5 6 7 8 11 12 14 19 27 2002 workers’ compensation legislative changes Insurers and self-insurers: Changes to the reporting system CompFact: Dogs and cats and insects, oh my! Workers’ compensation primary liability determination SCF assessment rate returns to 30 percent Benefit levels and provider fees increase October 2002 Work-related musculoskeletal disorder injuries in Minnesota Why did the claim rate fall in the 1990s? Free publications available online

7 Occupations with the largest number of indemnity claims caused by animal or insect, Minnesota, 1996-2000 Occupations with the largest percentage of indemnity claims caused by animal or insect, Minnesota, 1996-2000


12 Statewide average weekly wage 13 Compensation rates as of Oct. 1, 2002 14 Work-related MSD rate per 10,000 full-time-equivalent workers, private sector 15 WRMSDs in the United States, Minnesota and neighboring states, private employers, 2000 16 WRMSD indemnity claims, Minnesota, 1993-2000 16 Types of WRMSDs among indemnity claims, Minnesota, 1996-2000 17 Occupation of WRMSD claimants among indemnity claims, Minnesota, 1996-2000 17 Industry of WRMSD claimants among indemnity claims, Minnesota, 1996-2000 18 Detailed industries with greatest number of WRMSD claims, Minnesota, 1999-2000 19 Trends in the U.S. injury rate and the Minnesota filed-claim rate 20 Change in the claim rate from 12 months prior

29 Level 1 Adjuster Training registration 31 Qualified Rehabilitation Consultant Service and Fee Notification 33 Registered Rehabilitation Vendor Service and Fee Notification

22 Claim rate per 100 FTEs due to changes in industry mix 23 Expected wage-replacement rate for workers’ compensation benefits in Minnesota 24 Change in the claim rate from the previous year

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Summaries of


1 1


Why did the claim rate fall in the 1990s?
By David R. Anderson, Ph.D. Research and Statistics

The rate at which workers’ compensation claims were filed in Minnesota fell by more than one-third during the 1990s.1 After rising through the mid-1980s, the number of filed indemnity claims peaked at almost 48,000 claims a year in 1989 and 1990. The number of claims declined through most of the 1990s, and reached 38,000 claims a year in 1998. Considering the growth of the labor force, the claim rate per full-time-equivalent (FTE) worker2 declined at an average annual rate of 4 percent a year. This article examines factors that may have caused this decline. Minnesota’s experience was not unique. Significant declines in claim rates occurred in most U.S. states and even in Canada. Figure 1 shows trends in Minnesota claim rates and U.S. injury rates.3 In Minnesota the claim rate per FTE workers fell by 34 percent from 1990 to 2000. In the United States, the incidence rate for injuries resulting in days away from work fell by 47 percent. While the rates shown in Figure 1 are defined slightly differently, they both show similar and strong trends.4

F igure 1: T re nds in t he U.S. injury ra t e a nd t he M inne s o t a f ile d c la im ra t e ( c la im s o r injurie s pe r 10 0 f ull- t im e - e quiv a le nt wo rk e rs )

4.0 3.5 3.0 2.5 2.0 1.5 M i nneso t a wo r ker s' co mp ensat i o n cl ai m r at e 1.0 0.5 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 U . S. r at e o f injur ies w i t h d ays aw ay f r o m w o r k

The claim rate may decline because the injury rate falls or because of a decline in claiming propensity.5 It is difficult to quantify the extent to which the injury rate has fallen. Three reasons the rate may have fallen were examined: 1. a long-term trend toward safer work environments; 2. an increase in the age and, hence, experience of the workforce; and 3. a change in the mix of industries. Safer work environments have probably made a significant contribution to the fall in the injury rate. Changes in the age and experience of the workforce may have also contributed to the fall in the injury rate. Surprisingly, the mix of industries became slightly more dangerous during the 1990s.
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Claiming propensity is the likelihood that a worker will file a claim, given the worker has experienced a workrelated injury. Three reasons that claiming propensity might fall were also investigated: 1. a decline in the expected wage-replacement rate; 2. a change in the attitudes of workers toward filing a claim, perhaps because the costs of filing a claim are perceived to be higher; and 3. a fall in the unionization rate.6 A decline in the expected wage-replacement rate appears to explain 20 to 40 percent of the drop in the claim rate. Changes in workers’ attitudes might also explain a significant share of the drop in the claim rate, but it is difficult to quantify their effects. Changes in unionization seem unlikely to have had much affect on the claim rate.
Factors affecting injury rates

