CONTENTS

TABLES
3 Meet Robin Kelleher, DLI’s new acting commissioner 2003 Special Compensation Fund assessment methodology change Department document dilemma: duplicates Forms forum: E-FROI, the interactive First Report of Injury; Updated NOPLD, DSR forms online soon CompFact: Hospital charges, payments Avoiding boomerangs; stop documents from returning ‘Habla Espanol?’ Workers’ compensation dispute rate up in 2000, 2001 Vocational rehabilitation summary Free publications available online
2001 plan closures by employment outcome 9 7 Hospital charges and payments in general health care and workers’ compensation, 2000 Change in Medicare and Minnesota workers’ compensation conversion factors Incidence of disputes, injury years 1984-2001

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11 Claimant attorney fees paid with respect to indemnity benefits, injury years 1984-2001 12 Total legal costs as percentage of total benefits, 1995-2001 14 Percentage of paid indemnity claims with a VR plan filed, injury years 1991-2001 Time from injury to start of VR services, plan-closure years 1998-2001 15 VR service duration, plan-closure years 1998-2001 16 Return-to-work outcomes, plan-closure years 1998-2001

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FORMS
18 Basic Adjuster’s Training registration form

Department document dilemma: duplicates

Free publications available online

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Workers’ compensation dispute rate up in 2000, 2001
By David Berry, Ph.D. Research and Statistics

The dispute rate in Minnesota’s workers’ compensation system took a pronounced upward turn in 2000 and 2001. The rate of claimant attorney involvement also increased during the same years. However, while claimant and defense legal costs increased, they declined slightly as a proportion of total benefits. This article presents data about these and related developments. It suggests that the current recession may explain part of the recent increase in dispute rates. (Refer to the glossary, page 12, for definitions.)
Dispute rates

The overall dispute rate rose from 14.8 percent in 1999, to 16.6 percent in 2001 (Figure 1). This followed five years of stability at relatively low levels compared to the heightened rates of the early 1990s. Among the four major dispute types, the largest contributors to the increase were the claim petition rate, up 1.5 percentage points from 1999 to 2001, and the Medical Request rate, up 1.1 percentage points during the same period (1.5 percentage points since 1998).
Figure 1
Incidence of disputes, injury years 1984-2001 [1]
20%

15% Dispute rate

10%

5%

0% '84 '86 '88 '90 '92 '94 '96 '98 '00

Claim petitions [2] Medical requests [4] [7] Any dispute [6] [7]

Discontinuance disputes [3] [7] Rehabilitation requests [5] [7]

Injury year 1984 1990 1995 1998 1999 2000 2001 1. 2. 3. 4. 5. 6. 7.

Claim petitions [2] 8.5% 12.5 10.6 10.5 10.7 11.3 12.2

Discontinuance disputes [3] [7] 8.1% 6.4 6.2 6.1 6.7 6.8

Dispute rate Medical requests [4] [7] 7.4% 3.8 3.3 3.7 4.2 4.8

Rehabilitation requests [5] [7] 5.3% 3.2 3.9 4.2 4.4 4.5

Any dispute [6] [7] 19.0% 14.8 14.6 14.8 15.8 16.6

Developed statistics (see Glossary) from DLI data. Percentage of filed indemnity claims with claim petitions. Percentage of paid wage-loss claims with discontinuance disputes. Percentage of paid indemnity claims with Medical Requests. Percentage of paid indemnity claims with Rehabilitation Requests. Percentage of filed indemnity claims with any disputes. Not available before 1989.

Dispute continues ...
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Dispute continued ...

