Workers' Compensation Insurers' Task Force Sept.

15, 2004 Minutes Members present: Mary Beth Didion for Mary Abraham; Westfield Dennis Ballinger; Western National Robert Farber; Berkley Greg Jeans; Liberty Mutual Bob Johnson; Insurance Federation of MN Meg Kasting; State Fund Mutual Claire McCoy; GAB Robins Curt Pronk; Mayo Foundation Mike Johns; RTW Rob Rangel; Broadspire Gary Westman; State of MN, DOER Members excused: Cindy Van Eyll; General Casualty Mary Jo Wilson; City of Mpls. Penny Johnson, OAH Raymond Krause; OAH Tammy Lohmann; Commerce Lynn Miller; RTW Members absent: Jodie Connor; Wausau David Oertli; Sedgwick Laurie Simonsen; St. Paul Travelers Staff members present: Kate Berger Debbie Caswell Beth Hargarten Cindy Miner Cindy Valentine Visitors:

Co-chairman Rob Rangel called the meeting to order at 9:12 a.m. Task-force members and visitors introduced themselves. The minutes from the Dec. 17, 2003, and May 19, 2004, meetings were accepted as presented. The agenda was approved as presented. There were no announcements. 6) Assistant commissioner's update Assistant Commissioner Beth Hargarten noted the next Workers' Compensation Advisory Council (WCAC) meeting is scheduled for Oct. 13, 2004. They may begin legislative discussions at that meeting about where they might want go with a legislative package during the coming session. She informed task-force members there is a proposal regarding the Workers' Compensation Reinsurance Association (WCRA) on the agenda for the October meeting. It was introduced at the Legislature last session and proposes to move oversight of WCRA to the Department of Commerce. That bill was heard in a committee last year, but was not voted on. The committee chairperson asked that the WCAC look at WCRA, how it operates and how it is structured. Hargarten noted the Reinsurance Association of America (RAA) came to the WCAC Aug. 11, 2004, and outlined how they think reinsurance should be changed in Minnesota. The WCRA will make its presentation about how they operate and how they see reinsurance in Minnesota at the October meeting.

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Hargarten said Kate Berger would hand out preliminary draft rules and discuss proposed rules the agency has started to go forward with. They are changes in the managed care and pharmacy reimbursement area along the lines of what was discussed and put in the WCAC bill last legislative session. Hargarten announced the conversion factor would increase again this year on Oct. 1, by the producer price index – physicians' offices (PPIP), which is approximately 1.5 percent. It has been approved by the Office of Administrative Hearings (OAH). The adjustment for rehabilitation fees is 2 percent again this year, as it has been for several years. It will be effective Oct. 1. The qualified rehabilitation consultant (QRC) hourly fee maximum will be $83.77. The maximum hourly rate for job development and placement services will be increasing to $64.33. That is a 2 percent increase. 7) Administrative changes at OAH Hargarten noted Mary Jo Wilson asked that we have a discussion about some changes that are going on at OAH. Raymond Krause, the chief administrative law judge at OAH, was introduced to talk about the changes at OAH. Krause noted they have made structural changes at OAH. He began at OAH in February, as the chief judge, and started a process, working with the judges and the staff to re-examine their structure and processes to insure OAH is delivering the services it is designed to deliver in as efficient a way as possible after the budget cuts and staff reductions they have encountered in the past few years. They are adjusting to varying workloads in the workers' compensation area and other areas as well. They wanted to emphasize the settlement function in a much more direct and concentrated way. To that end, they are going back to a system where judges are in one division or the other. While the term for being in the settlement division is 18 months, it is not a permanent assignment. It is an "exclusive" assignment, meaning all those judges do is settlements for that 18month stint. Those judges have the option of rotating back into the hearing division after their 18month stint. Krause suspected some people will stay in the settlement division, because that is what they enjoy and do well. The judges view this as an opportunity that allows people to focus on settlement. Krause served on the Minnesota Tax Court before coming to OAH and, by way of comparison, the Department of Revenue has the function OAH has for workers' compensation. Without a strong settlement division over at Revenue, the Tax Court could not hear all the cases that would occur. He is a strong believer in a professional and focused settlement division. They felt that by not being pulled back and forth between the settlement and hearing divisions, judges could focus more on the division they are in. This also allows them to set up performance measures. The judges are interested in the performance measures, but it was difficult to do when going back and forth between two types of operations. They can now set goals for the settlement judges and work toward those goals Krause noted this method also removes a concern the judges have about having people rotate on a daily basis between settlement and hearing. How active of a settlement judge can you be when that case you are trying to get settled may end up before you in a hearing? The judges, rightfully in Krause's opinion, are uncomfortable with pushing for a settlement and then when that does not work and that case comes before you for a hearing, you may be viewed as prejudiced for having gone through the settlement process. This would pretty much eliminate that from happening. That is the major change.

