Workers’ Compensation Advisory Council January 7, 2004 Minutes

Voting Members: Paul Bailey Susan Olson for James Cavanaugh Stan Daniels Wayne Ellefson Tom Hesse for David Olson Glen Johnson Reed Pollack Brad Robinson Julie Schnell Gary Thaden Ray Waldron Voting Members Absent: Mike Hickey Non-Voting Members: Representative Dan Dorman Senator Linda Higgins Representative Joe Mullery Non-Voting Members Absent: Senator Geoff Michel Staff: Scott Brener Beth Hargarten Rosaland Hoffman Todd Hendrickson Jim Feckey Keith Keesling Cindy Miner Phil Moosbrugger Terry Mueller Teri Van Hoomissen Jana Williams Visitors: Coleen Colburn; MCA Judy Hawley; MN APTA Michael Johns; RTW Glen Johnson; IUOE Todd Johnson; WCRA Larry Koll; Koll-Morrison Tom Lehman; MN Hospital Assn. Brad Lehto; MN AFL-CIO Perry Lewis; TPS Tammy Lohmann; Commerce Bert McKasy; Lindquist & Vennom Louise Montague; MOTA Marnie Moore; Cook Hill Girard Andy Morrison; Koll-Morrison Sandy Olevitch; Park Nicollet Robin Peterson; MN APTA Mark Pixler; MAPS Erin Sexton; MN Orthopedic Society Jim Sieben; MAN/WBS Sarah Strong; CHG Marsha Thiel; MAPS Anna Thompson; Allina Beverly Turner; The St. Paul Companies Wendy Underwood; Winthrop & Weinstine Rachel Zagrabelny; MMGMA

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I. Call to order and Roll Call Commissioner Scott Brener called the meeting to order at 9:37 a.m. A quorum was present. II. Approval of the June 11, 2003 Meeting Minutes Brener asked for a motion to approve the June 11, 2003 minutes. All voted in favor of the motion and the motion passed. IV. A. Commissioner's Update Brener noted that two individuals; Andy Morrison and Kevin Gregerson have asked to have the opportunity to address the Council regarding some legislative proposals. IV. B. Exemption From Workers’ Compensation Omar Syed spoke regarding the proposed religious exemption specifically related to employers who have employees who have religious beliefs that preclude them from taking part in insurance, that is, receiving the benefit from either a private or public insurance program. He noted that at the October meeting the council’s decision at that time was to ask the Commissioner to submit some proposed language for an exemption. Syed distributed and reviewed the language he drafted for the Council to consider. Syed referred to the Wisconsin statutes and then spoke about Minnesota’s proposal and the changes. There was discussion about who would be eligible. He noted that there is no requirement in this proposed exemption that the employer be a member of a particular religion. It is based on if a particular employee would refuse to accept insurance because of their beliefs. He noted that this is the case with the Amish group that was involved in the lawsuit that lead to this proposal. It’s based around the employees and if an employer is going to apply for an exemption, he or she has to follow the requirements that are listed on pages 12 and 13. First the employer would have to submit a written waiver by the employee. He noted that it is also submitted to the Department for approval. Second, there has to be an affidavit by the employee describing that person’s religious opposition to regular insurance or receiving those benefits. Third, there would have to be an affidavit signed by someone who is authorized in that religious group to state that it has a long history of providing for it’s own people and whenever those people are injured on the job to provide a reasonable standard of living. Fourth, there would have to be a written agreement signed by that authorized representative that guarantees that this employee would be provided with financial and medical assistance that would be in keeping with what the members of the sect would usually receive. Under this proposed language the Commissioner would then review the application and see if those

