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Workers’ Compensation Coordinating Council Published by the Workers’ Compensation Coordinating Council P. O. Box 4600, Portland, ME 04112-4600 December 2010WCCC CHANGES Martha Mayo, Executive Director of the WCCC and Editor of the Alert for the past 15 years is retiring at the end of the year. She has enjoyed working with you and appreciates all of your support and encouragement. Kevin Gillis will be the Executive Director not only of the WCCC, but also the Maine Council of Self-Insureds (MCSI) and the Maine State Insurance Guarantee Association. (MSIGA). Please note the new address and related contact information for these organizations. Kevin Gillis, the new Executive Director of the WCCC, MCSI, and MSIGA, has been a practicing attorney in the field of workers’ compensation in Maine for more than 30 years. A graduate of Dartmouth College, with a BA in Government and Economics, and of Cornell Law School, he has been currently selected for inclusion in Best Lawyers in America in the field of workers’ compensation. He has extensive experience in lobbying with respect to legislation and regulations. He has acted as counsel for several years in the area of group self-insurance and for MSIGA. He has extensive knowledge of and experience with the historical changes in the Maine workers’ compensation system. He will continue to have clients through his law firm, Norman, Hanson & DeTroy. Kevin M. Gillis c/o Norman, Hanson & deTroy P. O. Box 4600 Portland ME 04112-4600 (207) 774-7000 Direct dial: (201) 553-4630 Fax: (207) 775-8006 Seeking a More Business Friendly Environment According to a recent article published by Forbes, Maine ranks 50th, dead last, in terms of our business friendliness and competitiveness when measured against other states. That makes us the least business friendly state in the US — a dubious distinction to say the least. In the category of regulations, Maine is ranked 48th. Prior to the election, WCB staff bragged that the agency had shifted its focus from dispute resolution to increased regulations. Clearly, change toward a more business friendly environment is long overdue. Recently, though no fault of their own, and employer was ordered to pay more than $140,000 in workers compensation benefits, even though the individual in question lost no time from work. Why … because of a slavish devotion to bureaucracy at the Maine Workers’ Compensation Board. Is it any wonder Maine has a reputation for being very unfriendly to business? The facts of the case are as follows. In 2004, a 22 year old man hurt his back. He had work restrictions for two weeks but never lost time from work. He hurt his back more seriously at a different company in 2008. He had forgotten the previous back injury until his attorney found record of it and reminded him. The attorney filed claims against both the 2008 employer and the 2004 employer. The 2004 employer knew there were only 14 days in which to file a denial of the claim and went right to work in order to meet the established WCB deadlines. The 1st Report had to be filed again before the claim could be denied. Since 2004, the Maine WCB had moved from manual to electronic filing and had added a required field. The employer needed the missing information from the WCB in order to complete the form in the manner required by the WCB. It was not until the 14th day that the WCB provided the required information and accepted the re-issued 1st Construction Services Workers’ Compensation Group Trust wIndependent Insurance Agents of Maine Maine Automobile Dealers AssociationwMaine State Chamber Maine Chamber Workers’ Compensation Group TrustwMaine Council of Self-Insurers Maine Farm BureauwMaine Grocers AssociationwMaine Merchants AssociationwMaine Motor Transport Association Maine Potato BoardwMaine Poultry FederationwMaine Petroleum AssociationwNational Federation of Independent Businesses Report; less than 24 hours remained for the denial to be filed. If a denial is filed after 14 days, the employer must pay a daily penalty to the injured worker. The employer’s insurer filed electronically from Chicago on the 14th day. The WCB did not show receipt of the filing until 2 hours after the midnight deadline. The Hearing Officer ruled that the report was late and awarded more than $140,000 on an injury that never resulted in lost time and from which the worker had recovered., The WCB awarded the employee benefits based on the inflexible and unjust implementation of rules by the WCB. This is a prime example why employers are wary of doing business in Maine and decide to leave. It is one of the reasons we were ranked 50th by Forbes. Adjusters who handle claims in other states are fearful of the traps they have experience in Maine. Outrageous demands on employers and fear of retaliation further undermine a “balanced” system and support the conclusion that Maine is not a business friendly state. Qualities of an Executive Director for the WCB When legislation made the Executive Director (ED) of the WCB the tie-breaker, it was meant to be as a last resort after encouraging dialogue between the two sides. Ironically, it can be argued that the best dialogue between the Labor and Management members has taken place since the ED recused himself on the Facility Fee Schedule issue. Soon, Governor-elect LePage will have his chance to impact the comp system by appointing an ED of his choosing. The current ED is retiring. It is the sincere hope of the WCCC that the next ED of the WCB takes the intent of the 2004 legislation to heart and fosters stronger relations with both sides of the WCB. The ED should have a good grasp of the legal issues in workers’ comp in Maine and strive to have Labor and Management come together. He/she should also be a good manager who directs and supports the various departments in fulfilling the mission statement. Taken from the WCB Website Home Page, the description of the board’s mission is as follows: “The general mission of the Maine Workers’ Compensation Board is to serve the employees and employers of the State fairly and expeditiously by ensuring compliance with the workers’ compensation laws, ensuring prompt delivery of benefits legally dues, promoting the