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But Will it really Help?: [2015-03-19]
There has been a great deal of discussion regarding how things could be different in workers' compensation in the United States. One of the issues in recent years has involved the interplay between the state workers' compensation programs and the federal government.
Certainly, workers' compensation is a variety of systems and processes codified by the different states. But there are instances in which those state benefits interact with federal benefits. One of the first places that this interaction received coverage was in the realm of Medicare. Medicare is a federal program that provides health coverage to people 65 and older; in that regard it is intertwined with retirement benefits from Social Security.
Social Security also provides support benefits for people with disabilities. As I explained in June 2014, this disability program is headed for bankruptcy in 2016. There have been concerns for years about the liquidity and solvency of Social Security and the programs that operate with it. For many years, there was a confidence among United States residents that Medicare would cover medical costs.
When the Florida workers' compensation law was changed in 1994, it became practical to settle the entitlement to future medical care in the majority of cases. Back then, a settlement required a Joint Petition, and the judge would make findings as to whether the settlement was in the best interest of the injured worker. In 2001, the law was amended again and settlement was further simplified. After 2001, the judge would make such findings only if the injured worker was not represented by counsel.
In 1980, the Medicare Secondary Payer law was passed. This was intended to require payments for medical care from non-Medicare sources. In workers' compensation, for example, the intent was for workers' compensation to pay for work-related medical charges. There was a perception at least that Medicare was sometimes left holding the bag for medical expenses related to work accidents. According to the Medicare Advocacy Recovery Coalition, "for many years, the MSP laws and regulations were poorly understood and" the federal government "rarely enforced" claims.
According to MARC, the law was amended in 2007 to strengthen enforcement. Companies that settled cases had to report each "settlement, judgment award or other payment to a beneficiary." With the enforcement enhancements in place, it was quickly discovered that the Centers for Medicare and Medicaid Services was not equipped to deal with the resulting volume of information. The result of an unprepared federal infrastructure was delay of many workers' compensation settlements.
In 2012, the Congress passed the SMART Act (Strengthening Medicare and Repaying Taxpayers). This was intended to bring efficiencies to the process. The goal remains that the interests of Medicare, and thus the taxpayer, are protected when a case is settled. Essentially, the cost of treating the work-related injury is to be covered by the employer or its carrier. The settlement of such liability is now subject to the approval of CMS. Anyone who spends any time around workers' compensation knows this process and the issues that have arisen.
In March, WorkCompCentral reported that the President's 2016 budget proposal would require carriers and state regulators "to report benefit information so that the (Social Security) administration can reduce disability benefits to beneficiaries who have received workers' compensation." In somewhat the same spirit as the MSP provisions, this provision is directed at the interrelationship of federal and state disability programs. There is an interesting explanation on Jon Gelman's blog also.
If someone is entitled to both workers' compensation and Social Security Disability, then the SSD benefits can possibly be reduced somewhat. This occurs when Social Security takes an "offset." It is to facilitate the calculation and application of this offset that motivates the President to seek easier access to that information. The federal government seems to be acknowledging that its current access to information as to who may be receiving workers' compensation, and how much, is not sufficient. According to WorkCompCentral, there are those in the workers' compensation industry that see this proposed requirement as "a burden."
The news has reported that federal social programs are not currently funded. There are some who predict that Social Security will run out of funding, perhaps as early as 2043, others predict 2049. So, it makes some sense for the federal government to get the benefit of the offset that the law allows it.
There are some question that needs to be asked though. First of all, how much of "a burden is it?" That bears consideration. And second, will it really help?
What the news coverage has not addressed in any respect is how much it would help. When the offset provision became part of federal law, it turns out there were already some state laws that allowed a reduction of workers' compensation benefits in recognition of concurrent receipt of SSD. The federal government recognized the existence of these provisions and labeled those states "reverse offset" or "reverse jurisdictions." If a jurisdiction is a "reverse" jurisdiction, then the federal law allows the workers' compensation to be reduced rather than the SSD.
The states with recognized "reverse offset plans" include Alaska, California, Colorado, Florida, Louisiana, Minnesota, Montana, Nevada, New Jersey, New York, North Dakota, Ohio, Oregon, Washington and Wisconsin. A minority of states, to be sure, but with a significant impact on the market. In these states, the federal government would be entitled to no offset. Arguably, the question of how much "burden" might be irrelevant, because if the federal government can get no benefit, is any "burden" justifiable?
According to Business Insurance, California accounted for 17.4% of workers' compensation benefits paid in 2011. That is all benefits paid, not just the benefits paid that might be subject to the offset we are discussing here. Florida was 4.5%, New York was 8.5%, Ohio was 3.7% and Washington was 3.8%.
The Business Insurance percentages were extrapolated from Table 8 of the Workers' Compensation Benefits, Coverage and Costs, 2011, published by the National Academy of Social Insurance. Extrapolating the share represented by the other "reverse jurisdictions" yields: Alaska (.4%), Colorado (.2%), Louisiana (1.4%), Minnesota (1.7%), Montana (.4%), Nevada (.6%), New Jersey (3.6%), North Dakota (.2%), Oregon (1%) and Wisconsin (2%).
These states, with "reverse offsets" accounted for almost 50% of all workers' compensation benefits in the United States. If the corollary is that these states were responsible for 50% of the potentially offset benefits, then the current proposal is to gain additional ease of reporting regarding information that may assist in the remaining 50-51%.
There is an argument that reporting would occur regarding some of these states even though they are "reverse jurisdictions." The insurance carriers that are paying these benefits would perhaps be likely to invest in programming to report their company data to Social Security. That would be perhaps simplified by reporting all of a carrier's data instead of its data for particular states. Less moving parts would perhaps be less of "a burden" for the large industry participants.
The industry is dominated by a few very large entities. In Where did it Come From?, Lex and Verum (June 2014), I noted that "the 25 largest workers' compensation insurers, based upon their net written premium, account for about 70% of the net written premium." If these payors wrote computer code for reporting this information on permanent benefits to Social Security, a great deal of the reporting burden would be covered.
However, that leaves about 30% of the market still to report, and that reporting would be by the smaller carriers. Also, there may well be self-insured employers in these "reverse jurisdictions" that might be forced to report data that could not assist the federal government, as no offset could be taken by SSD in any event. Likewise, there are "monopolistic" workers' compensation states. Workers' compensation in those states (North Dakota, Ohio, Washington) is paid by state-controlled funds. Those funds pay benefits only for that specific state. In these examples, any requirement of reporting might be a significant "burden" with no commensurate benefit to the federal government.
Is reporting worth the investment? To answer that, the "burden" has to be quantified. How much effort, time and money would that programming require? Second, with 50% of the market in a posture that will not allow any federal offset, is the return on investment in the remaining 50% sufficient to justify the proposed regulation and reporting?
David Langham is deputy chief judge of the Florida Office of Judges of Workers' Compensation Claims. This column was reprinted with his permission from his Florida Workers' Comp Adjudication blog.