Keefe, Campbell & Associates, LLC

Editor’s comment: Beginning on January 1, 2010, it may be illegal to use a cell phone on large stretches of Illinois highways. To the extent it will be illegal to cell phones in construction zones and the whole state highway system some times feels like a continuous and unending construction zone, cell phones are effectively banned in many areas. It is not going to be a defense to use hands-free phones.

Texting and email use while operating a motor vehicle will be completely banned across the state, including all roads, whether inside and outside construction zones.

The Associated Press reports the number of deaths in work zones along Illinois highways was already way down because of strict enforcement prior to passage of giant fines and other efforts targeting vehicular safety in construction areas. In five years the number of deaths in construction zones fell from 44 in 2003 to 21 in 2008. Obviously, the Democratic legislature and Governor feel this will further cut the number of fatalities.

The legislature has passed and the Governor has signed these bills:

• Texting and driving
  Public Act 96-130 (D’Amico, D-Chicago; Sandoval, D-Cicero) prohibits texting or reading email while driving on the road. Exempts emergency calls or GPS devices. Effective January 1, 2010.
• Cell phone use and driving
  Public Act 96-131 (D’Amico, D-Chicago; Althoff, R-Crystal Lake) prohibits any use of a cell phone while driving in a construction zone or school zone. Effective January 1, 2010.

We aren’t sure how these new laws are going to be enforced but we are certain the entire Illinois workers’ compensation community lives and works in their cars, vans and trucks. We caution all of the attorneys, physicians, nurses, claims representatives, brokers, Arbitrators, Commissioners and all of our other readers to watch out when using cell phones after January 1 while on the highways and by ways of our state. We can hardly wait to see cameras pointed into cars, vans and other vehicles and automatic tickets being sent out.

If you have thoughts or comments, please reply.

Editor’s comment: This is a major issue for transportation industry workers our readers should be aware of. If your focus is limited to workers’ compensation, please move on to the next topic.

The U.S. Department of Transportation reinstated its 2008 final rule subjecting transportation industry workers in safety-sensitive positions to direct observation for all return-to-duty and follow-up drug tests, according to a notice published in the July 30, 2009, Federal Register. The rule takes effect August 31.

Employees who fail or refuse to take the tests are barred from performing safety-sensitive duties until they complete a treatment program under the supervision of a substance abuse professional.  Employees who successfully complete the program must then pass a “return-to-duty” test before resuming safety-sensitive duties. During the following twelve months, employees must also pass at least six unannounced “follow-up” drug tests.

Prior to this rulemaking protocol, U.S. employers had the option of conducting return-to-duty and follow-up tests using “direct observation”, a procedure that requires a same-gender observer to “watch the [fluid] go from the employee’s body into the collection container.”  The DOT has now made this formerly optional procedure a requirement due to concern that not enough employers were utilizing the option. Because the rule applies only to employees who failed or refused to take previous drug tests, the regulation balances the government’s compelling interest in transportation safety with the employees’ freedom from intrusive searches.

All employers with CDL employees should review their policies and procedures for their DOT drug testing program to ensure they are up to date. Many employers do not perform specimen collection themselves, but outsource the function to certified vendors. For these employers, the new regulations may not require any change in procedures, but employers should ensure their CDL employees understand the new requirements. Employers who conduct collections in-house must continue to ensure that they meet the requirements of Subpart D to Part 40 of the Code of Federal Regulations (governing collection sites). Such employers are also well advised to ensure that collection site personnel include individuals of both genders to allow for direct observations by someone of the same gender.

If you have thoughts or comments, please send a reply.

Editor’s comment: We saw a very solid article in Business Insurance magazine that is required reading for HR, benefits, workers’ compensation and safety folks across the U.S. Please don’t take our word C for it, look yourself at http://www.businessinsurance.com/article/20090726/ISSUE01/307269992.

Their focus was to applaud and focus on efforts by Boeing Corporation to look at every step of their leave processes and distill them down to the bare minimum. Boeing’s leave management programs underwent the process beginning in 2007 because of patent inefficiencies. The company with 147,000 employees previously administered eleven different, complex leave programs and its workers generated 59,000 intermittent FMLA absences annually and 16,000 non-FMLA absences. Their managers felt poor administration of those cases was costing millions of dollars and lost productivity.

