Transcript Southern Association of Workers Compensation Administrators GENERAL SESSION Touching the Future AUSTIN, TEXAS  JULY 14 - 18, 2007

Southern Association of Workers
Compensation Administrators
GENERAL SESSION
Touching
the Future
AUSTIN, TEXAS  JULY 14 - 18, 2007
Southern Association of Workers
Compensation Administrators
GENERAL SESSION
Touching
the Future
Garry G. Mathiason, Esq.
Five Windows Into the Future:
Agenda
 This is not a
summary of
Current Legal
Developments
 Story of Legal
Initiatives
Five Windows Into the Future:
Agenda
 Mandatory Wellness
 Safety Incentives
 Immigration Reform
 The Exclusive
Remedy
 A Footnote on ERISA
The Future
The Crisis of Wellness
And Workers’ Compensation
The Crisis of Wellness
The Crisis of Wellness
The Crisis of Wellness
• The CDC has declared obesity
a national epidemic
Obesity Trends* Among U.S. Adults
BRFSS, 1985
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1986
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1987
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1988
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1989
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1990
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1991
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1992
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1993
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1994
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1995
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1996
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1997
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1998
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 1999
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 2000
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
≥20%
Source: Behavioral Risk Factor Surveillance System, CDC.
Obesity Trends* Among U.S. Adults
BRFSS, 2001
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2002
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2003
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2004
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
≥25%
Obesity Trends* Among U.S. Adults
BRFSS, 2005
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)
No Data
<10%
10%–14%
15%–19%
20%–24%
Source: Behavioral Risk Factor Surveillance System, CDC.
25%–29%
≥30%
Workplace Wellness Initiative
• Smoking continues to be
the number one cause of
preventable death in the US
Health Care Costs
• Health Care costs will reach $4.2
trillion by 2016
• Since 2000 employment-based health
insurance premiums are up 87%.
• Medical Costs Now Exceed Indemnity
Costs for WC (Over 55%)
• Notwithstanding NY, Calif., and
Florida “Reforms” Workers’ Comp.
Medical Costs Increase at 3X Inflation
Health Care Costs
• Starbucks spends more on health
care than it does on coffee beans
Health Care Costs
• Employers have almost exhausted the
options for modifying coverage to
control costs (from co-pays to unitary
plans)
• Aon Estimated Managed Care Could
Control Up To 10% of WC Costs—
Most Measures Have Been Taken
Health Care Costs
• 25% of the 5.3 billion GM spent
on health care in 2005 could be
traced back to unhealthy habits
such as overeating, lack of exercise,
cigarettes, and alcohol
Health Costs
• Obese Workers Filed Twice The # of
WC Claims and 7X higher medical
costs
• 13X More Days Lost From Injury Or
Work Illness Than Non-Obese
Workers
• Duke Medical Center Analysis,
Archives of Internal Medicine, April
23, 2007 (NIOSH Grant)
Health Care Costs
• Smokers Have Twice The Accident
Rate of Non-Smokers—Economist
Marvin Kristein, Ph.D., Am. Health
Foundation
• Four Year Study at Xerox with 3,338
employees—Smokers Averaged
$2,189 Workers’ Comp. Costs vs.
$176 For Nonsmokers.
Health “Benefits”
• Health is essential in the workplace
for productivity, attendance, reduced
turnover, and reduced work related
injuries and illness
The Benefits of “Wellness”
• Life Saving For Employers,
Employees, and The Workers’
Compensation System
• Yet----
Workplace Rights Are Increasing
• Individual Workplace rights are
increasing as they relate to medical
privacy, harassment, discrimination,
and retaliation
Workplace Rights Are Increasing
• Many restrictions on individual height
and weight have been found to violate
the ADA or to adversely impacting a
protected group (e.g. women), leading
to claims of discrimination and
harassment
The Wellness Collision
• Growing recognition of wellness
as a corporate asset demands a
full-fledged attack on preventable
illness and injury
The Wellness Collision
• Every employer will become involved in
this “war” as the workplace has a powerful
effect on individual health (with half of
waking hours spent working)
• This coming “war” will involve every
Workers’ Compensation Administrator
• There are no sidelines---this is your battle
as much as it is a battle for employers and
employees
The Wellness Collision
• The US Government established
the creation of wellness programs
by employers at a 2010 goal
aiming at reaching 75% of employers
and 75% of the workforce
The Wellness Collision
• This initiative collides with over 50
years of employment laws and rights
to privacy
The Wellness Collision
• The legal community has been slow
to provide options and advice
on how to reconcile these interests
• Many Workers’ Compensation
Administrators have questioned their
role and lacked an understanding of
how to become involved
The Wellness Collision
• One experienced corporate counsel of
a large employer stated she has
never seen more complex
employment law questions than those
associated with wellness programs
Meet Joe Pellegrini
Meet Joe Pellegrini
• Cycles 36 miles a day to and from
work
• Solid Muscle – 48 year old triathlete
• Supply chain executive at Scotts
Miracle-Gro Co., a $2.7 billion
organization with 6,000 employees
Voluntary Wellness . . . or Else
• With half of the 6,000 employees
overweight or morbidly obese and a
quarter of them smoking – something
had to be done
Voluntary Wellness . . . or Else
• Scott’s established the
usual elements
of a voluntary wellness
program, and then
added some “not so
voluntary” conditions
Voluntary Wellness . . . or Else
• If an employee refuses
a health risk assessment
– $40/month in
higher premiums
• Those who refuse a
health coach lose
another $67/month
Joe Pellegrini
• Bad cholesterol levels caused
Joe’s company to provide him
a health coach –
who pressured
Pellegrini to have a
series of diagnostic tests
• Joe finally agreed . . .
