Workers' Compensation Advisory Council Oct.

13, 2004 Minutes
Voting members: Jim Cavanaugh Don Gerdesmeier for Paul Bailey Glen Johnson David Olson Reed Pollack Gary Thaden Ray Waldron Voting members excused: Mike Hickey Julie Schnell Voting members absent: Stan Daniels Wayne Ellefson Brad Robinson Nonvoting members present: Thomas Bakk Joe Mullery Nonvoting members excused: Dan Dorman Geoff Michel Staff members: David Berry Scott Brener Debbie Caswell Jim Feckey Beth Hargarten Cindy Miner Phil Moosbrugger Terry Mueller Visitors: Debra Anger; League of MN Cities Marge Bigelow; Medical Advanced Pain Specialist Ray Bohn Mary Christensen; Metro Hand Colleen Colburn; MCA Judy Hawley; MN Physical Therapy Assn Todd Johnson; WCRA Mary Krinkie; MN Hospital Assn Abbie Laugtuy; MPHA Tom Lehman; The Lehman Group Aggie Leitheiser; MN Dept of Health Brad Lehto; MN AFL-CIO Matthew Lemke; Winthrup & Weinstein Bert McKasy; Lindquist Louise Montague; MOTA Tom Mottaz; MTLA Eric J. Myers; Leonard, Street & Deinard Jean Nelson; RTW Laura Offerdahl; League of MN Cities Sandy Oleritch; Park Nicollet Mark Pixler; MAPS Curt Pronk; Mayo Foundation Linda Sandvig; Allina Gary Seven; WCRA Steve Shakman; MN Dept of Health Linda Caroll Shern; PhRMA Joanne Schweinke; Western National Nora Stewart; LGN Anne Symington; Metro Hand Deneace Tucek; Health South

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Chairperson Scott Brener called the meeting to order at 9:43 a.m. Roll was called. No quorum was present on the employee side. The agenda was approved as presented. III. A. Commissioners’ update Brener outlined the timelines for the WCAC and announced he intends to have a Workers' Compensation Advisory Council (WCAC) bill done earlier this year and hopes to have a bill by the Dec. 8, 2004 meeting. He noted a meeting was added to the schedule: Tues., Nov. 16, 2004. Brener anticipated going through at least the issue areas that are potentially applicable to any bill the WCAC puts together in December. There could be a couple of other issues that come up in the next month or so, but he thought they were reasonably aware of what the vast majority of the issues were. He planned to use the meeting to refresh everyone's recollection of the 2003 and the 2004 bills, as well as some issues that had been brought up by the Workers' Compensation Reinsurance Association (WCRA) and the Minnesota Department of Health. In addition, a few new items were added to the legislative list and Brener said he would do a quick review of those items later in the meeting. Brener was not anticipating any votes today, but he expected some discussion about where the WCAC thought it needed to go, with a goal of coming to a complete resolution in December, so they would be ready to move quickly in January. III. B. Proposal to move regulation of the Workers' Compensation Reinsurance Association to the Department of Commerce Carl (Buzz) Cummins did a PowerPoint presentation about why regulation of the WCRA should not change. He noted that during the previous session, the Reinsurance Association of America (RAA) found an author for House File 2686 at the Legislature that would have changed the regulation and some of the financial reporting requirements for the WCRA. Brad Kading, from the RAA, made a presentation at the August meeting in support of H.F. 2686 and WCRA regulation by the Department of Commerce. When the bill received a hearing in the House Commerce Committee, no action was taken and the chairman of the committee suggested the WCAC look at the issue of WCRA regulation. Cummins presentation was in response to what Kading said at the August meeting. Cummins discussed the RAA and how commercial reinsurance operates and is regulated in the United States, the unique role of the WCRA in Minnesota's workers' compensation system, the nature of the WCRA regulation versus the regulation of commercial reinsurers and the impact of the RAA proposal on the WCRA and the Minnesota workers' compensation system. Cummins said the WCRA was created in the 1970s, because the commercial reinsurance industry abandoned the Minnesota workers' compensation market. The