Three broad factors could affect the injury rate. First, workplaces may become safer because of factors under the control of employers, including safer equipment, better safety rules and better training. Second, injury rates may drop because of changes in the workforce; older, more experienced workers generally have lower than average injury rates. Third, injury rates may fall because of a change in the types of things firms do, i.e., because of shifts in employment between industries. Some researchers conclude the drop in workers’ compensation claims in the 1990s occurred mainly because of a decline in injury rates.7 While injury rates likely have declined significantly, following a long-term trend that goes back at least a few decades, a significant share of the drop in claims is probably also explained by other factors. There are two main reasons for this belief. First is the variability in the drop in claim rates. The average annual decline in the claim rate was 4 percent in the 1990s, but the rate fell much faster during 1992 and 1995. During some years in the 1980s, the rate actually rose. It seems unlikely that dramatic improvements in safety would occur in some years, with declines in safety in other years.8 Figure 2 shows the change in claim rate from 12 months prior (i.e., it shows the percent change from the monthly rate one year before).9 It shows large declines in claim rates from October 1991 to September 1992, and also from October 1994 to September 1995, as well significant fluctuations in the 1980s. The second reason not to automatically expect drops in claims must mean drops in injuries is that researchers have found claim rates are affected by factors such as the workers’ compensation benefit levels.10 For example, studies have generally found an increase in benefits of 10 percent, leads to an increase in claims of from 4 to 10 percent.
F i g ur e 2 : C hang e in claim r at e f r o m 12 mo nt hs p r io r ( seven- mo nt h mo ving aver ag e)

15% 10% 5% 0% -5% - 10% - 15% Jan- 84 Jan- 86 Jan-88 Jan-90 Jan-92 Jan-94 Jan- 96 Jan- 98 Jan- 00

Sour ce: Minnesot a DLI claims dat abase.


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Trends toward safer work environments

The trend toward safer work environments has probably been the main factor that explains long-term reductions in claim rates. How much of the1990s drop in the claim rate does it explain? The most comprehensive source of data about work-related injury rates is the Bureau of Labor Statistics (BLS) annual survey of occupational injuries. Unfortunately, the data collected in the survey is probably significantly influenced by workers’ compensation claims. This is because people answering the survey are much more likely to recall an injury if a workers’ compensation claim was actually filed. Because of this, it is not clear how the BLS survey data can be used to estimate the difference between the changes in injury rates and changes in claim rates. One potential way to try to determine the overall trend in injury rates is to examine types of claims or injuries that seem unlikely to be under-reported. Nationally, the rate of occupational fatalities dropped by approximately 2 percent a year during the 1990s. There are a number of reasons, however, that the rate of fatalities may not change the same way other injury rates do. Fatalities may receive extra attention from regulators. Specific types of work-related fatalities, such as traffic accidents and homicides, are probably driven by factors that are not related to the factors that drive most other workplace injuries.11 An analysis of claims that are less subject to discretion in filing also did not yield results that support the safety hypothesis. The claim rate for a class of claims that is less subject to claiming discretion — claims such as cuts, burns and amputations — falls at a slower rate than all claims do through most of the 1990s. This suggests these claims are probably more closely tied to safety trends than other claims (and less affected by changes in the workers’ compensation system or the economy), but the trend in the claim rate is not very regular through the 1990s. The claim rate for these types of injuries falls much more rapidly in the early 1990s, than in the late 1990s, and for the last year or two, the claim rate starts to rise.
Age and job tenure