Pctg. of filed indemnity claims

The rehabilitation request rate showed a slower but more sustained increase – 1.3 percentage points since 1995. Part of this increase is likely related to rising participation in vocational rehabilitation (see vocational rehabilitation story, page 14). The discontinuance dispute rate for 2000 through 2001 was slightly above 1998 through 1999, but not much different from 1993 through 1997.
Claim denial rates

Figure 2
Rate of denial of primary liability for filed indemnity claims, injury years 1984-2001 [1]

15%

10%

5%

One factor related to the dispute rate is the rate of denial of primary liability. The denial rate for filed indemnity claims rose somewhat in 2001, but the 2001 rate was about the same as in 1997 and 1998 (Figure 2). By contrast, the rate of claim petitions (the vehicle for contesting a denial) was substantially higher for 2001 than for 1995 through 1999 (Figure 1). Thus, while the recent increase in the denial rate may have contributed to the increase in the overall dispute rate, this factor seems minor.
Other possible explanations

0% '84 '86 '88 Injury year 1984 1996 1997 1998 1999 2000 2001 '90 '92 '94 '96 '98 '00

Denial rate 7.8% 15.0 15.9 16.1 15.0 14.4 15.8

1. Developed statistics (see glossary) from DLI data.

Denied claims include claims initially denied (some of What else might explain the increase in dispute rates? which are eventually paid) and claims initially paid but In general, disputes are more likely, other things equal, later denied. if more is at stake. An obvious consideration here is the current recession.1 Where claim petitions are concerned, if the insurer denies primary liability, the injured worker may be more likely to contest the denial in hard economic times. One reason is there is less income from other family members (particularly a spouse) to fall back on. Another reason is that if the worker is partially disabled, his or her own earnings prospects are relatively poor in a recession. In either case, the workers’ compensation benefit becomes more important. These considerations also come into play if the insurer has accepted primary liability, but denies benefits for a claimed period of disability.

Economic hard times may also affect the other dispute rates. If the family has suffered a loss of earnings or health insurance or if the injured worker’s job prospects are relatively poor, the worker is more likely to contest a discontinuance or an adverse decision about medical or rehabilitation benefits. Another factor is that the past few years have produced relatively poor financial results for insurers.2 Insurers may be more likely to make decisions unfavorable to the worker in times of financial difficulty, which would tend to increase dispute rates. However, as shown in Figure 2, this does not seem to have been a major factor for denials of primary liability since the mid-1990s.
Claimant attorney involvement

As one would expect, the increase in the dispute rate has been accompanied by an increase in attorney involvement. From 1999 to 2001, the percentage of paid indemnity claims with attorney fees3 rose from 13.0 percent to 14.5 percent (Figure 3 next page). This increase is of similar magnitude to the increase in the overall dispute rate.

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Figure 3
Claimant attorney fees paid with respect to indemnity benefits, injury years 1984-2001 [1]

15%

However, among paid indemnity claims with claimant attorney fees, these fees fell from 11.8 percent of indemnity benefits in 1999, to 11.2 percent in 2001. Among all paid indemnity claims, the ratio of fees to indemnity benefits fell from 7.3 percent to 6.4 percent between the same two years. Why did claimant attorney fees fall in proportion to total indemnity benefits while claimant attorney involvement increased? One possibility is the $13,000 cap on total claimant attorney fees for a single claim. This limit has been in place since 1992, although attorneys may petition for additional fees.4 With increasing indemnity benefits per claim over time, the cap becomes more of a constraint, tending to cause total fees to increase more slowly than total benefits. The degree to which this explains the current data is unknown.
Claimant and defense legal costs

10%

5%

0% '84 '86 '88 '90 '92 '94 '96 '98 '00

Pctg. of paid indemnity claims with claimant attorney fees

Claimant attorney fees as pctg. of indemnity benefits — paid indemnity claims with claimant attorney fees Claimant attorney fees as pctg. of indemnity benefits — all paid indemnity claims Pctg. of paid indemnity claims with claimant attorney fees 10.2% 17.1 15.6 14.8 13.0 13.5 14.5 Claimant attorney fees as pctg. of indemnity benefits Among paid indemnity Among claims with all paid claimant indemnity attorney fees claims 8.8% 5.2% 9.9 6.7 11.9 7.5 12.3 7.3 11.8 6.6 11.4 6.6 11.2 6.4