prevention of disputes, utilizing dispute resolution to reduce litigation and facilitating labor-management cooperation.” (Emphasis added with bold) Misclassification It was very obvious from the notes of the minutes of the Misclassification Task Force last spring and from observing public hearings, that the WCB staff was deeply involved in developing and lobbying for passage of LD 1456, the legislation which put them in charge of enforcing employee misclassification in the construction industry. The bill added two additional staff persons to the ever growing MAE program. Not only has the agency hired two new people, it is shifting resources and promoting from within to satisfy its perceived requirements. At the October 26, 2010, WCB meeting, Labor members of the WCB and the Executive Director carried a 4-3 vote to turn Dick Dunn, the Deputy Director of Business Services, into a Hearing Officer to handle the misclassification issue and to expedite Stop Work Orders. It is not clear whether this is a full time job. Budget FY 12 and FY 13 Passes in 4-3 Vote Prior to his change from being Deputy Director to being a Hearing Officer, Dick Dunn announced at the September 9, 2010 WCB meeting that the Biennial Budget before the Board is a “status quo” budget; the Board’s budget for fiscal year 2011 was $10.7 million; that proposed for fiscal year 2012 is $10.6 million, and $10,932,000 for fiscal year 2013. Management Member Jim Mingo pointed out that fewer employees and fewer claims should result in a reduction of budget, and that it is time the WCB considers and addresses the reduction of revenues coming into the system. It has been projected that the decline in the wage base will result in the remaining employers having to pay as much as 25% more in the upcoming assessment to support the systemic statue quo. Executive Director Paul Dionne pointed out that the WCB has been very creative in funding the budget and has never assessed employers at the maximum amount. Mingo responded that one-time money and the Rehab fund would not continue to be available. There clearly had been no effort to cut back. In fact, just the opposite has happened with new misclassification hires and employees being shifted within the agency to support and increase in regulatory reinforcement. PI Threshold: Proposal and Threat As part of his long term Strategic Plan, ED Paul Dionne proposed at the 10/26/10 WCB meeting that the WCB submit legislation to set PI at 11% for 2006 to 2009 and then 10% starting 1/1/10. It would be effective until 1/1/15, and every 5 years the WCB would conduct a study of the reported PI assessments. In a back-handed threat, Dionne indicated that, should the WCB legislative proposal not move forward, employers would go through Phase II of Data Collection with an even more exhaustive review of old files. Dionne stated publicly that “If you thought Phase I was bad, this phase is much more difficult and will have more complaints.” Dionne also reminded the Board that the WCB, in a vote at a previous meeting, already gave the green light to Phase II, which would involve 2400 cases. Phase I involved only 720 cases and required dedicated time from two Hearing Officers. Phase II would require support from two Hearing Officers and two doctors. Phase II is attributed to suggestions from Jeffrey Kadison, the actuary used for the PI Threshold. This past year, employers were forced to check closed files in an exercise that produced a 4% error rate on the part of employers. .(See September 2009 and May 2010 Alerts.) Employers would be required to go back at least eight years because “the system is not proactive,” and the WCB is “always chasing bad data.” Dionne opined that the proposed legislation would help establish a stable system. Kadison has not given an opinion on the cost impact of a PI Threshold of 10% and 11%, and NCCI was unable to provide it. No other state in the USA uses permanent impairment as the determining factor for whether or not an injured worker has lifetime benefits. Could a Huge Victory for Payers” in Arizona Have Some Influence in Maine? There has been a long running court case in Arizona between Arizona’s largest workers’ comp insurer and a couple of ambulatory surgical centers. The litigation started back in 2003 when an ambulatory surgical center (ASC) claimed the insurer had violated state law by using a bill reviewer to recommend what to pay rather than what the ASC charged. The ASC had sought to force the carrier to pay 100% of their billed charges even though they presented no evidence that their billed charges were reasonable. This should sound familiar to readers of the Alert. The rulings of the courts differ, however.. In Fernald V. Shaw’s Supermarket’s Inc., Shaw’s had used a billing expert and had paid Central Maine Orthopedics (CMO) only what was determined to be reasonable ($2645.16 of a charge of $4.989.25). In a similar case, Babine v. BIW, BIW initially paid under the OWCP Facility Fee Schedule $3,156.83 of a bill of $6,498.63 to CMO. Both companies asked that CMO provide them with information about what they accepted in payment from 3rd party payors. CMO objected on the ground that the information sought was irrelevant and that is constituted confidential and proprietary business information. While three judges did argue in favor of Shaw’s and BIW, the majority of the Maine Supreme Court ruled that Shaw’s and BIW had to pay the full amount; They (and all employers) continue to get a 5% discount on whatever an ASC bills as long as they pay within 30 days. Here’s hoping the Arizona Court decision starts a trend: it concluded that the insurer had paid a reasonable rate to the ASC. Facility Fee Schedule Update The work to create a Facility Fee Schedule drags on. (See September 2010 Alert.) Even though some of the payments were higher than the Eric Anderson proposed fee schedule, the WCCC preferred adopting the OWCP Fee Schedule because updates would happen annually and easily rather than dragging along as they have for 18 years (and counting). WCB staff and Labor are against OWCP, so WCCC representatives continue their discussion with them to see if there can be some acknowledgement of the four major objections employers had to the proposed “Anderson