COMPACT

CONTENTS
2 'Appealing' new option: appeal a decision by fax to the Workers' Compensation Court of Appeals 3 Update: data-driven workers' compensation 4 News • 2006 legislative update • Unit name change • Introduction of new director • Special Compensation Fund trends 5 New benefit and provider fee levels effective October 2006 7 Complaints involving medical issues — 2005 9 Request to receive notices of agency rule proceedings 10 Workers' compensation dispute, disputeresolution trends 14 Results of Special Compensation Fund assessment 15 DLI primary liability determination review process D-1 Court decisions: April through June 2006

for workers' compensation professionals

Minnesota Department of Labor and Industry

August 2006
TABLES
5 6 7 8 Statewide average weekly wage Compensation rates as of Oct. 1, 2006

Number of complaints involving medical issues by type of complainant, 2000-2005 Outcomes of formal complaints closed in 2005 by subject type

10 Numbers of disputes received, fiscal years 1990-2006 11 Workers' compensation dispute resolution activity at the Office of Administrative Hearings, fiscal years 1999-2006 11 Workers' compensation hearings at the Office of Administrative Hearings and cases received at the Workers' Compensation Court of Appeals, fiscal years 1999-2006

FORMS
19 Openings available: Workers' Compensation Insurers' Task Force

'Appealing' new option ...

Complaints involving medical issues — 2006

Court decisions: January through March 2006

2

7

Decisions

Summaries of

D-1

'APPEALING'

appeal a decision by fax to the Workers' Compensation Court of Appeals
By Kate Berger, Legal Services

NEW OPTION:

Under Minnesota Statutes, §176.421, subdivision 4, a party appealing a decision to the Workers’ Compensation Court of Appeals must file the Notice of Appeal form (and proof of service) with the chief administrative law judge at the Office of Administrative Hearings (OAH). A copy of the Notice of Appeal form must be filed with the commissioner of the Department of Labor and Industry (DLI). The Legislature amended this law in 2006 (ch. 178 of the session laws) to permit appellants to file the Notice of Appeal forms with OAH and DLI by facsimile if the facsimile filing is 15 pages or fewer in length. A facsimile appeal received after 4:30 p.m. on a state business day is considered filed the next state business day. The amendments also require the filing fee to be received by OAH within 10 business days after the end of the appeal period. The following questions and answers related to the amendments to this law are reprinted from the OAH Web site at www.state.mn.us/ebranch/oah/wcdocs/faxappeal.htm. For additional information and resources related to litigation at OAH, visit its Web site at www.state.mn.us/ebranch/oah/wc.html.
Questions and answers
May I file a Notice of Appeal by fax? As of August 1, 2006, you may appeal a compensation judge’s decision to the Workers’ Compensation Court of Appeals by fax. You may either continue to file an appeal by sending an original notice as previously set out in Minn. Stat. § 176.421, subd. 4, or file your Notice of Appeal by fax. How do I file the Notice of Appeal by fax? You may file your Notice of Appeal to the Workers’ Compensation Court of Appeals with the Chief Administrative Law Judge at the Office of Administrative Hearings (OAH) by sending it to fax number 612-349-2691. (Please do not file a Notice of Appeal with our Duluth office.) The notice must be received by 4:30 p.m. on the day the filing is due. (Faxes received after 4:30 p.m. are considered filed on the next business day.) The statute requires that the notice must also be received by the Commissioner of Labor and Industry before the deadline. The Commissioner’s fax number for appeals is 651-284-5731. OAH would appreciate also receiving a copy of the $25 filing fee check with the faxed notice. The original filing fee check must be received by OAH within 10 business days after the end of the appeal period. What if the fax number is busy? To ensure a timely filing, do not wait until the last minute to file your appeal. If the primary fax filing number (612-349-2691) is busy or otherwise unavailable, you may fax it to 612-349-2634. Please do NOT file a Notice of Appeal by faxing the OAH Duluth office. If you are having a problem with transmission, call LeeAnn Shymanski at OAH for assistance at 612-341-7343. Will I receive a confirmation the Notice of Appeal was received? You may wish to retain the fax transmission report as proof of your filing. OAH will send an acknowledgement of appeal by mail after the filing fee is received. 2
• COMPACT • August 2006

Faxed decisions, continues ...

Update: data-driven workers' compensation
By Patricia Todd, DLI Assistant Commissioner

Recently, the Department of Labor and Industry's Workers' Compensation Division began to look at how it can move the current submission of workers' compensation information via forms to a "data-driven" system in which activity on a workers' compensation file is initiated or reported via new or changed data elements rather than these actions occurring on a prescribed form. The department currently collects the same data repeatedly, because of the practice of only receiving it via forms. A data-driven system would ultimately collect only data needed to reflect or report a change or progress on a claim. The first phase of this project began in June. During the next year, the division will identify stakeholders impacted by this proposed change, target concerns raised by stakeholders – including their electronic capacity to participate in a new

system, review statutes and agency rules that could impact this change, develop a formula business process model, identify high-level technical requirements to implement a data-driven system, and develop cost and time estimates to complete the changes. This first phase is expected to continue through July 2007. The project organization includes both internal and external stakeholders. The external stakeholders are representatives from the Department of Commerce, the Office of Administrative Hearings, insurers, qualified rehabilitation consultants (QRCs), medical providers and the Minnesota State Bar Association. The project leader is Cindy Valentine, DLI's chief information officer; Jana Williams, director of DLI's Workers' Compensation Division's Information Processing Center will provide operations leadership.

Faxed decisions, continued ...

What do I do with the original notice? The filing party retains the original Notice of Appeal. Only the faxed copy is sent to OAH and the Department of Labor and Industry. Who owes a filing fee? Please note that the 2006 amendment to Minn. Stat. § 176.421, subd. 4 clarifies that EACH appellant and cross-appellant owes a $25 filing fee.