Joe Pellegrini
The results were shocking:
a 95% blockage in two
arteries gave him less
than a week to live
Joe Pellegrini
• Within an hour of the diagnosis,
two life-saving stents were inserted
Joe Pellegrini
• This almost certainly would not have
happened without his employer’s
wellness program – now making him
a national celebrity due to
BusinessWeek’s Feb. 26, 2007 report
Joe Pellegrini
• Scott’s program goes further:
- Test positive for nicotine during your
introductory employment period and
lose your job
• Discrimination lawsuit pending
in Massachusetts
• Request to enjoin Scott’s
from enforcing or applying
its anti-nicotine program
The Voluntary/Mandatory Continuum
• Voluntary Plans are becoming
common – expected to ultimately
reach the goal of covering 75%
of the workforce
• Vol. Plans yield positive results
– but are they enough?
• Experts like Harvard Business School
Professor Michael Porter, say more is
needed
The Voluntary-Mandatory Continuum
“We Have to be Ruthless”
Lance Armstrong; Newsweek, April 9, 2007, p. 37
“We can prevent about one third of
cancer deaths just by widely distributing
information about prevention and early
detection – but we aren’t doing it.”
The Voluntary-Mandatory Continuum
The Voluntary-Mandatory Continuum
• The evidence between health and
fitness is overwhelming
• It’s linked to:
- new brain cells,
- less Alzheimers,
- less depression,
- better memory, and
- exercise can make you smarter!
The Voluntary-Mandatory Continuum
• The health fitness connection is
undeniable.
• Inactive:
- 40% more colon cancer
- 45% greater chance of coronary artery
disease (CAD)
- 60% greater risk of osteoporosis
• Exercise reduce risk of falls and injury
• Two additional hours of life expectancy
for each hour of vigorous exercise
The Voluntary-Mandatory Continuum
• The health fitness connection is
undeniable.
• The Xerox Study: Participating
employees in health programs saved
Co. $1,238 per year in workers’
compensation claims
• Kimberly-Clark (Everett Mill) initiated a
wellness program focused on excise
and strength building—Muscularskeletal injury cost went from $514,07 to
$67,851 Annually
The Legal Challenges
• Health Insurance Portability and
Accountability Act of 1996 (HIPAA)
• December 13, 2006 Wellness
Regulations becames effective July 1,
2007.
• Joint Effort DOL and IRS – antidiscrimination rules of ERISA health
plans (the vast majority of all plans)
The HIPAA Five
1. Rewards cannot exceed 20% of
total cost
2. Reasonably designed to promote
health or prevent disease
3. Annual eligibility
4. Alternative standards for
participants with medical conditions
5. Plan material must disclose
alternatives and waiver
The HIPAA Five
• Meeting the HIPAA five not a safe
harbor from other statutes
• Employers may be able to enforce
other reasonable workplace
requirements
• The story is starting not ending
ADA/State Disability Laws
1. Limit on questions that can be asked or
requiring a medical examination
- Info goes to Third Party Administrator
2. Confidentiality of Medical Information
- Info goes to Third Party Administrator
3. Essential Functions of the Job and A
Health Factor Requirement –
Reasonable Accommodation – Undue
Hardship
ADA/State Disability Laws
• What is a disability?
• Does a wellness plan discrimination
based on a disability or perception of
a disability?
• Are poor health habits protected by
the ADA?
• What is the adverse consequence?
What is the activity required by the
employer?
ADEA/State Age Statutes
• Age and weight have been well
litigated – airline cases
• Age and fitness requires adjustments
• Can a Wellness Program (Mandatory)
be adjusted to NOT adversely impact
employees based on age?