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Legislature created the WCRA in response to that action by the commercial market to ensure the availability of workers' compensation reinsurance and to help reduce workers' compensation costs for Minnesota employers and insurers. Cummins outlined the regulation of the WCRA and noted they think they receive far more regulatory scrutiny than any of the reinsurers that are members of the RAA. He spoke to the RAA's statement that the WCRA has a solvency problem and discussed investments and reserves. Cummins pointed out three time periods where their investments did extremely well and their board of directors determined they could make surplus distributions to their member companies and to the state's employers. He pointed out the first distribution, made in 1993, was made at the specific request of the commissioner of the Department of Labor and Industry and the commissioner of the Department of Commerce, because both of them felt the WCRA should not be carrying huge surpluses. Cummins noted those distributions totaled $1.23 billion and that is more than they have collected in total premium in the entire 25 years they have been in business. He believes the WCRA has been a "good bargain" financially for Minnesota employers and insurers. Cummins continued to supply information about the WCRA’s solvency. Their actuaries say $1.12 billion in reserves is required to pay claims over a 50-year period. Their current assets available to pay those claims is $1.09 billion, so their investments are running slightly lower than they need to pay long term, but there have been a number of times in the WCRA’s history where their reserves have actually exceeded their assets. They expect to make that up. Their long-term investment horizon indicates they should make 7 percent on their investments. Cummins stated that in addition to the commissioner's regulatory scrutiny, there are internal controls that make sure the WCRA is adequately reserving to meet its obligations. There is an actuarial committee that meets three to four times a year to look over the work the WCRA's actuaries do and that committee indicated the WCRA is solvent and able to meet its long-term obligations. This committee is composed of insurance company actuaries and representatives of state agencies. The board of directors also assures they are getting other independent looks at their reserves, so each year the actuaries for their certified public auditor, PricewaterhouseCoopers, look at their reserves. Each year, they have determined the WCRA’s reserves are adequate, so WCRA has more in reserve than their auditors think they need. They also found WCRA’s reserves to be adequate. In addition, every three to four years, their board of directors asks WCRA to hire an outside, independent actuarial firm. These independent actuaries have concluded the WCRA’s reserves are adequate to meet its long-term liabilities. Cummins pointed out what the effect of subjecting the WCRA to the financial solvency requirements of H.F. 2686 would be. This bill would transfer its regulation to the Department of Commerce and require the WCRA to meet the financial solvency standards of commercial insurers of reinsurance. They would be required to change their discount rate from 7 percent to 5 or 4 percent. That would increase their annual premiums for 2004 from $43 million in premium revenue to something in excess of $60 million, so

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they would have a 30 to 50 percent rate increase just to generate sufficient additional premiums to meet those new financial solvency standards. They would also be required to increase their reserves by $500 to $600 million additional from $1.1 to $1.7 billion. The only way to raise those funds is to charge their members additional premium. In addition to the 50 percent annual premium increase, the WCRA would have to surcharge its members an additional 40 to 100 percent premium to build up the additional reserves they would be required to generate. The WCRA thinks if the RAA were to be successful in its legislative proposal, it would cause the WCRA to significantly increase Minnesota workers' compensation costs by significantly increasing its premiums. It would also result in the loss of the WCRA’s tax-exempt status, which would further increase the costs to its members. Cummins suggested the passage of H.F.2686 would eliminate the possibility of any future surplus distributions to member companies. Finally, it would disrupt what he characterized as a thorough and successful form of regulation of the WCRA by DLI. Cummins noted the advantages of having the WCRA continue to operate as it currently does in Minnesota. The WCRA makes workers’ compensation reinsurance coverage available to all of Minnesota’s insurers and self-insurers certified by the Department of Commerce and they have not reduced their coverage for the past five or 10 years. Their coverage includes coverage for terrorism under the federal Terrorism Risk Insurance Act and is the only reinsurance mechanism in the country that has direct access to federal benefits in the event of a terrorist act in Minnesota. This would protect the state's economy if an act of terrorism were to occur. The WCRA’s rates are much lower than commercial rates would be if the RAA could write in Minnesota. Cummins concluded by saying the WCRA has met the objectives set forth by the Legislature to ensure the reliable availability of workers' compensation reinsurance at a low cost for Minnesota employers and their employees and to provide stability for Minnesota’s workers’ compensation system. Thaden noted Cummins mentioned two reports. One was from PricewaterhouseCooper and one was from Milliman and Associates. He asked for copies. Cummins said the commissioner had copies of the Milliman report available for review. He said the WCRA’s annual report contains the PricewaterhouseCooper information and could also be provided. Thaden noted DLI deals with workers’ compensation and the Department of Commerce deals with insurance. He asked what would happen if there was the same discount rates and everything, but it was regulated by the Department of Commerce instead. Cummins responded that could be done. He said he thought the regulation that WCRA has with the DLI commissioner and his predecessors has worked very well for the WCRA. They are not a reinsurance company in the same sense as other reinsurance companies are, so there is a good rationale for having the WCRA regulated somewhere other than the Department of Commerce. Thaden noted the Department of Commerce regulates insurance companies so, in some ways, it seems similar to what the WCRA is and that was why he asked. Cummins agreed it could be done that way. Cavanaugh asked if it would open the field up to competition if the WCRA went to Department of Commerce oversight. Cummins thought the RAA would like to see WCRA’s regulation changed to the Department of Commerce. They would like to see the