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Krause said they have tried to change the scheduling system so the judges have more influence on how things get scheduled. With the system they were using, it was hard to block-assign a case, so that when a judge was assigned a case they would have everything from the first prehearing and all the way through. They thought it would be more efficient and would cut down on the number of continuances and on the number of misunderstandings when a case bounces from one judge to another before it actually gets to a hearing. They are now block-assigning cases, so as soon as it is certified to the hearing division, cases are assigned to a judge and all of the prehearings and the continuances stay with that judge; there is no incentive for an "ugly" case to be continued and hope another judge gets it. The incentive is to face it straight up, deal with it and move it through the system more quickly. Hopefully, this will not affect the practice before them in any significant way and their customers will not notice any changes. These are internal structural things that will allow them to deliver the service more efficiently and keep the process moving at a pace that gets these cases heard in a timely way throughout the system. Meg Kasting asked it they had actually made the divisions yet. Krause said, because their cases are set so far out, they are still working through the cases that had already been set. They know who is going to be in which division, but that will not happen until November, so they can work through the cases the judges who are going into the settlement area already have on their calendar. Kasting asked if there would be an announcement in November about which judges are in each division. Krause said they could and noted there would be five full-time judges in the settlement division, which is one more than they currently have doing settlements now. He believes the better job they do with settlement, the faster and more positive the resolution of cases will be. Also, it is more time-consuming for cases to go through the hearing division, so they will focus on settlement and only do those cases in hearings that really require a hearing and cannot be settled. Rangel asked Krause what his goal was on the timeframe for hearings by November. Krause said they set their cases in the settlement division about five to six months out, because of the statutory time allowed for getting the IME in and cases are just not ready to be discussed seriously before that. If they do try to push it earlier, they end up resetting the cases. If a case goes through settlement and the parties decide no settlement is possible and it gets certified to the hearing, they are willing at any point to have it go back to settlement or the mediation department there, or elsewhere if that is what the parties want to do, if something changes and the parties decide to take another crack at settling the case. Being certified to the hearing division does not mean that is your only option. They are still happy to work out a settlement. After a case gets certified, their goal is to have cases set for their first hearing in no more than six months. It takes that long to get the depositions and medicals, etc. It has not been practical to do it sooner than that and, in their experience, they end up getting resets all of the time if they push it sooner than six months. He noted, with their compliment of judges reduced by six, that is practically as much as they can get. If you put the two together, you will have 13 months or so, from the time the claim is filed until the case goes to hearing. That is where they have been running and they hope to continue to do that and, where they can, improve upon that. To give some perspective, Krause noted three to four years ago, it was 16 to 18 months before you got to a hearing. They have been able to get that down to 12 to 13 months statewide in the past two or three years. Doing that is not only a nice accomplishment, in Krause's opinion, but is fairly remarkable with the budget, staff and judge cuts. They have actually improved the time to hearing period with six fewer judges than they were doing 16 to 18 months ago. Rangel asked how many hearing judges we currently have. Krause said there were 24 and that includes the five they have in settlements.

