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Worker's Compensation Advisory Council

Meeting Minutes
Madison, Wisconsin
April 26, 2005

Members present:  Ms. Bean, Mr. Beiriger, Mr. Brand, Mr. Buchen, Ms. Connor, Mr. Furley, Ms. Huntley-Cooper, Mr. Newby, Mr. Olson, Mr. Shaver, Ms. Vetter

Excused:  Mr. Kent, Mr. Gordon, Mr. Welnak
Absent: 

Staff present: Mr. Conway, Mr. O’Malley, Mr. Shorey, Mr. Krueger, and Ms. Knutson

1. Call to Order/Introductions:  Ms. Huntley-Cooper convened the Worker’s Compensation Advisory Council (WCAC) meeting in accordance with Wisconsin’s open meetings law. 
    
2. Minutes:    Mr. Newby moved adoption of the minutes of the April 13, 2005 meeting; Mr. Buchen seconded the motion.The motion was unanimously approved. 
    
3. Public Comments:  Mr. Tim Tucker, National Association of Professional Employer Organization (NAPEO), provided background information on professional employer organizations (PEOs). PEOs “form partnerships with employers” and become co-employers of employees”. PEOs provide payroll services and employee benefits administration including retirement plans. Currently 29 states recognize PEOs and NAPEO favors state regulation. Nationwide $43 billion in payroll is handled through PEOs for two million workers, with the average PEO client having 15 employees.
   
   Mr. Mike Gossler, QTI Human Resources explained that they have 150 clients, with the average client having 8 to 9 employees. They have been in business for 10 years and provide payroll processing and benefits administration services. There are at least 7 PEOs domiciled in Wisconsin with 56 PEOs doing business in Wisconsin involving 27,000 employees. Mr. Buchen expressed concern that all PEO clients are included in one master policy, departing from individual employer experience ratings. This is a departure from long-standing policy. Rates paid by employers vary based on individual risks/employee classifications. Mr. Gossler explained that master polices currently are not prohibited in Wisconsin and are being used by PEOs. QTI has a master policy for its clients. Some PEOs do use the master policy as a selling point for clients with negative experience modification factors. However, if the PEO adds high risk clients into their client base, it affects the cost of the master policy and negatively impacts the entire client base. Mr. Shaver stated another issue involves notification when a PEO contract is discontinued so that the employer purchases its own worker’s compensation policy. Mr. Gossler replied there is no process for reporting currently and that he is in favor of a notification requirement. If an individual policy is required for each PEO client, the result would be a significant increase in administrative costs that would be passed on to the clients. Currently, QTI provides workplace safety management services for clients.
   
   Mr. Ralph Herman, Worker’s Compensation Rating Bureau (WCRB), indicated that in Wisconsin master policies were currently permitted. With a master policy, the experience rating of the employer does not go to the PEO. To coordinate multiple polices, the WCRB would follow the experience rating in and out of the PEO relationship. The WCRB would need to constantly recalculate the experience rating, which is not feasible within the current recording structure. There are also proof of coverage issues as the WCRB currently does not have a list of clients for each PEO. It is possible to require notification when client changes occur, but there are issues with this as well.
    
4. Employee Trust Funds Presentation: 

   Mr. Bill Kox from Employee Trust Funds (ETF) gave a presentation on the state’s prescription drug program. The state now has one pharmacy benefit manager, Navitus. The prescription drug benefit has been modified through participant co-pays. A flat administrative fee is paid to Navitus per contract per month. There are three levels of benefits for prescription drugs. Navitus determines which specific drugs are on the formulary. Navitus negotiates the contracts for drugs with the retailers and rebate contracts with manufacturers. Drug rebates are issued to the state. Level 1 and Level 2 drugs have a $5 and $15 co-pay respectively. Level 3 contains non-formulary drugs, with a $35 co-pay. Pain medications and anti-inflamatories are all covered. Higher level narcotics require pre-authorization. The three-tier program encourages use of generic drugs. In order for the program to be successful, the member must pay the co-pays or there is no market incentive. Navitus determines the dispensing fees, which are different for independent pharmacies. No co-pays can be required for worker’s compensation. The council requested the WCD contact Navitus regarding the possibility of utilizing a pharmacy benefit manager for worker’s compensation claims.
    