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WCRA follow the various financial solvency requirements regular reinsurance companies have to follow. The WCRA would then have to dramatically raise its rates and the RAA could be competitive with them and would ask the Legislature to open the market. Cummins said that was the RAA’s ultimate objective. Cavanaugh asked about a scenario, as did Thaden, where everything in the playing field remains the same and asked what the problem would be for the WCRA, because they would be able to compete quite well. Cummins agreed they could compete quite well, but the problem is they would be competing at a premium level that would be 50 to 100 percent higher than what they currently charge. Their member insurance companies and self-insurers, such as Cavanaugh’s company, would lose the benefit of the bargain they have had. Cavanaugh asked if that was because the discount rate would change from 7 percent to 4 or 5 percent and clarified his scenario assumed only the nameplate changes, with everything else, including the discount rate, status quo. He asked if the WCRA is allowed to keep the discount rates when regulated by DLI, but would not be able to at the Department of Commerce. Cummins said it would not, unless the Legislature imposed the same solvency standards on the WCRA. He noted they have been able to distribute excess surplus to their members, because they earned 11 percent on investments. They invest 60 percent in equities and 40 percent in fixed income. Insurance companies are statutorily limited to 25 percent in equities, so the WCRA has done very well in the equity markets and their members have benefited. At the same time they have been able to charge low premiums while maintaining adequate reserves to meet their long-term obligations. Mullery asked about the distributions Cummins said were made to employers. There was one in 1997 or 1998, and he thought the issue at the Legislature at that time was that the money went to insurance companies at that distribution and there was discussion about how to get some funds to the employers. Cummins confirmed the first distribution in 1993 went entirely to their member insurers and self-insured companies. None of it went directly to other employers. There was a law change in 1993, and two court cases interpreted what the law change meant. That resulted in a formula, so employers get a portion of any surplus distributions the WCRA makes, as do their members companies. That is what happened with the 1997 and 2001 distributions. Pollack said his company purchases reinsurance outside of Minnesota and has never received a discount credit or a surplus distribution. In his opinion, the situation with the WCRA is, “if it is not broken, it does not need to be fixed.” He appreciated the information provided by the RAA and did not see where it had an impact with the history the WCRA has shown. Waldron agreed with Pollack and said we would not be here if it were not for the insurance companies leaving 30 years ago. The WCRA was created to fill that gap. He noted the WCRA has been successful and questioned why we would want to dismantle success. Brener stated he would keep the WCRA issue “floating,” but he did not anticipate much activity.