While total legal costs grew between 1995 and 2001, they did so more slowly than total benefits. 1. Developed statistics (see Glossary) from DLI data. Total legal costs fell from 11.4 percent of total Includes claimant attorney fees determined as a benefits in 1995, to 9.6 percent in 2001. This relative percentage of indemnity benefits plus additional amounts awarded to the claimant attorney upon decrease occurred for both claimant and defense application to a judge. legal costs. In 2001, claimant legal costs were equal to 3.9 percent of total benefits, as compared with 5.7 percent for defense legal costs. In 2001, total legal costs were about $83 million, or 7 percent of total workers’ compensation system cost. The question remains, with the sharp increase in the dispute rate and claimant attorney involvement between 1999 and 2001 (Figures 1 and 2), why did both claimant and defense legal costs fall relative to total benefits during the same period? One reason is the $13,000 cap on claimant attorney fees, the largest component of total claimant legal costs. Another reason is simply that rapid increases in medical costs have outpaced other costs in the system, including legal costs.6
Dispute continues ...

Injury year 1984 1991 1993 1996 1999 2000 2001

The above perspective on dispute costs can be broadened to include (1) costs other than attorney fees on the claimant side and (2) attorney fees and other legal costs on the defense side.5 This more comprehensive measure of legal costs is shown in Figure 4 (see next page), relative to total benefits (indemnity plus medical).

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Dispute continued ...

Figure 4
Total legal costs as percentage of total benefits, 1995-2001 [1]

Glossary
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 Customer Assistance unit of the Department of Labor and Industry conducts administrative conferences about medical issues involving $1,500 or less and about vocational rehabilitation issues; the Office of Administrative Hearings conducts conferences about medical issues involving more than $1,500 and about discontinuance disputes presented on a Request for Administrative Conference form. Claim petition – A document by which the injured worker contests a denial of primary liability or requests an award of indemnity, medical or rehabilitation benefits. Most claim petition disputes are about primary liability or cash benefit issues. In response to the claim petition, the Office of Administrative Hearings generally schedules a settlement conference or formal hearing. Customer Assistance – A unit in the Department of Labor and Industry that provides information and clarification about workers’ compensation statute, rules and procedures; carries out a variety of dispute prevention activities; conducts informal dispute resolution activities including mediations; and conducts administrative conferences about some issues (see administrative conference).

Pctg. of total benefits

10%

5%

0% '95 '96 '97 '98 '99 '00 '01

Claimant legal costs [2] Defense legal costs [3] Total legal costs [4] Claimant legal costs [2] 4.8% 4.1 4.2 3.9 Defense legal costs [3] 6.6% 6.4 5.7 5.7 Total legal costs [4] 11.4% 10.6 9.9 9.6

Year 1995 1999 2000 2001

Developed statistic – An estimate of what a given statistic will be when claims are fully mature or have reached a given maturity. Developed statistics are obtained by applying projection factors (“development factors”) to tabulated numbers; the projection factors are derived from historical rates of development of the statistics in question. Disability – A full or partial loss of the ability to earn income. Discontinuance dispute – A dispute about the discontinuance of wage-loss benefits. Discontinuance disputes are most often initiated by the claimant’s Request for Administrative Conference form in response to the insurer’s declared intention to discontinue temporary total or temporary partial benefits. It may also be presented on the claimant’s Objection to Discontinuance form or the insurer’s petition to discontinue benefits, which leads to a hearing at the Office of Administrative Hearings. Filed indemnity claim – A claim for indemnity benefits, whether ultimately paid or not. (See indemnity benefit, paid indemnity claim.) Hearing – A formal proceeding about a disputed issue or issues in a workers’ compensation claim, conducted at the Office of Administrative Hearings or Workers’ Compensation Court of Appeals, after which the judge issues a decision that is binding unless appealed.