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agreements and affidavits are satisfactory and then along the way would presume that a 25-year history of providing for their own would be sufficient evidence for alternative benefits. He noted that the differences between this proposal and the way that it is currently being handled is on pages 15 and 16 of the proposal. He noted a correction on the proposal on page 16, line 8 that should read, “If the compensation judge concludes that the religious sect has not done so.” This part of the proposal is more specific then Wisconsin’s is right now. Wayne Ellefson spoke to Syed regarding a previous meeting where several representatives of the Amish community were present and there were questions to members as to whether or not they used power tools and other equipment. Ellefson wondered what happens if an employer who is a member of a religious sect needed components of a job done by other people other than in the religious sect and asked Syed who would be responsible for those employees and how does that tie into the independent contractor issue. Syed noted that it doesn’t change what the Workers’ Compensation requirements would be for anyone who doesn’t hold those particular religious beliefs or for whom there isn’t an already approved application. The only people whose status would change by the proposal would be individual employees who hold a religious belief that preclude them from taking part in the insurance. Gary Thaden asked if this is based on whether the employer has those religious beliefs or not and whether it is contrary to some religious beliefs that he would buy insurance for someone else? For example, if you have employees who don’t have this belief, you would have to buy workers’ compensation insurance for them. Would the employers’ beliefs prevent them from purchasing insurance for someone else? Thaden asked if Syed knows of a religious sect that would qualify under this and do their beliefs prevent an employer from buying workers’ compensation insurance for non-members of a sect? Syed noted he did not know of such a group and as he understands it, the old Order Amish who were involved in the case about a year ago said that it was their view that they weren’t going to employ people that weren’t members of their sect, but if they did, they would feel they would have to make the right workers’ compensation arrangements, which is why they didn’t want to employ people who weren’t in their sect. Beth Hargarten noted that she was looking at the Wisconsin statute and the language that has been drafted for the council and asked if there should be some procedure like Wisconsin has to revoke an exemption. Syed noted that he feels this would make sense if those individual employees no longer meet the conditions that justify granting them it in the first place. Hargarten noted that in Wisconsin the law references a self-insurer’s council and wondered if for Minnesota it should be the Department of Labor and Industry after seeking the advice from the Department of Commerce or some other entity. Hargarten also noted that it would be a good idea to have the ability to grant the application to be exempt, but that if for some reason in the event that something happened to the community, it would be nice to have the ability to revoke the exemption. Thaden noted that it would also be a good idea to have the ability to not only be able to revoke the sect, but also the individual.

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Reed Pollack asked Syed if he was aware of any cases where an Amish individual has worked for an employer with Workers’ Compensation coverage and has chose not to participate in the benefit plan or structure? Syed noted that he was not. Pollack noted he does not support the proposal. Mullery thanked Hargarten for sending copies of the court decisions. Mullery asked Syed since they don’t have to get benefits that are equal, can someone else argue that this is a religious privilege and if someone would or has done an analysis of any other possible or similar issues that would come up in state laws. Syed said he doesn’t know of any analysis being done. Hargarten commented to Mullery that the key is the belief of not participating in a social insurance program and that the number of government social programs is rather limited including items such as unemployment insurance and Social Security on the Federal level. She also noted that she doesn’t think that they are coming forward and saying that they need an exemption from all laws that somehow burden their operations, they are focusing on the social insurance aspect and that the number of instances where there would be that conflict would be rather limited. Mullery noted that he isn’t sure whether they are limited or not. Hargarten asked Syed if he was aware of how unemployment insurance or social security is handled in this situation and whether they had an exemption. Syed noted that they could file an application for an exemption with the IRS and that the particular group that was involved in the lawsuit had done so. Syed noted that he doesn’t have much information on Unemployment compensation, but that the particular group involved in the lawsuit claimed not to be involved in any sort of insurance program and he assumed that they did not pay into or receive anything from insurance. Ray Waldron asked if a decision was to be made at this meeting. Brener noted there wouldn’t be a vote on it at this meeting because he wanted everyone to be able to look at the information provided and act on the issue at the next meeting. Waldron asked if there was anything in the proposal for fraud if the employer or employee hires a construction person or independent contractor and says, “In order for you to work for my company, you have to be Amish.” What would happen to the employer? Ellefson asked if that could be tied into some of the revocation language? Brener asked Jim Feckey who runs the fraud unit for the Department if he could answer the question. Feckey noted that you would have to look at it as an uninsured situation and pursue it through the regular mandatory coverage penalty, which can be substantial. He believed that current law and procedures would possibly address the situation. Brener noted that he is comfortable with working on developing something that would work. Thaden noted that if someone said that you needed to be Amish to be a construction worker, that this would be a violation of the human rights act. He also suspects that if an Amish employer were only hiring Amish, this would also be a violation of the human rights act. Thaden asked Syed how many exemptions were granted in other states and how many employees that it covered. Syed said he doesn’t have those statistics. Glen Johnson asked how can you qualify someone’s beliefs and how do you determine how many employees you have and what they believe in. What are the