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Minnesota Department of Health Assistant Commissioner Aggie Leitheiser and Steve Shakman, a legal affairs consultant/coordinator, Department of Health, presented information about their proposal to provide workers' compensation protection for volunteers responding to emergencies. Leitheiser said it has become apparent to them as they engage in a variety of emergency planning and preparedness efforts that it is a difficult situation when they try to recruit volunteers and ask them to put their lives at risk. If they were able to clarify that workers' compensation would be available to the volunteers as if they were employees, they could greatly expand the number of people who are willing and able to help them get through an event. Leitheiser noted they looked at the current workers' compensation language and found the coverage is already there, but it is outdated and is based on the Civil Defense Program created in the 1950s. Shakman pointed out the language on the front page of his handout from Minnesota Statutes §176.011, subd. 9. They proposed three changes to paragraph nine of that subdivision. 1. Eliminate the restriction in the current law to “peace time.” For example, when dealing with anthrax mailings, it would be difficult to determine whether to categorize those attacks as peace-time events. 2. Change the words “civil defense” to “emergency management.” The 1951 Civil Defense Act was largely rewritten in 1996, and is now called the Emergency Management Act. 3. Protect people who are doing the work they volunteered to do by changing the words “when ordered to training or other duty by” to “persons acting under the direction and control of the state, county, city or any political subdivision and within the scope of duties approved by that state or local government unit.” Their intent is to narrow the protection to people doing what they are assigned to do in the volunteer effort. They proposed additional language be included within the scope of duties approved. Shakman noted they have been working closely with the Division of Homeland Security and Emergency Management in the Department of Public Safety, so that agency is aware of the requested volunteer language changes and that they would be presented to the WCAC for approval. They have not had official word back from them about this proposal. If approved, these changes would be incorporated, along with other changes, into the Emergency Management Act to make it clear that volunteers both actually involved in a disaster or in training will have this type of coverage. Cavanaugh asked if someone working as a volunteer for one of Minnesota’s government agencies in another state would be covered for workers’ compensation under that circumstance.

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Cavanaugh was concerned about the language where it uses the preposition “in” as opposed to “by” where it says, “a voluntary uncompensated worker in.” He would prefer to have more of a “bright line” about who the volunteers are actually working for and that it is some government agency or under the auspices of a government agency versus someone who just shows up and volunteers, so there is more control of who is covered and who is not. He suggested a written understanding or agreement that the person was a volunteer, so you know they are “directed by” as opposed to just “in” volunteer status. Cavanaugh also asked for a clarification about who pays the workers’ compensation claim if a volunteer from Minnesota is working in another state. Shakman said the Interstate Emergency Assistance statute is a law that spells out who bears what responsibilities. Every state, except California, has signed the agreement. Shakman would have to look at what it said regarding compensation. He thought the Emergency Assistance statute said the receiving state would bear these kinds of costs. He did not know if that statute has been used. There have been requests from Florida for assistance during the recent hurricanes. Minnesota has disaster medical assistance teams that are volunteer groups. Cavanaugh noted the key to that statute would be whether people are compensated here. He is more concerned about the uncompensated “John Doe” off the street, who is working under the auspices of some state agency going down there, and asked the Department of Health to check out the issue. Leitheiser said she believed the issue Cavanaugh was referring to was related to where the volunteer is providing the services and where the workers' compensation would come from. They will clarify it to be sure. If the volunteer is providing services in Ramsey County, under Ramsey County control and direction, it would be Ramsey County workers’ compensation. If the volunteer goes to Texas, the volunteer would be under Texas authority and control. She said that was a good question and it needs a clear answer. She referred to Cavanaugh’s question about the people who are not just showing up and starting to do things. That is addressed on their proposed change at line 4, “acting under the direction and control of the state or any political subdivision.” That language is to say it is not whoever just shows up and starts working. They need to be under the control and direction of the government to be covered by this provision. Cavanaugh understood that. His concern was, for example, if there is a flood and you have 30 people show up and all start working, then five of them later show up and make a claim. They were all acting under somebody out there supervising. It is muddled, in the sense that it gets gray as to who is acting under control as opposed to “I have five people that have all shown up; I know who they are; I know they are helping to do the job; and they are under my direction.” That is a different situation. He was not against the proposal, but suggested it needed accountability for people who showed up later and took direction from someone. Hargarten agreed that it looked like someone could show up and there could be someone there who directs the person. She suggested adding “specifically directed by” or “specifically directed to report,” or in addition to, not just the direction while you are there. Shakman asked if the phrase “registered with the state or subdivision” would work. Cavanaugh agreed to that. Brener noted, with respect to general workers’ compensation, if the employee is principally employed in the state of Minnesota and is harmed outside of the state lines,

