Worker's Compensation Advisory Council

Meeting Minutes
Madison, Wisconsin
May 11, 2005

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


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: Ms. Vetter moved adoption of the minutes of the April 26, 2005 meeting; Mr. Brand seconded the motion.  The motion was unanimously approved.

  3. Public Comments: Mr. Todd Cohn, National Association of Professional Employer Organization (NAPEO) stated that NAPEO recognized the concerns of reporting procedures and experience rating for Professional Employer Organization (PEO) clients. He was convinced a compromise could be reached. He emphasized small business interests need to be considered. He advocated a delay in the WCAC acting on any proposed statutory changes.

    Ms. Laura Andresson, Office of the Commissioner of Insurance (OCI), expressed concern that an issue could be raised regarding employer-employee relationship in PEO arrangements. Multiple coordinated policies have been proposed to resolve the issues regarding experience rating for PEO clients. However, OCI has concerns that multiple coordinated policies may weaken OCI’s ability to regulate the insurer. Currently, when a PEO cancels a contract with a client-employer, a policy is cancelled mid-term, leaving the employer without coverage. OCI has concerns regarding the issue of naming the PEO as an employer for worker’s compensation purposes.

    Ms. Susan Haine, QTI, explained that QTI has been a PEO for 10 years. PEOs are recognized in other statutes (i.e. Unemployment Insurance) as the employer. General Casualty is their worker’s compensation insurance carrier. QTI provides services such as pre-claim worksite inspections, claim investigation and return to work programs. Ms. Haine stated that if their clients were required to have individual policies, some of these small businesses may end up in the residual market. She confirmed that even with individual policies, they would still be able to provide human resources and other administrative services for their clients. She advocated for a multiple coordinated policy approach where experience modifications are tracked for each employer.

    Mr. Tom Detmer, General Counsel for The Employer Group, indicated they have been operating since 1995, have 2000 employees, and are currently operating in 20 states. General Casualty provides worker’s compensation coverage for their clients. He stated the master policy approach for PEOs works well in Wisconsin. Individual policies are required in Arizona and Ohio, which result in higher administrative costs passed on to their clients. He advocated for the multiple coordinated policy approach for PEO clients.

    Mr. Ralph Herrmann, Wisconsin Compensation Rating Bureau (WCRB), stated he was involved in discussions with OCI and NAPEO regarding coverage issues for PEOs. He is most concerned with the definition of employer and coverage (including experience rating) issues. WCRB is concerned with an unintended consequence of less desirable businesses/clients retaining coverage only through the assigned risk pool. He advocated for legislation in this agreed bill cycle to address issues surrounding master policies for PEOs. In addition, he stressed that OCI and the WCD should determine who the employer is in PEO arrangements.

    Mr. Buchen stressed that the WCAC needs agreement from all the parties on any proposed PEO legislation for this agreed bill cycle. Mr. Krueger responded that all interested parties understand in principal what needs to be accomplished. Multiple coordinated policies address proof of coverage and experience rating issues. Mr. Krueger suggested that the parties continue to discuss the issues and be ready for a firm proposal for the WCAC to consider at the next meeting. Mr. O’Malley expressed concern that benefit issues may arise if temporary help agencies, employee-leasing companies and PEO are defined differently as the employer. The WCAC members agreed that for the next meeting, the parties should present one proposal that addresses the relevant issues.

  4. Report on Pharmacy Benefit Manager information: Mr. O’Malley reported that he contacted Navitus at the request of the WCAC. Two issues raised by Navitus regarding contracts for pharmacy benefit management in worker’s compensation are: prohibitions in worker’s compensation to requiring that drugs be obtained only from network providers and adherence to a drug formulary. Navitus provided some very general ranges on projected savings for drug costs. Generally, drugs account for 12% of all healthcare costs. It is unknown whether this same percentage would apply to worker’s compensation; Mr. Gordon stated General Casualty’s experience is that drugs account for 5% of all healthcare costs. In addition, some insurers use pharmacy benefit managers to screen for work-relatedness and formulary issues. Employees in general have been cooperative. Drugs are directly billed and many times received through mail order to achieve some bulk savings. Mr. O’Malley indicated that a state-wide pharmacy benefit manager program may have follow the state bid process. The Medical Cost subcommittee had proposed imposing an average wholesale price plus a dispensing fee as a cost savings measure for prescription drugs. The WCAC directed the WCD to request a detailed written proposal from Navitus to be available at the next meeting.

