by Douglas J. Holmes, President UWC—Strategic Services on Unemployment & Workers’ Compensation

1. Federal Legislation and Developments Affecting Self Insurers by Douglas J. Holmes, President UWC—Strategic Services on Unemployment & Workers’ Compensation Federal Impact on Workers’ Compensation May 19, 2009

2. About UWC Established 1933 “The Voice of Business on Unemployment & Workers’ Compensation” Only association exclusively devoted to lobbying for business on national workers’ compensation and unemployment insurance issues • Lobbying • Support for state lobbying organizations • National professional society • Employers, insurers, service providers, law • firms, state administrative agencies, and associations • Research/education arm is the National Foundation for • Unemployment Compensation & Workers’ Compensation

3. Federal Impacts on WC and Insurers • HR 635 National Commission on State Workers’ Compensation Laws Act of 2009 • New reporting requirements under Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (S 2499) • Prospects for 2009 and 2010

4. HR 635 Provisions • Establish National Commission of 14 members: President appoints the Chairman, 1 appointed by Senate majority leader to serve as Vice Chairman, 2 appointed by House Majority Leader, 2 appointed by House Minority Leader, 2 appointed by Senate Majority Leader, 2 appointed by Senate Minority Leader, 4 cabinet Secretaries from Labor, Commerce, HHS, and Education. • Not more than 6 from same political party • At least 3 representatives of injured workers, 3 representing insurance carriers or employers, and 1 representing the general public.

5. Commission Duties • Review findings of previous 1972 National Commission Report • Study and evaluate state WC laws to determine if they provide adequate, prompt and equitable system of compensation for injury or death arising out of or in the course of employment • Study and evaluate whether additional remedies should be recommended to ensure prompt and good faith payment of benefits and medical care to injured workers and their families.

6. Specific Items to be studied and evaluated • Amount of permanent and temporary disability benefits and criteria for maximums • Adequate, prompt and equitable system of comp. and medical care • Alternatives to reduce or eliminate bad faith delays, discouraging misclassification of workers as independent contractors and/or leased employees to avoid paying WC benefits • Amount and duration of medical benefits, adequacy of medical care and free choice of physician • Rehabilitation

7. Specific Items to be Studied and Evaluated • Standards to determine assurance of benefits caused by aggravation or acceleration of pre-existing injuries or disease • Time limits on filing claims; waiting periods; compulsory or elective coverage; administration; ensuring prompt hearings and due process evidentiary rights in the resolution of claims; • Relationship between WC, old age, disability, and survivors insurance and other insurance

8. Powers and Authority of Commission • Hold hearings, take testimony, receive evidence, administer oaths • Require by subpoena or otherwise the attendance and testimony of witnesses, production of books, records, correspondence, memoranda, papers and documents • Subpoena authority vested in Chairman and Vice Chairman or 6 members of the Commission • Failure to respond to subpoena punishable as contempt of court and subject to prosecution by US Attorney

9. Commission Reports • Interim reports to the President and Congress at any time • Final report not later than 18 months after the date of enactment to President and Congress containing findings, conclusions, and recommendations for enhancements and improvements in benefit levels, medical care, and administration of State WC systems; improvements in insurance practices, due process and evidentiary hearings and reduction of bad faith handling and delays, as agreed by majority of Commission members. • Funding for staff and contractors needed.

10. Fundamental Issues • Unbalanced Commission with political agenda • Review of state WC system not the federal role • State WC system already continuously studied and evaluated • Unnecessary federal spending in time of tight federal budget • Trial lawyers (WILG and AAJ) and organized labor seeking changes on issues rejected by states • Many 1972 Report recommendations would impose significant cost and premium increases for employers

11. 1972 Recommendations • 19 Primary Recommendations, with many controversial issues, including compulsory WC coverage, no exclusion based on number of employees, coverage of household and casual workers, farm worker coverage, presumption against independent contractor status, maximum wage benefits at least 200% of state average weekly wage, worker choice of physician, second injury fund, no limit on total benefits paid for PT, “full” coverage for work related diseases. • Cost of implementing the 1972 report recommendations in most states ranged from 30% to 80% per year.

12. Opposition to HR 635 building • Individual state chambers and business organizations communicating with Congressional delegations • Letter coordinated by UWC and US chamber to House Members from large list of national business organizations (US Chamber, NAM, NFIB, NRF, AIA, PCI,NCSI, and many others) • Seek to stop HR 635 from being taken up on suspension calendar by House of Representatives • Other organizations involved include IAIABC,State Funds, NCSL, ALEC (no positions yet)

13. HR 635 Opposition Challenges Priority for Rep. Baca On the list of D Majority for action after card check Likely to have votes to pass in House if it gets to the floor Posturing as “Just a Study” Carryover of “Academic” recommendations from President Nixon’s 1972 Report National Press – New York Times response

14. Organizational Strategy • Grass Roots Opposition from state and local business and state groups • Targeted pressure on swing members of Congress in House and particularly Senate; members with WC backgrounds • Policy group to develop responses to “academic” arguments and press reports • Development of news media campaign.

15. S 2499 Section 111 Reporting • Enacted during last day of Senate session in 2007 • Projected to produce $1.1 billion in revenue for Medicare over 10 years; CMS expects much greater revenue as reporting is implemented • Requires WC insurance companies and plans of insurance to report all judgments, settlements, awards and payments of WC to individuals who are Medicare entitled (No-fault auto and liability insurers also required to report)

16. S 2499 Section 111 Reporting (cont’d) • Interim Report Record Lay-outs available from CMS along with User Guide and training from CMS beginning in May, 2009 • Implementation through CMS web site -No formal regulations to be issued for comment • No formal administrative appeal

17. CMS New S 2499 Reporting Issues • Verification of Medicare entitlement – query into CMS data base to verify • Definition of “Date of First Exposure” • Thresholds for reporting – through December 2010 exclude if for medicals only, lost time of no more than 7 days, payments directly to medical provider, and total payment does not exceed $600. • CMS Reach Back Recovery • www.cms.hhs.gov/MandatoryInsRep

18. Other Reporting Issues • Report payments made after July 1, 2009 must be reported even if based on settlements, awards or judgments prior to July 1, 2009 • RREs must report information even if not currently captured on data bases – date of first exposure • CMS guideline for SSNs acquisition from claimant for reporting purposes • $1,000 per day fine for failing to report will not be imposed until reporting registration and standards are finalized

19. Costs of S 2499 Reporting • Increased risk that old settlements will be reviewed with changes in Medicare recovery, increasing potential costs • Administrative costs of reporting is significant for insurance carriers, self-insurers, state and federal agencies • Increases in risk and prospective costs of WC where Medicare interests involved

20. Outlook for 2009, 2010, and thereafter • Registration and development of reporting requirements and implementation will continue through 2009 • Active enforcement and penalties imposed beginning in 2010 • Significant additional Medicare recoveries and cost avoidance above $1.1 billion, shifting Medicare costs to state WC, self-insurers and insurance industry

21. Join US UWC -- Strategic Services on Unemployment & Workers’ Compensation “The Voice of Business on Unemployment & Workers’ Compensation” 910 17th Street, NW, Suite 315 Washington, DC 20006 holmesd@UWCstrategy.org www.UWCstrategy.org 202-223-8904