3

• COMPACT • August 2006

labor & industry
Workers' Compensation Division

minnesota department of

News

2006 legislative update
By John Rajkowski, Legislative Director

2006 session laws, chapter 178: Workers' compensation technical changes – This bill amended the workers' compensation statute to allow fax filing of a Notice of Appeal form to the Workers' Compensation Court of Appeals (see page 2). It also amended Minnesota Statutes §176.185 regarding notices of cancellation of a workers' compensation insurance policy for nonpayment of premium. Bills passed in the 2006 regular session are available on the Web site of the Office of the Revisor of Statutes (www.revisor.leg.state.mn.us). To get to the session bills, click on "Bill Search and Status," scroll down to "More information about bills," click on "Chapters and Resolutions, Regular Session," then scroll down to Chapter 178.

Unit name change
By Carol Pankow, Claims Services and Investigations Director

The Special Compensation Fund (SCF) unit within the Workers' Compensation Division at the Minnesota Department of Labor and Industry has changed its name to Claims Services and Investigations (CSI). Numerous organizational changes have occurred within the Workers' Compensation Division during the past year to more clearly define the services provided to internal and external stakeholders. In evaluating the services provided by the SCF unit, it was determined the name was linked to the funding source and not the activity being performed. The members of the unit act on the behalf of the actual fund; however, they are not the fund itself. Changing the unit's name to CS I will have no impact on statutory responsibility or definition related to the actual Special Compensation Fund, but will more clearly define the activity performed for all stakeholders.

Introduction of new director
By Patricia Todd, DLI Assistant Commissioner

Carol Pankow has been hired as the new director of the Claims Services and Investigations unit (see above). Pankow's experience includes being: a CEO of an organization that provides vocational support for individuals with developmental disabilities and mental health needs; a residential director with responsibility for 19 day-training facilities; and a policy consultant in the development and implementation of consolidated standards for licensing regulators. In addition, she has exhibited strong budget, leadership and change-management skills.

Special Compensation Fund trends
By John Kufus, Financial Services

The Special Compensation Fund assessment has declined by more than 20 percent since fiscal-year 2003. In 2002, the assessment rate was 30 percent and resulted in $118 million collected. The assessment rate for 2006 is 23.69 percent and will result in $92 million collected. This decline is due to reduced second-injury and supplementary benefit reimbursements resulting from the repeal of those programs in 1992 and 1995, respectively, as well as claim settlements initiated from 2000 through 2004.
4
• COMPACT • August 2006

New benefit and provider fee levels effective October 2006
By Brian Zaidman and David Berry, Research Analysts, Research and Statistics, and Kate Berger, Legal Services

The statewide average weekly wage (SAWW) effective Oct. 1, 2006, is $782, a 1.03 percent increase over the current SAWW of $774, which has been in effect since Oct. 1, 2005. [See the table on this page.] The levels for minimum and maximum weekly benefit payments are presented in the table on the page 6. The statewide annual average wage will change to $40,636 on Jan. 1, 2007. The new SAWW is based on 2005 payroll and employment figures supplied by the Department of Employment and Economic Development and the calculation procedure in Minnesota Statutes §176.011, subd. 20. The increase in the SAWW is the basis for the M.S. §176.645 annual benefit increases. Statewide average weekly wage Only injured workers meeting the eligibility requirements of M.S. §176.645 will receive adjusted benefits. Benefit increases for workers injured prior to Oct. 1, 1992, are limited to 6 percent. Benefit increases for workers injured between Oct. 1, 1992, and Sept. 30, 1995, are limited to 4 percent. For workers injured on or after Oct. 1, 1995, the initial annual adjustment is made on the fourth anniversary of the date of injury and is limited to 2 percent. Vocational rehabilitation provider hourly fees will be adjusted by the 1.03 percent SAWW increase, pursuant to Minnesota Rules 5220.1900 subp. 1b, 1c and 1e. On Oct. 1, 2006, the maximum qualified rehabilitation consultant (QRC) hourly fee will increase to $86.33 and the maximum hourly rate for rehabilitation job development and placement services will increase to $66.40.
Effective Oct. 1 of the indicated year Statewide average weekly wage Percentage change from previous year

Year

1993 ..................... 1994 ..................... 1995 ..................... 1996 ..................... 1997 ..................... 1998 ..................... 1999 ..................... 2000 ..................... 2001 ..................... 2002 ..................... 2003 ..................... 2004 ..................... 2005 ..................... 2006 .....................

$484 .................... 5.45% $492 .................... 1.65% $505 .................... 2.64% $524 .................... 3.76% $553 .................... 5.53% $579 .................... 4.70% $615 .................... 6.22% $642 .................... 4.39% $680 .................... 5.92% $702 .................... 3.24% $718 .................... 2.28% $740 .................... 3.06% $774 .................... 4.59% $782 .................... 1.03%

Minnesota Statutes §176.136, subd. 1a, as amended during the 2005 legislative special session, requires the conversion factor for chiropractic services to be increased to 72 percent of the medical/surgical conversion factor on Oct. 1, 2006. The law also provides that the annual adjustment of the conversion factors may be adjusted (by no less than zero) to offset the increase in payments resulting from the increase in the chiropractic conversion factor. Pursuant to this law, the 2005 conversion factors are adjusted by 0.73 percent. Subject to the approval of an administrative law judge, effective Oct. 1, 2006, the new conversion factors will be: • medical/surgical services in part 5221.4030 ...................................................................................$76.87 • pathology/laboratory services in part 5221.4040 ............................................................................$64.19 • physical medicine/rehabilitation services in part 5221.4050 ..........................................................$66.64 • chiropractic services in part 5221.4060...........................................................................................$55.35 Minnesota Rules, part 5219.0500, subp. 4, provides for adjustment of the maximum fees for independent medical examinations in the same manner as the adjustment of the conversion factor. Therefore, the independent medical examination fees will be increased by 0.73 percent for services provided on or after Oct. 1, 2006, subject to approval by an administrative law judge. An official notice of the medical fee schedule conversion factors and independent medical examination fees as approved by the administrative law judge will be published in the State Register in September.
5
• COMPACT • August 2006

