Annual Agents Meeting
2016
Dan M. Hair
Emerging Issues in 2016
• Opt-Out Programs –the Future?
• The ACA and Cost Shifting in WC
• Contingent and Temporary Workers
Opt-Out & The Grand Bargain
1911 Fire in NYC – 146 young women, mostly immigrants,
lost their lives – locked doors, inadequate fire escapes –
burned alive or jumped to their deaths – the final trigger
for modern WC laws (the Grand Bargain)
The Opt-Out Hybrid - History
• Allowed in Texas since inception
• Oklahoma passed modified version in 2013
• National Coalition of larger multi-state
employers has formed an association pushing
legislation in Tennessee and South Carolina
and other potential, high cost states (ARAWC)
• Coalition includes P&C Carriers and Brokers
• Governed by ERISA (The Employee Retirement Income Security Act of
1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established
pension and health plans in private industry to provide protection for individuals in these
plans. )
Point/Counterpoint
“ARAWC's mission is to pass laws allowing private employers to opt out of the
traditional workers' compensation plans that almost every state requires
businesses to carry. Employers that opt out would still be compelled to purchase
workers' comp plans. But they would be allowed to write their own rules
governing when, for how long, and for which reasons an injured employee can
access medical benefits and wages. In recent years, companies have used that
freedom to severely curtail long-standing benefits.” MotherJones.com
“Option is our term for allowing employers to elect an alternative to traditional
workers' compensation insurance. Each state may have different requirements for
employers that choose to exercise an Option, but the fundamental principles of
any alternative are to improve access to quality health care, increase employee
accountability, improve medical and return-to-work outcomes, and reduce claim
costs. Allowing an Option creates competition that can reduce rates and drive
improvements to the workers’ compensation system.” ARAWC.com
Other Sources of Info
2012 NewStreet Group – Sedgwick Funded Study
“Workers’ Compensation Opt-Out: Can Privatization Work?
“The Future of Workers Compensation: Is Opt-Out the
Answer? “ NCCI 2013 Issues Report
Alison D. Morantz – Stanford School of Law
Opting Out of Workers' Compensation in Texas: A Survey of
Large, Multistate Nonsubscribers, in Regulation versus
Litigation, Daniel P. Kessler ed., Chicago: University of
Chicago Press, 2011.
Bottom Line?
• This is still evolving and case law is clarifying
some of the issues such as reporting and
statute of limitation questions
• Insurance contract language is being
developed and policies underwritten
• Some fundamental public policy decisions
must be made in each state
• Will it develop into an alternate coverage
option for larger risks?
• Maybe
WC Cost Shifting – HC Capitation
“Capitated payment systems are, as the name implies, based on
a payment per person, rather than a payment per service
provided. There are several different types of capitation, ranging
from relatively modest per member per month (pmpm) case
management payments to primary care physicians involved in
patient centered medical homes, to pmpm payments covering all
professional services, to pmpm payments covering the total risk
for all services: professional, facility, pharmaceutical, clinical
laboratory, durable medical equipments, etc.”AMA
Sometimes Medical Diagnoses
Aren’t Always Clear
ACA & Cost Shifting
WCRI Study , R. Victor, September 2015
• Since the discussion of ACA began cost shifting has been a
concern given the evident differences in provider
reimbursement under the two systems
• Risk is greatest for injuries with indeterminate causes such as
soft tissue injuries (strains,sprains)
• Cost shifting is more pronounced in states with high rates of
capitated health insurance plans (Utah ranked 10th highest)
• Shifting increases as capitation rates increase – in states with
“consequential penetration” soft tissue injuries were 31%
more likely to be coded as WC than in a low capitation states
• Ex. California:= 45% of all cases and 50% of costs = $1.85B
due to soft tissue injuries
Temporary Workers, Independent Contractors
and Joint Employment
•
USDOL Administrative Interpretation No. 2015-1 “Misclassification of workers as
independent contractors is found in an increasing number of workplaces…The
FLSA’s definition of employ as “to suffer or permit to work” and the later
developed “economic realities test” provide a broader scope of employment than
the common law control test”
•
“An “entity ‘suffers or permits’ an individual to work if, as a matter of economic
reality, the individual is dependent on the entity.” Antenor, 88 F.3d at 929. The
Supreme Court and Circuit Courts of Appeals have developed a multi-factor
“economic realities” test to determine whether a worker is an employee or an
independent contractor under the FLSA… The factors typically include: (A) the
extent to which the work performed is an integral part of the employer’s business;
(B) the worker’s opportunity for profit or loss depending on his or her managerial
skill; (C) the extent of the relative investments of the employer and the worker; (D)
whether the work performed requires special skills and initiative; (E) the
permanency of the relationship; and (F) the degree of control exercised or
retained by the employer.
•
State vs. Federal Definitions may be in conflict
Independent Contractors
• Some of your 1099 contractors could be found
to be employees and entitled to all regular
employee benefits
• It seems probable that many current
“independent contractors” may not be so
under the new Federal guidance
• Expect case law to follow
• Counsel with your attorney to determine if
you have any issues
Joint-Employment
• NLRB in Calif. in the Browning-Ferris (BF)case
found that employees provided by a temp
agency were “joint-employees”
• BF only had to possess the authority to control
employees terms and conditions of
employment, not exercise it
• Control exercised indirectly through the temp
agency (wages,hours,personnel) may establish
joint employer status
Bottom Line
• Have a labor attorney review with you your
Independent Contractor relationships as well as
your contracts with Temporary Employment
Agencies
• It seems the law may be evolving as Federal
Agencies “adapt their rules and practices to the
Nation’s needs in a volatile changing economy”
• WCF is following this closely and will provide
updates as policy becomes clearer
Interested in a Separate Seminar
On These Topics?
Let me know at dhair@wcf.com