The age and experience of the workforce may affect injury rates. Older, more experienced workers tend to have lower injury rates than younger and less experienced workers. The average age of workers in Minnesota rose significantly during the 1990s. Data from the Current Population Survey showed that, weighted by hours worked, the average age of workers in Minnesota increased by almost four years from 1993 to 2000. Such a change could have a major impact on injury rates. One study of the effect of age on workers’ compensation claims, however, projects only small effects on claim rates from the aging of the workforce.12 It may be misleading to examine only the effects of age without considering job tenure. As the workforce ages, average job tenure could increase or decrease. Employees who are starting a new job get injured at much higher rates than more experienced employees. There is little data about how average job tenure has changed in Minnesota. Some data about job tenure for workers’ compensation claimants is available, but the data for years prior to 1995 is not particularly accurate. Until more data is available, it seems premature to conclude that the aging of the workforce has led to a significant decline in the claim rate.
Industry mix

A long-term trend in the U.S. economy has been a shift of employment from manufacturing to services. Because workers in service industries generally have lower injury rates than workers in manufacturing industries, the change in the mix of industries should reduce the overall injury rate.13 Somewhat surprisingly, it appears the changes in the mix of industries that occurred in the 1990s, actually led to a small increase in the overall injury rate – about 1 percent during the entire decade.14 An analysis of

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employment in 46 industries in Minnesota shows the recent change in industry mix has actually tended to make workplaces slightly more dangerous, rather than safer. To isolate the effect of changing industry mix, it was assumed claim rates for each industry did not change and stayed at each industry’s average levels from 1993 through 2000. Next, it was assumed each industry had the same share of employment in 2000 as it did in 1993, but overall employment grew from its 1993 level to its 2000 level.15 There would have been 36,500 claims in 2000, if claim rates had stayed at their average level and employment was at its actual 2000 level. Had the mix of employment stayed the same as in 1993, there would have been only 36,000 claims. The shift in the distribution of industries from 1993 through 2000 would have led to an increase in the overall claim rate by 1.4 percent. Figure 3 shows the results of the same type of analysis done for 10 major industry groups.16 The claim rates were seasonally adjusted to account for shifts in industry mix throughout the year. To reduce random variation, a five-month moving average was calculated. The overall increase in the claim rate shown in Figure 3 is relatively small, about 2.5 percent in the 1990s if a straight line is fitted to the rate. Note that the changes in the claim rate resulting from changes in the industry mix are quite small in absolute terms, but appear to be larger because of the scale of the figure. The figure seems to capture effects of economic trends. The rate declines slightly from 1990 to 1992, probably because the economic slowdown hurt the manufacturing sector. The rate increases slowly from 1993 to 1997, probably because of the strength of the manufacturing sector. From 1997 through 2000, the rate increases even faster, coinciding with a boom in the construction industry. In 2000, the rate starts to decline, coinciding with layoffs in the manufacturing sector. The result that changes in industry mix tended to lead to higher injury rates during the 1990s, while somewhat surprising, agrees with other research.17
F i g ur e 3 : C l ai m r at e p er 10 0 F T Es d ue t o chang es i n ind ust r y mi x ( f i ve- mo nt h mo ving aver ag e, seaso nal l y ad j ust ed )

2.39 2.38 2.37 2.36 2.35 2.34 2.33 2.32 2.31 2.30 Jan- 90 Jan- 91 Jan-92 Jan-93 Jan- 94 Jan- 95 Jan- 96 Jan- 97 Jan- 98 Jan- 99 Jan- 00

Source: Bureau of Laobr St at ist ics dat a and M innesot a DLI claims dat abase.

Factors affecting claiming propensity

Almost all workers’ compensation claims result from injuries — fraudulent claims appear to be very rare — but many work-related injuries may not result in claims. One study suggests that approximately 50 percent of work-related illnesses do not result in claims.18 Injuries, as opposed to illnesses, are likely to be reported more often, but many still probably do not result in claims. A large number of unreported injuries means changes in claiming propensity — the probability of filing a claim given an injury has occurred — may have large affects on claim rates. A variety of factors have been found to influence claiming propensity. Three are discussed here: the wage-replacement level, workers’ attitudes and unionization levels.
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Changes in the wage-replacement level