Compensation rates as of Oct. 1, 2006 Statewide average weekly wage (SAWW) = $782 Percentage change in SAWW from previous year = 1.03%
(Apply Minnesota Statutes §176.645 adjustment as necessary based on date of injury.) Minimum under M.S. 176.101, subd. 1(2) Supplementary benefits under M.S. 176.132
(Minnesota Statutes 1994)

Maximum under M.S. 176.101 and 176.111

100% of SAWW

50% of the SAWW or gross wage, whichever is less, but in no case less than 20% of the SAWW
50% 20%

10-01-77 .............$197.00 10-01-78 .............$209.00 10-01-79 .............$226.00 10-01-80 .............$244.00 10-01-81 .............$267.00 10-01-82 .............$290.00 10-01-83 .............$313.00 10-01-84 .............$329.00 10-01-85 .............$342.00 10-01-86 .............$360.00 10-01-87 .............$376.00 10-01-88 .............$391.00 10-01-89 .............$413.00 10-01-90 .............$428.00 10-01-91 .............$443.00

and permanent total minimum under M.S. 176.101, subd. 4 (for injuries 10-1-95 and later)

105% of SAWW

10-01-92 ........... $481.95 10-01-93 ........... $508.20 10-01-94 ........... $516.60

Set by Statute

10-01-95 ............ $615.00 10-01-00 .............$750.00

10-01-77 .....$ 98.50 (gross wage - $147.75)... $ 39.40 10-01-78 ....$104.50 (gross wage - $156.75)... $ 41.80 10-01-79 ....$113.00 (gross wage - $169.50)... $ 45.20 10-01-80 ....$122.00 (gross wage - $183.00)... $ 48.80 10-01-81 ....$133.50 (gross wage - $200.25)... $ 53.40 10-01-82 ....$145.00 (gross wage - $217.50)... $ 58.00 10-01-83 ....$156.50 (gross wage - $234.75)... $ 62.60 10-01-84 ....$164.50 (gross wage - $246.75)... $ 65.80 10-01-85 ....$171.00 (gross wage - $256.50)... $ 68.40 10-01-86 ....$180.00 (gross wage - $270.00)... $ 72.00 10-01-87 ....$188.00 (gross wage - $282.00)... $ 75.20 10-01-88 ....$195.50 (gross wage - $293.25)... $ 78.20 10-01-89 ....$206.50 (gross wage - $309.75)... $ 82.60 10-01-90 ....$214.00 (gross wage - $321.00)... $ 85.60 10-01-91 ....$221.50 (gross wage - $332.25)... $ 88.60 20% of the SAWW or the employee's actual weekly wage, whichever is less 10-01-92 ........... $91.80 10-01-93 ........... $96.80 10-01-94 ........... $98.40
Set by statute, the listed amount or the employee's actual weekly wage, whichever is less

10-01-84 ...............$213.85 10-01-85 ...............$222.30 10-01-86 ...............$234.00 10-01-87 ...............$244.40 10-01-88 ...............$254.15 10-01-89 ...............$268.45 10-01-90 ...............$278.20 10-01-91 ...............$287.95 10-01-92 ...............$298.35 10-01-93 ...............$314.60 10-01-94...............$319.80 10-01-95............. $328.25 10-01-96 ...............$340.60 10-01-97 ...............$359.45 10-01-98 ...............$376.35 10-01-99 ...............$399.75 10-01-00 ...............$417.30 10-01-01 ...............$442.00 10-01-02 ...............$456.30 10-01-03 ...............$466.70 10-01-04 ...............$481.00 10-01-05 ................ $503.10 10-01-06 ................ $508.30 10-01-95 ........... $104.00 10-01-00 ........... $130.00

(rounded to $214) (rounded to $223) (round) (rounded to $245) (rounded to $255) (rounded to $269) (rounded to $279) (rounded to $288) (rounded to $299) (rounded to $315) (rounded to $320) (rounded to $329)* (rounded to $341)* (rounded to $360)* (rounded to $377)* (rounded to $400)* (rounded to $418)* (round) (rounded to $457)* (rounded to $467)* (round) (rounded to $504)* (rounded to $509)*
*Rounding applies to supplementary benefits.

Complaints involving medical issues – 2005
By Julie Marquardt, State Program Administrator, Principal Medical Compliance

DLI has established rules that govern the delivery and reimbursement of medical services within workers’ compensation. The department has the authority to investigate complaints against health care providers (Minnesota Statutes §176.103; Minnesota Rules Part 5221.8900), certified managed care organizations (M.S. §176.1351; Minn. Rules Parts 5218.0800 and 5218.0900) and insurers or employers (M.S. §176.251) regarding noncompliance with laws and rules governing medical benefits. This authority also allows for disciplinary action to be taken by DLI, if appropriate.
Complaints received by DLI

Anyone may file a complaint with DLI about a health care provider, certified managed care organization (CMCO), employer or insurer related to workers' compensation. Complaints can be received by phone, fax, letter or electronic mail (e-mail). The table below details the number of complaints received and the source from which the complaint originated.
Table 1: Number of complaints involving medical issues by type of complainant, 2000-2005 Year Employer or insurer 26 35 34 12 1 6 Health care provider 4 5 5 4 6 3 Employee or attorney 7 4 9 6 5 1 Certified managed care plan1 0 2 0 0 0 0 DLI Other2 Total

2000 2001 20023 2003 2004 20053

2 1 2 1 0 1

0 0 1 1 0 0

39 47 50 24 12 10

1. A certified managed care organization is an entity that has a contract with an insurer or self-insured employer to provide managed care services to employees under M.S. §176.1251. 2. Other entities may include: qualified rehabilitation consultants, other state boards or agencies, etc. 3. One complaint was brought forward by two different complainants