Facility Fee Schedule rule” when it went though Public Hearings more than a year ago. Paul Dionne has stated, “Once the base rate is established, everything else will fall into place.” Your current editor can not explain how an actuary arrives at a base rate, but it does make sense to her that it would go up over time. In 2009, Actuary Eric Anderson set the base rate at $8,923. In May of 2010, he suggested it was $12,791. Obviously there were some problems with that figure because on October 25, 2010, he said it was $10,907. What Happened to the RFP? Another key factor regarding fee schedules is the conversion factor of $60 that was set by the WCB in 1997 for professional fees. Remarkably, research by the Maine Health Care Managements Coalition determined in 1997 that 3rd party payors had a conversion factor of $45. (Since then, 3rd party information “has not been available.”) Medicare had a conversion factor of $35. “Cost Neutral” for employers was determined to be $59. Hoping that the fee schedule might actually save employers some money, the WCCC was looking to recommend $50-55. At that time, a Management Member of the WCB proposed $50 as a starting point for discussion with an eye to a compromise at $55; instead discussions just shut down. The WCB chose to round up to $60. A recent court decision that the $60 conversion factor did not reflect what 3rd Party payors were paying and should be reconsidered has gotten a minimal amount of attention from the WCB. At the 9/8/10 meeting, there was a vote to send out an RFP to study and recommend the appropriate base rate. There was no mention of the RFP at either the October or November WC meetings. From Your Chair At the beginning of this, her final Alert, our Executive Director typically and modestly sold herself short in announcing her retirement. As the longtime chair of the WCCC, and the person who has probably worked the closest with Martha for low these last 13 years or so, I don’t think any of our Alert readers can really appreciate how much she has done for you, our little organization, or Maine’s business community. If you haven’t taken the time to actually attend a WCB meeting, then you can’t appreciate how difficult and frustrating an experience this can be for an employer representative. Yet Martha has attended every one. Time and again, she has stood up for your rights, voiced her concerns and support and been the rock steady voice of reason. Martha is a bastion of institutional memory, and that will never be replaced. Martha, on behalf of me, the WCCC Board, and businesses across the state, thank you for a job well done. You will be missed by all of us at the WCCC Board. Best wished in your retirement. You certainly have earned it. September 2010WCCC Proposes a Fee Schedule Solution Review of a bill from a Lewiston hospital for a June 2010 admission in underscores the need for a Medical Fee Schedule. The hospital charge was $51,637. The negotiated rate with Anthem including co-pays was $14,310; employers would have been expected to pay $37,373, or 260%, more than what has been negotiated by a 3rd party payor. This 260% difference is what employers have been paying since Jan 1, 1993. It is what the Court has said needs to stop. In cooperation with BIW and other litigants in the law suit against the WC B pushing for the WCB tp promulgate a fee schedule, the WCCC has suggested that the WCB adopt the Federal Office of Workers’ Compensation Programs (OWCP) fee schedule which is, in itself, a third party payor, and which considers each year changes in medical payments. While Eric Anderson, a consultant for the WCB, has determined that the costs of the OWCP fee schedule would exceed what has been proposed as a proprietary system by the WCB, the WCCC is of the opinion that the reliability and dependability of the OWCP program would outweigh expecting the WCB to review such material on a yearly basis. After all, it has taken 18 years for the WCB to have anything to suggest in regards to the Facility Fee Schedule, and the 60 conversion factor (and 5% discount for prompt payments) have both recently been ruled as illegal. The Proposed Regulation would adopt the OWCP schedule for all purposes but prescriptions. The proposed regulation substantially increases the amounts to be paid to doctors for their time with medico-legal and return to work issues. The draft also sets a limit on the amounts to be paid to doctors selected by the employee to attend a section 207 exam. Medical Fee Schedule Background (thanks mostly to John Lambert) The 1992 Blue Ribbon legislation, in Section 209 (1)(A), required the WCB to promulgate a standard, scale, or schedule to govern the payment of health care services. In crafting the schedule, the WCB was to consider maximum charges paid by private 3rd party payors for similar Maine services and to adjust the schedule annually to reflect any appropriate changes in levels of reimbursements by these payors to health care providers. In 1997, the WCB adopted a fee schedule for physician services that employed the Medicare Relative Value Unit (RVU) process paying on the basis of the CPT code assigned to the service. The key data point for this process is the Conversion Factor. The Muskie Institute study that served as the basis for the adopted fee schedule showed that the Conversion Factor for private 3rd party payors was $42. The WCB, however, chose to adopt a schedule using a Conversion Factor of $60. Shortly afterwards, the WCB adopted a discount program for the facility charges of hospitals and ambulatory surgical centers allowing employers to lower these unilateral charges by 5% if paid within 30 days. In 2003 and 2006, the WCB proposed some minor updates to Chapter 5 and, in both instances, the WCCC submitted public comments objecting to the $60 Conversion Factor, which ignored 3rd Party Payors, and asked that the WCB adopt a fee schedule to govern facility charges to replace the discount program. In October 2006, BIW started a lawsuit seeking a ruling that the discount program did not comply with Section 209. Shortly afterwards, the WCCC and others joined the suit to argue that the $60 Conversion Factor also did not comply with the statute. In August 2008, the Superior Court ruled that