Washington DC’s View of
Workers’ Compensation
by Douglas J. Holmes, President
UWC—Strategic Services
on Unemployment & Workers’ Compensation
June 4, 2012
About UWC
Established 1933
“The Voice of Business on
Unemployment & Workers’ Compensation”
Only association exclusively devoted to advocacy for business on
national workers’ compensation and unemployment insurance issues
• Advocacy
• Support for state and national business organizations
• National professional society
• Employers, insurers, service providers, law
firms, state administrative agencies, and associations
• Research/education arm is the National Foundation for
Unemployment Compensation & Workers’ Compensation
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Federal Impacts on WC and
Self Insurers
• HR 5284 MSP Workers’ Compensation Settlement
Agreements Act of 2012 – Focus on reform of WC
Settlement Agreements and Medicare Set Aside.
• HR 1063/S 1718 Strengthening Medicare and Repaying
Taxpayers Act (SMART) – Focus on Section 111
Reporting, MSP issues for Liability, No Fault and
Conditional Payments.
• Government Accountability Office (GAO) Study on
Medicare Secondary Payer (MSP).
• HR 623 Commission on State Workers’ Compensation
Laws Act.
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Federal Impacts on WC and
Self Insurers
• Federal Standards Imposed on WC.
• WC/SSDI relationship under study -WC/SSDI “reverse”
offset at risk.
• Impact of Patient Protection and Affordable Care Act
(PPACA) on Health Information Reporting.
• S 1789 (Lieberman-Collins) Title III of bill amending
Federal Employees Compensation Act (FECA).
• S 669 Isakson (R-GA) Longshore Act Reform.
• Prospects for 2012 and 2013.
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MSP WC Settlement
Agreements Act of 2012
• HR 5284 (Reichert R-WA and Thompson D-CA).
Statutory Exclusions from MSP for certain settlements.
• Total settlement amounts of $25,000 or less.
• Not eligible for Medicare and Unlikely to become
eligible within 30 months.
• No future medical.
• No limit on future medical.
• Definition of “total settlement amount” matches CMS
definition. Secretary of HHS could increase above
$25,000.
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MSP WC Settlement
Agreements Act of 2012
• “Total Settlement Amount” for threshold purposes
includes monetary wage replacement benefits, attorney
fees, all future medical expenses, repayment of
Medicare conditional payments, payout totals for
annuities to fund expenses and any previously settled
portion of the WC claim.
• Included to avoid “scoring” issue from Congressional
Budget Office (CBO) and create bright line exemption
from MSP.
• Define “qualified set-aside” and procedures for
submission of set-asides for review.
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MSP WC Settlement
Agreements Act of 2012
• Conditional payment requirements to be determined
within 90 days of request
• Conditional payment recovery by CMS limited to
items and services payable under applicable WC law
• Future medical not to exceed amounts under workers
compensation fee schedules or law
• CMS must approve or disapprove an MSA submission
within 60 days of submission
• If disapproved, submitter may request reconsideration
within 60 days
• Further appeal to ALJ and Federal Court
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MSP WC Settlement
Agreements Act of 2012
• Optional direct payment of Medicare Set-aside amount
to CMS.
• Optional “Safe Harbor” on agreement of the parties to
pay 15% of total settlement amount directly to CMS
and discharge Medicare’s interest for total settlements
of $250,000 or less.
• “Total Settlement Amount” for the safe harbor includes
items as set forth in the definition for the threshold
excluding conditional payment recovery amounts and
previously settled portions of the claim; and including
only the cost (but not the payout amount) of any
annuities.
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MSP WC Settlement
Agreements Act of 2012
• The Safe Harbor percentage will be reviewed over the
first three years in effect by the CMS Actuary.
• If the Safe Harbor causes a significant negative
financial impact on Medicare the Secretary of HHS
shall adopt rules to reduce the impact and modify the
percentage.
• Actuarial review designed to address cost issues and
enable streamlining of process while generating
additional up front revenue for Medicare and address
“scoring” issues with CBO.
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Strengthening Medicare and
Repaying Taxpayers Act
(SMART) of 2012
• Introduced by Reps. Tim Murphy (R-PA) and Ron Kind
(D-WI). Companion bill S 1718 (Reps. Wyden (D-OR)
and Portman (R-OH).
• Requires CMS to determine conditional payment
amounts within 65 days after request with a statement
of the reimbursement amount.