Since 2003, the number of complaints involving medical issues has declined. Some of the decline is due to procedural and recordkeeping changes initiated by the department. Since 2003, the department has informally intervened to obtain permanent partial disability (PPD) ratings and expedite the exchange of medical records related to the injury. In all cases beginning in 2004, informal resolution is sought initially whenever appropriate given the circumstances of the case. If intervention efforts fail to resolve the concern or any time the party bringing forward the concern requests, a formal complaint is filed. When informal resolution is not appropriate due to the circumstances of the case – for instance, employees being billed for medical treatment, patterns of excessive treatment being rendered or questions of billing fraud – a formal complaint is filed. In 2005, 14 of the 19 cases closed were resolved informally. Informal resolution typically translates into faster resolution with less animosity and less expense. Complaints against employers and insurers most often involve issues of medical billing and payment, and directing employees to see specific health care providers without having a contract with a CMCO. Complaints against health care providers often involve failure to release medical
Complaints, continues ... 7
• COMPACT • August 2006

Complaints, continued ...

records, excessive charges, treatment parameter compliance and attempting to collect payment from injured employees for treatment or charges deemed excessive.
Complaint outcomes

After a formal complaint has been filed, an investigation is conducted that involves gathering information from relevant sources and sometimes a conference with the subject of the complaint to discuss the allegations. A single complaint may involve violations of several workers’ compensation statutes or rules. During the course of an investigation, additional issues may be identified. However, the most serious outcome is the one recorded for the complaint. Outcomes are determined by the findings of the investigation. Possible outcomes are dismissal, letter of instruction and discipline. • Dismissal – If the complainant fails to provide necessary information, the allegations are not supported by the information obtained or the department lacks jurisdiction, the complaint may be dismissed. • Letter of instruction – If the investigation reveals the subject did not act optimally, but there is not justification for discipline, a letter of instruction may be sent to the subject identifying corrective action(s). A letter of instruction is not considered discipline. • Discipline – If the results of an investigation support the allegation that the subject violated workers’ compensation statutes or rules, disciplinary action may be warranted. Disciplinary action can include: a warning, penalties, a hearing under M.S. Chapter 14 or a stipulated agreement, typically involving corrective action and a fine. The severity of disciplinary action may be increased if the subject of the complaint has a history of similar violations, if the violation(s) are determined to be egregious or if the subject has demonstrated a pattern of noncompliance with workers’ compensation statutes and rules. All information about a complaint is private unless disciplinary action, such as a hearing or penalty, occurs. Five complaints were closed during calendar-year 2005. Table 2 identifies the outcomes by subject type.
Table 2: Outcomes of formal complaints closed in 2005 by subject type Subject of complaint Health care provider CMCO Employer or insurer Other Total Dismissed 2 0 1 0 3 Closed with instruction 11 0 0 0 11 Closed with discipline 1 0 0 0 1 Total 4 0 1 0 51

1. One complaint involved two health care providers, both of whom received letters of instruction.

Complaints, continues ... 8
• COMPACT • August 2006

Complaints, continued ...

One complaint resulted in disciplinary action: A health care provider failed to respond to a request for the maximum medical improvement and permanent partial disability information contained on the health care provider report as required under Minn. Rules Part 5221.0410. The health care provider paid a $125 penalty and provided the required information to the insurer.
Conclusion

The immediate result of a complaint is to correct inappropriate behavior and prevent future problems. Cumulatively, complaints are monitored by DLI to identify trends and areas of confusion. Training and/or rule amendments may be developed to address areas of concern. The department provides training about medical issues to insurers, health care providers, billing and medical record staff and employers. Information about medical benefits is available on DLI’s Web site at www.doli.state.mn.us/ workcomp.html and by contacting DLI’s assistance line at 1-800-342-5354. Complaints or questions pertaining to medical issues may be directed to Julie Marquardt by phone at (651) 284-5173 or by e-mail at julie.marquardt@state.mn.us.

Request to receive notices of agency rule proceedings
Each state agency is required to maintain a list of people who have registered with the agency to receive notices of agency rule proceedings. To receive these notices from the Minnesota Department of Labor and Industry, complete the form that is online at www.doli.state.mn.us/statrule.html (see left column) and send it to the department via e-mail, fax or U.S. mail, as directed at the bottom of the form. The form may also be used to update mailing information or to request to receive rule notices about additional topics.

Workers' compensation dispute, dispute-resolution trends
By David Berry, Research Analyst Research and Statistics

The annual workers’ compensation system report1 includes trend statistics about dispute rates. These are of interest because they indicate the propensity of claims to have disputes. Also of interest, but not presented in the system report, are the numbers of disputes, because these indicate the overall demand for dispute-resolution services at the Department of Labor and Industry (DLI), the Office of Administrative Hearings (OAH) and the Workers’ Compensation Court of Appeals (WCCA). This article presents data about the numbers of disputes over time, along with trends in dispute-resolution activities at OAH and WCCA. See the glossary at the end of the article for definitions of terms.
Numbers of disputes