the 5% discount program was not legal. In June 2010, the Superior Court ruled that even the current fee schedule for physician services was not legal. During 2008 and 2009, the WCB did try to establish a fee schedule for facility charges to replace the discount program. The employer representatives had four major objections to the proposed rule. (See the April 2009 Alert) After the APA process, it was not adopted. There has not been another rule proposed. PROPOSED RULE The WCCC proposes adopting the Office of Workers’ Compensation Program (OWCP) Fee Schedule issued by the Federal Department of Labor. The OWCP Fee Schedule governs payments of all health care services for federal workers’ compensation programs throughout the US covering federal employees and private maritime and harbor workers who receive benefits through the Longshoreman Act. The schedule relies on the Medicare payment system, includes a geographic practice costs index to reflect different costs in different areas of the country, and is updated yearly. Important to the Maine statute is the fact that the OWCP Fee Schedule does attempt to capture what is paid by 3rd party payors and the prevailing community charge. For more information, go to: http://www.dol.gov/owcp/regs/feeschedule/fee/fee09/fs09instructions.htm. The OWCP schedule covers Ambulatory Surgical Centers, Facility Fees, and Professional Fees. The WCB is devoting a special meeting on September 8, 2010 at Central Office to discussion of the proposed rule. WCB Back to Full Board Governor Baldacci appointed two new Labor members for the WCB, and, on August 17, 2010, the Labor Committee voted to recommend confirmation by the Senate. Senate Confirmation should occur August 25, 2010. Emery Deabay is from Bucksport and has worked at Verso Paper for 36 years. He has been an active union member. He is also a member of the Maine AFL-Cio E-Board and Co-Chair of the legislative committee. He is Vice President for the Eastern Maine Labor Council and state Coordinator for the USW Rapid Response initiative. He has served for four years on the Bucksport Planning Board of Appeals. In his remarks to the Labor Committee he said, “Unions and management have learned over the years that the most productive mill is one where people with diverse backgrounds and interest learned to collaborate for the good of all.” Glen Burroughs is from Lewiston and have worked at Bath Iron Works for 32 years. Since 1985, he has been active in Local S6. He has served for ten years on the Union Benefits Committee and has assisted union members to understand and gain access to their benefits under various negotiated programs as well as those provide by federal and state statutes. He is currently Chairman of the Union Benefits Trust for Local S6. In his remarks to the Labor Committee he said, “In my experience at Local S6, things work best for everybody concerned when they are achieved by consensus and when management and labor can agree as to how the system should be run.” Both men have the experience and articulated philosophies to help the additional labor and three management members of the WCB to work effectively together in making decision that do not require the tie-breaking vote of an executive director. WCB Adopts New Policy for Mediations and Formal Hearings At the August 10, 2010 WCB meeting, the Board adopted the following policy regarding Audio and Video Conferencing. Note: It is a policy and not a rule. If any readers of the Alert have concerns, they should be in touch with Paul Dionne (287-7086 / Paul.Dionne@maine.gov ) or John Rohde (287-7086 / john.rohde@maine.gov) at the WCB. AUDIO & VIDEO CONFERENCING (Explanation Provided by WCB) Mediations shall be conducted telephonically unless both parties agree to appear in person. If it is available and feasible, and both parties consent, videoconferencing may be used instead of teleconferencing. Some cases have already been scheduled and noticed as regular in-person mediations. New notices will not be sent out on these cases; however, if a request for a phone mediation is made by any party the mediator shall grant the request. Agreed upon requests to conduct the mediation in person must be received in writing (or by e-mail, fax, etc.) at least 7 days prior to the scheduled mediation so appropriate arrangements can be made. Agreed upon requests to conduct mediations by videoconferencing must be received in writing (or by e-mail, fax, etc.) at least 7 days prior to the scheduled mediation so it can be determined if videoconferencing is feasible and, if it is, so appropriate arrangements can be made. Attendance by a party in person is permissible if they notify the other party or parties and the Board prior to the mediation. Notice will be sent to the interested parties listed in the Board’s file. Notices will include a call-in number and teleconference number for the parties to use. All parties must dial-in at the designated time. Mediators will not initiate the calls. If no agreement is reached, the mediation agreement does not have to be signed by the parties but will be signed by the mediator. If agreement, or partial agreement, is reached, then the mediation agreement must be signed by the parties and then returned to the Board so the mediator can sign it. Electronic signatures are permissible. For Formal hearings, videoconferencing may be made generally available for conferences of counsel at the discretion of the Hearing Officer. It may also be available for hearings, including lump sum settlements, in cases in which it is impractical or impossible for a party, a party’s representative, or a witness to attend. When considering the request, the Hearing Officer shall consider the factors in the preceding paragraph. As a general rule, however, hearings will continue to require in-person attendance. Parties shall be clearly notified that the videoconferencing is operational and who is connected. For videoconferencing, the parties will receive an e-mail link that will enable them to connect with the regional office via videoconference. After the initial sign-on, no downloads are necessary, but you will be required to enter your name in the appropriate field when prompted. To participate in a videoconference, parties