Worker’s Compensation Insurers’ Task Force December 17, 2003 Minutes

Members Present: Kris Andrus; The Travelers Indemnity Company David Clark for Dennis Ballinger; Western National Dave Dolsky for Robert Farber; Berkley Administrators Greg Jeans; Liberty Mutual Mike Johns; RTW Mark Arrington fro Meg Kasting; State Fund Mutual Claire McCoy; GAB Robins Rob Rangel; Risko Claim Services Laurie Simonsen; The St. Paul Companies Gary Westman; State of Minnesota Mary Jo Wilson; City of Minneapolis Members Excused: Greg Coon; Grinnell Mutual Reinsurance Curt Pronk; Mayo Foundation Members Absent: Mary Abraham; Westfield Group Jodie Connor; Wausau Robert Johnson; Insurance Federation of MN David Oertli; Sedgwick Claims Management Cindy Van Eyll; General Casualty Staff: Jamie Anderson Kate Berger Debbie Caswell Beth Hargarten Cindy Miner

The meeting was called to order at 9:17 a.m. by Mary Jo Wilson as the co-chair. Members and staff introduced themselves. Assistant Commissioner Beth Hargarten made announcements about building security at the Department of Labor and Industry (DLI) and parking restrictions. Wilson pointed out the 2004 meeting schedule for quarterly meetings for the Workers’ Compensation Insurers’ Task Force (WCITF) in the members’ meeting packets and asked them to put these meetings on their calendars. 5) Assistant Commissioner’s Update Hargarten noted that the last time the WCITF met there was a question about rumors that the Office of Administrative Hearings (OAH) has a serious backlog. She reported that Commissioner Scott Brener spoke with Acting Chief Administrative Law Judge Bruce Johnson. Johnson assured the Commissioner they are not backlogged in the Minneapolis office. They have had some delays in the Duluth office, which they expect will be resolved by early 2004. They are making some shifts around in terms of staffing but Johnson assured the Commissioner there are no backlogs at OAH. They are on the same time lines that they have been on for a number of years. In fact, they sampled a

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four-month period in FY ‘03 and they conducted 12 more benefit hearings this year than they did for the same time period the previous year with more staff. Wilson noted Cindy Miner handed out information about EDI FROIs at the last meeting. Hargarten pointed out a correction to that information in members’ meeting folders. As part of the larger discussion, Hargarten stated that DLI’s Chief Information Officer, Cindy Valentine, has been working on an EDI Business Plan at the request of the Commissioner and she submitted some ideas to him. Brener is reviewing those ideas right now and Hargarten hoped to have a more substantive discussion about the agency’s EDI Business Plan at the next WCITF meeting. Hargarten pointed out updated organization charts for DLI’s administration and also charts for the Workers’ Compensation Division broken down by unit in members’ packets. She noted that last time the WCITF met the department was in the process of merging the Investigative Services Units and the Special Compensation Fund and were searching for a director. Jim Feckey was appointed as director of the combined units. Phil Moosbrugger is still at the agency and is working in the Customer Assistance unit. Hargarten pointed out the Request for Comments notice about Joint Rules for DLI and OAH in members’ packets. This endeavor has been in the works for quite a long time. Kate Berger at DLI and Penny Johnson at OAH have been working on these rules. The rules have not been revised for 15 or 20 years. Hargarten invited Task Force members to give their comments to Berger when she joined them for the next agenda item. 6) Federal Terrorism Law Discussion Hargarten said that Wilson asked the department for information about the new Federal law, or directive, that talks about imposing penalties upon insurance companies or other individuals that provide insurance proceeds to individuals who are on the Federal Government’s terrorist list. She introduced Kate Berger to report her findings to the Task Force. Berger noted she reviewed material from the Office of Foreign Assets Controls (OFAC) Web site and discussed the relevant laws with an attorney who works for that agency. The OFAC is a division of the United States Department of Treasury and it administers and enforces economic and trade sanctions against countries, organizations and individuals who are on their terrorist list. It is based on a number of Federal statutes and Presidential Executive Orders. The OFAC is not new and was not created in response to September 11, 2001. Berger distributed a copy of information she printed from the OFAC Web site. She noted the sanction programs are listed in the materials, and there are information sheets on each one of them. The sanctions programs most relevant to the workers’ compensation insurance industry are the narcotics trafficking and the terrorists programs.