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qualifiers that would have to be in place. Syed said he thinks the way the proposal is set up right now is the people are required to sign an affidavit and an agreement from other members of the sect. He doesn’t know how the Department can regulate this. Johnson noted it sounded kind of gray. Syed noted that there is not just one Amish leader, so you wouldn’t have just one or two figures that would be representing the whole community, you might have what would be called local bishops or deacons. Johnson asked if on any particular project how do you know who is working on it and would it fall through the cracks and who would be responsible for it would be the state. Who is going to govern the process? Syed noted that he thinks that it would be dealt with how it is now and if something comes to the attention of the Department then that is when it comes up and then they would go back and see if there is documentation that the person had exemptions, and if they weren’t, then the uninsured laws would apply and that employer would then be penalized for that situation. Waldron asked Syed if the Amish that were at the Department in the past were participating in Workers’ Compensation currently. Syed noted that they were not and they have said that they will not do so. Brener noted that is why it is before this group is because it is pending in the courts and has been put on idle status pending this body’s decision to do something. Otherwise, it will be pursued further in the courts and he anticipates it would then make its way up to the Supreme Courts. Mullery commented regarding Hargarten’s comment that it if the Amish’s claim of religious violations only applies to social insurance, he noted that he can’t think off hand of the large number of programs in the state and whether or not they qualify for that. He thinks that Temporary Disability gives you a system where you get partial payment on wages while you are out on disability. Another would be the Partial Pay Family Leave. This all seems to fit into social insurance idea. He assumed there are other programs similar that would fall within this issue. Hargarten noted she is not aware of TDI, however, she is aware of Social Security Disability Insurance, but she thinks that they base that on how much you have paid in earned wages that have been reported to social security and so if they have an exemption from general social security and have never paid any in, she doesn’t know if they would necessarily be able to receive social security disability. Mullery noted that he is talking about TDI where the states have them and Family Leave where the states have them, because those are not connected with social security. He doesn’t know if they have specific exemptions for this, and if they do, he’s never heard of them. Hargarten noted that she hasn’t heard of it either. Bailey asked Syed when they buy materials for putting the buildings up, do they pay sales tax on it? Syed said he didn’t know for sure, but as far as he knows they do. Bailey noted that he believes that when they were working in their own community and building their own barns, etc., that was one thing, but now going outside of their community to do work is a different situation. Ellefson asked Brener if it would be possible for him to make a motion to put in some revocation language. Brener noted that he could make a motion. Ellefson made a motion to include in the draft some additional language that would speak to the issue of

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revocation as well as fraud. All voted in favor of the motion and the motion passed. Ellefson noted that he would like some idea of how many people there are in other states and that he understood the difficulty of figuring out how many people and families there might be and how many would be covered by this, but he wondered if other states could give us an idea. Brener noted that the Department would make some calls to try to get that information. Mullery asked if anyone had an idea how many other states have this exemption. Brener noted that five states have it. Syed said he thinks that there are about 10 states that do have groups like the Amish that have those beliefs that don’t have exemptions. There are only five states that have any sort of exemptions. Reed Pollack commented on the 25-year limit and if that is specific to activities within the state of Minnesota or the United States or would that 25-year limit include what they had done in another country? Syed said the way it reads right now he understands it to mean 25 years regardless of where the group is located. Johnson spoke about exemptions and corporate public bidding laws. Part of the requirement to bid on a project using public funds is to have documentation that you have a Workers’ Compensation certificate and how would this work if this exemption went into the law. Brener said he doesn’t have an answer for that. Syed noted that he thinks the exemption certificate has been received for that individual employee and that would be what the employers had to attach in lieu of workers’ compensation insurance. They would have to attach a certificate saying that these people are eligible for alternative benefits and they are going work on this job. He said that he thinks what Johnson is trying to say is that there might be other workers that are unknown at the time of that bid. Johnson asked who would be responsible for assuring that every worker on every project has the exemption prior to starting that first day of work on that project. Who is going to pay for the regulation to verify their exemptions? Syed noted that unless someone was designated to deal with that issue, he believes that the way it would be treated is like the way it is treated now, which is if there are employees on a job where there is no insurance, then the state’s remedy is to issue a penalty. Hargarten noted that right now we don’t have someone that goes out on projects to make sure that every person who is working on a project has workers’ compensation insurance. We don’t have that now. It would be the same situation if there is someone on that job that doesn’t have the exemption and they get hurt, it would be the same as if someone who is on a job right now and that employer does not have workers’ compensation insurance. They file a claim and they come to the state and it ends up being the states responsibility to pay the benefits. And then the state tries to go back to collect the benefits that were paid out plus penalties. She noted that she understands what Johnson is saying, but there is nobody out there right now monitoring to make sure that every single construction project has workers’ compensation insurance and every single building project has workers’ compensation insurance. People could file bid documents that are false now. Gary Thaden noted that the bid documents that he has looked at all say “required to have Workers Compensation under Minnesota Statutes Chapters 176.” If there is an exemption they fulfill the statute so it would be in compliance with that contract language