will need the following equipment: (1) A personal computer (2) An Internet connection (3) A web camera (4) A microphone (either as part of your computer, web camera, headset, or freestanding computer microphone) Law Court Activity BIW v. WCB On June 9, 2010, Superior Court Justice M. Michael Murphy ruled against the Motion to Appoint Receiver and Resolve Conflict Issue that had been filed by Bath Iron Works and other interveners (Law Court con’t) including the WCCC against the Workers’ Comp Board. She found that the Board was currently involved in the process. She also denied the motion to Resolve Conflict of Interest. However, word of Dionne’s recusal must not have yet reached the Justice Murphy because, in denying the motions, she wrote, “Nothing in this decision would prevent the issue from coming back to the Court at a later time, and the Court trusts Mr. Dionne has considered what effect his continued participation in rulemaking might have on a future challenge to the legality and validity of that process, should a Court later find that he did not act free from a conflict of interest.” On the same day as the ruling cited above, Superior Court Justice Murphy remanded the Maine Workers’ Compensation Board to comply with the statute with regard to physician services to comply with its obligation to annually adjust the fee schedule to reflect the changes in levels of reimbursement by private third-party payors in the State of Maine. Mr. Dionne alluded to this decision in point 5 of his Strategic Plan when he acknowledge work had to be done on the “Medical Base Rate, but there was no other reference by WCB staff to this decision at the recent WCB meeting. On top of the Court’s declaring that the 5% discount for early pay does not constitute a fee schedule, this ruling leaves the WCB with no legal Physician or Facility Fee schedule. The 60 conversion factor was touted as retaining a revenue neutral conversion factor, but the judge was not convinced that the Board ever took into consideration what 3rd Party Payors were paying. Now, there are 2 Court Orders (August 2008 and June 2010) which support the Employers’ positions regarding the legal basis for the content of the current physician fee schedule as well as the failure to comply with law requiring a facility fee schedule. Those Court Orders require the Comp Board to make rules establishing fee schedules for physicians and for facility fees as contemplated by the statute. While the secondary issues around conflict and receivership have generated more attention, the primary issues on which the litigation was initiated-a physician fee schedule that violates the statute and the complete absence of a facility fee schedule-have been decided in favor of employers and the Comp Board has been Ordered to fix those legal deficiencies. Buckley v. SD Warren On June 24, 2010, the Maine Supreme Court decided that the Workers’ Compensation Board can “stack” permanent impairment from related work injuries to get an employee over the PI threshold for lifetime partial benefits under § 213. In Buckley v. SD Warren Co., 2010 ME 53 (copy attached), Buckley had two 1996 left shoulder injuries, a 2000 right shoulder injury, and a 2001 bilateral shoulder injury, all work-related. Hearing Officer Tim Collier found that the 2000 right shoulder injury occurred because Buckley was favoring his left shoulder, but it did not cause any additional PI to the left shoulder, and that the 2001 bilateral shoulder injury did not cause any additional PI or aggravate or accelerate any of the prior injuries. HO Collier found that the two 1996 injuries caused 7% PI to the left shoulder, and the 2000 and 2001 injuries caused 7% PI to the right shoulder, but he did not combine or “stack” the impairment percentages. On appeal, the Court vacated the decision. The Court found that, because the 2000 right shoulder injury resulted from the 1996 left shoulder injuries, they were related to each other, that both injuries were part of the “work injury at issue in the determination” under § 213 (1-A), and that the PI from both injuries should therefore be combined or ‘stacked.’ The Court did not state, however, whether the PI from both related injuries should be combined to determine the PI rating only for the first injury or for both injuries. Buckley had argued that PI from all work injuries must always be combined because they all collectively constitute the “work injury at issue in the determination.” The Court did not agree with that argument, but some employee attorneys — and hearing officers — may interpret Buckley to say that. If you have any questions about the Buckley decision, permanent impairment determinations, or other workers’ compensation issues, please call Thomas Getchell, Michael Richards, orDaniel Gilligan at Troubh Heisler. Consensus Based Rules Still Not Scheduled for Pubic Hearing Four draft rules which were laboriously drafted by a Consensus Based Rulemaking Group, have yet to be scheduled for public hearing. The work on the rules resulted from issues pointed out more than a year ago by Peter Gore, Chair of the WCCC, in a letter to the WCB. While the requested meeting with WCB staff never did take place, the rulemaking discussions worked through the issue presented in that letter. The WCB voted that the rules go through the APA process; we do not understand why there is such a delay. MAE Recognizes High Compliance Performers On page 5 of the Annual Compliance Report for 2009, MAE of the WCB noted, “Entities large and small have developed the policies, processes and systems necessary to achieve or exceed the benchmark compliance levels relative to forms filing, as well as the initial indemnity payments that put money into the injured Maine employees’ households. The Board wishes to recognize the for their excellence in these areas. For Insurers/ TPA’s: Broadspire Services, Inc.; Claims Management, Inc. (Wal-Mart); Maine Employers’ Mutual Insurance Company; Synernet; Willis (formerly HRH). For Self-Insureds: City of Bangor; Bath Iron Works; Hannaford Brothers; Maine Motor Transport; Maine Municipal Association; Maine School Management Association; and State of Maine Workers’ Comp Division. Congratulations to you all!!! Most of these companies