Workers’ Compensation Insurers’ Task Force May 19, 2004 Minutes

Members: David Clark for Dennis Ballinger; Western National Greg Coon; Grinnell Mutual Reinsurance Tom McCarty for Robert Farber; Berkley Administrators Greg Jeans; Liberty Mutual Lynn Miller for Mike Johns; RTW Margaret Kasting; State Fund Mutual Claire McCoy; GAB Robins Curt Pronk; Mayo Foundation Rob Rangel; Broadspire Laurie Simonsen; St. Paul Travelers Cindy Van Eyll; General Casualty Members excused: Gary Westman; State of Minnesota Mary Jo Wilson; City of Minneapolis Members absent: Mary Abraham; Westfield Group Jodie Connor; Wausau Bob Johnson; Insurance Federation of Minnesota David Oertli; Sedgwick Claims Management Kevin Gregerson; Wilson-McShane Tammy Lohman; Commerce Staff: Jamie Anderson Kate Berger Debbie Caswell Jim Feckey Ralph Hapness Beth Hargarten Cindy Miner Terry Mueller Cindy Valentine Teri Van Hoomissen Jim Vogel Jana Williams Visitors:

The meeting was called to order at 9:07 a.m., by Rob Rangel, who served as the chairperson. The Sept. 17, 2003, minutes were approved as presented. The Dec. 17, 2003, minutes are in the process of being finalized and will be available online on the department’s Web site soon. Assistant Commissioner Beth Hargarten noted that agenda items six and nine would be reversed and she would present agenda item eight about the rules update. Rangel provided information about building security and parking restrictions.

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9) Update on legislative initiatives Jamie Anderson gave a summary of what happened and what did not happen at the Legislature. She reported the Legislature did not really do anything, including workers’ compensation legislation. The Workers’ Compensation Advisory Council (WCAC) sponsored a bill that made it through six committees in the House and four committees in the Senate. The bill stalled on the floor of both. Hargarten noted the WCAC bill had a couple of sections that dealt with medical cost control measures. The Medical Costs Task-force met throughout the summer and fall of 2003. The WCAC put some of the task force’s recommendations in its bill and those provisions proved to be quite controversial. Specifically, language about managed care and expedited rulemaking got people quite active. The Department of Labor and Industry (DLI) is very disappointed the WCAC legislation did not go through. This is the second year in a row the WCAC bill did not pass through the Legislature. Commissioner Brener plans to meet with the two leaders of the WCAC, David Olson and Ray Waldron, in the next couple of weeks to discuss the future of the WCAC. Hargarten said this is unfortunate and noted she has worked with WCAC for many years and it was functioning quite well. It was keeping a lot of the vicious debate and politics out of workers’ compensation for a good number of years. The department does not want to have this conversation about whether the WCAC should continue to exist, but, given the fact that for two years in a row the process seems to be falling apart and the WCAC is not getting the respect from the Legislature that it had in the past, unfortunately, we do have to have the discussion about whether the WCAC should even continue. She will keep the Workers’ Compensation Insurers’ Task Force (WCITF) members posted about the status of the WCAC. Meg Kasting asked whether the voting in the House and the Senate was a close vote or whether it went handily through the committees. Anderson responded that they tend to vote partisan, but the vote was flipped in each body, with the DFL favoring the bill in the Senate and the Republicans favoring the bill in the House. She said there was very little rhyme or reason to it and they just didn’t know what to expect. The committees were tough, with debate in each. The final straw was in the last Senate committee, where they took out a big chunk of the bill about managed care and it, basically, made the bill fail. Rangel asked if the bill contained a provision about prescriptions. Anderson said there was language that had to do with pharmacy and it almost got overlooked. There was no debate on that section. Rangel asked whether some of these bills could resurface next year. Anderson said they definitely would; in fact, whatever happens, it is likely that some of those issues will resurface whether they come forward as another advisory council bill or in another bill. Hargarten noted that, along with these discussions, DLI talked internally about what the commissioner wants to do regarding possible rulemaking. She pointed out that this weekend’s editorial page, she believed it was in the Pioneer Press, was about the