Title VII
• Gender – BMI standards based on
gender and age
• Religion – Accommodation for
medication
NLRA
• Duty to negotiate as a
mandatory subject of
bargaining
• Modification of medical
plan
• Union support possible
(UAW e.g.--$120 health
insurance contribution for
taking annual screening
tests)
Privacy-A New Balance
• Balance between personal privacy
and the social, economic, and
personal benefits of wellness
• Regulations and state legislation
expected
• The Workers’ Compensation
Community needs to join in the
debate
Lawful Off-Duty Conduct
• Potential prohibition of tests for lawful
substances such as nicotine
• Activity outside the workplace that is
lawful but not good for one’s health –
Do they impact the workplace?
Genetic Testing
• State law prohibitions unless voluntary
• Congress considering: “Genetic
Information Nondiscrimination Act of
2007”
- Allows voluntary testing not disclosed
to the employer except collectively
Today’s Wellness Plans
• The economic evidence of wellness
programs is substantial and mounting
• March 31, 2007 St. Louis Business
Journal “Wellness Worth Every Dollar
You Spend.” Prudential Study
• $4.50 of lowered medical expenses for
every dollar spent on wellness
programs (45 Jour of Occ. & Environ.
Medicine 109-117 (2003))
Tomorrow’s Plans
• Mandatory wellness plans that set
requirements for weight, BMI, or
general health conditions may be
upheld but discipline will receive close
scrutiny
• Mandatory wellness plans that require
actions in the workplace such as
mandatory education, physical
activity, and “goals” will be more
enforceable
Tomorrow’s Plans
• Individual harassment protections will
be heightened while wellness plans
and health targets become more
common
• This is an achievable but difficult
balance – it is already available in
employment harassment prevention
programs (www.elt-inc.com)
Transformations
• Workers’ compensation carriers and
administrators can play a vital role in
this coming “war”.
• Creative economic partnerships with
mandatory wellness plans
Worker’ Compensation Essentials
• Become informed about the economic
benefits and mandatory legal
engineering possibilities (Littler 2007
Report Provided)
• Suggest options and offer assistance
• Provide Third Party Role Re: Privacy
• Consider new legal theories for plan
design—State legislative opportunities
• Prepare for the consequences
New Area of Claims
• The Darker Side of Wellness
• Meet Todd Malouin
• Participated in employer wellness
plan on Co. time – ruptured left bicep
tendon
• Supreme Court of New Hampshire,
June 13, 2007 Decision
New Area of Claims
• State Law: Excluded
“athletic/recreational activities” from
coverage
• Unless “participation was a condition
of employment, or was required for
promotion, increased compensation,
or continued employment.”
• Coverage Affirmed!
Benefits of Wellness Programs:
• For Every Todd Malouin there will be
at least ten claims never filed
• The Movement toward mandatory
wellness is an overwhelming force
• Transformations will be intellectual
and physical
The Future
•Safety Related Incentives
When It Pays To Be Safe
Controlling Workers Compensation
Costs
• Major Area of
Legislative and
Employer
Attention.
• NY 20.5%
Reduction
(7/12/07)
• What About
Direct
Incentives?
Beyond Wellness: Controlling Workers
Compensation Costs
• Fed-OSHA
Critical of
Incentives
• Underreporting
Testimony in the
80’s & 90’s
• Clinton
Administration’s
Challenge
Controlling Workers Compensation
Costs
• Workers
Compensation
Challenges
• Discrimination
against those who
file claims
• Class actions
based on workers
compensation
retaliation
When Can WC Costs Be Used
• Bonus for managers with
low claims rates—one
example.
• Ralphs Grocery Co. v.
Superior Court just argued
in California Supreme
Court
• Can WC costs be part of a
bonus calculation?
Safety Incentives
• The key is to overcome
underreporting
• Independent auditing—
sampling professionals
• Employee education
• More defensible if part of
a comprehensive safety
and wellness program
The Future
Workers Compensation Benefits and
Undocumented Workers:
The Coming Change
The Hidden Workforce
• Currently there are at least
12 million undocumented
workers in the U.S. (Pew
Hispanic Center Report)
• Are These Workers Eligible
For Workers’
Compensation Benefits?
• If you are in Idaho or
Wyoming the answer is NO
(e.g., Wyo. Stat. Ann. 2714-102(a)(vii)
Hidden Workforce
• If you are in the rest of the
U. S. the answer is
probably YES
• Calif., NY, Texas and
Florida, Utah and Nev.
statutorily recognize
undocumented workers
as eligible for WC.
• Other states recognize
them by case law. E.g.
Continental PET
Technologies v. Palacias,
2004 Ga. App. LEXIS
1225 (Sept. 13, 2004)
Hidden Workforce
• Federal law may preempt certain benefits
such as retraining and
rehabilitation
• Some states prohibit
benefits on other grounds
(e.g., fraud).