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then. Paul Bailey spoke about the construction industry and how you don’t buy workers’ compensation after an accident has happened. He thinks that what is being said is that someone has to get hurt and they we will find out if they have workers’ compensation or not. He believes that this is the problem with independent contractors. Hargarten noted that the Department also relies on tips. The Department doesn’t always wait until there is an injury on the job. People call up and complain, which was the situation here, where nobody got hurt in this particular case. Bailey noted that by giving them this exemption you won’t have to worry about getting calls anymore because they will have the exemption anyway. Mullery noted that there is a technical distinction but is it a real distinction between this situation and the Hill Murray case as the state was held to be wrongfully giving privileges to the religious group. It seems to him that this doesn’t seem far from the technical distinction. Senator Linda Higgins asked Mullery to elaborate on this. Mullery noted that there is a Hill Murray case whereby the state gave an exemption for somebody for what he calls social insurance legislation in the state for all parochial schools. They ended up losing in the Supreme Court because they couldn’t make that distinction. Mullery wonders if we aren’t getting into the same area and that it seems similar. Syed said he thinks the issue was that it was at a parochial school and there were a group of teachers who were trying to organize somewhat of a union and the dispute was whether the employer would allow them to do this or not. He noted that what was important with that case was it laid out part of what now equals the test for whether a state law infringes on religious beliefs in an unconstitutional way. Syed asked Mullery if he were thinking that by creating this exemption, it would be seen as a privilege for those who had those religious beliefs? He noted that there is no reason that the state couldn’t also be sued for putting an exemption like this one into law, but effectively the state was already forced into court for trying to enforce a law that is currently on the books. So one way or another, it is possible litigation could occur. Brener asked members to be prepared to vote on this issue at the next advisory council meeting. Andy Morrison who represents the Minnesota Self Insurers Association spoke. He spoke about a Minnesota Supreme Court decision, which is called Supreme Court case of “Spaeth vs. Cold Springs Granite.” An employee went to a doctor to be treated for knee problems. He had one knee that had a work related injury and the other knee was not injured in work. The knee that was injured that was not work related got surgery. The doctor did the surgery, BlueCross paid for the surgery. BlueCross’s contract said “paid in full”, no co-pays and the doctor received reimbursement. Later the doctor said that he thought that the non-work related knee was also work related. The end result was that the Workers’ Compensation Court of Appeals said that since the doctor had been paid in full by BlueCross BlueShield, any other charges would be excessive, therefore, he had already been paid and had no interest in the action because he would have been paid since it was not work related. Brener asked if the payment was less. Morrison said it was. Morrison noted that the Supreme Court said that due to technicalities and due to the statute and regulations, they said no. If the case is work related, then the provider can get

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the difference between what BlueCross pays and what Workers’ Compensation pays. If the law stays as it is, every time we have a Workers’ Compensation case, it becomes more complicated for both parties because every medical provider who has received payments can now make a claim for Workers’ Compensation payments. The plaintiff attorneys don’t like it because it slows down payment to their injured employees. The second issue he addressed was a case called Irwin. This case indicated that if a medical bill is contested and later the court determines that the medical bill may be work related, the plaintiff’s attorney could collect Roraff fees for collecting that medical bill. For years, the plaintiff attorneys got a percentage of the benefit paid to the employee. He said that the law now says we are paying employee’s attorneys to collect these medical bills and you also have to pay the employee 30% under subdivision 7 because that law doesn’t say Roraff or not Roraff or contingent or not contingent. He asked the group to distinguish this from the situation where benefits are taken from the employee’s stream of income and when they are not taken from the employees’ stream of income and the employer pays 100%. There is no need for a circuit breaker. Mullery commented to Morrison that he had said that it wouldn’t affect the health insurer of the employee if they make the Workers’ Compensation claim and it’s found to be appropriate, doesn’t the health insurer have a subrogation interest against the Workers’ Compensation insurer for anything that they have paid? Morrison said yes, the Spaeth case does not deal with the intervention of 176.191 or other intervention statutes. Spaeth says if the health insurer has paid the benefit, they can go in and get their intervention interest just like they always have. The person affected is the doctor. The doctor did the knee surgery, health insurer pays a certain amount, and Workers’ Compensation pays 150% of that. If the knee surgery is not work related he would be happy with the reimbursement he received. Under Spaeth, he can say it’s work related, therefore he lost 50% more to surgery today. Morrison noted that what they are intending to change is if a doctor has taken a case and has been paid, then later decides that it is work related, he is entitled to 150%. The problem with this is that every case has been slowed down because they have to contact every medical provider that saw the patient about how much they received for the service and now they may be entitled to 150% of what they were paid originally for the service. It may be a long time before this is all settled, and then at that point, the employee receives their money. That’s one of the biggest problems with Spaeth. Bailey said in many cases the providers are settling for 80 and 90%. He noted it’s not always 100%. Morrison said if the case settles. Bailey said they wind up paying a lot of the costs of insuring that individual when it may be Workers’ Compensation. Morrison noted that the Spaeth issue does not affect that and what happens is they will settle for 80%, instead of getting their money in 30 days. The bottom line is they have already been paid so why should they get 150% because it may or may not be work related. Brener noted that we should table this until next month. Thaden said that he would like to see a change in the statute and would like to see some language with his proposal. Ellefson asked Morrison how many claims has this happened with and is this