Figure 1 shows trends in the numbers of disputes received at DLI, featuring four major dispute types. The number of disputes of each type peaked in the early 1990s and then fell at least until the middle or late 1990s. Claim petitions have Figure 1 numbered in the low 6,000s for Numbers of disputes received, most years since fiscal-year 1999, fiscal years 1990-2006 [1] down from a plateau near 8,000 in the early 1990s. Discontinuance disputes reached a low of about 8,000 Claim petitions 2,570 in 2006, having descended from a peak of 4,820 in 1992. 6,000 Medical requests fell from 5,970 in Medical requests 1992 to 2,150 in 1999 (a 64-percent Discontinuance disputes 4,000 decline), but rose to 2,860 to 3,010 for 2003 to 2006. Rehabilitation requests have remained between 2,000 2,280 and 2,450 since 2001. Rehabilitation requests This picture contrasts with that 1990 1992 1994 1996 1998 2000 2002 2004 2006 presented in the system report, 1. See Glossary for definitions. which shows dispute rates increasing from injury-year 1999 to 2004.2 The difference occurs because the number of claims has been falling. The number of disputes is the product of the number of claims and the dispute rate (disputes per claim). From injury-year 1999 to 2004, the number of filed indemnity claims fell from 39,300 to 31,000.3 The combination of a falling number of claims and increasing dispute rates produced the trends in Figure 1.
Dispute-resolution activities at OAH and WCCA
0

Figure 2 (see next page) shows workers’ compensation dispute-resolution activity at OAH. The most frequent activity at OAH is settlement conferences. These numbered about 2,690 in fiscal-year 2006,
Trends, continues ...
1

2 3

The Minnesota Workers’ Compensation System Report, 2004 is available at www.doli.state.mn.us/pdf/wcfact04.pdf or by calling the Department of Labor and Industry at (651) 284-5025. See Figure 6.1 in Minnesota Workers’ Compensation System Report, 2004. Since these numbers are by year of injury, they are projected to full claim maturity.

10

• COMPACT • August 2006

Trends, continued ...

down from 3,540 in 2002. Next most frequent at OAH are discontinuance conferences, which declined from about 1,730 in 2002 to 1,210 in 2006. Workers’ compensation hearings at OAH are currently running near 900 a year, down from a peak of about 1,650 in 1994. Medical and rehabilitation conferences numbered 600 or more a year from 2003 through 2005 before falling to about 360 in 2006. As shown in Figure 3, cases received at WCCA have followed the same trend as OAH hearings (see note 3 in figure). The number of cases received at WCCA peaked in fiscal-year 1993 at nearly 650 and fell to just less than 200 by 2006.
Glossary

Figure 2
Workers' compensation dispute resolution activity at the Office of Administrative Hearings, fiscal years 1999-2006 [1]
4,000 Settlement conferences [3] 3,000 Administrative conferences-discontinuance [3]

2,000

Hearings [2]

1,000 Administrative conferences-medical and rehabilitation [3] 0 1990 1992 1994 1996 1998 2000 2002 2004 2006

1. See Glossary for definitions. 2. Excludes attorney fee hearings. 3. Unavailable before 2001.

Administrative conference – An expedited, informal proceeding where parties present and discuss viewpoints in a dispute. If agreement is not achieved, a “decision and order” is issued that is binding unless appealed. Currently, the Department of Labor and Industry's Benefit Management and Resolution unit conducts administrative conferences for medical issues involving $7,500 or less presented on a Medical Request form and for vocational rehabilitation issues presented on a Rehabilitation Request form; the Office of Administrative Hearings conducts conferences for medical issues involving more than $7,5004 presented on a Medical Request form and for discontinuance disputes presented by a claimant’s request for an administrative conference.
Trends, continues ...

Figure 3
Workers' compensation hearings at the Office of Administrative Hearings and cases received at the Workers' Compensation Court of Appeals, fiscal years 1999-2006 [1]
1,750 1,500 1,250 1,000 750 500 250 0 1990 Cases received at WCCA [3] Hearings at OAH [2]

1992

1994

1996

1998

2000

2002

2004

2006

1. See Glossary for definitions. 2. Excludes attorney fee hearings. 3. Includes cases with and without hearings. Both types of cases are usually disposed of by decisions but sometimes by settlement. Statistics are unavailable on the number of hearings at WCCA. Currently, about 75 percent of cases received have hearings. This percentage has risen over time.

4 This threshold was raised from $1,500 to $7,500 by the 2005 Legislature.

11

• COMPACT • August 2006

Trends, continued ...

Benefit Management and Resolution (BMR) – A unit of the Department of Labor and Industry that (among other activities) provides information and clarification about workers’ compensation statutes, rules and procedures; carries out a variety of dispute-prevention activities; conducts informal dispute-resolution activities, including mediations; and conducts administrative conferences for some issues. Claim petition – A form by which the injured worker contests a denial of primary liability or requests an award of indemnity, medical or rehabilitation benefits. In response to the claim petition, the Office of Administrative Hearings generally schedules a settlement conference or formal hearing. Discontinuance dispute – A dispute about the discontinuance of wage-loss benefits, most often initiated when the claimant (usually by phone) requests an administrative conference in response to the insurer’s declared intention to discontinue wage-loss benefits. The conference is at the Office of Administrative Hearings (OAH). A discontinuance dispute may also be presented on the claimant’s Objection to Discontinuance form or the insurer’s petition to discontinue benefits, either of which triggers a hearing at OAH. Discontinuance of wage-loss benefits – The insurer may propose to discontinue wage-loss benefits (temporary total, temporary partial or permanent total disability) if it believes one of the legal conditions for discontinuance have been met. See “Notice of Intention to Discontinue,” “Request for Administrative Conference,” “Objection to Discontinuance” and “petition to discontinue benefits.” Filed indemnity claim – A claim for indemnity benefits, whether ultimately paid or not. Indemnity benefits are paid to the injured or ill worker or survivors to compensate for wage loss, functional impairment or death. These benefits include temporary total disability, temporary partial disability, permanent partial disability and permanent total disability benefits; supplementary benefits; dependents’ benefits; and, in insurance industry accounting, vocational rehabilitation costs. Hearing – A formal proceeding about a disputed issue or issues in a workers’ compensation claim, at the Office of Administrative Hearings (OAH) or Workers’ Compensation Court of Appeals (WCCA), after which the judge issues a decision that is binding unless appealed. OAH conducts formal hearings about disputes presented on claim petitions and other petitions where resolution through a settlement conference is not possible. OAH also conducts hearings about some discontinuance disputes, disputes referred by the Department of Labor and Industry's Benefit Management and Resolution unit because they do not seem amenable to less formal resolution, and disputes about miscellaneous issues such as attorney fees and pre-hearing disputes. OAH also conducts hearings de novo when a party disagrees with an administrative-conference or nonconference decision and order. Injury year – The year in which the injury occurred or the illness began. In injury-year data, all claims, costs and other statistics are tied to the year in which the injury occurred. Medical dispute – A dispute about a medical issue, such as choice of providers, nature and timing of treatments or appropriate payments to providers. Medical Request – A form by which a party to a medical dispute requests assistance from the Department of Labor and Industry (DLI) in resolving the dispute. The request may lead to mediation or other efforts toward informal resolution by DLI Benefit Management and Resolution (BMR) or to an administrative conference. The conference is at BMR if the disputed amount is $7,500 or less; otherwise the conference is at the Office of Administrative Hearings. Trends, continues ...
12
• COMPACT • August 2006