• If no statement provided by CMS, parties may give
notice to CMS to respond within 30 days; if no
response, unless exceptional circumstances, no liability
to reimburse CMS.
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Strengthening Medicare and
Repaying Taxpayers Act
(SMART) of 2012
• Thresholds for Section 111 reporting would be set each
year after review by the CMS chief actuary at amounts
based on the expected average amount of conditional
payment collections in comparison to the cost of
collection.
• Modifies the current $1,000 per day penalty for failure
to report to include good faith waivers.
• Statute of limitations- United States may not bring an
action with respect to conditional payment
reimbursement later than three years after the date of
the receipt of notice of settlement, judgment, award, or
other payment.
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Strengthening Medicare and
Repaying Taxpayers Act
(SMART) of 2012
• A civil money penalty may not be imposed with respect
to the failure to submit required information unless
notice to impose the penalty is provided not later than
three years after required submission.
• Issues in HR 1063 reviewed in hearing in House Energy
and Commerce Subcommittee.
• Co-sponsors have grown since 2011.
• Complimentary to HR 5284.
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Government Accountability
Office (GAO) Study of MSP
Issues
• Requested by Rep. Stark (D-CA) with support from
Rep. Tanner (D-TN-retired) in 2010.
• Addressed many issues in HR 5284 and HR 1063.
• The overall presentation and organization of process
guidance on the CMS website does not ensure that
pertinent information can be identified by external
stakeholders.
• Because CMS regularly updates its policies and
processes by issuing memos or “alerts” it is difficult to
determine what the current policy is or what may have
changed in the process.
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Government Accountability
Office (GAO) Study of MSP
Issues
• There is no process or policy manual describing the
WCMSA policy.
• The WCMSA-related memorandums are accessible on
the CMS website, but they are poorly organized.
• CMS has challenges with contractor performance
related to timeliness of MSP recovery and MSA
reviews.
• CMS has challenges related to timing of demand
amounts, cost effectiveness, recovery efforts, and
amounts demanded from liability settlements.
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Government Accountability
Office (GAO) Study of MSP
Issues
• CMS has challenges in guidance and communication
related to the MSP process, Medicare set-aside
arrangements, and beneficiary rights and
responsibilities.
• Many areas are in need of improvement.
• CMS has indicated interest in releasing a notice to
adopt regulations to address many issues raised in the
GAO study.
• Self Insurers should be prepared to respond to proposed
regulations and to suggest best practices while also
pursuing legislative change.
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Federal Standards for State
Workers’ Compensation
• HR 623 Introduced by Rep. Baca (D-CA) to establish a
national commission to review workers’ compensation.
Re-intro of HR 635 from 111th Congress.
• Suggested reforms for study include coverage,
adequacy of benefits, determination of impairment and
disability, alternatives to reduce or eliminate bad faith
delays, discouraging misclassification of workers as
independent contractors and/or leased employee to
avoid paying WC benefits.
• The list is similar to 1972 National Commission list
with goal to move recommendations to national
standards to be met in all states.
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Federal Standards for State
Workers’ Compensation
• Standards to determine assurance of benefits caused by
aggravation or acceleration of pre-existing injuries or
disease.
• Time limits on filing claims; waiting periods;
compulsory or elective coverage; administration;
ensuring prompt hearings and due process evidentiary
rights in the resolution of claims.
• Relationship between WC, old age, disability, and
survivors insurance and other insurance.
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Federal Standards
• Many reforms not on the list for study, including
evidence based medicine, utilization review, managed
care, drug abuse, impact of increasing costs on business
operations and economic development.
• Rep. Woolsey held hearing in November, 2010 in the
House Education and Labor Worker Protections
subcommittee to address HR 623 issues as well as the
AMA Guides 6th edition and the relationship between
workers’ compensation and SSDI.
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Development of Federal/State
Issues
• Greg Krohm (IAIABC) and Doug Holmes (UWC)
submitted statements in rebuttal to statements from
John Burton suggesting that state WC changes caused
increased costs for SSDI.
• States already regularly review the adequacy of WC
awards and payments, the cost of the system to
employers, and a wide range of issues.
• Reps. George Miller (D-CA) and Lynn Woolsey (DCA) requested a GAO report to review and quantify the
impact on SSDI of changes in state WC as well as the
AMA Guide 6th edition. The National Institute for
Occupation Safety and Health (NIOSH) was also tasked
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with a follow-up report.
