Workers’ Compensation Advisory Council June 11, 2003 Minutes

Voting Members: Paul Bailey Susan Olson for James Cavanaugh Stan Daniels Wayne Ellefson Mike Hickey David Olson Reed Pollack Julie Schnell Gary Thaden Ray Waldron Voting Members Absent: Brad Robinson Non-Voting Members: Senator Linda Higgins Joe Mullery Non-Voting Members Excused: Geoff Michel Non-Voting Members Absent: Dan Dorman Staff: Scott Brener Debbie Caswell Jim Feckey Beth Hargarten Keith Keesling Cindy Miner Teri Van Hoomissen Jana Williams Visitors: Debra Anger; BRAC Greg Coon; Grinnell Mutual Carol Dexter; North Memorial Jennifer Dunn; MARP Bryan Flynn Hiedi Genosky; MAPS Judy Hawley; MN APTA Tom Hesse; MN Chamber Mike Johns; RTW Todd Johnson; WCRA Larry Koll; Koll-Morrison Tammy Lohman; Commerce Bob Lund; State Fund Mutual Brian McDaniel; MN Business Partnership Louise Montague; MOTA Andy Morrison; Koll-Morrison Jean Nelson; RTW John Nesse; Association Officers Robin Peterson; APTA Dorothy Quick; CPMG Nancy Robb; MAPS Scott Sexton; Corvel Janet Silversmith; MN Medical Assn

Commissioner Scott Brener called the meeting to order by at 9:40 a.m. A quorum was present. Brener introduced himself and said his appointment as Commissioner was effective May 1, 2003. Brener previously served as an Assistant Commissioner and General Counsel for Legislative and Legal Affairs at the Department of Labor and Industry (DLI) from 1994 to 1998. Brener noted he made some staffing decisions. Phil Moosbrugger served as the Acting Assistant Commissioner, and did a great job. Brener expressed his appreciation to Moosbrugger for stepping in during the legislative session and shortly beyond. Moosbrugger moved back to the

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Special Compensation Fund Director position. The new Assistant Commissioner for the Workers' Compensation Division as of Monday is Beth Hargarten. Hargarten started at DLI in 1995. She has served as the Legislative Affairs Director and as an attorney in the Legal Services unit as well. She has great expertise in workers’ compensation and has performed casework as the legislative liaison at DLI for some time. Hargarten stated she is looking forward to working with the Advisory Council and is happy to be here. There are a lot of issues to dig into this summer and fall. II. Approval of Minutes from the February 12, 2003, March 5, 2003, and April 9, 2003 Meetings Paul Bailey made a motion to approve the minutes from the February 12, 2003, March 5, 2003, and April 9, 2003 meetings. Gary Thaden seconded the motion. All voted in favor of the motion and the motion passed. III. Approval of the Agenda Ray Waldron made a motion to approve the agenda as presented. Thaden seconded the motion. All voted in favor of the motion and the motion passed. IV. A. Commissioner’s Update Brener called for discussion regarding his memo about the time lines for legislative proposals that come before the Workers’ Compensation Advisory Council (WCAC). How legislators and other interested parties can bring proposals to the WCAC for inclusion in a session bill has been a recurring issue. There has been confusion in the past about what those time lines are. The purpose of Brener’s memorandum is to firm up that process. Brener suggested that any legislative proposals affecting Chapter 176 be submitted to the WCAC in time for their October 8, 2003, meeting in order to allow the WCAC sufficient time to discuss and debates the proposals. The WCAC then would go to the Revisor of Statutes with a session bill in January or February. Discussion followed. Thaden said the October deadline was too soon. Bailey did not think it is too soon because the WCAC needs more time to prepare its bill. Mike Hickey stated that having a deadline is a good idea but if it is too early the WCAC will still have the last minute proposals come to the WCAC and suggested it be moved to December. He does want the legislature to participate in the process and be aware of it and October is too early for the legislators. Brener clarified that his intent was to get the proposals to the Advisory Council which would give the WCAC three or four months to formulate its bill which would then go to the legislature. Hickey said his point was about trying to get legislators to continue to recognize the WCAC and work with it versus brining up workers’ compensation bills the last week before the deadline. If the deadline is too early the legislator will not be ready. Reed Pollack expressed approval of the concept of an early timeline. This should preclude some of those bills that come in the week before the bill is due, which is actually quite late. Whether or not the timing is good for the people who are presenting the bills, it does give them a sense of an operational definition of how to get the information to the WCAC.