Trends, continued ...

Notice of Intention to Discontinue (NOID) – A form by which the insurer informs the worker of its intention to discontinue temporary total disability or temporary partial disability benefits. In contrast with a petition to discontinue benefits, the NOID brings about benefit termination if the worker does not contest it. Objection to Discontinuance – A form by which the injured worker requests a formal hearing to contest a proposed discontinuance of wage-loss benefits (temporary total, temporary partial or permanent total disability). The hearing is at the Office of Administrative Hearings. Office of Administrative Hearings (OAH) – An executive branch body that conducts hearings about administrative law cases. One section is responsible for workers’ compensation cases; it conducts administrative conferences and settlement conferences in addition to hearings. Petition to discontinue benefits – A document by which the insurer requests a formal hearing to allow a discontinuance of wage-loss benefits (temporary total disability (TTD), temporary partial disability (TPD) or permanent total disability (PTD)). The hearing is conducted at the Office of Administrative Hearings for TTD or TPD benefits and at the Workers’ Compensation Court of Appeals for PTD benefits. Primary liability – The overall liability of the insurer for any costs associated with a claim after the injury is determined to be compensable. An insurer may deny primary liability (deny that the injury is compensable) if it has reason to believe the injury did not arise out of and in the course of employment, was intentionally self-inflicted, resulted from intoxication or happened during participation in a nonrequired recreational program. Rehabilitation Request – A form by which a party to a vocational rehabilitation dispute requests assistance from the Department of Labor and Industry (DLI) in resolving the dispute. The request may lead to mediation or other efforts toward informal resolution by DLI Benefit Management and Resolution (BMR), or to an administrative conference, usually at BMR but occasionally at the Office of Administrative Hearings. Request for Administrative Conference – A form by which the injured worker requests an administrative conference to contest a discontinuance of wage-loss benefits (temporary total, temporary partial or permanent total disability) proposed by the insurer on the Notice of Intention to Discontinue form. Requests for a discontinuance conference are usually done by phone. Settlement conference – A proceeding at the Office of Administrative Hearings to resolve issues presented on a claim petition when it appears possible to settle the issues without a formal hearing. If a settlement is reached, it typically includes an agreement by the claimant to release the employer and insurer from future liability for the claim other than for medical treatment. Vocational rehabilitation (VR) dispute – A dispute about a VR issue, such as whether the employee should be evaluated for VR eligibility, whether he or she is eligible, whether certain VR plan provisions are appropriate or whether the employee is cooperating with the plan. Workers’ Compensation Court of Appeals (WCCA) – An executive branch body that hears appeals of workers’ compensation decisions from the Office of Administrative Hearings. The next and final level of appeal is the Minnesota Supreme Court.
13
• COMPACT • August 2006

Results of 2006 Special Compensation Fund assessment
By John Kufus, Accounting Officer Financial Services The Special Compensation Fund (SCF) assessment funds Minnesota's workers' compensation programs. Most of the assessment dollars go to funding the supplementary and second-injury benefit programs. The assessment also pays the operating expenses of the Workers' Compensation Division of the Department of Labor and Industry, the Office of Administrative Hearings and the Workers' Compensation Court of Appeals. As a result of legislation enacted in 2002, the assessment process has changed. Companies are no longer required to report on a semi-annual basis. The reporting is now done on an annual basis and the reports are mailed at least 45 days before the due date of April 1. The Special Compensation Fund assessment is now directly invoiced by the Minnesota Department of Labor and Industry. The first half of the assessment is invoiced by June 30 of each year, and is due Aug. 1 of that year. The second billing is due Feb. 1 of the following year, and is mailed approximately 30 days before the due date. The estimated state-fiscal-year 2007 funding requirement for SCF was determined to be $92 million. The liability was divided between the insurers and self-insurers by the ratio of their 2005 indemnity payments to the total indemnity reported by both groups.
2005 indemnity Insurers Self-insurers Total $289,433,265 $ 98,964,947 $388,398,212 Ratio 74.52% 25.48% 100.00% Estimated liabilities $68,558,144 $23,441,856 $92,000,000 $742,678,211 DSR pure premium $742,678,211

Insurer premium surcharge rate

The derived insurer premium surcharge rate applied for the purpose of determining the Special Compensation Fund assessment was 9.2312 percent. The rate was determined by dividing the insurer portion of the SCF state-fiscal-year 2007 liability ($68,558,144) by the 2005 designated statistical reporting pure premium reported by all insurers to the Minnesota Workers' Compensation Insurers Association ($742,678,211).
Self-insured assessment rate

The imputed self-insured assessment rate was 23.6870 percent. It was determined by dividing the self-insured portion of the Special Compensation Fund state-fiscal-year 2007 liability ($23,441,856) by the total 2005 indemnity reported by the self-insured employers ($98,964,947). If you need further information, call John Kufus at (651) 284-5179.