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Hargarten asked if they have ever talked about judges from the traditional OAH side doing any of the workers' compensation side of the work. Krause said they had, but part of the problem has been to get them trained to be able take on workers' compensation. That is an option they are looking at, particularly as may be the case, if they are putting a greater emphasis on settlement and the .239s and the .106s. Then, he thinks there is a good opportunity to bring some people over from the administrative law side and help on the settlement side. He thinks their transition is easier and you can do that more quickly than you can get trained to do the full-blown hearings. Krause said he was told there was some interest in the caseload at OAH and he pulled some statistics together. From fiscal-year 2003 to fiscal-year 2004, the number of hearings set has stayed flat. It was 4,600 in 2003; it is 4,800 in 2004. The number of hearings that actually took place was, again, flat at 1,000 vs. 1,013. He reported that what has gone down is the number of conferences set and held, and that is one of the things they are concerned about. He would like to see that, as a proportion of the number of total cases, not go down and to see it continue to be a large part of the total case percentage. Everything else has stayed fairly flat. The only thing that has gone down is the number of judges. What you can also see from the statistics is the number of cases per judge, on average, has gone up from 40 full-blown hearings to 50 a year, per judge, and from 130 conferences to 145 conferences a year, per judge. If you add the two together, the 50 and 145, their judges are doing 195 individual cases a year, per judge. Flopping back and forth between settlement and hearing, you can see by those numbers, that does become distracting and is why he wants to focus people on one or the other. Farber asked about the emphasis on the settlement aspect of OAH and whether they can expect changes with regard to making sure all parties are present at the conferences and ready to actually settle the case versus what he has seen in the past. At one point, there was something in statute, years ago, about fining the parties for not being prepared to discuss the cases. Krause said yes, and added they are trying to address that in the hearing division by having the cases blockassigned to a judge in the settlement division as they come in. That judge knows that will be his or her case, and you get it when it comes in the door, not the day before the hearing. The judge has an opportunity to call the parties to say, "Your date is May 13, are you going to be ready?" You know that is the judge you are going to stay with, so if you are not going to be ready, there is more incentive to be forthright about that right up front to change the date or get ready, than there is currently because right now, if I say yes, and come the day, and I want a continuance, I am likely to get it and it will probably go to a different judge anyway, so no hard feelings and we move on. Whereas under this system, you will stay with that judge and if you tell the judge you are ready and you are not, you will have to live with the consequences. Krause said as they certify cases to the hearing division, they are going to have a review process for a "holding pen" where, if you have exhausted your settlement remedies and you are not going to settle, but you are not ready for trial, OAH will not set the date. They will put the case in the "holding pen" until they certify it is ready for trial. They are trying to ensure the case is ready to go and the cases can be moved through and they will have fewer cases fall away for not being ready. There are only so many judges and so many hours in a day. If a judge is ready for a fully blocked day, and most or half of the cases go away because they are not ready, it is an inefficient way to get the cases through the system, so they are trying to minimize that. Mike Johns commented that with the five settlement judges, they would see the trends, such as certain attorneys who are delaying things or holding up the process. Krause agreed that when you

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have the same judges in that small group, they are going to know who is ready and who is not ready. Johns said if the judges could push them to get ready or to continue the cases until they are ready, so that everyone is not wasting their time, it would help them a lot. Krause said that was a very big issue for them as well and that is why they are focusing on that. It is a terribly inefficient use of their judges’ time, as well as the insurers time, so they are trying to find ways to minimize that, without infringing on the parties, to do the work they need to do to get prepared. Curt Pronk asked for a couple of examples of the performance measures OAH looks at. Krause said that is still a "work in progress." The settlement division has been meeting the past few weeks, and he is meeting with them the end of next week to talk about performance measures for them. One of those measures is going to be whether the caseload is moving through on the timeframes they are working toward. There will be others, too, but they have not yet agreed on what those are. In the hearing division, each judge will have a performance measure for whether they are getting their hearings scheduled in six months or less from the time it hits their queue on the computer as certified and assigned to that judge. It is then the judge's responsibility to get that set for the first hearing in less than six months. If you do not, you need to document why, such as if the parties are not ready and have asked for a continuance. That is fine, if the parties are agreeing to delay it, not just the judge was not ready to hear the case. Now that they understand how the system will work, they will have discussions, beyond those two obvious ones, between now and November. 8) Rules update Kate Berger gave a brief update about the rehabilitation rules. Those rules were approved by the Rehabilitation Review Panel (RRP) at its most recent meeting. The department just got the final draft from the revisor. The most recent draft is available on the Department of Labor and Industry's Web site. They have to obtain approval for the rules from the governor's office and the Department of Finance. They will then publish and mail the Notice of Intent to Adopt Rules and then the official 30-day comment period will begin. Their goal is to do that in October or November. Members of the task force will receive a copy of the intent form. The second and third sets of rules are the pharmacy rules and the managed care rules. Copies were provided in members’ packets. Berger recalled last fall the department had a medical task-force that made some recommendations about pharmacy costs. This rule, 5221.4070, to a certain extent, tracks those recommendations, although not exactly. Subpart 3, starting on line 34, establishes a new formula for determining payment for outpatient drugs. The dispensing fee, per drug, is, as recommended by the task force, at $3.65 per medication, plus the lower of the average wholesale price of the drug minus 11.5 percent. The task force recommended 86.5 percent, because that is what they thought the Department of Human Services (DHS) was going to use, but that changed, so it remains at 88.5 percent. The lower of these three items are basically the formula that is in Chapter 256B. Berger reported the third item was the usual and customary price charged to the public. Items B and C are just simplifying that again and referencing a statute. Meg Kasting asked about Minnesota Statutes, §256B, and how often an update has been published about the maximum allowable cost (MAC). Berger said it was quite frequent and distributed a copy of their model from the State Register. Sometimes they only update one drug, but other times they publish a whole list.