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Brenner stated it is for the WCAC to decide whether the deadline should be October 8, 2003, or December 10, 2003. He noted discussion about the medical rates would start taking place this summer. Representative Joe Mullery suggested a priority and that the WCAC accept the proposals that are in by a certain date. It is important to encourage people to get their proposals in. He thinks an absolute cut off is not appropriate. Some kind of an early date is a good idea as long as it is not a cutoff. Olson noted the session will start in February and suggested the cutoff date be set at December 10, 2003, for the first time. Then, when session starts earlier, we can creep that forward and let people get used to it. Olson made a motion to set the cutoff date for proposals to the WCAC at December 10, 2003. Wayne Ellefson seconded the motion. All voted in favor of the motion and the motion passed. The deadline for these proposals was changed to December 10, 2003. This deadline will allow for a more firm calendaring process to ensure thorough discussion of the proposals, provide legislators and other interested parties with an opportunity to be heard, and will enable the WCAC to include any agreed-upon proposals in their legislative package for the 2004 session. IV. B. Legislative Update Brener covered the Legislative Update. There was not much workers’ compensation legislation that passed the legislature this session. The WCAC bill did pass out of the House with a vote of 123 to 1 but was then held up in the Senate. No vote was taken in the Senate so there was not a workers’ compensation bill that was presented to the Governor. The department is moving forward on some of the issues that were addressed in that bill. The department is working on the Special Compensation Fund Assessment with the Department of Commerce. There was language in the Advisory Council bill that provided workers’ compensation coverage for small pox vaccinations. Brener stated that some of the other issues that were in the WCAC bill would have to be taken up again this year to determine if the Advisory Council wishes to include them in this year’s session bill. Brener reported that some language passed last session that mandates the creation of a Medical Costs Task Force that the agency would have pursued anyway. The legislation requires, at a minimum, that an equal number of employer, employee and medical representatives serve on the Task Force. Brener will be working with interested parties over the next month or two to put together a Task Force that would look at medical issues. Brener noted there was some chiropractic language related to coding and tying in with the doctor’s coding that came out of the Omnibus Bill during the last week of session.

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IV. C. Medical Fee Schedule Study Group Brener pointed out a handout in the packets listing the primary medical issues to be discussed by the study group including the medical fee schedule, payments to hospitals, pharmaceutical costs, negotiation of fees paid to providers and certified managed care plan networks and the treatment parameters. Brener noted these issues were “on the table” back in 1993. Health care costs have rapidly escalated to levels that are causing problems both in workers’ compensation and other sectors in the economy. The legislature asked the WCAC to look at medical costs and determine where the cost drivers are and come up with some recommendations for the legislature. Brener will put together a team in the next four to six weeks. He would like to begin on this no later than August 1, 2003. It will be an ongoing discussion at the WCAC, but there will be a separate Task Force whose recommendations will flow to the WCAC and then to the legislature. Ellefson asked the commissioner if he had any thoughts about what organizations or groups, he would like to see involved on this study group. Brener responded that he is still very open to recommendations. He is continually receiving applications to serve on this Task Force. Ellefson commented that WCAC members received stacks and stacks of letters from people who would potentially be affected by cutting medical payments and he would like to see at least some of those groups send a representative to the Task Force to be a part of this. Brener said his only caution would be to avoid an excessively large membership so we need to keep that in mind as we move forward. He does think the Task Force needs to reflect the primary stakeholder groups. The statute does lie out three of those groups, the employer, the employee and the medical community. Therefore, we know there will be an equal number of representatives from at least those three sectors. Hickey asked if, regardless of who is appointed to the Task Force, everybody from the WCAC be welcome to attend all of the meetings. Brener responded that these would be open, public meetings. Hickey noted if we are trying to do something complicated in this area, the more people we have involved, the better the decision we are going to come to. Brener agreed and will not allow one or two people to monopolize this. Brener plans on moving forward quickly and asked WCAC members to get any suggested names for Task Force members to him as soon as possible. Thaden asked if the WCAC would appoint liaisons to be at the study group meetings and how the connection will happen between that group and the WCAC. Brener was open to suggestions. He does not want the study group to be a mirror image of the WCAC. It will require some expertise that the members on the council do not necessarily have as it relates to medical costs issues. Obviously there needs to be a connection, but he does not foresee it as being a duplicate of the WCAC. Thaden clarified that he was not thinking of “duplication”. He was wondering how the WCAC would interface with them. Brener invited any WCAC members to participate as a witness at any of these public meetings. He noted that he assumes the employee and employer community, as represented at the WCAC will also have some say in getting the names for those representatives to him.