Employees and managers were very dissatisfied with the complexity of the cumbersome leave management administration. They moved all of them to one main site and administration. The overall management focus was then to revisit and “reinvent” every aspect of every leave request to see if it could be made more efficient. That required examining minutiae of every step in various leave processes to find improvement opportunities. It also allowed establishing an integrated and centrally managed absence-management program.

Boeing teamed with its group disability provider to obtain short and long-term disability support. They worked together to implement a current map of its leave processes. The process required a painstaking look where they mapped out every process, every person involved, every single transaction, every system, and every handoff. From the article, it appears to be a win-win situation for everyone involved from top management to the line workers.

We don’t see why this same process couldn’t be applied to workers comp leave—we feel it would bring definition to a hard to define process. If any of our readers are doing so, please send a reply.

Editor’s comment: We continue to get this question over and over from our defense clients. You are settling a claim for $100-500K and claimant’s counsel and his client are itching to get the settlement and move on with their lives. They tell some adjusters the workers’ compensation settlement can move ahead immediately and you don’t have to wait for

• MSA documentation;
• MSA pricing;
• MSA approval by CMS; and
• Funding of the Set Aside trust by the carrier/self-insured employer.

Is there anything wrong with moving ahead with settlement contracts and finalizing the settlement prior to final approval and funding of the Medicare Set Aside trust.
Actually, from our perspective, we feel you take a number of risks in moving forward with the state settlement without getting a federal Medicare Set Aside trust priced, approved and paid. We want all adjusters handling litigated and non-litigated claims to understand claimant attorneys do what is in their best interests. They are ethically required to do what is in their clients’ best interests. They don’t care if they put you into a corner.

When asked to move forward with lump sum settlement contracts while the MSA process is pending, defense attorneys from Keefe, Campbell and Associates don’t sign settlement contracts in this setting unless we are directed by client to do so. There are a number of pitfalls to moving ahead without first finalizing the MSA process.

What most of our clients feel is the best thing about Illinois WC is complete closure of claims where Petitioner moves on to another employer or outside your organization as part of the settlement process. In such a setting, full closure of medical rights almost always occurs. This does not happen if you settle and move ahead with the settlement but leave the MSA process in the middle of pricing or federal approval. Most adjusters/claims reps do not consider this situation—if you don’t get the MSA approved, medical rights stay open and remain the employer’s or insurance carrier/TPA’s continuing responsibility.

Please note claimant typically has to cooperate at all times in the MSA process. If you move ahead to sign lump sum settlement contracts and the Arbitrator approves them, you have to pay the settlement amount or be subject to a claim for penalties/fees. Claimant can also seek a judgment in circuit court on the approved settlement—the only ‘real’ defense to such claims is payment. We are confident to advise claimants across the country will no longer cooperate nor sign authorizations or other documentation if they receive settlement checks. If they refuse to further cooperate, medical rights remain open unless and until an MSA is finalized.

The next problem for an adjuster in closing any file with a pending Medicare Set Aside but active settlement is you are typically settling with an expected or estimated Medicare Set Aside value. If you sign the contracts prior to the MSA being finally priced and/or approved by CMS, we ask the next question: what if the Medicare Set Aside pricing or needed approval value comes back at ten, twenty, even fifty times the expected amount? We just had a set aside value come in at over $500,000. The claim will settle on the indemnity side for much less due to the many disputes present. But the pricing of the Set Aside will be hard to modify or reduce. While we don’t agree with that value at all, if you get a wildly high Set Aside price, it greatly limits your options when you have already moved ahead with the settlement paperwork at the IWCC.

When you get a very high price for a Set Aside, you may want to keep medical rights partially or completely open and/or not do a Set Aside. You may want to also see if there are any other options or pricing that may work. When Set Aside costs skyrocket, you may also want skip the settlement to fight part of or the entire claim and see what the Arbitrator and Commission will do with it. In contrast, when you sign contracts that require a Set Aside you have committed to do a Set Aside at whatever amount or leave medical rights open. The contracts, once approved, cannot be changed or technically modified—even by agreement.
So, our vote is to drag all of it along with you and end at the same finish line with claimant and counsel in tow. We know claimant attorneys push and push to get major claims settled and paid as rapidly as possible—closure for you is a tertiary goal. In ordinary circumstances, we don’t recommend adjusters ever move ahead with lump sum settlement contracts solely to make claimant counsel happy. We feel they can wait for their money until the MSA is both reasonable and approved by CMS and funded to protect everyone’s interest. Please always remember it is not your fault claimant may have to wait.