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Berger said the OFAC has identified the names of more than 5,000 Specially Designated Nationals (SDNs). The lists are updated at random intervals, up to three times a week. All United States citizens and companies are prohibited from doing any business, including insurance transactions, with any person or entity on these lists. The penalties for doing so can be significant. Page four of the OFAC question and answer handout refers to criminal and civil penalties of up to $10 million. The OFAC has posted information on requirements for the insurance industry, including frequently asked questions, and Berger included that in the packet as well. One question is: “A workers' compensation policy is with the employer, not the employee. Is it permissible for an insurer to maintain a workers’ compensation policy that would cover a person on the SDN List, since the insurer is not transacting business with the SDN, but only with his/her employer?” And the OFAC answer is, “If an insurer knows that a person covered under the group policy is an SDN, that person’s coverage is blocked, and if he or she makes a claim under the policy, the claim cannot be paid. If an insurer does not know the names of those covered under a group policy, it would have no reason to know it needed to block anything unless and until an SDN files a claim under that policy. At that point its blocking requirement would kick in." Berger said there are a number of ways that companies comply with these requirements. The OFAC Website does publish the names and updates them but because the lists are so large and change so often some large insurance companies subscribe to some commercial software packages that provide automatic updates in matching names. The attorney she talked to at the OFAC indicated that industry groups would sometimes pool their resources and do a contract as an industry rather than individual companies. Also, OFAC staff will travel throughout the country doing seminars and workshops, so if anybody is interested in hearing from them directly they should call the OFAC hotline listed in the materials to arrange a workshop. Berger asked members if anyone else was aware of the OFAC and what their experience was. Rangel commented that Risko Services has been checking this list for about three years. Risko Services was created and owned by CNA Insurance Company and recently sold off as of June 1, 2003. Initially, every time a First Report of Injury came into the office, whether it was medical-only or a lost time claim, they were manually checking the name against the OFAC list which, as Berger indicated, can be updated anywhere from one to three times a week. They created a special stamp for the back of the First Report so they could verify they had done this in case they ever needed to go back and review it. That system has been automated within CNA but they are still checking the list manually at Risko. Rangel noted it was his understanding that one of the CNA offices out on the East Coast apparently was in non-compliance and ended up with some stiff penalties to the tune of over $300,000. He did not know all the details but shared this information as an “FYI”.