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commissioner’s participation in the governor’s Health Care Cabinet. This Cabinet is made up of six or seven commissioners throughout the administration, discussing a wide range of issues, including: health care and medical cost, medical health care delivery and regulation. She believes it is the intent of the governor to come forward with some sort of broad legislation next year, so Commissioner Brener is involved in that group. He is also having those discussions about whether some of the things we talk about in the workers’ compensation arena should be included in the Health Care Cabinet proposals. Curt Pronk asked if the nurse and firefighter issues were passed by way of another vehicle. Anderson said they were attached to House File 2799, which is a Department of Employment and Economic Development dislocated-worker bill. They were attached late Saturday night, on the floor, by Sen. Ellen Anderson; when the bill got sent back over to the House, they conceded. Pronk asked if these two provisions are to be administered by workers’ compensation. Anderson said they would, assuming the governor signs the bill. Pronk asked whether the governor is not standing by the previous premise that if he got a bill that is not approved by the advisory council, he would not sign it. Hargarten said it could be interpreted that the council process is being bypassed. This was an unfortunate situation and it is hard to argue against the nurse’s provision that was in the bill. She did not think there was anybody that was opposed to that language. Some people are saying that without that language, it is inhibiting the nurses from actually taking the smallpox vaccine. She did not know to what extent that is true. She thinks the governor was in an unfortunate political situation. Hargarten said it became clear very late last week that the advisory council bill, as a whole, was not going to make it. Too many changes had been made to it, to the point where it really was not the advisory council’s agreed-upon bill anymore, and it was the choice of the council to just pull it from consideration. That gave some of the individuals that had provisions in that bill, particularly the nurses’ and the firefighters’ associations, a couple of days to really drum-up support for their provisions and get them pulled out and attached to some other sort of vehicle that was moving. There were discussions on Saturday afternoon about other options that could be available in terms of taking last year’s workers’ compensation bill and trying to get those provisions passed and about taking other parts of this year’s workers’ compensation bill and getting them in other bills and it did not happen. There are pros and cons to everything. After you start pulling portions out of the bill, you are favoring one group over another and it was something that business and labor wanted to step out of. Hargarten did not think the business community wanted to see pieces pulled out of the bill, but it was beyond their control at that point. The nurses’ association and the firefighters’ group got a tremendous amount of support at the Capitol and their provisions were not in any way controversial. There was really nobody who ever argued against their provisions that were in the bill and, so, they were successful in finding other vehicles to put those two sections on to. Pronk asked how Hargarten thought the commissioner’s discussions with David Olson and Ray Waldron would go. Hargarten stated she did not think any one of the groups, business, labor or the administration, wants to see the council disappear. It serves a very important function, but you have to be realistic about the fact that it is not working

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the way it has in the past. A lot of people tell a variety of interest groups that have issues with workers’ compensation that they have to go through the council. If you keep telling people they have to do that, that those are the rules they have to play by, that they cannot go directly to the Legislature, and the council – for two years in a row – does not work, you are essentially shutting the door to the Legislature for a variety of people, which is not a fair political process. They need to have access to the Legislature, access to the ability to have their voices heard and the ability to change the law. If you are funneling them into a process that is not working, that is just not right. Hargarten noted she has been here since 1995, and has put in a lot of years of work with the WCAC. She thinks it was working relatively well for a couple of years. However, one of the problems they are encountering at the Legislature is a lot of legislators are relatively new. They did not live through the 1992 and 1995 workers’ compensation reforms and they do not know what workers’ compensation debates are like without the council. They do not have an understanding about how awful it can be, how bitter and divisive, and what a difficult situation it can be. Some legislators do not understand the WCAC, what the point is of having it and why people cannot come directly to the Legislature with their legislation. They think it is not that big of a deal and everybody else does it. Hargarten does not want to see the council disappear, but she thinks we also have to be a realistic about whether it is working. Ultimately, that decision is up to the two major groups to the council – business and labor – and the DLI commissioner. 6) Assistant commissioner’s update Hargarten noted a task-force member asked for information about the rate of penalties for items that are filed via EDI versus the rate for penalties for paper FROI forms, at the September meeting. She reported the percentage for EDI was approximately 5 percent; the percentage for all other filings was approximately 4 percent. However, she noted the estimates include unaudited numbers, so even if the penalties may have been rescinded, they may still be included in these percentages. She also noted the numbers include one insurance company that had numerous problems, after a merger and some moving problems, that may have slightly skewed the numbers. Hargarten said they looked at the first quarter of fiscal-year 2004 and the percentages are closer, with approximately 4.8 percent for EDI and 4 percent for all others. 7) EDI business plan and web-enabled NOPLD Cindy Valentine, DLI chief information officer, noted EDI was discussed at the task-force meeting in September. Since that time, she received an assignment from Commissioner Brener to put together a business plan to expand DLI’s use of EDI in late November. Valentine sought input from staff members in the department’s Workers’ Compensation Division, as well as the International Association of Industrial Accidents Boards and Commissions’ (IAIABC) staff. The IAIABC did a survey of jurisdictions using EDI in March 2003, and had a lot of good data. Valentine also contacted some staff