The wage-replacement level is the ratio of the benefits a worker would receive from workers’ compensation if a claim were filed to the wages that would be received if no claim were filed and the worker continued working. The expected wage-replacement level is the wage-replacement level considering that future wages and benefits are uncertain. Most studies have found that a 10 percent increase in the wage-replacement level leads to an increase of between 4 and 10 percent in claims.19 Using data from the Current Population Survey for 1994 to 1999, it appears the ratio of benefits to wages fell from 61 percent to 57 percent for the average worker in Minnesota.20 This amounts to a 5.9 percent decline in the wage-replacement rate. A better measure of the wage-replacement level would account for the unemployment rate in addition to the wage rate. Other things equal, higher employment raises expected earnings. Accounting for the upward trend in the employment rate and assuming expected wages equal actual wages times the employment rate, the ratio of benefits to wages fell 7.3 percent. Expected benefits may also depend on the probability that a claim will be denied. To adjust for this it was assumed expected benefits equal actual benefits times the claim-acceptance rate.21 Because information about the claim-acceptance rate is transmitted only slowly to workers, it was assumed the acceptance rate changed throughout the 1990s at a steady rate, based on the difference between the average rate in the 1980s and the average rate in the 1990s.22 Accounting for the change in denials, the expected wage-replacement rate fell by 10.2 percent from 1994 to 1999. During the 1990s, the expected wage-replacement level may have fallen by approximately 16 percent.23 Using the relationship between wage-replacement levels and claiming propensity described by Butler, the change in replacement level during the 1990s may have led to a decline in claiming propensity of between 6 and 16 percent. A mid-range estimate would be 10 or 11 percent. Because the overall indemnity-claim rate fell by 36 percent, changes in the wage-replacement level may account for between one-fifth and two-fifths of the drop in the claim rate. Figure 4 shows the trends in expected wage-replacement level, accounting for the rate of Claim rate continues next page unemployment and denials.
F igure 4 : E xpe c t e d wa ge - re pla c e m e nt ra t e f o r wo rk e rs ' c o m pe ns a t io n be ne f it s in M inne s o t a ( f iv e - m o nt h m o v ing a v e ra ge )

Unadjusted ratio

Ratio adjusted fo r the unemplo yment rate o nly




Ratio adjusted fo r the unemplo yment rate and the denial trend
45% Jan-94












Source: Bureau of Laobr Stat istics data and M innesot a DLI claims dat abase.

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Changes in workers’ attitudes

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One puzzling fact about changes in the claim rates is they are not particularly gradual. There was a very large decline in the claim rate in 1995 — almost 11 percent — and declines of almost 8 percent in 1992 and 1993. Together, these three years accounted for more than half of the overall decline in the claim rate during the 1990s. The annual changes in the filed indemnity-claim rate are shown in Figure 5. (Monthly changes are shown in Figure 2.) One potential explanation for the relatively sharp drop in claims in 1992 and 1995, is the fairly large changes that occurred in workers’ compensation laws. At first, this explanation seems flawed, because the laws did not take effect until October of these years and the largest declines in claims occurred in the first parts of these years. Changes in the law may have been less important than changes in workers’ attitudes, however. The legal changes had fairly modest impacts on wage-replacement levels anyway.24 The debate about the legislation and the attention to perceived problems with the workers’ compensation system that prompted the legislation, may have made workers more reluctant to file claims. If, perhaps, one half of workers who are injured on the job do not file claims, it would not be surprising if even fewer workers would file claims when a great deal of public attention is being given to perceived problems with workers’ compensation.
Figure 5: Change in the claim rate from the previous year Year Change in rate

1990 1991 1992 1993 1994 1995 1996

-2.2% -4.0% -7.7% -7.7% -3.5% -10.8% -3.2%

Workers’ attitudes may also change, because the cost of having a claim denied 1997 -4.2% may change (or at least may be perceived to change). The potential effect of 1998 -5.2% denials on benefits was quantified above, but workers may also feel that having a claim denied is costly. A denied claim might cause tension between the worker 1999 -0.9% and the employer, which may affect future promotions and wages. If this is the case, higher denial rates might have a larger effect on claiming propensity than previously estimated. This effect may have been most pronounced in the early 1990s, because most of the increase in the denial rate occurred in the 1980s, especially the late 1980s. The denial rate went from about 8 percent in the early 1980s, to 10 percent in the late 1980s, and then rose rapidly to approximately 15 percent, where it stayed for most of the mid-1990s. Unfortunately, there is not much data available with which to quantify the effects on claiming propensity of either the perceived costs of denials or public debates about workers’ compensation.
Changes in unionization