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Berger said the third set of rules was the amendments to the certified managed care rules. It has been 10 years since they were last amended, but they tried not to "go overboard." She gave a brief overview. On page 13, it requires the managed care plan, in their annual report, to give the department the number of employers and employees covered as of June 1. The department gets questions all the time about how many people are in managed care and have not been able to track that number, so they are going to try this to make them accountable. They also get questions from the employees about whether they are covered by managed care, but cannot get that information. With this, they would have that information. Hargarten noted this was not a final draft and said they are planning to discuss the proposed rules at the Medical Services Review Board (MSRB) meeting Oct. 21, 2005. Berger said they were also going on the Web site today. They have published a Request for Comments, which was in COMPACT and in the State Register. Berger's and Keogh's numbers and e-mail addresses are listed on the second page of the Request for Comments for the pharmacy and managed care rules; Berger invited task-force members to contact them with any comments or questions. She also urged members to check the department's Web site for changes to the proposed rules as they occur. The third set of rules is the OAH and litigation rules. They consist of two parts: the joint rules between the two agencies and the rules OAH is promulgating itself. Penny Johnson, OAH, was introduced and gave a brief review of these rules. Berger noted the executive summaries for both rules were in the members’ packets. Johnson noted these rules are 21 years old and were well overdue for an update. Most of the changes are simply bringing them up to date and eliminating some unnecessary items that clutter the rules. They are trying to keep it simple and up to date. They are almost ready for publication as proposed rules and they will then go to the governor's office for approval, after which they would be published as proposed rules and sent to everyone on the mailing list and others they have gathered on an additional list. These rules are also on the OAH Web site and members were invited to view a current draft at www.oah.state.mn.us – click on workers' compensation, there is a link to the proposed rules. The Statement of Need and Reasonableness (SONAR) will be there soon too. Johnson said there are two sets of proposed rules. They are taking the joint rules that are now in Chapter 1415 and making a division, keeping the joint rules in 1415 that relate to things that the Department of Labor and Industry and OAH have joint authority over, such as filing procedures, notice to potential parties, attorney fees, etc. The rules that relate just to the litigation process at OAH are in a new set of rules in Chapter 1420. Johnson did not review the proposed rule, but noted the executive summary explained the highlights and items such as where to file the documents when you have three different agencies. They also deal with exhibits and that is a change you should be aware of. After rules are effective, if they are adopted in their current form, the exhibits would be destroyed after 60 days if nobody comes to get them, so there will no longer be the process of sending letters, etc. If there are any original documents you really need, you should pick them up after a final decision. Attorneys' fees are consolidated into one rule, with a few minor changes, instead of having a Department of Labor and Industry rule and an OAH rule. It covers notice to potential interveners, with some clarifications to try to make it less burdensome.

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Johnson said the OAH rules change the pretrial procedures a bit, requiring a demand for settlement one week before the settlement conference. That is already the current procedure they are expecting the parties to do, but it is not formally in the rules, so they are adding that and hoping to get that dialogue going before the parties show up, so they are prepared and have a summary, so the insurer knows what all the claims are and there should be a response. The insurers will be expected to respond to that demand 24 hours before the conference. There is a rule on Parker Lindbergh hearings, where there is agreement from some parties but not all of the parties. This is OAH's best effort to get a single procedure for all cases, so you know what happens and when, and the rule lays that out. They added language about disclosure of surveillance to try to eliminate the "trial by ambush." The general rule is that information gets disclosed ahead of time, including surveillance evidence, and there are some exceptions to that. There are some clarifications in the rule about removing judges, either as a matter of right in a request for reassignment or with an affidavit of prejudice. It is basically the same, but is just tweaked a bit. Johnson pointed out one difference is there is not a second chance to ask for a reassignment if the case comes back to the same judge. When the case is block-assigned and you have one hearing with that judge and then it comes back a year or two later, it goes back to the same judge and, assuming that judge is available, it is still going to be blockassigned with that particular judge. Johnson noted someone asked earlier about settlement conferences and whether OAH can ensure people are prepared. Sanctions are one of the methods for dealing with that. They do not anticipate issuing a lot of sanctions, but, where it is necessary where someone is chronically unprepared, a sanction can be issued. Cases can be stricken from the calendar if they are simply not ready to go and should not just be hanging out there for months and years. There is also a provision in the rules about notifying OAH about cancellations. They have had some problems with having to pay court reporters, security personnel and interpreters when everybody else knows it is settled but somehow OAH did not get the word. There is a provision to cover that with a small fine to cover their costs. Johnson asked members to take a look at the rules and asked for any comments earlier rather than later when it is harder to make changes. 9) EDI/IAIABC update Cindy Valentine, chief information officer, noted she was before the task force in May and talked about the business plan they put together to expand the agency's use of EDI. Since then, they have made steady progress. In their plan, they identified the need to acquire file transfer protocol (FTP) servers and software in an effort to allow insurers to send the First Report of Injury form via EDI without the need for a value-added network (VAN). They have acquired and installed two FTP servers and the software. These are being tested by technical staff. The agency has identified, with their concurrence, GAB Robins as a tester. They hope to have them sending FROI forms to DLI in this way by the end of the year. In her May briefing, Valentine talked about investigating the IAIABC Release 3, which is a new version of the First Report of Injury (FROI), with the additional data and expanded field sizes. Since then, they have decided to move forward with migrating to this version. Internal staff members did side-by-side reviews of DLI's current Release 1 data elements and the layout, and that of Release 3. Based on this analysis, they recommended going to Release 3. They have had discussions internally about the changes they need for the Workers' Compensation Division, as well as with their