14

• COMPACT • August 2006

DLI primary liability determination review process
By Philip B. Moosbrugger, Compliance Supervisor Benefit Management and Resolution

Editor’s note: The following information is intended to give insurers and self-insured employers some direction regarding the information the Department of Labor and Industry (DLI) looks for when evaluating the sufficiency and validity of denials of primary liability. DLI believes this may be particularly helpful for those insurers that are working with a variety of different states’ workers’ compensation laws. The examples cited are not rules and any denials filed that are similar to the examples would continue to be evaluated on a case-by-case basis. However, the examples are intended to give DLI stakeholders a better sense of the types of denials it receives and the issues it sees with them. DLI’s goal is to improve the quality of denial notices by providing a framework for understanding, evaluating and communicating the underlying basis for a particular denial. Accomplishing this goal will require increased educational efforts, increased compliance efforts and, most of all, cooperation with and a commitment from those stakeholders that file denials with the agency. This information, along with others previously published in COMPACT, can be used as both a reference tool and a training or discussion resource.

Introduction

In November 2005, the Department of Labor and Industry (DLI) began its effort to systematically review Notice of Insurer’s Primary Liability Determination (NOPLD) forms wherein primary liability is denied. The denials are reviewed to determine whether they comply with the statutes and rules regulating denials of liability. (See COMPACT, November 2005, www.doli.state.mn.us/compact2.html). Denials are reviewed without regard to the compensability of the claim. Denials are reviewed for compliance with the requirements of the Workers’ Compensation Act (including Minnesota Statutes §§176.225, 176.194 and 176.221, Subds. 1 and 3a; Minnesota Rules 5220.2570, Subparts 2, 9 and 10), as well as conformity with specificity requirements (M.S. §§176.84 and 176.221; Minn. Rules 5220.2570, Subparts 2, 9 and 11). The early experience with this process has revealed some recurring issues that may result in penalties. This article is intended to assist claims handlers by identifying some of the more commonly encountered denial deficiencies, along with a brief discussion of ways to improve the quality of denials filed with DLI’s Workers’ Compensation Division. It is not intended as an exhaustive or comprehensive discussion of issues encountered in reviewing denials of primary liability, but is only a brief examination of selected issues.
Specific denial issues

“We have evidence to suggest no injury occurred ...” Claims handlers are required to clearly state a legal defense to the claim (reason for denial), along with detailed specific facts supporting that reason. The law does not allow the claims handler to conceal or obscure the reasons for the denial, but requires full disclosure of the reasons for denying the claim. Minnesota Statutes §176.221, subd. 1, requires that a denial of liability “... state in detail the facts forming the basis of the denial ...” [emphasis added], as well as the specific reasons why the injury is not compensable. If there are good reasons to deny the claim, those reasons should be stated clearly.
Review process, continues ...

15

• COMPACT • August 2006

Review process, continued ...

“There are conflicting histories of the incident ...” This statement, by itself, is not a valid reason to deny primary liability. If the defense is that the alleged incident did not occur, that should be stated as the reason for denial. Facts supporting that denial reason may include that the employee has contradicted himself about some material point and that the very occurrence of the alleged incident is, thus, reasonably called into question. The claims handler should recite specific facts and describe why those facts call into question the occurrence of the incident. “The employee did not make a timely report of the injury ...” The specific reason for denial should be given. If the employee reported the injury within 30 days of the occurrence, there is no notice defense, unless the employer and insurer can show actual prejudice (M.S. §176.141). Such showing should be clearly set forth, if applicable. If the late notice really goes to the veracity of the employee’s claim of injury, and the claims handler is actually denying the occurrence of the incident or injury alleged, that should be stated, with indication of how the facts (including the delayed notice) support the denial reason. “The employee has a pre-existing condition ...” Again, the denial must be specific. Is the claims handler denying the occurrence of a new aggravation or injury, or merely saying that any current disability and need for medical treatment is attributable to a preexisting condition? If the former position is being taken, the claims handler must indicate that the existence of any injury or aggravation is being denied and must explain what facts underlie that assertion. If the claims handler is admitting an injury or aggravation, but denying any disability is attributable to it, Box 2 (C) on the NOPLD form should be checked and an explanation given why no disability resulted. “We have no medical to support a work injury ...” DLI has seen a number of denials that state: “We have no medicals to support an injury ...” or words to that effect. This statement is problematic because it is unclear whether the claims handler has obtained medical records. If the claims handler has obtained medical records and those records show an injury has not occurred, the medical records should be attached and the denial should clearly explain how the supplied records show there was no injury. If, on the other hand, this statement is meant to convey that there is no medical support for compensability because the records of the treating doctor have not yet been obtained, that should be stated clearly, along with the reason(s) why the records are actually needed to determine compensability and a description of the efforts to obtain them (see the discussion about the need for a good faith investigation, below). “Our investigation is not complete ...” Another relatively common statement is “our investigation is not complete ...” or “our investigation continues ...” (sometimes seen in conjunction with “we have no medicals to support ...”). This is commonly followed by a statement indicating compensability will be reassessed when the investigation is completed.
Review process, continues ...

16

• COMPACT • August 2006

Review process, continued ...

