What would be meaty reforms to the state’s troubled workers’ compensation system are contained in new draft Senate legislation heard in the Commerce, Labor and Sports Committee this week. S-0424.2 includes provisions from previously failed measures – SB 5508, SB 5509, SB 5513 and SB 6602 – to revamp the program. It would:
- clarify through a four-part test that occupational injuries have really arisen from a worker’s employment, not something else;
- lower the statute of limitations for most claims from two years to one;
- lower from 50 to 18 the minimum age required to enter into structured settlements, a simpler way to resolve claims through fixed payments;
- subject to existing law, expand reimbursements when on-the-job workers are injured by an outside party;
- by 2019, put self-insurers directly in charge of administering claims instead of going through the Department of Labor and Industries (L&I).
Cars, Vacations, Appliances, Home Renovations
A discordant note emerged in a report to the committee from outside researchers. Among a sub-group of structured claim settlement beneficiaries responding to a survey, 60 percent told L&I they used at least some of their money for either cars, vacations, major appliances, or home renovations. This would suggest that “risk management” of at least some claims under the state system involves institutionalized over-payments.
Public testimony January 23 to the Senate panel was divided on two major points. One was how to define occupational disease. The other revolved around shifting the minimum age for participating in structured settlements.
In the last six years, less than five percent of occupational disease claims were denied, which one committee Republican said shows the process is too lenient. In the current workers’ comp system, self-insured employers often have trouble disproving workplace injury claims, and workers can take advantage of faulty formulas for calculating time loss.
‘Guaranteed Retirement Bonus’
According to L&I data presented to the committee, an average of 4.3 percent of occupational disease claims were denied each year from 2010 through a portion of 2016. For injury claims, the department denied 13.2 percent of claims.
Vice Chair State Sen. John Braun (R-20) said at the meeting, “If you have an occupational disease claim, you are pretty much going to get an award. In real life, when you are out in businesses, you see folks..they have a hearing loss issue, they just make a claim,” and “it’s a guaranteed $10,000 to $15,000 retirement bonus,” even if the company has provided proper protection or its tests show workplace factors are not responsible.
Braun continued, “Our definition of occupational disease is so broad that a reasonable application of the law would award a settlement in almost all cases…we ought to revisit the definition because, in this day and age, we know a lot more about what causes these medical difficulties and what doesn’t, and what is related to work and what’s just a natural occurrence as a result of all of us aging.”
Surprising Settlement Award Spending
In Washington now, only employees aged 50 or older can more quickly resolve their workers’ comp claims in a structured settlement, versus the standard and often drawn-out claims process.
A 2016 UpJohn Institute for Employment Research report, presented to the committee on January 23, found that from 2012 through 2015, L&I made 230 structured claim settlements, at an average of $96,207. L&I typically facilitated an agreement in about six months.
To help evaluate the success of L&I’s structured claim settlement process, UpJohn looked at data, surveys, and focus groups with workers, and talked to employers. Of the claimants responding via mail, 38 percent reported using their compensation on major medical expenditures, 27 percent on a new car, 13 percent on home renovations, 11 percent on vacations, 11 percent on stocks or mutual funds, and 9 percent on large appliances.
A ‘Judgement Issue’
Some committee members cited uneasiness towards lowering the minimum age for structured settlements.
State Sen. Steve Conway (D-29) said to colleagues at the meeting, “The thing that concerns me is how many young people who are 18 realize that they gave up their right to sue their employer for workforce injury, in exchange for relief from the workers’ comp system.”
Conway continued, “If you are really seriously injured when you are 18 years of age…and you are not aware of any of the benefits that you are entitled to, like time loss benefit and pension for that matter, and you get floated in front of you a $200,000 check, you are going to grab it and think that you can live on that, and that’s a big problem.”
Ranking Minority Member State Sen. Karen Keiser (D-33) shared similar concerns. She said, “If under our current structured settlement(s), the people who are mature and experienced are spending about 50 percent of their settlement on a combination of automobiles, vacation expenses and renovation expenses, you…wonder what an 18-year- old would spend…I think they’d buy a really sweet car…I worry that if they take that big lump sum and buy that big fancy car, they are going to be out of luck, because they won’t go to school and get a new career. They don’t necessarily think 10 years down the road at 18, and I’m really concerned about the judgment issue.”
Business stakeholders concerned with risk management argued that the current system for structured settlements has built-in protections and the options should be extended to workers 18 and over.
Tom Kwieciak, lobbyist for the Building Industry Association of Washington, said workers in a structured settlement with L&I “are represented…either by an attorney or the Board of Industrial Insurance Appeals to make sure it is in their best interest…” A young worker “that is…seriously injured and can’t go back to construction…should have the option of taking some of the money and maybe getting a four-year degree. For $96,000, you can go to the University of Washington with room and board for four years and have a brand new career, rather than getting $1,000 a month or $500 a month that doesn’t really help you change your future.”
Bob Battles, Director of Government Affairs at the Association of Washington Business, said, “These reforms that are being sought in this bill are not intended to limit employees’ access to workers’ comp but are intended to find efficiencies in the system…across the board, everything is claimed along with the kitchen sink, as part of the industrial insurance, and yet employers are having to defend against something that really isn’t related…” The provision allowing self-insured employers to administer claims in 2019 “saves time, and that saves money for the system, and it also gets benefits quicker to the employees.”