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partners at OAH. In general, people are happy with the idea of receiving additional data, as well as some expanded data. The migration to Release 3 is a major technical undertaking that will require resizing their database and making changes to more than 200 screens and data windows in applications used throughout the Workers' Compensation Division and OAH. They are currently working on the project plan and Valentine is hoping this will be accomplished in another six months or so. They have identified a VAN called Red Oak Electronic Services (ROES), which is a VAN SafeCo uses, as a potential beta tester. ROES recently participated in a successful rollout of Release 3 with the state of West Virginia. In May, Valentine noted she talked about creating a Web application for the NOPLD form. They still plan to do this, but following the May meeting, they received a suggestion from George Poulin from Liberty Mutual. He suggested Minnesota look at the Web site the state of Wisconsin provides for its EDI clients. How this works is, a trading partner that sends DLI FROI data using EDI can see that data populated on the Web page. That insurer can then go in and add the additional information that is on the NOPLD or other subsequent reports. It also allows the insurer to see the status of the FROI, such as whether DLI received it and if it has been accepted. Before DLI does anything more with the Web application for the NOPLD or additional subsequent reporting, DLI will be doing some investigating with their colleagues in Wisconsin, as long as their goal makes sense. Valentine reported Minnesota continues to participate at the IAIABC EDI Council level. Two staff members attended the recent convention in New York City. One of the highlights at the convention, from an EDI perspective, was a request by a group of insurers to remove 33 data elements that had been agreed to in Release 3. Minnesota is currently participating in polling and voting to resolve this issue. The most recent edition of COMPACT featured an article about DLI's stepped up EDI efforts. Kasting asked about the IAIABC, Release 3 and testing it for the ROES VAN, presuming DLI goes with the IAIABC with Release 3, and whether that could also be served by FTP servers. Valentine said it could. Kasting asked for a sense of what the 33 elements were that the insurers asked about. Valentine said that, of the 33 that were being requested, there were probably 10 that Minnesota felt it absolutely needed. One was the UI number, one was insurer FEIN and one was different pieces of data related to the employer mailing address. Valentine said it was medical provider information and some other things; she could send that information to members if they are interested. Bob Johnson asked how much of the market today comes in and uses EDI for FROI forms. Valentine responded DLI gets about 15 percent of them electronically. There are other states that get up to 40 percent and places where it is mandated the number is 98 percent, so Valentine noted Minnesota has a ways to go. Johnson asked whether any of the top 10 companies in the insurer market were in that 15 percent. Valentine did not have the information, but said she could send him a list of who the partners are.

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10) 2005 meeting schedule Hargarten pointed out the 2005 meeting schedule in the meeting packets. They are not exactly every three months, because they have been trying to work around the availability of the Minnesota Room, other advisory council meetings, Caswell's growing workload and session. She wanted to get the middle of session at the March meeting, so the task force will know what is happening at the moment, and a meeting after session, to let them know what did happen; that will be the May meeting. [Please note the Aug. 17, 2005, meeting is now set for Sept. 21, 2005.] 11) Future agenda items There were no suggestions for future agenda items. Rangel asked members to call if anything comes up. 12) Paper reports Rangel pointed out the paper reports, which included an update about case law and the Minnesota Workers' Compensation System Report. Hargarten pointed out the report was only the executive summary and the table of contents, instead of copying the entire report. The full report is available on the department's Web site if anyone wants to review the entire document. Rangel pointed out the next task-force meeting is scheduled for Wed., Nov. 17, 2005. The meeting was adjourned at 10:01 a.m. Respectfully submitted, Debbie Caswell Executive Secretary dc/s