The difficulty with this statement is that filing a denial of liability for workers’ compensation benefits without conducting an investigation is a prohibited practice under M.S. §176.194, subd. 3 (4), and is considered a “frivolous” denial under M.S. §176.225, subd. 1. The requirement of an investigation as a prerequisite to a denial is further specified in Minn. Rules 5220.2570, Subp. 10, which requires that a denial “state facts indicating that an investigation has been completed or that a good faith effort to investigate has been attempted.” A penalty may be issued if the denial does not clearly show a good faith attempt to investigate or if the denial appears to have been filed as an attempt to extend the timeline for liability determination. For example, a denial filed within a day of the insurer’s request for medical records from the treating doctor, which states no medical information has yet been received about the claim, may indicate a good faith investigation effort has not been made. Sometimes, despite good faith efforts to do so, it is impossible to obtain the information needed to determine compensability. If the claim is being denied on the basis that, despite a good faith attempt, the claims handler has been unable to obtain the needed information (i.e., the claims handler has been unable to contact the employee or obtain medical records needed to determine liability), it should be clearly set forth what investigation efforts were made prior to denial of the claim (who was contacted, dates of contact, etc.). The claims handler should also clearly indicate why the missing information was needed to determine primary liability. It should be noted that if the facts are sufficient to make a compensability determination without obtaining additional information (such as medical treatment records or a statement from the claimant), the lack of those records is not a reason to deny primary liability. For example, if there are clear facts upon which to deny (e.g., a coworker has stated he saw the employee break his leg in an ATV accident during the weekend), the claims handler may not need medical records to deny a leg injury claim the following Monday. By the same token, if there are clear facts to accept an injury (e.g., witnesses saw a roofer fall 10 feet off a roof and break his leg), the medical records or a telephone contact with the employee are not needed to make the primary liability determination (although this information may be needed later to determine the nature and extent of the injury). Whenever the reason given for denial is that the adjuster was unable to obtain needed information, the denial should contain an explanation about why the information was actually necessary to make a primary liability determination and a description of the good faith effort made to obtain the information. This is based on the requirement that a claim cannot be denied without a good faith investigation. “We received this claim on the 14th day ...” The timeline for investigating and filing an NOPLD form is limited. Prior to 1983, the law allowed the insurer to ask for a 30-day extension, which could be granted at the discretion of the DLI commissioner (M.S. §176.221, Subd. 2). However, with the repeal of Subd. 2 in 1983, the Legislature made clear its intention that claims be paid or denied within 14 days of notice to the employer. There is presently no statutory provision to deny primary liability to extend the time to conduct, continue or complete an investigation. As discussed above, the law requires a good faith investigation before denying a claim. Reconciling these provisions sometimes presents a challenge to claim handlers. Occasionally, a claims handler is
17
Review process, continues ...
• COMPACT • August 2006

Review process, continues ...

faced with a difficult choice between filing a denial without a reasonable investigation or filing it late. Either option risks a penalty. The point is often made by claims handlers that it is difficult to properly investigate a claim within the time allowed by statute when the employer does not get the claim to the claims handler until very close to the 14th day. The employer is required to report the injury to the insurer or third-party administrator within 10 calendar-days of the injury (M.S. §176.231, subd. 1). If the NOPLD form is late because the employer did not meet this time limitation, the insurer may be able to charge any late filing penalty back against the employer (M.S. §176.221, subd. 6). Thus, where the employer has put the claims handler in the position of having to make this difficult choice, the claims handler must weigh the potential for a late filing penalty against the possibility of a penalty for frivolous denial or prohibited practices, and make a business decision about which course to follow. There is a third option that avoids a penalty altogether. The claims handler can pick up the claim if it appears likely it will be compensable, and if further investigation reveals the claim is not compensable, discontinue benefit payments by denying liability within 60 days (filing an amended NOPLD form) without the need of filing a Notice of Intention to Discontinue (NOID) form (M.S. §176.176.221, subd. 1). The claims handler can also accept the claim, but decline to initiate wageloss benefits if there are appropriate reasons to do so, by checking Box 2 on the NOPLD form and detailing the reasons why indemnity benefits are not being paid. Every workers’ compensation insurance policy in Minnesota must contain the provision: “Notice to or knowledge by the employer is notice to or knowledge by the insurer” (M.S. §176.185, subd. 4 (1)). Some insurers and third-party administrators work closely with their insureds/clients (employers) to ensure the First Report of Injury form is submitted to the claims handler promptly after the employer receives notice of an injury. This is a very effective way of ensuring the claims handler has adequate time to properly investigate a claim before making a determination of liability, which is in the best interests of all parties.
Conclusion

To sum up, the law requires that a denial include: • specific defenses (reasons) explaining why the claimed injury is not compensable (M.S. §176.221); • the detailed facts underlying the specific reasons for denying the claim (M.S. §176.221); • evidence of a complete investigation or a good faith effort to investigate the claim (M.S. §§176.225; 176.194; Minn. Rules 5220.2570, subp. 10); and • medical records attached, if the claims handler is relying on medical reasons to deny the claim (Minn. Rules 5220.2570). For more information, contact Philip Moosbrugger at (651) 284-5262. Further guidance about this topic can be found in the August 2002 and August 2004 editions of COMPACT, available on the DLI Web site at www.doli.state.mn.us/compact2.html.
18
• COMPACT • August 2006

Openings available:
Workers' Compensation Insurers' Task Force
The Workers’ Compensation Insurers’ Task Force is an organized body of representatives of insurance companies that write workers’ compensation insurance within the state of Minnesota and those employers that self-insure for workers’ compensation coverage. There is no statutory authority vested in this body; recommendations that are forwarded to the commissioner are nonbinding. However, the department values the input from the Workers’ Compensation Insurers’ Task Force. The task force meets quarterly at the Department of Labor and Industry, 443 Lafayette Road N., St. Paul, in the Minnesota Room. To apply for appointment to the task force, complete the following form and mail it to the address at the bottom. Applications must be received by Fri., Sept. 8, 2006.

Application for appointment to the Workers' Compensation Insurers' Task Force

Name Organization Address City, state, ZIP

Title Phone number

Below, please indicate your experience with Minnesota workers' compensation claims and explain how you could contribute to the effectiveness of this task force.

Signature

Date
Return completed form by Sept. 8, 2006 to: Debbie Caswell Assistant Commissioner's Office Department of Labor and Industry 443 Lafayette Road N. St. Paul, MN 55155

labor & industry
19
• COMPACT • August 2006

minnesota department of