We appreciate your thoughts on comments on this situation. If you need help or assistance with Medicare Set Asides in the Illinois workers’ compensation industry, let us know.

Editor’s comment: Most Illinois risk managers will note Illinois is ranked at the bottom in a tier with six other states. Most of the states in that tier have administrative systems that some consider biased, such as Oklahoma. We hope the folks at the Illinois State Chamber note the results carefully as we move into an election year in 2010.

These report cards help employers, insurers, TPA’s, state and municipal governments and consultants answer the questions, “Who is doing well and why?” WLDI’s State Report Cards are based on data from OSHA Form 300’s and 200’s, which cover all OSHA recordable injuries and illnesses and provide the basis for rating state-by-state workers’ compensation performance. The 2009 release adds four more years’ worth of data (2003-2006) to the rankings, which makes for a total of seven years of data since it includes statistics collected in the last publication, which was released in 2004. Now having seven years worth of data, it was possible to track trends and not only give states a grade based on most current performance, but also to give them a “Tier Ranking” based on how they performed on average over the seven years, and whether they have an upward, downward or stable trend. There is data available for 43 states including Illinois, plus Puerto Rico, Guam and the Virgin Islands.

Similar to past releases of this report, the 2009 State Report Cards also provide five different outcome measures compared among the states for each year:

• Incidence Rates,
• Cases Missing Work,
• Median Disability Durations,
• Delayed Recovery Rate; and
• Key Conditions: Low Back Strain.

An essential requirement for production of this report was the proprietary crosswalk program that has been developed by Work Loss Data Institute, which converts OSHA-reported data into an ICD9 code format.  More details on the methodology used are located at http://www.odg-disability.com/pr_src_methods2009.htm.

Iowa performed the best of all the states for 2006 and Minnesota came in a close second. Both states received a grade of “A+” based on an average of their 2006 scores in the five categories above. Illinois came in last, with Wyoming, Rhode Island and New York very close to the bottom. In total, nine of the 43 states received a grade of “F” in 2006. A summary of each grade for all states is shown on a U.S. Map Showing Grades by State, located at http://www.odg-disability.com/pr_src2009_us.htm.

In terms of the tier ranking system, the Tier I states are Iowa, Kansas, Minnesota, Utah and Virginia. Tier I means the state had an average grade of “B+” or better, and a trend going up or level. Those five states were doing great and continuing to improve. Eight states fell into the opposite category, Tier VI which means they had an average grade of “D-“ or worse, and a trend going down or level. The worst performers for the years 2000-2006 were: Illinois, Louisiana, New Jersey, New York, Oklahoma, Rhode Island, Texas and Wyoming. A summary of Tier Rankings for all states is shown on a U.S. Map Showing Grades by State, located at http://www.odg-disability.com/pr_srctiers2009_us.htm.

The WLDI special report is available in both electronic and hardcopy formats for $250 each. Click to order: http://www.odg-disability.com/SRC_Order_Form_2009.htm.

Work Loss Data Institute is an independent database development company focused on workplace health and productivity based in Encinitas, California. The Official Disability Guidelines product line provides evidence-based medical treatment and disability duration guidelines to improve as well as benchmark outcomes in workers’ comp and non-occupational disability. ODG is available in Web-based, textbook and Systems Integration formats, used in all 50 states and worldwide.  For more information, visit www.worklossdata.com or contact Work Loss Data Institute at 800-488-5548.

Editor’s comment: Issues you may face in managing an Illinois workers’ compensation claim is what to do when you receive a notice of claim for a lien or order for withholding against pending workers’ compensation benefits or lump sum settlements. In looking at our Workers’ Compensation Act, Section 21 addresses the issue of lien, assignment, attachment or garnishment. The Act states

“no payment, claim, award or decision under this Act shall be assignable or subject to any lien, attachment or garnishment, or be held liable in any way for any lien, debt, penalty or damages, ….”

In reviewing the case law interpreting this section of the Illinois Act, the court in Mentzer v. Van Scyoc held workers’ compensation benefits cannot generally be applied to debts of claimant, even when reduced to judgment, unless some specific statutory provision so provides. Therefore, the specific statute which authorizes or provides for enforcement of the lien must be examined to determine whether there is a specific provision which would require enforcement of the lien against workers’ compensation benefits. If not, that specific lien is not enforceable against workers’ compensation benefits.