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Wilson said information about the OFAC came to the City of Minneapolis via a marketing call with the new index bureau system. A new company took over the Chicago Index Bureau system and one of the offerings they had was the OFAC check. They were told they needed this check because there was a million dollar fine. Wilson went in to look at the Web site for the SDNs and could not tell by the name if she was even looking at the right one. There is an inexpensive program on the Internet you can sign up for where you go down the list of what you want on your request for the index bureau system and you can hit OFAC check. The City of Minneapolis is not at that point yet but Wilson hopes to use this service. They have a lot of claims, they have a lot of immigrants and they need to check all of the names. Berger stated that her contact at the OFAC said that there are names on the drug trafficking list of people who live in our country. She was not so sure about the people on the terrorism list but it was very possible. Berger noted we were talking about individual claimants but the law has a much broader range than that. It also prohibits companies from issuing an insurance policy to anyone on the list and making payments to banks that are on the list. So it is not just individuals who are listed. Berger asked if anyone else had any experience with the OFAC list. Claire McCoy said she was under the impression it was more of a monetary transaction so she thinks their transactions are screened through the bank system where the checks are actually issued. She noted that just because somebody presents a claim that does not necessarily put them on this “radar screen” unless you are making a payment to them. She could be wrong about that. Rangel and Wilson agreed. McCoy said she had forgotten about this because it was an issue at one time and they were wondering what they were going to do about this. The home office took care of it and it went through the banking system. They screen where the checks are going, the addresses and the names the checks are issued to. She is going to check to make sure. McCoy noted the list changes constantly. The name might not be on the list when you have a claim that is reported but then they may show up on the list later on at another payment point. Berger noted the attorney she talked to at OFAC said they are often asked whether you can rely on somebody else to do this. He indicated that they look at what is reasonable under the circumstances, but that relying on somebody else in the stream of commerce is not necessarily going to protect you; each company needs to make a decision about whether or not that would work. Wilson said that is why they thought they would give the responsibility to their Treasury Department. They are the ones that actually cut the check so it would not even get to the bank. It would stop there if it had to. Rangel asked if DLI was in compliance with their employees. Hargarten said that would be something DLI would have to discuss with the Department of Finance because they issue the checks on behalf of Labor and Industry. She will talk to Finance and follow-up with them and let Westman know.

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Rules Discussion Berger asked if anyone had questions about the Joint Rules. DLI anticipates a draft will be published on the OAH Web site by the end of December. This draft is not yet being published as official proposed rules, where there is a 30-day comment period. It is a preliminary draft and the agencies are asking for your thoughts. Berger pointed out that right now there is just one set of joint rules in Chapter 1415. The proposed rules on the web site will show possible amendments to the existing joint rules, and also a separate set of proposed rules unique to OAH. Rangel asked if anything really stands out as a significant change such as timeframes. Berger said there are a number of rules on interveners. The OAH rules also address expedited hearings and procedures. Some of DLI’s rules on administrative conferences are moved to the Joint Rules to standardize procedures between the two agencies, since OAH also holds administrative conferences. Rangel asked if there were any changes in the time frames to respond to a claim petition or in the time frames for discovery. Berger said there are some new rules on surveillance in the OAH rules and there might be some timeframes in there. The draft joint rules also require documents to be filed with the department unless OAH action is required within 48 hours. Fax filing is permitted. Hargarten announced DLI is also in the process of working on revisions to the rehabilitation rules. There was a draft of the rehabilitation rules that was around two years ago and has been sitting on the table since then. Since Commissioner Brener has come on board, DLI is restarting the discussion in conjunction with the Rehabilitation Review Panel (RRP). The draft of the rules is on DLI’s Web site under the Rehabilitation section, along with some suggested changes from this agency. The RRP will be meeting January 8, 2004, to have further discussion on the rules, refresh their memory and see what things they may still like about the rules, and some things that they may want to change since two years have passed since the last draft was done. DLI is moving forward with these rehabilitation rule changes but they are still in the discussion phase with the RRP. Hargarten invited members to give her input and she would share it with the RRP on behalf of either an individual or as the Task Force. She noted Dennis Ballinger is a member of the RRP and he is another contact for the Panel if you have something particular you want to share with the RRP. She did not anticipate the RRP will wrap things up at the January meeting and would probably extend it into their next meeting, which is probably in April. The RRP will be meeting on a quarterly basis. These meetings are open to the public. The next meeting is on the January 8, 2004, from 1:00 p.m. to 3:00 p.m. in the Minnesota Room. Meeting times and dates for all of DLI’s Advisory Boards and Councils are listed on the Web site by clicking the Advisory Boards and Councils icon on the home page.