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Hargarten announced that the dates, times and locations of the meetings will be published on the department’s Web site to keep the WCAC members and the public informed about what is happening, and when. IV. D. Workers’ Compensation Coverage for the Amish Community Hargarten noted that the WCAC has the Amish issue before it once again. Mr. Bellows came to the April meeting and made another presentation. Those members who have been on the WCAC for a few years remember that he also came in and spoke to the Council back in early 2001 about the situation that we are in with the Amish community and their lack of workers’ compensation insurance. Hargarten said that in early 2001 she spoke with the three other states that have exemptions in the law for Amish and Mennonite groups. Her plan is to go back and talk with them again about what their experience was over the last two years and review with them if there have been any changes in their law, what their experience has been and if they have ever seen any Amish community members that were not, indeed, taken care of by their own community. She will find out what their experience has been with any of the competitive advantage arguments that have been a concern of a number of the WCAC members. Hargarten will gather this information and report back to the WCAC to discuss the Amish issue at either the August or October meeting. Brener noted the reason for the Amish issue discussion is because the Amish litigation case was dismissed in the recent past without prejudice premised on the WCAC’s action on this issue, which means it is still around and we still need to address it. He reminded WCAC members that we would have to come up with something on the Amish issue, hopefully in 2003. Pollack asked whether the Amish currently carry workers’ compensation coverage. Hargarten responded that they do not. A few years ago the situation began when DLI’s mandatory coverage section of the Special Compensation Fund penalized Mr. Yoder for not having workers’ compensation insurance and assessed a penalty. Pollack asked whether Yoder paid the penalty. Hargarten said he has not. She noted that DLI and Yoder are in the process of litigation and it has not gone to a hearing yet. DLI is currently dealing with constitutional issues, which do not traditionally go through the Administrative Hearings process because that is not in their jurisdiction. It would push DLI to the District Court/Supreme Court area process and lengthy litigation to address whether requiring the Amish to purchase insurance possibly is a violation of their religious beliefs and therefore a violation of the Constitution. Pollack asked whether the penalty was applied to Yoder alone or the broader community. Hargarten responded that a penalty was assessed against Yoder, not the entire community. However, their issue certainly extends across the community because there are other members of the community that have a variety of different businesses. Pollack asked if the other businesses the Amish are controlling purchase workers’ compensation coverage. Hargarten said this particular case came to the department in 1999, and, if she remembers correctly, there was a complaint that initiated DLI’s investigation. There have not been any other actions that would initiate any other investigations, such as a First Report of Injury, for any Amish individuals that are not getting workers’ compensation benefits. She does not believe there have been any further complaints against other Amish businesses. Mullery noted Hargarten mentioned three or four other states that do not require the Amish to carry workers’ compensation. He asked if that is because the Amish won on a constitutionality issue or whether it was because the legislature acted instead. Hargarten responded that, in those states, the

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legislature specifically enacted exemption language in their law. She clarified that the states are Wisconsin, Pennsylvania and Kentucky. These states outlined a whole series of criteria that certain religious groups must meet in order to be exempt from the requirement to provide insurance. Brener noted, as a follow up, that in Wisconsin, at least, this issue was taken to the Supreme Court and the Amish won. He thinks that the legislative language precipitated from this litigation. Mullery asked if the Amish have won in any courts. Hargarten said the Amish have succeeded on other issues, not specific to workers’ compensation, such as the slow moving vehicle orange triangle on their buggy, and she believes they succeeded, in Wisconsin. She noted that when she looked at this in January of 2001, she did not see any litigation specifically about workers’ compensation. There were other related religious exemptions issues, but nothing about workers’ compensation. She will check if there has been anything in the two years since then. Mullery noted he asked Moosbrugger to look into alternative ways of handling this issue such as a reserve fund and asked if there were any other alternatives to either all or nothing. Brener stated he does not have an answer now, but will look into self-insurance methodology, a deposit or guarantees. Hickey asked what the total number of Amish people is in Minnesota and the potential affect of this decision. Brener and Hargarten did not know, and Hargarten said there is no data collection that could be used. Thaden noted that, in the beginning of May, the State of Indiana passed a statute that exempted the Amish. Hargarten will look at it. Bailey asked what would happen if another religion decides to set up a construction crew and goes the same route and uses the same criteria. Hargarten responded the way Wisconsin structured their criteria is so specific and it is clear that only one or two religious groups could meet that exemption. They had to be in existence for a certain number of years, they had to have long-standing religious beliefs about taking care of their own communities and the language was so narrowly tailored that it would be very difficult for other religious groups to come forward and do that. As she recalled, there was no experience of other groups coming forward to get themselves into that exemption. She will check it again to see if there have been any changes in that area. Hargarten noted if the WCAC chooses to go forward after further discussion with some sort of a religious exemption, the statutory language can be drafted so specifically that the groups that will fit into that exemption are very limited, to maybe one or two groups. Mullery said he assumes both the owner and the employee would have to belong to that religion and asked how that can be constitutional. He thought religion was a basis you cannot distinguish on in this state as far as employment, so how can that be constitutional? If they have to be a part of that religion to be employed there, why aren’t we taking action through another part of our state? Hargarten responded she does not think that these exemptions in the other states have been challenged on that basis. You could make the argument, but their religious exemptions are geared towards those individuals that are part of the community. A couple of their laws specifically state that if the individual that is working for the Amish employer is not a member of the Amish community, then the Amish employer must purchase workers’ compensation coverage. Their laws are designed to only apply to this small number of people that have, as part of their whole belief system, that they take care of their own. Hargarten will talk to them and find out if there have been any challenges to their law. The Wisconsin law went into effect in 1996. When Hargarten spoke to