If you receive an order or claim for lien which is unenforceable against workers’ compensation benefits, we suggest you contact us or your selected defense counsel for updated advice. There are five common liens or other claims you may encounter.

a. Garnishment/wage deduction order

The Illinois Wage Garnishment Act permits a judgment creditor to obtain an order requiring a judgment debtor’s employer to pay a portion of the employee’s income directly to the creditor. There is no specific statutory provision indicating that workers’ compensation benefits are subject to wage deduction orders.

In addition, the case of East Moline Works Credit Union v. Linn held exemption from garnishment attaches to workers’ compensation benefits that have been paid as well as compensation that may be due or become due. Therefore, wage deduction orders are not enforceable against workers’ compensation benefits.

b. Child support order and spousal maintenance order

Withholding of income for payment of child support and/or maintenance of a spouse is addressed in both the Illinois Marriage and Dissolution of Marriage Act and the Non-support of Spouse and Children Act. Both Acts contain identical provisions for withholding of income to secure payment of support.

The Act specifically provides that “Income” includes workers’ compensation payments. In addition, the Act also contains a provision specifically stating any other state or local laws which limit or exempt income or the percentage of income that can be withheld shall not apply. Therefore, any order for child support or spousal maintenance is enforceable against workers’ compensation benefits. These orders may include withholding for current support payments as well as including additional dollar amounts or percentage of income amounts for delinquent payments.

Both Acts specifically provide penalties for noncompliance. If an employer willfully fails to withhold or pay income pursuant to a properly served order, then the obligee (individual to whom the support payment is owed), public office or employee may file a complaint against the employer. The Circuit Court would then notify the employer of the time and place for hearing on the complaint. If the court finds in favor of the complaining party, the court enters a judgment directing the employer to pay the total amount which it willfully failed to withhold.

There is an additional provision which indicates that an employer, who knowingly fails to pay any amount withheld within 10 calendar days of the date income is paid to the employee, is subject to a penalty of $100.00 for each day the amount withheld is late after the expiration of 10 calendar days. Therefore, it is important that funds withheld from workers’ compensation payments due to a child support order or spousal maintenance support order are paid promptly.

c. Physicians’ liens

The Illinois Physicians Lien Act provides that physicians practicing in Illinois who provide services by way of treatment to injured persons have a lien upon all claims and causes of action for the amount of reasonable charges up to the date of payment of damages. The Act specifically makes an exception so it does not cover services rendered under the provisions of the Workers’ Compensation Act.

Therefore, like wage deduction orders, physicians liens are not enforceable against workers’ compensation benefits.

d. Public aid lien

The Department of Public Aid has a right of subrogation to any right of recovery the recipient of that aid may have under terms of any private or public health care coverage or casualty coverage. The Public Aid Code specifically includes coverage under the Workers’ Compensation Act. In order to enforce its rights, the Department may either intervene or initiate proceedings for the cost of services provided by the Department.

If Public Aid paid medical expenses as a result of injuries later deemed to be compensable under workers’ compensation, you may receive a subrogation notice. Medical expenses must be reimbursed from funds owed petitioner in settlement of the workers’ compensation claim.

e. Federal tax lien

The Internal Revenue Service, pursuant to Section 6321 of Tax Code, has advised that federal tax liens attach to all property. With such broad power, the Internal Revenue Service may issue a tax lien which would be enforceable against workers’ compensation benefits. This lien would attach to any benefits, settlement or permanency award.

Summary

We suggest that, upon receiving notice of a lien claim involving workers’ compensation benefits, you contact us or your selected defense counsel for updated advice. You probably should notify both claimant and his attorney in writing to confirm both receipt of the claim and your course of action with regard to same.

Please do not hesitate to reply with thoughts and comments.

Editor’s comment: We have several clients who are struggling and struggling with wage loss differential claims and their relative indefensibility in this state. We have already advised our readers to reconsider and update job descriptions to try to accommodate Illinois workers with permanent restrictions wherever possible and avoid wage loss differential exposures.

The claim costs from wage loss benefits are spiraling and, in this rotten economy, everyone is trying to cash in. Section 8(d-1) allows a petitioner, at his or her option, to elect to receive, in lieu of all other permanency benefits, 2/3 of the difference between what he would be earning in the job he was working when injured and what he can currently make, usually due to permanent and some times life-changing work restrictions.