are well known to the WCCC, and we rely on their experiences when we conclude that the major employers in Maine are working very hard to meet the demands of the MAE program. They cover a major portion of injured workers in the State. At the same timed the MAE program was recognizing high compliance, they also point out the 77% of the 115 companies that filed First Reports this past year did not meet the threshold for timely filing. In terms of number, those companies above the threshold timely filed 8276 of 9244 claims; the remaining companies timely filed only 2884 of 4109 claims. View of the WCB by its Executive Director At the August 10, 2010 WCB meeting, Paul Dionne, Executive Director of the WCB, presented a strategic plan to the other board members and challenged them to review and develop it in coming months. He wrote, “Overall, dispute resolution is performing at high levels of efficiency; compliance with the Workers’ Compensation Act is high; frequency of claims is down; compensation rates have dropped 53 percent since 1993; MEMIC has recently declared a $12 million dividend to Maine businesses; and the Board has reduced the assessment to employer by over $3 million for two successive years (all of which contribute to one of the more stable workers’ compensation systems sin the country. “ During the past seven years, the Workers’ Compensation Board has transitioned from an agency whose purpose was mainly dispute resolution to one which provides effective regulation, improved compliance, strong advocacy for injured workers, and is now assuming a major role in addressing the problem of employee misclassification.” He went on to comment on the Political Landscape: “It is particularly important at this time to maintain the positive momentum generated by the Board over the years. The political landscape will change next year with both a new Governor and Legislature. It will be important for the Board to have a solid strategic plan to reassure the Governor and Legislature that the Board is fulfilling its mission ‘to serve the employees and employers of the State fairly and expeditiously…’ “There will also be a major transition in staff leadership with key positions being vacated during the 2011 year. The governor will appoint an Executive Director and key staff people will be retiring.” (Editorial note: more specifically, Frank Richards and Betty Inman, Deputy Director of Medical / Rehabilitation Services, who have provided both employers and employees with honest, balanced service will retire; they will be missed.) Dionne went on to list what he sees as the major initiatives for the next 18 to 24 months: (1) transition Governor, Legislature, Executive Director, Deputy Director, and Staff;(20 Section 213 Data Gathering Project; (3) Biennial Budget; (4) Facility Fee Schedule; (5) Medical Fee Schedule Base Rate; (6) Legislation and Rulemaking; (8) Workers Advocate Program; (9) Independent Medical Examiners; (10)_ Dispute Resolution; and (11) Programming Priorities. May 2010 Concerns with the WCB Budget
On August 26, 2008, the WCB voted 4-2 to approve a biennial budget for the Fiscal year 2010 of $10,446,994 and $10,681,089 for FY 2011. In May of 2010, the assessment cap was described as $10,800,000, which must have increased to include the $187,000 approved by the Legislature to fund additional staff for the MAE Program and 2 reclassifications. The WCB voted on an assessment of $7,500,000 for FY 2011 at the May 11, 2010 meeting. Insureds account for 58.9% of the market and will be assessed at 2.33% on the projected $186,000,000. Self insureds account for 41.1% of the market, an assessment share of $3,020.000. Historically, the assessments have been lower than the budget cap, but this year the assessment is dramatically lower. The WCB explained a breakout of the assessment dollars in this manner:
The fiscal notes for LD 1565 and LD 1815 combined authorized taking $187,000 from the WCB Reserves to cover two additional people for the MAE program to enforce Misclassification crackdowns, as well as to reclassify two current employees in the Abuse Unit for the same purpose. Not surprisingly, WCB staff actively lobbied for the passage of LD 1565. Both bills were portrayed as no/low costs for employers precisely because the money was to come from the reserves. Apparently the Legislature can do what it pleases despite language in §154.6 of Title 39-A which limits the use of any reserves to reducing the assessment in the following year (and not for personnel expenses). In February 2008, just prior leaving the WCB after 8 years as a Management Member, Gary Koocher went on the record with a detailed forewarning of an impending crisis with the budget. As he explained, the Board’s revenue will undoubtedly decline in the next few years as a result of reduced statewide payrolls. Unless the Board curtails expenses, the inevitable deficits will have to be funded from the reserves. In due course, either the reserves will be depleted or the employers of the State of Maine will be hit with substantial increases of their assessments….another tax on Maine businesses. Koocher compared the situation to recent financial scandals, when no one would go on the record to warn the public of the consequences of such irresponsibility. The complete text of Koocher’s remarks was recorded in the of the February 10, 2008 meeting. (http://www.maine.gov/wcb/ go to Board of Directors and then Minutes.) As Koocher predicted, expenditures are going up, and the premium base on which the employer assessments are based continues to go down precipitously. Once the reserve account is depleted, employers will be paying much more. The premium base has dropped more than 20% in the past 4 years. In 2007 it was $240 million; in 2008 $ 223 million; in 2009, $200 million. Projections from insurers and the Bureau of Insurance indicate that the base could drop to $186 million in 2010. Current Management member, Jim Mingo summarized the situation: “The base has dropped more than 20%. Should those remaining expect a 25% increase?” Numerous issues were raised at the May 11, 2010 meeting; WCB Chairman Paul Dionne declared they would have to be taken into consideration during the next budget discussions this summer.