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Minnesota’s workers’ compensation system picks him up. Leitheiser thought they were trying to make a clarification for the uncompensated people. Cavanaugh said that was his point. If someone goes through a state agency as a volunteer, they are not normally compensated, but a Minnesota agency would end up picking up the workers’ compensation, because that is the purpose of this text. Don Gerdesmeier asked whether the compensation rate would be based on the volunteer’s regular job salary. Leitheiser responded they used the existing language, which is “the usual wage paid for similar services performed by paid employees,” so if they had a county worker working at a clinic giving medications and that volunteer had a workers’ compensation claim, the volunteer would get the same rate of pay as the county employee. It is not the rate of pay for their usual job. For instance, if a doctor is filling sand bags, it would not be the doctor’s usual rate, it would be the rate of an employee filling a sand bag. Gerdesmeier expressed concern about the rate of compensation if he were to appropriately volunteer at a flood to fill sandbags and was being compensated at the rate of $8 an hour to fill sandbags, then got hurt, because he makes $40 an hour. Hargarten asked Leitheiser whether they had discussed this proposal with the political subdivisions, such as the counties or cities, because if the counties, cities or the state is the entity that is directing the person, they are going to be the one to foot the bill. Leitheiser said they talked with the League of Minnesota Cities and the Association of Minnesota Counties when they were working on this as a legislative package last year and they were supportive. As they looked at the existing language, it is not an expansion of coverage, it is more of a clarification, so they were “already there.” Brener announced the Department of Health proposal would be considered as the WCAC goes forth with legislation in the next few months. WCAC bill discussion Brener summarized 13 issues that remain from last year’s WCAC bill and seven new issues. A handout was provided. The remaining issues are: 1. 2. Eliminating the requirement that defense attorneys must file fee information with DLI. Housekeeping language regarding deposit of workers’ compensation penalties, moving the collection of those monies from the Special Compensation Fund to the Assigned Risk Safety Account. The revision and update to assessment language. Restore offset language. Allowing pharmacy networks where the employee must select the pharmacy from networks to fill prescriptions if the pharmacy is within 15 miles of the employee’s home or work. Allowing electronic submission of bills between insurers and health care providers.

3. 4. 5.

6.

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7.

8. 9. 10. 11. 12. 13.

Allowing certified managed care plans to negotiate fees and make peer review, utilization review, case management and dispute resolution options features of certified managed care. Adding language granting an exemption from workers’ compensation. The pilot project extension for collective bargaining agreements in nonconstruction settings. Changing notice requirements for employers whose insurance is about to expire. Housekeeping language eliminating outdated forms language. Housekeeping language that eliminates the outdated reference to the neutral physician list. Housekeeping language that clarifies the presumption that “parent is guardian” applies when the injured worker is a minor.

New issues of discussion: 1. The issue of North Dakota incidental contact. This issue has been around for a while. When a North Dakota employee comes into the of state Minnesota for purposes of employment, the question is who picks up the primary liability for a workers’ compensation injury. Most of this issue has been resolved through insurance policy work they do in North Dakota, but there is still the issue of incidental or sporadic coverage. Brener said North Dakota would be presenting a proposal about that issue. Making Minnesota Statutes §176.82 actions part of the workers’ compensation system instead of the district court system. A letter was distributed at the last WCAC meeting that goes into greater detail about this proposal. Relates to data privacy changes. Brener noted data privacy, in general, for state government is a nightmare. In workers’ compensation it is a particular nightmare that has been further complicated by a decision by the courts in the last year. The Supreme Court has issued a new directive in the last year that further muddies data privacy law with respect to workers’ compensation. DLI may have a proposal to clarify the law in this area. The Department of Health proposal regarding volunteers. Elimination of the $1,500 limit on medical disputes that can be handled by DLI. This has been a jurisdictional issue between DLI and the Office of Administrative Hearings. It is an issue that resulted from the 1995 law changes. This whole area of the law has morphed itself in a way that was not anticipated in 1995. By eliminating the cap, it provides a much more streamlined approach to handling medical claims in workers’ compensation. Brener has had conversations with the chief judge at OAH and he has agreed to this proposal. The issue of the Minnesota Insurance Guaranty Association (MIGA) has been discussed at DLI for a year and was briefly discussed at the Legislature. The MIGA issue principally resulted from the 2003 legislative changes, which relieved MIGA of some liability for large corporate institutions with $25 million in assets. The question has become who picks up that liability and whether it is the Self-Insurance Association, the Special Compensation Fund or if it is the employer itself. Brener stated DLI has been attempting to work through these

2.

3.

4. 5.

6.

