted.
In July 1995, workers comp rates for Wisconsin companies dropped 11.9%, which saved employers an estimated $135 million in insurance premiums in 1996. That is Wisconsin's biggest decrease over the past 20 years.
Unlike Tennessee and Wisconsin, where reform measures are created free of the general assembly, Illinois' workers comp reform efforts are a different story.
Illinois is one of the only states left to allow "balance billing," where medical care providers can collect payments from injured workers that are in excess of the fee reimbursed by the employer or insurer. The state also has made no major changes to its workers comp system in the past 20 years and few changes since 1989.
In 1995, an employer-sponsored bill was introduced, but the Legislature took no final action. The proposed bill included a variety of changes, including: allowing payments for repetitive-motion injuries only if work activities were
the principal cause; limiting the worker's choice of physician and reimbursing medical care at "usual and customary" as opposed to "reasonable and necessary" levels; prohibiting balance billing by medical providers; and increasing and then freezing the maximum weekly permanent partial disability benefit.
Hank Kinzie, executive secretary for the Illinois Self-Insurers Assn. in Chicago, said the trend toward inertia in the Legislature is attributable to lack of meaningful data showing the need for reform, as well as powerful lobbying groups who not only contribute large amounts of money to many legislators' campaigns, but who also favor leaving the system alone.
"You find lots of legislators very, very hesitant to enact sweeping, significant workers comp reforms," Mr. Kinzie said. "Even if we do something like Tennessee and restrict gifts and contributions, we'd still find in the long run that the medical society would oppose many changes suggested by business interests."
The state's medical society over the past five to six years has been the largest campaign contributor to the Senate, House and governor, followed closely by other powerful labor and business groups, said Mr. Kinzie, an attorney with the law firm of Nyhan, Pfister, Bambrick & Kinzie in Chicago.
With no clear data and frank disagreement from various campaign contributors, the Illinois Legislature has decided workers comp reform "was too hot" to take on, he said.
But there are groups, including employer groups, that are becoming more focused, he said. Rather than putting out a large wish list, they are focusing on a few elements that need attention and are gathering data.
Indeed, special interest groups can have a significant influence on reform efforts and can be "a big stopping block" in getting reforms enacted, noted Barry I. Llewellyn, senior vp and actuary for the National Council on Compensation Insurance in Hoboken, N.J.
During a speech at a workers comp conference last March in Chicago, Mr. Llewellyn contrasted what he considers key reform issues that clearly drive costs out of the system, but tend to be avoided due to their complexity and political contentiousness, with those issues that achieve consensus but may not drive costs out. The conference was sponsored by UBA Inc., now known as UWC Strategic Services on Unemployment and Workers Compensation.
He said such reforms as medical cost containment, including fee schedules, utilization management and managed care, and a variety of litigation controls, are initiatives that will save the workers comp system money but are quick to raise hairs with various interest groups. Similar issues include changing benefit levels, duration limits and objective evaluation of disabilities.
Conversely, such initiatives as anti-fraud programs, drug-free workplace credits and safety program mandates are easier to get enacted, Mr. Llewellyn said. While these are legitimate reforms, the programs may not be the most effective from an employer cost-savings standpoint.
If a governor is trying to respond to business groups that are saying workers comp costs are too high, he or she can easily pass a mandate giving premium credit for unproven programs, Mr. Llewellyn said in a follow-up interview.
"Who's going to argue against safety? It's a very easy political call."
"Workers comp reform is an issue that is in a lull period," Mr. Llewellyn added. "We are starting to see some evidence of organized labor gearing up to go back and make changes in the next couple of years," he said. "The question is, what form will it take?'