5. Questions/Comments – Submitted Proposals:  Department proposals:
   1-7. Mr. O’Malley explained that the PEO’s and the WCRB arrived at amended proposals, but further modifications may need to be made and the final language is not ready. The WCAC shares the concerns of the Office of Commissioner of Insurance (OCI). Proposals 1-7 will be held until the next meeting to allow the department the opportunity to further meet with WCRB, OCI and the PEO representatives.
   8. WCAC agrees.
   9. WCAC disagrees.
   10 & 11. WCAC agrees.
   12. Mr. O’Malley explained the proposal was amended to address concerns expressed by the council at the last meeting. The WCD is not subject to HIPPA.
   There is also an exception for research activities. WCAC agreed with the proposal as amended.
   13 & 14. Mr. O’Malley indicated the WCD has discretion to apply fines and the amount of the fines. Mr. Shorey clarified that there is still a problem with reporting and response compliance for non-litigated cases. Formal training is provided to carriers and self-insured employers three times per year. Internet training is also available. Last month 1,800 late correspondence letters were issued and 300 letters with referrals to OCI were issued last quarter. Forfeitures are an effective tool to deal with insurers and self-insured employers who do not file required reports on a timely basis. The forfeiture level has not increased since 1931. The WCD also counsels insurers and develops corrective action plans if necessary. Since 1999 when the WCD began using forfeitures as an enforcement tool, the rate of compliance in filing reports has significantly increased. The WCD will continue to have discussions with insurers and self- insured employers about compliance issues.
   15. Mr. O’Malley explained that the Wisconsin Constitution provides that forfeitures shall be paid to the School Fund. It is arguable that the department may not have the authority to order interest on forfeitures to be credited to the assessment or paid to the Work Injury Supplemental Benefit Fund. The Attorney General’s Office would need to be consulted on any constitutional issues. The WCAC agreed to the department’s proposal as drafted.
   16. WCAC agreed.
   17. WCAC agreed as amended.
   29 & 30. Mr. Newby stated that Labor had concerns with the department’s proposed language. The proposed language may not accomplish what the department intends (in response to the Gehin case). Labor will submit proposed language for consideration at the next meeting.
   31 & 32. WCAC agreed.
   33. Mr. O’Malley stated that this proposal tracks with #10. This proposal covers situations where the permanency rating is set by a doctor’s opinion. The rating would fall outside the minimum ratings set out in DWD 80.32. The WCAC tabled action on this proposal.
    
6. Discussion and Debate Labor Proposals:1. Mr. Shaver indicated Management would agree with this proposal if the statute were amended to repeal the requirements of the Massachusetts Bonding case. The process set forth in DWD 80.49 would apply to all injured workers claiming vocational retraining benefits. If the employer did not provide work within the employee’s restrictions, the process in DWD 80.49 would be followed. There would be no involvement by the Division of Vocational Rehabilitation.
   2. Mr. Shaver commented that the maximum award for bad faith could be adjusted higher if Labor agreed there could be only one claim per date of injury with no stacking of claims. In addition, the interest at the rate of 12% would need to be precluded as well as a 10% delayed payment penalty when a bad faith penalty is awarded. Management will provide its counterproposal in writing.
   3. Mr. O’Malley reported that the WCD compiled data for 1999-2002 for claims with 200 weeks or more of PPD paid. The average was about 100 claims per year but this does not include compromise agreements. The WCRB was not able to calculate a projection on premium cost.
   4. Labor handed out draft language. Management indicated they preferred one form and inquired whether the WKC-13A could be modified. Mr. Newby clarified that the insurance carrier would complete the proposed form and send it to the injured worker. Mr. Shorey stated the WCD suggests that all WKC-13A forms be submitted electronically. The WCD intends to send a letter to all carriers and self-insured employers requiring that the WKC-12 and WKC-13A be submitted electronically by July 2005.
   5. Management suggested modifying the language to only require the report after 6 weeks of temporary total disability. Mr. Furley commented that many injured workers undergo surgical procedures and do not understand that they may be entitled to PPD benefits. In those cases, the insurance carrier may not follow-up with the doctor for a rating. WCAC tabled action on this proposal.
   6 & 7. Mr. Shorey indicated the WCRB provided premium projections (as calculated by an actuary). Proposal # 6 would result in a 3.9% increase in premiums. Proposal #7 would result in a 6.7% increase in premiums for a total of 10% for both proposals. However, the actuarial calculations for proposal #6 assumed an $800 maximum TTD rate, so that the projected rate increase is overstated. The WCAC requested the actuarial opinion in writing. The proposals are tabled.
    
7. Discussion and Debate Labor Proposals: 
   2. Mr. Newby indicated that drafting an acceptable proposal is difficult when considering situations such as a union worker in the building trades with many employers. Mr. Dennis Wicht indicated that it is difficult to cover all of the possible exceptions, but he agreed to work on a draft proposal.
   7. Mr. Newby indicated the WCD Process Improvement Team is working on resolving the issues in this proposal.
   
   Labor agreed that the cost of prescription drugs needed to be addressed and that the WCD should contact Navitus to determine if a pharmacy benefit manager arrangement would be feasible. Mr. O’Malley indicated that the draft of the Treatment Guidelines was complete. A draft amendment to §102.16(2m), DWD 80.73 and a new rule (80.74) would be forthcoming.
   
   Regarding adjusting permanent total disability benefits, Labor was still evaluating the options. Mr. Newby inquired whether money from the Work Injury Supplemental Benefit Fund could in part fund an increase in PTD benefits. Mr. Shorey indicated there is a 3 year cushion currently in the Fund. The Fund balance is $6 million, with current annual revenues and expenditures each at $2 million. Eliminating the death benefit would save $600,000 on existing claims and small amounts on future claims over a long period. Currently there are 20 to 30 death claims per year. Mr. Conway indicated that further information on PTD benefits and premium rates would be discussed at a meeting scheduled for April 27, 2005.
    
8. Adjournment:  Discussion on all agenda items concluded and the meeting was adjourned. The next meeting has been scheduled for May 11, 2005 beginning at 1:00 p.m. at Holiday Inn Madison East. Future meeting dates are: June 8, 2005 beginning at 10:00 a.m. and June 22, 2005 beginning at 10:00 a.m.