WCB Board Member Resigns
Anthony Monfiletto, long time Labor member of the WCB, submitted his resignation for personal reasons to Governor Baldacci, and it was accepted April 29, 2010. A former Bath Iron Works employee, Monfiletto’s resignation leaves the WCB in a temporary imbalance. “Tony” brought intelligent institutional knowledge and understanding to the board. (See http://pinetreewatchdog.org/ for more details.) Ironically, in the waning days of the session, the Legislature changed the statute to eliminate term limits for the WCB members. it is likely that many years will pass before anyone exceeds Monfiletto’s record of 14 years on the WCB. In an interview, Paul Dionne, Executive Director of the WCB, said that the board will most likely postpone any contentious business until Monfiletto is replaced. “I think the board can deal with most of the issues it’s going to deal with for the next meeting or two,” he said. “If there’s an issue that’s controversial…maybe that can be put off until we’ve got an equal complement of board members.” According to board procedure, Baldacci must now select a new representative from a list of four names provided to him by the AFL-CIO. The nominee must first be approved by the legislature’s Joint Standing Committee on Labor, before being confirmed by the State Senate. The next confirmation session would not be until summer.
Update on “The Letter”
Readers of the Alert may recall the furor over a July 2, 2009 letter from Peter Gore, of the Maine State Chamber, to Paul Dionne, Executive Director of the Workers’ Compensation Board. The letter requested a meeting between WCB staff and stakeholders to draft protocols and rules “so that the best lawful practices can be discussed, understood, and agreed to by regulated parties.” Insurers and employers felt that, rather than by going through the APA Rulemaking Process, directives with the force of rules had been put forth in various MAE Newsletters. Eight months later, the WCB chose a group of stakeholders to participate in discussions of four potential rules…each of which were addressed in Gore’s letter! The rules at issue involve (1) using a WCB-4 to report documented earnings of an employee who returns to work or receives an increase in pay; (2) rules for reductions and/or discontinuances when an employee returns to work with a different employer; (3) The definition of a day for purposes of filing a 1st Report; and (4) the limitations on the use of the WCB-4A. The very good news is that the first two meetings went very well, with extended, effective discussions and even agreement on some issues. It is our hope that the official rulemaking process continue to go smoothly.
Misclassification Update
LD 1565 (“Stop Work Orders”) went through a number of changes before the Joint Committee on Labor. From the start, the purpose of the bill was to give the Workers’ Compensation Board the authority to shut construction businesses down for not carrying workers’ compensation coverage on employees. Legislative discussions on the bill were side tracked as the Labor Committee clarified its original intentions for independent contractor predetermination as laid out in LD 1456, which passed in 2009. It took Emergency Legislation (LD 1815) to clarify that predeterminations for Independent Contractors are good for one year and are portable. As originally drafted, the “stop work” order process would occur for those individuals who “knowingly” failed to obtain coverage and/or misrepresented who they were covering. It authorized the WCB Executive Director to issue such orders, after investigation. Once issued, the “Stop work” order would give the affected party 10 days to file an appeal and, if one were filed within 48 hours, the matter would be scheduled for a hearing. Moreover, that affected employer would be precluded from working on any State projects for a period of three years. There was concern that the original bill did not allow for sufficient due process and that the improved predetermination process would not provide for adequate enforcement. In addition, the “knowingly” standard was removed from one draft amendment of the bill at the request of the WCB staff. At one point, there was even language considered that broadened the WCB power to issue “stop work” orders to all businesses. In the finally enacted version of the bill, the knowingly standard is back in and defined: For purposes of this subsection, a violation is considered knowing if the hiring agent or construction subcontractor has previously obtained workers’ compensation insurance and the insurance has been cancelled or the insurance has not been continued or renewed; has been notified in writing by the board of the need for workers’ compensation insurance; or has had one or more previous violations of the requirement to secure the payment to that hiring agent’s or construction subcontractor’s employees of the compensation provided for by this Act. In addition, the law applies only to the construction industry (for now) and the debarment language has been struck.