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7) Revisit the Objectives of the Task Force Discussion Rangel noted that at the last meeting copies of the Task Force’s mission statement and 2001 objectives were distributed. Members were asked to look at these documents and offer feedback at this meeting. He asked if there were any comments and changes regarding those statements. It was decided that the Mission Statement still covers what the Task Force does and would remain the same. The Task Force members discussed the 2001 Objectives and made the following changes to update them: 2) To assist the divisions in its on-going forms redesign efforts. A subcommittee was formed. This objective is to remain on the list as an inactive subcommittee so we know whom to call. Work on the standard forms has been completed. Legal forms will be added. 7) To assist the division in the development of disbursement mechanisms in the expenditure of the $325 million Assigned Risk Plan (ARP) transferred proceeds. This objective has been completed and will be deleted. The subcommittees were reviewed and it was decided the ARP Settlement Subcommittee’s work is done and it will be disbanded. The NOPLD Penalty Subcommittee did not make any progress but will remain available. Rob Rangel and Greg Jeans will be added to the list. The Forms Subcommittee will remain as a standing committee the department can use if it needs input for forms only. The subcommittee finished its work on the First Reports of Injury and will remain available to work on legal forms. An EDI subcommittee will be formed in the future if it is needed. A new subcommittee list will be distributed at the next meeting. Members recalled earlier discussions that occurred regarding members’ concerns about when an NOPLD is due and whether it must be mailed by the 14th day, or received at DLI by the 14th day. It must be received by DLI on the 14th day and a statutory change would be needed to change this to the NOPLD must be mailed on the 14th day. If the WCITF would like to discuss a possible legislative change it would need to wait until the 2005 session, as most legislative proposals for this session are already complete. Discussion occurred about setting up a subcommittee to make recommendations or suggestions to the Workers’ Compensation Advisory Council (WCAC) from the WCITF. Dolsky suggested the WCITF form a legislative subcommittee to look into relief from currents parts of the law where results in the courts are not equitable for insurers. There was a recent case where an illegal alien was entitled to benefits. This affects insurers and would be a worthwhile issue for the WCITF. Johns remembered the case and said they discussed the issue with the commissioner at the time, but the commissioner did not want to it take on with all of the ramifications involved. He seconded a suggestion to interact with the WCAC rather than get the information

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afterwards. Wilson clarified that the WCITF would then submit any recommendations to the WCAC as a group. Dolsky was sitting in for Robert Farber and was to discuss his participation on a subcommittee and report back. Wilson announced she would like to step down as a co-chair since she has been a co-chair for some time and asked members to contact her or the department between now and the next meeting if they are interested in volunteering. She wants to give others the opportunity to serve in this role. 8) Follow-up EDI Discussion Hargarten noted members asked for cost information about Advantis at the last meeting. She checked with Marybeth Stoltz who said the cost depends on the package you purchase from Advantis so members should contact Advantis for that information. Hargarten said someone asked about penalties and the amount of penalties that are assessed for FROIs that come through via EDI versus those that come through on paper. DLI’s Information Technology Services unit is working on converting from the Mapper system to Informix and that has been absorbing their time. When that project is done, there will be more staff available and it will be easier to pull the data on Informix that DLI needs to answer that question. Hargarten anticipated the information would be available at the next meeting. Hargarten noted WCITF members expressed concern at the last meeting about how often DLI retrieves the EDI data it receives. It used to be retrieved once a day, early in the day. DLI is now pulling the data off the system twice a day, at 7:00 a.m., and again at 4:30 p.m. 9) Update on Medical Costs Task Force Hargarten pointed out a printed version of the PowerPoint slide presentation for the Medical Costs Task Force. She characterized it as the “executive summary version” of what was presented to the WCAC. There are many more in depth slides on the department’s Web site at http://www.doli.state.mn.us/medcost.html and extensive information about numerous presentations and testimony. The recommendations of the group are not completed yet but Hargarten expected them to be out by the first of the year. They did not take votes on the issues, but submitted individual recommendations regarding DLI’s recommendations and some Task Force members made their own recommendations. The department is compiling the information about each recommendation, such as recommendation #1, no one agreed, or 10 people agreed, or a list of alternative suggestions to agency recommendation #1. This information will be submitted to the WCAC to begin in depth discussions at its January meeting. Hargarten suspected the WCAC will not make a final decision about what will be in its legislative package until the February meeting. She expected there would be in depth discussion on medical costs issues at the January and February WCAC meetings.