From a plain reading of the Act, one would think this benefit would continue until petitioner would retire from the work force. The words of the statute are: “for the duration of … disability.” We ask everyone how one can be disabled from work and require benefits for that disability when you retire from the work force, never to work again. We assure all of you the word “disability” has been stretched and strung out like a rubber band. In their ruling in Cassens Transport, our highest court used what we feel is an artificial definition of “disability” to rule that, if a worker had lower income at the time of the 8(d-1) hearing and then made double or triple or more what they were making prior to injury, if their “disability” didn’t change, the employer still owed them wage loss differential benefits. For example, if a truck driver with an operated shoulder was making $1,220.00 per week at the time of injury and then made minimum wage or $320 per week after the injury, their wage loss differential benefit would be $1,220.00 minus $320 or $900.00. They would be entitled to 2/3 of the $900 gross wage loss or $600 per week for life. If they then started a business and were making $2,500 per week but their “disability” didn’t change, they would still be entitled to the $600 per week from the former employer. We think it is an abuse of the language of the Act to require an employer to continue to keep making wage loss benefit payments to such a worker but we don’t define the law, our courts and legislature does.

One major problem is everyone in the insurance industry wants to “lump out” such benefits to avoid having to pay them on a weekly basis for decades. Almost all lump sum wage loss differential benefit settlements are in the range between $100,000-600,000. While we have not seen one yet, it is possible to have a wage loss differential present value in the seven-figure range. Trust us; it is coming to a claim near you. The problem this creates in some settings is similar to throwing gasoline on a fire. Everyone who has a permanent restrictions arising from a simple injury, like an operated shoulder or knee is thrilled to seek more money than what Illinois would pay for 100% loss of use of the affected limb, if it were amputated.

The claims industry is struggling to slow the tide of such claims. The problem is what to do when there is no question about the loss, the permanent restrictions and the giant claim that arises from all of it. Other than keeping the permanently restricted worker in your workforce at the same pay in a permanent light duty position, in our view, there is one effective “defense” to this concept–don’t have high wage workers. Whenever and wherever possible, restrict everyone in high wage but low education positions to 20-hour weeks. If you don’t already know it, companies like 24-Hour Fitness®, CVS® drug stores, United Parcel Service® and Wal-Mart® already do this as a routine course of business.

We understand there are many industries where it might be problematic to hire such workers but we are telling every Illinois employer who will listen that having more part-time workers makes WC sense in this state. Having more part-timers in high wage jobs will start to affect underwriting of workers’ compensation losses and concomitant premium dollars. We are surprised more risk managers, insurance carriers and brokers aren’t sitting up and taking notice.

How would it work? Well, if you have someone who is making $30 per hour in a heavy job and they work full time or 40 hours each week, their pre-injury wage is $1,200 per week. If they suffer in an injury with permanent restrictions and then get a minimum wage job, the wage loss calculation is $1,200 less $320 (the income from the minimum wage job after injury) or $880.00. They would be entitled to a weekly benefit of 2/3 of that amount or $586.67 on a weekly basis for life or just over $30,000 per year. For a 40-year-old with a 40 year life expectancy, the full undiscounted value is over $1,200,000!! Present values depend on the discount factor but it would be in the range of $500,000-800,000.

In contrast, if the same worker is only working 20 hours a week at $30 per hour, they are making $600 per week. If they suffer an injury with permanent restrictions and then get a minimum wage job, the wage loss calculation is $600 less $320, creating a gross wage loss of $280 per week. Two-thirds of that difference is $186.67. On an annual basis, the value is less than $10,000 per year. For the same 40-year-old, the full undiscounted value is about $400,000. The present value is no more than $100,000-200,000. While that is still a boatload of money for an arm strain with surgery, it isn’t close to the values we can expect to see in the coming years.

We assure all of our readers these numbers are immutable. If the wage loss sets up, it is truly difficult to defend under this administration. And please also understand the Arbitrators and Commissioners aren’t doing anything technically wrong—they are applying Illinois law to the facts before them. If Illinois business wants to change this system, we have to take it to the legislature when the time is right.

If you have any further thoughts on wage loss differential claims and how to save money, please let us know. We appreciate your thoughts and comments on these issues.