1. Data from DLI and the Minnesota Workers' Compensation Insurers Association. Includes claimant and defense attorney fees and other legal costs paid with respect to indemnity, medical and rehabilitation benefits. Benefits (in the denominator) include indemnity, medical and rehabilitation benefits. 2. Numerator and denominator are developed statistics (see Glossary) on an injury-year basis. 3. Numerator and denominator are on a paymentyear basis. 4. Sum of first two columns.

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Primary liability – The overall liability of the insurer for any costs associated with a claim when the injury is determined to be compensable. An insurer may deny primary liability (deny the injury is compensable) if it has reason to believe the injury was not work-related, was intentionally self-inflicted, resulted from intoxication Injury year – The year in which the injury occurred or or happened during participation in a voluntary the illness began. In injury-year data, all claims, benefits recreational program. and other statistics are tied to the year in which the injury occurred. Paid indemnity claim – A claim with paid indemnity benefits. Most indemnity claims involve more than three Medical request – Medical disputes are often filed on days of total or partial disability, since this is the threshold a Medical Request form, which triggers an for qualifying for the temporary total disability or administrative conference at DLI Customer Assistance temporary partial disability benefits paid on most of these or the Office of Administrative Hearings. claims. Indemnity claims typically include medical costs in addition to indemnity costs. Minnesota Workers’ Compensation Insurers Association (MWCIA) – Minnesota’s workers’ Rehabilitation request – Vocational rehabilitation compensation data service organization (DSO). State disputes are often filed on a Rehabilitation Request law specifies the duties of the DSO and the Department form, which leads to an administrative conference at of Commerce designates the entity to be the DSO. DLI Customer Assistance. Among other activities, the MWCIA collects data about claims, premium and losses from insurers and annually Wage-loss claim – A claim with paid wage-loss benefits, produces pure premium rates. specifically, temporary total, temporary partial or permanent total disability. Office of Administrative Hearings – An executivebranch body that conducts hearings about administrative Workers’ Compensation Court of Appeals – An law cases. One section is responsible for workers’ executive-branch body that hears appeals of workers’ compensation cases; it conducts hearings, administrative compensation decisions from the Office of conferences and settlement conferences. Administrative Hearings. The next and final level of appeal is the Minnesota Supreme Court. Payment year – The year in which a payment was made. In payment-year data, benefits and other financial

Indemnity benefit – A benefit to the injured or ill worker or survivors to compensate for wage loss, functional impairment or death. Indemnity 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 benefits.

amounts are categorized according to the year in which the payment was made.

1 In Minnesota, the total non-agricultural employment trend flattened in late 2000, and turned downward in 2001. U.S. Bureau of Labor Statistics, http://data.bls.gov. 2 See “Explaining Recent Workers’ Compensation Premium Increases,” DLI Research Reporter, September 2002, www.doli.state.mn.us/ reporter.html, especially Figure 3 and surrounding discussion. 3

See note 1 in Figure 3.

4

The 1995 Legislature repealed Minnesota Statutes §§176.081, subd. 2 and 5, which permitted the commissioner or compensation judge to award fees in excess of the statutory limits. However, in 1999 the Minnesota Supreme Court ruled that absolute limits on attorney fees, without the availability of judicial review, was unconstitutional in the case of claimant attorney fees (Irwin v. Surdyk’s Liquor, 599 N.W.2d 132 (Minn. 1999), Sept. 2, 1999). In 2000, the Workers’ Compensation Court of Appeals applied this ruling to defense attorney fees (Tucker v. Plymouth Plumbing, 60 W.C.D. 160 (May 25, 2000)).
5

Legal costs other than attorney fees include costs of independent medical evaluations, depositions and expert witnesses, investigations, medical reports, copies, court filings, transcripts, and travel and mileage.
6

Data from DLI and the Minnesota Workers’ Compensation Insurers Association. February 2003 • COMPACT •

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