Social Security Disability
Insurance Under Scrutiny
• House Ways and Means Social Security Subcommittee
hearings in 2012 on reasons for exploding caseloads
and costs in SSDI.
• Causes identified included: changes in SSDI to
compensate for mental illness, fraud on the part of
certain hearing officers, abuse in the filling of cases by
private practice attorneys, increasing age of the
workforce, increasing percentage of women in the
workforce long enough to qualify and develop
disabilities, and lack of effective return-to-work efforts.
• No mention in hearings about workers’ compensation as
a factor.
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Social Security Disability
Insurance Under Scrutiny
• SSA continues to seek workers compensation
information from state agencies to cross-match and
more effectively determine SSDI/WC offset.
• John Burton has proposed that reverse offsets in place
in 15 states no longer be recognized by SSA in
determining the SSDI/WC offset amount.
• Congressional staff continues to reference 2001 GAO
report in raising the point of whether annuities in
structured settlements should be accepted in
determining the SSDI/WC offset.
• Informal discussion of new employer reporting for
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WC/SSDI cross-match.
Development of Federal/State
Issues
• The push for federal standards is in part a
response to changes in the political landscape at
the state level making such “reforms” more
difficult.
• At the same time that there is a push at the federal
level to address perceived shortcomings in the
state WC system, there is also a budget concern
at the federal level looking for ways to shift costs
away from the federal budget.
• The policy direction from Reps. Miller and
Woolsey appears to call for greater federal control,
entitlement expansion, and cost shifting to states
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and employers.
Patient Protection and
Affordable Care Act
• PPACA requires that HHS solicit comments on whether
there could be greater uniformity in financial and
administrative activities and items.
• Should federal standards be applied to workers’
compensation medical information?
• Consistent with requirements of the Act, a hearing was
held to ask the questions
Should health insurance information under workers’
compensation be subject to the Health Insurance
Portability and Accountability Act (HIPAA) ?
Would information restrictions have an impact? 10
Patient Protection and
Affordable Care Act
• UWC filed comments and the insurance industry filed
comments that
• 1) workers’ compensation medical information
should not be subject to HIPAA; and
• 2) HHS should learn from its experience with
Section 111 reporting for Medicare and the difficulty
of “requiring” ICD-9 and ICD-10 codes or other
reporting standards that may not fit with workers’
compensation.
• HHS determinations with respect to health information
reporting and the application of HIPAA are pending.
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Longshore Act Reform
• Interest in Longshore Act Reform continues with introduction of
S 669 by Sen. Isakson (R-GA).
• Reforms would include many addressed in state workers’
compensation reforms (e.g. choice of physicians, evidence based
medicine, compensation rates, utilization reviews, etc.).
• S 669 would eliminate dual jurisdiction issues as a matter of
federal law instead of relying on state by state law changes
(Virginia recently addressed).
• Recent legislation passed by the Senate to reform the Federal
Employees’ Compensation Act (FECA) indicates what to expect
in Congress addressing comprehensive Longshore Act reform.
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Longshore Act Reform
• Although S 1789 had support from the Administration
and bi-partisan support, particularly from Senators
Collins and Carper, the Senate passed version emerged
as a watered down compromise.
• The Senate passed version of S 1789 has been sent to
the House.
• A window for amendment of the Longshore Act may be
available in the next Congress and S 669 could start as
the vehicle.
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Observations for Self Insured
Employers
• The risk of greater federal regulation on workers’ compensation is
growing.
• Medicare and Social Security trust funds are going brokeeasier for Congress to shift costs to workers’ compensation
than to cut benefits or raise taxes.
• Change in the composition of state legislatures since 2010 has
increased pressure for federal standards to overcome state
restrictions.
• The costs associated with compliance with new federal
regulations that may be inconsistent with state laws will increase.
• The results of the Supreme Court decision in determining the
constitutionality of the PPACA and the 2012 elections will
determine how federal law and standards will be administered
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and the impact on states and employers.
Join US
UWC -- Strategic Services on Unemployment & Workers’
Compensation
“The Voice of Business on Unemployment & Workers’
Compensation”
910 17th Street, NW, Suite 315
Washington, DC 20006
holmesd@UWCstrategy.org
www.UWCstrategy.org
202-223-8904
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