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members in the IAIABC member jurisdictions that had the responsibility for EDI. In addition, she spoke with some task-force members or their staff. The plan Valentine wrote included technical solutions and identified associated costs. Most of the technical solutions included the purchase of hardware, software and costs for consultant time, as well as use of DLI staff members’ time. She also identified some business or nontechnical issues that would have the effect of creating issues or situations that needed to be looked at if DLI were to expand its use of EDI. The commissioner and Hargarten looked at the business plan and, as a result, there has been a decision to expand DLI’s use of EDI. Valentine noted the technical solutions that were going forward would include acquiring file transfer protocol (FTP) software and a new server, adding ANSI as an acceptable format and pursuing work with additional value-added networks (VANs). At this point, the agency works only with Advantis and occasionally has been contacted by other VANs that have insurers who are interested in working with us. Valentine said they would investigate Release 3 of the IAIABC format. Valentine reported they have purchased the FTP server and software. They hope to have that in place by the end of summer and will continue to pursue the ANSI solution as well. Valentine said, from a nontechnical perspective, they have become more involved in the EDI Council of the IAIABC. Minnesota has not been especially active in the past few years, but has recently started becoming more involved. She attended the AllCommittee Conference last month in Florida. Minnesota has a reputation for requiring a lot of data and the commissioner has asked us to look hard at the data that is required at certain points from the insurer community. DLI needs to balance ensuring it gets the data it needs, but also look at encouraging working with our customers electronically. As DLI goes forward with EDI, it is interested in working with insurers and hearing their perspective. Valentine left some business cards on the table and encouraged task-force members to contact her. She noted the commissioner has a fairly aggressive approach to this and said he is talking about implementing parts of the business plan by the end of summer. Pronk asked what the time of filing is currently. Valentine said the submissions are picked up from the mailbox at 7 a.m. and again at 4:30 p.m. If the FROI data gets to DLI before 4:30 p.m., it is date-stamped that day. If it comes in after 4:30 p.m., it is datestamped at 7 a.m. the next day. Pronk asked if EDI would be mandatory; Valentine said DLI would rather give its customers an incentive to participate. Rangel asked when the forms would be available. Valentine said if someone is willing to beta test the forms, the forms would be made available to that company and,

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hopefully, the forms will be available to everyone else within six months from then. She needs a customer out there using it so they can tweak it. Contact Valentine if you are interested in being a beta tester. 8) Rules update Hargarten provided the rules update. Kate Berger has been kept busy with the governor’s Health Care Cabinet and was unable to attend the task-force meeting. A request for comments for a possible amendment to the workers’ compensation vocational rehabilitation rules and a May 19, 2004, memorandum from Hargarten requesting an estimate of costs that would result from the rehabilitation rule changes being proposed were in members’ folders. Hargarten noted a request for comments about the Office of Administrative Hearings (OAH) rules was distributed to task-force members at the last meeting. She clarified that there are two sets of rules: one is exclusively an OAH rule; a smaller set of rules is the joint Labor and Industry and OAH rules. The joint rules are a lot of procedurally based rules about how you go about filing things and going through the hearing process. They cover the litigation and administrative conference process. OAH had asked for informal comments by April 30, 2004. A draft of the amendments is on the OAH Web site at www.oah.state.mn.us. The handouts distributed at this meeting dealt with rehabilitation rule amendments. A few years ago, DLI did a lot of work with the Rehabilitation Review Panel (RRP) about rehabilitation rules. In 2001, all rulemaking procedures were shut down. DLI is again looking at the rehabilitation rules and has had a couple of meetings with the RRP to review the changes that were being discussed in the past, to determine whether they are still valid. They made a few changes and a draft is attached to the memo from Hargarten. The request for comments was published Monday. A draft of the proposed rehabilitation rule changes is available on DLI’s Web site at http://www.doli.state.mn.us/comments_52200100_52201900.html. Any comments about the draft should be directed to Ed Spitler in the department’s Compliance Services unit. Hargarten asked task-force members to let Spitler know if they have any concerns with costs associated with complying with the proposed rules changes, so they can be made a part of the statement of need and reasonableness. The department hopes to get both sets of rules completed and in place by the end of the year. Task-force members were invited to contact Hargarten, Berger or Spitler if they have any comments or concerns. Hargarten thinks they are close to the final draft of the rehabilitation rules and they will be discussed at the RRP meeting that is scheduled for July 1, 2004. Those meetings are open to the public, so if anyone would like to come and talk to the panel or hear what the panel has to say about them, they are invited to attend the meeting from 1 to 3 p.m. in the Minnesota Room at DLI. If anybody has any questions, just speak up.