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Hargarten introduced Jamie Anderson, the department’s new legislative liaison. She joined DLI about a month ago. WCITF members were invited to call her if they have any questions about legislative issues. She has a background in legislative issues and is very familiar with the legislative process. Most recently, she was the Committee Administrator for Representative Bob Gunther who chairs the Budget Committee that DLI’s budget goes through. Wilson asked if there are any other workers’ compensation changes being proposed. Hargarten noted this will be a short session and it begins on February 2, 2004. She said the Committee deadlines were coming up quickly, probably the first week in March. Those deadlines would be set when session starts. DLI hopes the WCAC has an agreement about what will be in its bill and DLI continues to work with all the parties, including medical providers, hospital associations and pharmacy groups, to come to an agreement. Hargarten said they would most likely not get an agreement on all of the topic areas, but perhaps there would be agreement on some items this year, then debate over the summer about any remaining items for the 2005 legislative session. She wished the department and the WCAC had more time, but they were under some time deadlines that were set by the legislature and were working with very complicated issues. DLI will continue into the 2005 session to grasp and discuss the issues. Hargarten announced WCAC meetings are scheduled on Wednesday, January 7, 2004, at 9:30 a.m. and February 11, 2004, at 9:30 a.m. in the Minnesota Room. Those meetings are open to the public. Hargarten said the Commissioner and Anderson are working to educate the legislators on the issues and told them this is the second year in a row we are seeing double-digit increases for the costs of workers’ compensation. They are concerned Minnesota will end up in a crisis situation. Commissioner Brener wants to reign in some of those costs but also maintain access to health care and treatment for employees. Johns noted RTW does a lot of business in Massachusetts and they had trouble getting to doctors because the fee schedule prices are too low. You think it is better initially, but you run into problems in clinics and with doctors who will not treat injured employees. If the fee schedule is too low you cannot get the good doctors. They have had to negotiate a lot of surgeries above the fee schedule so the doctor would perform the surgery. Massachusetts is a very difficult state to deal with and they constantly have to negotiate with the medical providers. McCoy asked how those reimbursement rates compare with the general health reimbursement. Johns could not recall that information, but he thought those states are below Medicare. Hargarten said they were comparing the fee schedule to Medicare and Minnesota is significantly higher, and is at about 204% of what Medicare pays. They have also made comparisons to commercial insurance and, in Minnesota workers’ compensation reimbursements are considerably higher than other payment systems. Wilson noted if the rate could be comparable with personal health insurance it would

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remove the possibility that the doctor might propose the injury is workers’ compensation to get a higher payment. Members with questions about the Medical Costs Task Force or the WCAC were invited to call Hargarten at (651) 284-5350 or send her an e-mail. 10) Future Agenda Items Johns asked to discuss Roraff fees. There was a new case mentioned at a desk book seminar, but he missed it. It was regarding someone paying under a temporary order. Marking Arrington said that was a State Fund Mutual case and it came to the Supreme Court. It said subdivision 7’s are now payable on .191 fees. He said a temporary order was filed too. Wilson said the apportionment had to be decided and then they ended up giving the subdivision 7s. Johns said there were consequential injures and case law came out on that about a month ago. Wilson said they do not know if it is “going to fly” so we will have to wait and see. She said at the CLE conference they suggested some wording to be used and that is the best you can do. A full, final and complete is not full, final and complete anymore. Wilson announced the next WCITF meeting is scheduled for March 17, 2004. She pointed out that the meetings now begin at 9:00 a.m. She directed members to the paper reports in their meeting packets. The meeting was adjourned at 10:31 a.m. Respectfully submitted,

Debbie Caswell Executive Secretary dc/s