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fraud? Morrison noted that it is not fraud. What happens for Spaeth to apply, the first thing is that the medical provider had to have been paid. Otherwise, they have their claim like any other party. If the doctor says there is no health insurance, then they go forward like any other party and then there is a determination to whether it is work related. When Spaeth applies, they have been paid and they have accepted money from another source. Then the doctor can pursue that claim to receive the additional 50% and can pursue that claim. Bailey asked if it’s later determined to be Workers’ Compensation and the doctor is entitled to that, why isn’t it fair for the doctor to pursue that higher pay and get the difference? Morrison said they can, but what they are asking is if the doctor has accepted the benefit and he has already been paid, why should he get a windfall if it’s work related. Pollack commented that he believes the problem exists because of the difference in the payment structure between Workers’ Compensation and general medical. If we can solve the second problem, which is the discrepancy, Spaeth would probably not be problem. Bailey noted that if Workers’ Compensation paid what the market pays, there would be no Spaeth. It’s because Workers’ Compensation is so much higher than the market that the bonus is allowed to the provider. Morrison noted that some doctors advise their patients that it may be work related because they know that can get paid a lot more. Some doctors are very sophisticated and wait to see if the Workers’ Compensation case will settle or go forward and at the last minute if they think that the Workers’ Compensation case doesn’t look good, they will go to the general health insurer to get reimbursed. Julie Schnell was concerned about Morrison calling it a windfall. Morrison said the insurers and self-insured employer want to pay the same and don’t want to pay more just because it’s work related. Brener said this issue would be put into the agenda for next month to vote about. IV. C. Medical Costs Discussion/Review The Task Force report on Medical Costs was distributed. Brener noted that this information is all available on the website at: www.doli.state.mn.us/medcost.html. Brener noted that this synopsizes the Department’s recommendations and the recommendations from the task force members. He noted that he hopes everyone will carefully look through all the information because he would like to vote on this issue at the next advisory council meeting. Thaden said he has an issue that he would like to be put on agenda next month regarding a letter that was sent to him and a copy to the commissioner about an issue where there is an employee with an injury that has occurred over a long period of time, but has only worked their current employer for a short time. That current employer would then be held responsible for the total cost of the claim until it gets apportioned out. Two things happen here. Sometimes it doesn’t get apportioned out because it’s too

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expensive to do the apportionment so the last employer ends up paying it. The other issue is the employer ends up getting a higher workers’ compensation rating for that time period until it is apportioned out which could take a number of years. The current employer’s rate goes over 1.0 and because of that they aren’t allowed to bid on a number of projects and it adversely impacts their ability to do the work even though the employee didn’t get most of the injury while with that employer. Brener noted that this is known as the Gillette issue and asked Thaden if he could copy the letter. Thaden had copies of the letter that were handed out. Daniels spoke about an issue in the mining industry where the mining company had filed for bankruptcy. Usually the new employer keeps employees, however in a couple of instances recently the new company that has taken over is taking the seniority list and any employee that has had an injury, they’ve let go. He noted that he believes there should be language to protect those employees. He said he is working with some legislators and what he wants is language that protects the employees so that when something like this happens it allows that employee to go back and perhaps start with new training or some other alternative. Brener noted that he would like both of these issues to be voted on at the next advisory council meeting. Thaden noted that he wasn’t proposing any legislative language; he just wanted to look at the issue. Pollack asked Daniels if he would be submitting language for everyone to look at. Daniels said he would work on putting some language together. IV. D. Legislative Items Jamie Anderson noted that next month she would have a list of everything that has been discussed including what was on last years bill and everything that was discussed at this meeting. This will be in the packets at the next meeting. Brener suggested that the next meeting be held from 9:30 to noon. V. Adjournment Brener made a motion to adjourn at 11:04. All voted in favor of the motion and the motion passed. Respectfully submitted,

Rosaland Hoffman