One study found that after controlling for other factors, union members were 60 percent more likely than nonunion members to receive workers’ compensation benefits.25 According to Bureau of Labor Statistics data, the unionization rate fell in Minnesota by slightly less than 8 percent during the 1990s. In addition, there has been a nationwide trend during the past three or four decades that an increasing share of union membership has been shifting to the public sector. This means declines in union membership have probably occurred disproportionately in relatively high-risk industries, such as construction and manufacturing. Workers in the public sector generally have low injury rates. Using data from the Current Population Survey about unionization in nine major industry groups in Minnesota, it appears the net affect of changes in unionization on claims rates is small. If these industry groups had the same unionization rates in 2000 as they did in 1993, the 2000 claim rate might be 0.7 percent higher. It seems unlikely, therefore, that changes in unionization could account for more than 1 or 2 percent of the overall decline in claim rate during the 1990s.
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There seems no reliable way to estimate how much safer workplaces are, as opposed to how claiming propensity has changed. Using national figures about fatalities, general improvements in safety may be pushing down injury rates by 2 percent a year. If that is right, the trend in safety may explain approximately one-half of the change in the claim rate. The age and job tenure of workers may have pushed the claim rate down, but the effects cannot be reliably quantified yet. Changes in the mix of industries in Minnesota seem to have actually pushed the claim rate up a bit. Between 20 and 40 percent of the drop in the claim rate might be explained by changes in the expected wagereplacement rate. The expected wage-replacement rate fell during the 1990s, because of statutory changes in benefit levels, changes in the wage distribution, a decline in the unemployment rate and an increase in the denial rate. Unionization may contribute slightly to the decline in the claim rate, but probably only explains – at most – a few percent of the drop in the claim rate. The large drop in the claim rate that occurred during two years when major changes to the workers’ compensation system were being debated, but before the changes took effect, suggests changes in claiming propensity occurred during those years. One story that fits the data fairly well is that changes in the wage-replacement rate and a general trend towards safer workplaces account for 70 or 80 percent of the drop in the claim rate, and changes in workers’ attitudes account for the remaining 20 or 30 percent of the drop. Attitudes may have been especially influenced by public debates about how to change the workers’ compensation system, perhaps explaining the large share of the decline in the claim rate that occurred during the first half of the 1990s. This explanation does not seem to fit the last two or three years of the 1990s. During this period, the claim rate stabilized. The years 1998 to 2000 were a boom period in which labor markets were extremely tight. Very tight labor markets may raise claiming propensity, because workers know that demand for their services will stay high.

Claim rates referred to in this article include both indemnity and lost-time claims. Most indemnity claims are made to receive compensation for lost time. In Minnesota, an injured worker is eligible to be compensated for lost time if the injury results in more than three calendar days of disability. In addition to lost time, indemnity payments can also compensate for permanent functional impairment or death. Lost-time claims are claims resulting from injuries in which workers may have lost time, whether or not indemnity payments were made. A full-time-equivalent worker is defined to be 2,000 hours of work a year. All of the figures in this report show claims by injury year.



The data comes from different sources — U.S. injury rates are obtained from the Bureau of Labor Statistics and Minnesota claim rates are obtained from the Minnesota DLI claims database. Also, “days-away-from-work cases” do not match with indemnity or lost-time claims. A case involving days away from work is defined as one in which a worker was injured and missed at least one day of work after the day of injury.