As noted earlier, the bill includes a fiscal note for an additional Auditor and Management Analyst for the MAE program for the fiscal note of $167,000. For the time being, this money comes from the WCB Reserves, so it “doesn’t cost anything.” Employers who have been “going bare” or not reporting their employees properly will have 48 hours to obtain a policy and avoid a “stop work” order even though they may still be subject to penalties for not having had prior coverage. Supreme Court Decision Regarding Retirees Written by Mike Richards of Troubh Heisler
On Mar. 23, 2010, the Maine Supreme Court issued a decision that guts the retirement presumption in 39-A MRS § 223, which says an employee who retires from “active employment” and receives a non-disability pension from the employer is presumed not to have lost earnings from a prior work injury. In Damon v. SD Warren, 2010 ME 24, the Court held that the presumption does not apply to a retiring employee who “immediately” obtains full-time employment elsewhere. Damon worked at SD Warren for 36 years. He developed carpal tunnel syndrome in 1991, underwent surgery in 1992, and was returned to full duty work in 1993. In 2003, he learned he would be laid off because of downsizing, so he accepted an early retirement package instead. Before he left the mill, he found part-time work as a school custodian, and upon retirement he “immediately transitioned” to that as his full-time job. In 2007, Damon filed a Petition for Restoration, and SD Warren raised the retirement presumption. HO Collier found that the presumption did not apply and granted partial benefits with offsets, and the Court upheld that decision. Although in 1999 the Court had held in Pendexter v. Tilcon that the presumption applied to an employee who recommenced work 2 years after his retirement, the Court in Damon held that it did not apply because this employee immediately went to another full-time job. In Pendexter, the Court said that § 223 recognizes that a retiring employee’s wage loss is likely due to the retirement and not the injury, and that the Board cannot accurately determine the employee’s subjective intent upon retiring. In Damon, the Court opens up the can of worms it avoided in Pendexter. We are left to wonder what “immediately” means: Is a 1-day gap between jobs enough to trigger the presumption? Must it be a week, two weeks, a month, or a year? Does it matter whether the employee was looking for work all that time, or whether the post-retirement job is only part-time? Will the retirement presumption apply when the retiree quits his post-retirement job, or is fired or laid off, or takes a vacation, or goes elsewhere for even less money? The Damon decision further upsets the balance the Maine Legislature achieved in the 1993 Act. The Legislature should amend the statute to clarify that retirees are not entitled to worker’s comp incapacity benefits, but that is unlikely, given the politics involved. In Maine, employees can now avoid the retirement presumption simply by finding another job before they retire and starting work there “immediately” upon retiring. They can have their cake and eat it too, but the added cost to employers means fewer jobs and lower pay for other Maine workers and less ability for Maine employers to compete in the regional, national and world marketplaces.
Conflict of Interest
Bath Iron Works, along with a group of approved interveners, has filed a Motion to Appoint Receiver and Resolve Conflict Issue in their lawsuit with the WCB before Superior Court. They accused the WCB of dragging its feet in establishing a medical facilities fee schedule, which the Reform Act of 1992 obligated them to do 17 years ago. Moreover, BIW pointed out that Executive Director Paul Dionne has a clear conflict of interest because he is the Chairman of the Board of Maine Central Healthcare, the parent company for several Maine hospitals, and therefore should not be participating in rulemaking which determines the fees for those hospitals. At the May 11, 2010 meeting, Dionne read his response to their motion into the record. He denied that his leadership in the Facility Fee Schedule had resulted in any payment to himself or Central Maine Health Care. He pointed out how he had actively pursued a rule since he became chair in 2004 by establishing a Consensus Based rule making group and later hired an expert to collect and analyze data. He blamed delays on other sources. He did, however, recuse himself from further participation in the Facility Fee Schedule rule to “avoid even the appearance of conflict of interest.” He then handed the gavel on the issue to Management member, Jim Mingo. There is a March23,2010 article on this topic by Jon Coppelman at www.workerscompinsider.com.
Senior Staff Attorney Hired to Supervise Worker Advocates
Thom Watson, a Democrat who has represented most of Bath in the state House of Representatives since 2002, said he plans to resign from the Legislature about six months before the end of his final term to become Senior Staff Attorney of the Maine Workers’ Compensation Board. He will be in charge of the Worker Advocates Program. Watson is a retired US Navy commander with service in Vietnam and also a practicing trial lawyer. Originally from Louisiana, he now lives in Bath. He is a man of many talents which range from the leading Studio Theatre of Bath, to having a Master Maine Guide license. Paul Dionne, Executive Director announced at the April 13, 2010, WCB meeting that he had offered the position to Watson and that he would start work on May 3, 2010. The WCB then voted on the action. Data Gathering Project (See “More Work for Employers” in the September 2009 Alert) A pilot project with MEMIC and BIW focused on how long it would take to review the files once they were obtained. From the WCB minutes of the January 12, 2010 meeting: “Director Wilson inquired of staff if there is any evidence, during the pilot project, of why the information was not provided to the board or collected by the Board. In response, Deputy Director Minkowsky noted that in approximately 80% of the cases the Board did not receive the information and that there were some occasions in which the information was submitted but that in the bulk of the cases the Board never received it.” Perhaps the Pilot Project should have checked to see where the problem lay before making employers spend so much time and money. |
Workers Compensation Coordinating Council (WCCC)
83 Green Street Bath, Maine 04530 Phone (207) 443-5834 Fax (207) 443-5867
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