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them in 2001, they had not had any constitutional challenges to that law at that point, but they may have since that time. Ellefson asked whether the Amish issue would go through the courts if the WCAC does nothing. He also asked what would happen if the WCAC decided to let the court handle the Amish issue and if they have to come back and draft some legislation in a case like Hargarten cited in Wisconsin, is that how you envision it going in Minnesota? Brener responded that he would have the call on what to do. The expectation, as he understands it, is that this case was dismissed without prejudice in order for the WCAC to formulate a decision on how to handle the issue. If the WCAC decides not to formulate a decision on the issue, Brener’s hands would be tied and he would be forced into a litigation mode. Thaden stated he thinks the WCAC would be abdicating its responsibilities if it does not do something, in addition to the fact that if they raise constitutional issues this could not only go to Minnesota Supreme Court, but to the U. S. Supreme Court. To him that seems like a waste of money when it is the WCAC’s obligation to deal with the Amish issue. Ellefson clarified that he is not suggesting the WCAC do that; he was asking whether or not the WCAC could prevent litigation.

Pollack noted that Mr. Bellows asked the WCAC to promote that the Amish did not need workers’ compensation coverage and the WCAC made a decision that the Amish do need workers’ compensation coverage. Bellows did not come to say make a decision whether the Amish do or do not need workers’ compensation coverage. He said they would like to avoid paying workers’ compensation and the WCAC’s decision was “sorry, we do not have that perspective”. Therefore, Pollack thinks the WCAC made its decision. Bailey noted the original complaint came from competition not from someone who was hurt or a complaint from the Amish community. His feeling has always been if they were working within their own community such as building a house or a barn for a member, he has no problem with that. He would be concerned if they go out into the community and form a construction company and start building houses and commercial buildings. He is concerned they might bid on a highway project. The complaint was not from someone who got hurt; it came from competition. When they go out and start working for the general public, where do you draw the line? You are setting a precedent here and we do not have to do everything Wisconsin does. Brener said he understands both perspectives. There is a fairly excessive litigation expense that will be tied to this and he cannot guarantee an outcome. The courts traditionally have been pretty friendly to the Amish. It is a cost/benefit analysis you need to do. He brings the issue up because it is on the shoulders of the WCAC to decide which way to go. Brener is bringing the Amish issue up as an action item and he wants this issue to be resolved by this fall. Olson agreed and noted that we know what the arguments are and we ought to just decide what we are going to do.

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IV. Future Agenda Items Waldron said he made a call over to the workers’ compensation judges at the Office of Administrative Hearings to ask how the current budget has affected their scheduling for employee’s cases and asked for information about how much of a delay this will cause. Brener he said he has not had an opportunity to meet with Ken Nickolai or any of the folks at the Office of Administrative Hearings since he became Commissioner. It is Brener’s understanding that OAH went down four settlement judges; he is not sure if some of those may have been vacancies. Waldron noted he has heard a number of stories of problems that could exist at OAH but he has not had a return call from that group with any information. Brener said he would meet with Nickolai and report back to the Advisory Council at the next meeting Waldron made a motion to move the date of the August 13, 2003,meeting to August 20, 2003, due to a conflict with the AFL-CIO convention. Bailey seconded the motion. All voted in favor of the motion and the motion passed. Olson made a motion to adjourn at 10:25 a.m. Thaden seconded the motion. All voted in favor of the motion and the motion passed. Respectfully submitted,

Debbie Caswell Executive Secretary dc/s