It could also decline if changes to the workers’ compensation system affected what is considered a compensable injury. It seems unlikely, however, any such changes to the system in the 1990s would have significantly affected claim rates. An additional factor, not examined here, that may have influenced the claim rate is more rapid medical recovery. There was a decline in the ratio of medical-only claims to indemnity claims in the early 1990s. See, for example, Welch in On Workers’ Compensation, “A Real Reduction in Injuries,” March 2002, pages 5-6, and the study he cites. Claim rate continues next page



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Claim rate continues ... It is possible injury rates could drop rapidly in some years if employers suddenly place a much higher emphasis on safety. Such an awareness of the importance of safety could have come about because of the widespread concerns about rising workers’ compensation costs in the early 1990s. Still, it seems unlikely this could entirely explain changes of the magnitude seen in the 1992 and 1995. Figure 2 can be difficult to interpret because it shows changes and not actual levels. When the graph is negative, the claim rate is declining. Figures 2, 3 and 4 show moving averages. A five-month moving average is the average for the period from two months previous to two months ahead. A seven-month moving average is the average from three months previous to three months ahead.



Some of these studies are discussed by Butler in The Journal of Risk and Insurance, “Economic Determinants of Workers’ Compensation Trends,” pages 383-401, 1994. Some work finds benefit levels also affect injuries (higher benefit levels reduce injuries but increase the claim rate), but this effect is generally thought to be much smaller than the effect on the claim rate. Highway safety levels and the rate of violent crime probably drive rates for these types of fatalities, respectively.


12 Tattrie, Gotz and Liu, Workers’ Compensation and the Changing Age of the Workforce, Workers’ Compensation Research Institute, 2000.


Some types of service workers, however, have higher than average injury rates. Health care workers are one example.


The analyses discussed here ignore shifts in occupational groups within industries. Such shifts could have important effects on safety. For example, the number of workers in relatively high-risk manufacturing industries might have increased, but the added workers may be operating computers instead of more dangerous types of equipment.

For example, there were 77,900 special trade contractors in 2000 (composing 3 percent of all employees). In 1993, special trade contractors made up only 2.2 percent of all employees, so if the industry mix had stayed the same, there would have been only 59,400 special trade contractors in 2000.
16 The figure was constructed as follows: The average claim rate was calculated for each industry group; the number of full-timeequivalent workers (FTEs) was calculated monthly for each industry; the number of monthly claims was calculated assuming each group’s claim rate was the group’s average claim rate; and the monthly claim rate was calculated by dividing the claim number calculated in the third step by the number of FTEs in that month.


See, for example, Conway and Svenson in the Monthly Labor Review, “Occupational Injury and Illness Rates, 1992-1996: Why they Fell,” Bureau of Labor Statistics, pages 36–58, November 1998.
18 See Biddle, Roberts, Rosenman and Welch, Journal of Occupational and Environmental Medicine, “What Percentage of Workers with Work-Related Illnesses Receive Workers’ Compensation Benefits?,” pages 325–331, April 1998.



Some of these studies are discussed by Butler in The Journal of Risk and Insurance, “Economic Determinants of Workers’ Compensation Trends,” pages 383–401, 1994.

20 These numbers were calculated by applying the benefit formula to the data about individual workers. The numbers account for changes in wage levels and statutory changes in benefit levels, but it was assumed all benefits were paid during the year the injury took place. Also, these numbers do not account for taxes.

21 Another way to adjust benefit levels would be to multiply the benefit level times the percentage of claims that are ever paid. (Some claims are initially denied, but eventually paid.) Adjusting benefit levels this way is sensible, but it would ignore the costs to workers (monetary and nonmonetary) of disputes.

Only data from 1983 through 1999 was available. The average denial rate for all indemnity or lost-time claims for 1983 through 1989 was 9.5 percent. For 1990 through 1999, it was 14.7 percent. This assumes the changes in the unadjusted wage-replacement level occurred at similar rates from 1990 to 1994, and from 1994 to 1999. The unemployment rate fell at approximately the same average annual rate from 1990 to 1994, as it did from 1994 to 1999.
24 The analysis of the wage-replacement level found that, without adjusting for unemployment or denial rates, the wage-replacement level may have fallen by 9.6 percent during the 1990s. This entire decline is not due to statutory changes, however; a significant share of this drop is probably due to changes in the distribution of wages. The change in the law in 1992 had a significant effect on the replacement rate for workers at low-wage levels. 23


See Hirsch, Macpherson and DuMond, “Workers’ Compensation Recipiency in Union and Nonunion Workplaces,” Industrial and Labor Relations Review, pages 213-236, January 1997.



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