  5. Questions/Comments – Submitted Proposals:  Mr. O’Malley reported he drafted statutory language to provide that an administrative law judge at a formal hearing was also required to follow the treatment guidelines. In addition, draft language was presented to cross-reference the use of the treatment guidelines in the necessity of treatment dispute resolution process and to provide the appointment of an advisory committee with regard to the treatment guidelines adoption/amendment. Mr. Newby indicated that Labor was not ready to act finally on the issue of medical treatment guidelines. Mr. Kent inquired whether the Labor and Industry Review Commission would be required to apply the treatment guidelines. Mr. O’Malley will discuss this issue with the drafter from the Legislative Reference Bureau to determine if any additional statutory language is needed.

    Mr. O’Malley requested confirmation on the WCAC’s position on the outlier proposal. Management is not in agreement with the outlier proposal. The WCD will not draft any language for the outlier proposal.

    Mr. Conway provided additional information regarding Permanent Total Disability subcommittee proposed options in response to a request from the WCAC. Option 3 would accelerate supplemental benefits to a 6 year lag and is a less costly option. Mr. Conway also reported on the proposed wage information sheet to be sent to injured workers. A document could be created when the WKC-13A is completed by the insurer. The insurer could print the document and mail it to the injured worker. This could be accomplished through the pending report system.

    Mr. Newby reported that Labor has proposed language in substitution for Department proposals #29 and 30. If the WCAC cannot agree on proposed language to address the Gehin case, Labor proposes that the WCAC wait until the Court of Appeals decision is entered in the Wicke case and if necessary, a trailer bill could be introduced. Ms. Knutson will circulate Labor’s proposed language to interested persons for comment.

    Mr. Newby relayed that with regard to Labor Proposals:

    • #1 Labor withdraws this proposal.
    • #2 Labor is willing to revise the proposal to eliminate the reference to delayed payment of 12% and 10%, but continue to include the maximum award of $45,000 for bad faith. Management in their counter-proposal included a cumulative cap for a bad faith award.
    • #3 Labor clarified that the proposal provides for loss of earning capacity in scheduled injuries which result in at least 200 weeks of permanent partial disability and vocational retraining is not feasible.
    • #4 Labor will provide some clarifying information for the next meeting.
    • #5 Management proposed requiring a final medical report following 6 weeks of temporary disability, while Labor proposes keeping the current requirement of 3 weeks.
    • #6 & #7  Labor is requesting additional information from the WCD for permanent partial disability benefit rates based on the scenarios of 35%, 40%, and 45% of wage for temporary total disability.
    • Regarding the options for raising benefits for permanently and totally disabled workers, Labor is encouraged by the information provided by Mr. Conway.  While Labor prefers option 1, they are willing to consider option 3.
     Mr. Shaver reviewed Management Proposals:
    • #2 Still under discussion.
    • #3 Labor requested some additional examples from Management. Mr. Gordon explained that the specific LIRC case which served as the basis for the proposal involved use of a company basketball hoop during a lunch hour. LIRC found the employee suffered a compensable injury. Mr. O’Malley clarified under current law if the injury does not occur on the employer’s premises, and not during paid company time with no company endorsement of the activity, the injury is not compensable. Mr. Shaver explained in the specific LIRC case, the decision turned on the definition of a wellness program. The WCAC agreed that current law should not be changed, but that the WCD should draft some language to clarify the definition of wellness program and send the draft to Attorney Sachse and Attorney Weir for comment.
    • #4 Labor does not agree.
    • #5 Labor does not agree. Management Labor reconsider its position.
    • #7 Management is withdrawing this proposal.
    • #8 Labor does not agree.
    • #10 Labor does not agree.

    The WCAC requested that the WCD submit one proposal to address the PEO issue and that only one spokesperson would explain the proposal at the next meeting. The WCAC requested that “public comment” be removed as an agenda item for future meetings during this agreed bill process.

  6. 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.