• Comprehensive survey of
laws (Am. Assoc. of State
Comp. Ins. Funds, 3rd Quarter
2007 “Workers’ Compensation
and the Undocumented
Worker” Prof. of Law Thomas
Lee, Brigham Young Univ. et
al. )
Immigration Reform?
• Congress is deadlocked on how to resolve
the legal status of undocumented workers.
• With no resolution, the status quo survives
• What is the status Quo?
• Projected that significant numbers of injuries
go unreported. [74 Fordham L. Rev. 1521,
1529 (2005)]
Immigration Reform?
• Why are claims
underreported?
- Fear of Deportation
- Distrust of Government
- Implicit Discouragement by
Employers
- Lack of Knowledge
- Lack of English
- Lack of Representation
Immigration Reform?
• So—why should be we concerned
about immigration reform prior to the
next Presidential election?
• Senate may not be done
• But the Real Reason is Homeland
Security
• Imagine the Following
July 31, 2007
• Suicide Bombing in
Six US Cities
• Coordinated Attack
by Al Qaeda
• US Reaction Is
Extreme—Public
Demands
Immediate Action
To Close Border
Immigration Reform (Hypothetical)
• Senator Clinton introduces
Immigration Identification and
Security Act
• All Undocumented workers are to
be registered within 30 days of
passage. Anyone not registered
will be declared a potential enemy
combatant and is subject to
immediate deportation
• Those Registering Are Protected
From Deportation and Given
Interim Work Permission
• Borders Sealed By Whatever
Means Needed
Impact on Workers Compensation
• Approximately 12 Million Workers
Properly Identified
• Hispanic Organizations And
Organized Labor Advise Workers
Of Rights
• Use Of Workers Compensation
To Cover Workplace Injuries And
Potential Sole Access To Medical
Assistance.
• Claims Increase Yet Number Of
Workers In System Does Not
Significantly Change (Limiting
New Premiums).
Impact on Workers Compensation
• Industries
Predictable
• Claims Predictable
• Rating and
Reserves
Predictable
• Timing is
Unpredictable
• This is not
Speculation----This
is the future in
2008? 2009?
The Future
The Exclusive Remedy
Future Cracks?
The Exclusive Remedy Related 2007
Cases
• Supreme Court of
Florida, June 21, 2007
• Proof of intentional
concealment of danger
unnecessary (defective
ladder, employee had
requested new one)
• But Statute was
amended (Bakerman v.
The Bombay Company)
The Exclusive Remedy Related 2007
Cases
• Supreme Court of Texas,
June 1, 2007
• Lien for surplus hospital
costs on employee tort
lawsuit
• Held: Since no
reimbursement from
employee was possible,
the lien was void
• Issue: Recovery of
reduced medical charges
(not paid medical charges)
The Exclusive Remedy Related 2007
Cases
• Supreme Court of New
Mexico, April 18, 2007
• Can tort action exist
while receiving interim
WC benefit? What
about partial and full
lump sum payments?
• Held: Yes WC benefits
can be received, but
not full lump sum
settlement
The Exclusive Remedy Related 2007
Cases
• Supreme Court of
New York (not the
same)
• What is a grave
injury allowing roofer
to recover beyond
WC?
• Answer: $30 million
dollar paralysis
The Exclusive Remedy Related 2007
Cases—Coverage Issue
• How important is the
coverage question?
• In Iowa it is very
important
• $13,087,453 award
3/6/07 from jury for
bad faith denial of
coverage (causation
of injury)
The Exclusive Remedy Related 2007
Cases
• Conclusions
• Challenges will
continue
• Exclusivity is usually
honored
• Qualifications
important for fund
administration (such
as interim benefits)
The Future
Federal Pre-Emption
The Future of ERISA and Workers
Compensation Claims
Navarro and its Following
• California Decision
• Denying medical
coverage to someone
who has made a
workers compensation
claim.
• Cannot be processed
under Labor Code
Section 132a. Must
proceed under the
Medical plan
• There is a future for
ERISA preemption !
Southern Association of Workers’
Compensation Administrators
1. Become a source of information on
mandatory wellness programs
2. Sponsor ROI studies
3. Become a change agent
Southern Association of Workers
Compensation Administrators
The Future Is
Yours
Are You Ready?
Southern Association of Workers
Compensation Administrators
THANK YOU
for your time
Garry G. Mathiason, Esq.
The Tangled Web:
ADA & Workers Compensation
• ADA
The Tangled Web:
ADA & Workers Compensation
• ADA
The Tangled Web:
ADA & Workers Compensation
• ADA
Southern Association of Workers’
Compensation Administrators
1. Become a source of information on
mandatory wellness programs
2. Sponsor ROI studies
3. Become a change agent
The Tangled Web:
ADA & Workers Compensation
• ADA