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7.

issues with the Department of Commerce and MIGA, and has not gotten too far at this point. Utilization of medical services was discussed last year. Brener reported there seemed to be some confusion with the WCAC about how to effectuate the treatment parameters and put some teeth into the existing treatment parameters, which seem to be a little “slippery” in the court system.

Brener noted the vast majority of these issues have been around and the WCAC knows them well. Hargarten pointed out a note she put on page seven, number nine, about the pilot project proposal. Last year, the WCAC voted to extend the pilot project. The pilot project has now technically ended. The proponents were planning to get the pilot project extended and then have a more in-depth discussion at a later date. What they would truly like is to extend the ability to do collective bargaining agreements and extend it past the construction industry. Two options are listed in the handout. One is to have a pilot project again. Option two would extend the ability to do these collective bargaining agreements in areas other than the construction industry. Brener clarified the folks advocating this would rather not see this become a pilot project, because that creates a chilling effect on any industry that wishes to engage themselves in these collective bargaining agreements, because the pilot project ends at some point. Waldron asked about the case law about these agreements. Hargarten responded that the case that came out this summer principally dealt with the use of attorneys in the early stages of alternative dispute resolution and the court said an injured worker must be allowed to have an attorney present if they want one in the early stages of the dispute resolution process. The very first dispute resolution level previously did not have attorneys present. The decision did not invalidate the collective bargaining agreement or the procedures that are used. Gerdesmeier asked if there was a report about the results of the pilot project. Brener said it was not used, because there were no entities engaged in this activity beyond the construction trades. DLI has been told the reason for that, principally, was because it was a pilot project in nature. There were parties interested in expanding the concept, but they saw the time limitations on it and it caused a chilling effect. Cavanaugh asked if the construction industry adopted it and liked it. Brener said they did. Pollack asked for a presentation about the MIGA issue. Brener said that would be done at the next meeting and that he had a proposal. Gillette injuries Thaden said the issue they would discuss today was for injuries that occur because of lifetime activity, whether it was a bad back, carpal tunnel or something else. Usually, the last employer the person is working for is on the hook for the workers’ compensation costs for the employee’s whole lifetime of activity. That affects that employer’s experience modification. Many of the people who build buildings would not allow a company to bid on projects if that company’s experience modification rate

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(EMR) is more than 1.0. If a company’s EMR is more than 1.0 because of these lifetime injuries, it unduly affects specific employers and keeps them from bidding on particular projects. Thaden noted this happened to Collins Electrical Construction Company and introduced Jerry Hagen, the safety director/project manager for Collins, to tell his story. Hagen noted Thaden summed up the issue. Employees come to work on Collins’ crews and may have been recently employed elsewhere, because they work out of a labor pool from the union, and the employee then ends up with a soft tissue injury. As the contractor of record for that employee, these injuries are having a very adverse affect on Collins’ experience modification, with these soft tissue injuries that occur over a lifetime. That goes on Collins’ record and dramatically affects their experience modification, which affects their ability to go out and be a viable contractor with those companies that are demanding that the experience modification be 1.0. Hagen noted there is a trend that this EMR is moving down to .9. Pam Johnson, a cost containment manager for Krause Anderson Insurance, expanded on this issue. An employee may be in the electrical contracting line of work for 20 years and then come to Collins Electric and develop carpal tunnel syndrome or some other soft tissue injury three months after they begin working at Collins. Under case law for the Gillette case, Collins is “on the hook” for the entire cost of the claim. Because of the Gillette case, Collins has great difficulty trying to go to prior employers that this employee worked for to try to collect or offset the entire cost of that claim. The cost of the entire claim goes into Collins’ EMR calculation and negatively impacts the company and its ability to bid for work competitively. Johnson noted she is seeing owners such as 3M and Koch Refinery, where they intend to continue to lower the EMR to .8 or below, because the owners see this rating is an indication of how safe an employer is. Johnson referred to the letter in members’ packets and said Collins is a safe employer that does things such as having various committees in place and safety practices and has a full-time safety director. Collins exemplifies an employer that puts safety as number one, but, because of the Gillette injuries, their EMR does not reflect that. Hargarten asked whether the EMR changes if you go through the hearing process and the previous employers are found to share some of the costs. Johnson responded that if there is a situation where you are able to go to a prior employer to apportion out part of that claim, the EMR can be revised. Unfortunately, with most of these cases, it may be two or three years before you know what the full extent of the cost exposure of the claim is going to be with respect to permanency or permanent restrictions, and the claim has already been on the rating for two years. You can get it revised and get a credit on the premium, but the impact from the bidding process cannot be retroactive or corrected. Cavanaugh asked what they were requesting and whether they want to change the law. He speculated it would be easier to change the rating process to accommodate the Gillette injuries. As he understands Gillette injuries, there is an apportionment process