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10) Future agenda items Kasting noted the 2004 objectives item about advising the department about training needs caught her eye. Kasting has a seasoned staff, but training issues still arise. She asked if there are issues the division is seeing, as it reviews forms and has conferences, where the insurance community needs training. She would like to discuss training at the next meeting. Rangel asked Jana Williams for input about any trends where insurers might benefit from training. Williams said she and Jim Vogel just returned from two out-ofstate training trips for companies in Schaumburg, Ill., and Milwaukee, Wis. They had 60 people between the two training sessions. The newest trend causing a lot of trouble with multiple states is that adjusters are handling up to as many as 11 states and they have no idea how to handle the complexity of Minnesota’s workers’ compensation law. When they ask for a show of hands, about 90 percent of the people who attend their training sessions handle multiple states. Five or six is typical. The highest was an adjuster who had 11 different states. Williams said there is absolutely no way for an adjuster to keep track of the laws for all those states. This is the trend Williams and Vogel are noticing and she reported it is getting almost to a crisis level. For example, they had an adjuster from Illinois the other day who took a full offset for an overpayment. In Minnesota, you can only take 20 percent, but he took this person’s whole check. Williams called and told him he cannot do that. He was surprised, because that is what they do in Illinois. Williams thinks this is a disturbing trend they are seeing because of the relocation of the insurers. Compliance Services is trying to get out there as much as they can to educate insurers. They have had a lot of requests for training about how to use the PPD schedule. There are new adjusters out there who do not even know there is a schedule in Minnesota, and some of them adjust things for six months to a year before they know it exists, so Compliance Services will focus on PPD this fall. Williams asked task-force members to let her know if they see other problems. Members were asked to call Rangel, Wilson, Hargarten or Caswell with any future agenda ideas. Pronk asked Teri Van Hoomissen whether the state is looking at putting out new statistics for the system report. The last one was out in 2001. Van Hoomissen said they are still working on the report, because Commissioner Brener wanted more medical cost information in the report, and will finish the draft by June 30, 2004. It will contain information through 2002, because the data needs time to mature. Hargarten suggested the task force discuss medical costs and data collection at a future meeting. DLI does not have as much data as it would like.

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Tom McCarty asked if we could simplify the way claims are handled. It is a challenge to the claims person and is confusing to the injured worker. Claims costs are high. Other jurisdictions are more simplified and it is a win-win situation for all involved. When extra layers of rules are added, everybody gets more confused. Hargarten said the commissioner is always open to suggestions to simplify the process. She invited taskforce members to call her with suggestions if there are specific things they think are cumbersome or time consuming. McCarty noted Minnesota’s system is very formsintensive. Hargarten said some jurisdictions that are less forms-intensive do not collect data and stay out of issues such as rehabilitation. She has heard before that there are too many forms and DLI will have more discussions internally. Rangel noted these are good comments and they may overlap onto the subcommittee topics; he suggested members get involved in those subcommittees. 11) Paper reports Rangel reviewed the paper reports in member’s packets. McCoy asked if there are any important changes in the rehabilitation rule amendments. Hargarten said there are three areas that may impact costs. She mentioned she talked with Rangel about Minnesota Rules, 5220.0130, subpart 4. It provides for a penalty of $350 or $700 for failure to arrange a rehabilitation consultation within 15 days. Rangel asked how much of a departure this is from any previous penalties. Hargarten was not sure, so she will check on that and get back to the task force. The other item that may have a cost implication is .0410, subp. 11. This one talks about the insurer reimbursing the employee for auto mileage. You already do it, but it is indicating that it is now the IRS rate. This is what the medical rule currently says, so it is imaging that. The other one is .1900, subp. 1C, and this has to do with travel time. It would change the reimbursement to three-quarters of the hourly rate for travel time. The rules as drafted from two-plus years ago made a variety of changes and increases in rehabilitation fees. Commissioner Brener was not supportive of increasing rehabilitation fees or increasing any sort of reimbursement in the workers’ compensation system at a time when the costs are going up, so out of all fee increases that were proposed, this is the only one that survived in this draft of the rules. It is minor compared to where we were two years ago in the draft of the rules. The meeting was adjourned at 10:05 a.m. Respectfully submitted, Debbie Caswell Executive Secretary dc/s