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and it may take two years to get through that. Johnson agreed that going to the experience rating formula might be the viable solution to see how that could be modified to address the Gillette injuries and said they have discussed that option. Any claim that goes into that experience rating is coded as a medical-only case or a lost-time injury, etc. Maybe there could be a coding specific to a Gillette injury and those injuries are entered at a reduced amount, a zero amount or one that would not impact the rating. Cavanaugh said his belief was there should not be a dis-incentive for safety; what he was hearing was Collins is a safe employer, but it was being penalized for prior acts and he thought that was more a function of the rating system and not the statute the WCAC works with. Pollack agreed with Cavanaugh and noted the modification factor changes every year, based on your last years of experience, not including the most recent year for exposures to injuries and cost. It is a nationwide calculation and is not specific to the state of Minnesota. Johnson said the Minnesota Workers' Compensation Insurers' Association (MWCIA) oversees the Minnesota rating and then that feeds into the National Council of Compensation Insurance (NCCI), so what is done in Minnesota would ultimately affect how the NCCI receives it on a national basis. Thaden noted one problem is often the employee does not see the doctor until the end and there is no objective criteria to use to apportion out the injury, even though they know it is a lifetime injury. The apportionment process is very time-consuming and expensive, so sometimes it is not worthwhile. He agreed there are some problems with the system and he agreed one of the solutions might be to change the EMR calculation. Bakk sympathized with the predicament Collins’ was in and asked whether all of their competitors in the construction industry were in the same predicament. Any industry that has seasonal, cyclical employees has a certain percentage of those incidents. He asked why Collins’ situation was any different than the companies they compete with. Johnson agreed that each employer has exposure and could be in this predicament, depending upon what the work is, how long the individual has been working for a respective employer and how often they are changing from one employer to another. It is the “luck of the draw” and some employers are more burdened than others, because they happened to be the employer at the time of the ultimate breakdown. Brener asked the WCAC for suggestions about how to move forward. Thaden clarified that he brought this forward as an informational item and said he would continue to work on the Gillette injury issue and maybe come back with something in November, if appropriate. Gerdesmeier asked if the biggest part of the problem was the rating, as far as their ability to bid. Johnson said the rating impacts the bidding and the ultimate premium that is paid for workers’ compensation insurance. Bakk said if there are workers’ compensation injuries in the system, the overall amount of premium paid is not going to change. It might be redistributed among some employers, depending on how it is assessed. At the end of the year, an injury is an injury

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and it does not matter who pays it out. He said he thought they were wrong in that it affects premium rates, because there are going to be the same number of claims. It is just a matter of how they get apportioned. Johnson responded that the experience rating is another factor that comes into play when an employer's insurance premium is calculated. Your rates are already established. After those are established and a base premium is calculated, they are based on what the payroll exposure is. That experience rating is then applied to that. So, if someone has a rating of more than 1.0, for example 1.10, they are going to pay an additional 10 percent on top of whatever rates were established. Bakk understood that and said if it is changed they might benefit by that by not picking up somebody else’s injuries. But if the apportionment is changed, you could lose on the other side of some other employer’s claims, which now would get partially apportioned to you, but which you were not paying for before. He said there might be some gain, because you pick up some other claims that are not your employee’s anymore. Johnson asked if he was saying they would pick them up from a standpoint of something that got apportioned back to them. That is how the system is currently, so the recommendation to look at the formula and the impact there would be the viable solution. Gerdesmeier asked if there is any way to rate the Gillette injuries differently or separately. Brener noted that is not happening now, but it could. XII. Adjournment Thaden made a motion to adjourn at 11:08 a.m. Pollack seconded the motion. All voted in favor of the motion to adjourn. Respectfully submitted, Debbie Caswell Executive Secretary dc/s