Date: 08/04/2009
Final
Colorado's Workers' Compensation System
INTERIM COMMITTEE TO STUDY ISSUES RELATED TO PINNACOL ASSURANCE
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09:34 AM -- Colorado's Workers' Compensation System
The following staff from the Colorado Division of Workers' Compensation gave a presentation on the workers' compensation process: Bob Summers, Director; Paul Tauriello, Deputy Director; and Brandee Galvin, Special Assistant to the Director. Mr. Summers offered a handout of a slide presentation (Attachment A) entitled Overview of Workers' Compensation. He explained the nature of the workers' compensation system, beginning with the history of workers' compensation in Colorado.
09:40 AM
Mr. Paul Tauriello provided a more detailed explanation on the role of the Colorado Division of Workers' Compensation and the process of covering injuries under a variety of circumstances. He discussed the insurance aspect of Workers' Compensation, noting penalties that employers would receive if they do not provide coverage for Workers' Compensation. He stated that the division conducts investigations to find employers who do not provide insurance, sometimes working off of tips. Mr. Tauriello explained the time duration that can occur with some claims and injuries. He continued with explanations of other aspects of the program, including rules and incentives offered to employers.
09:52 AM
Mr. Tauriello discussed the Medical portion of the Workers' Compensation system, explaining the role of physicians and defined topics such as Independent Medical Exams (IME) and Maximum Medical Improvement (MMI). He explained the final aspect of the workers' compensation system, which is the claims portion under the control of the division's claims management section. He explained the process of claims and adjustments made when deviations to the claims process occur. He then discussed the audit process of carriers, and the potential fines and pre-hearings that occur. He noted the role of Administrative Law Judges and prehearing procedures.
09:59 AM
Mr. Summers explained a 'compensable claim' and provided examples. He discussed both claims and injuries and explained that lost time claims include injuries that result with an absence of three or more days. He also explained the timeline for reporting injuries and filing claims. Mr. Summers offered some statistics on claims for 2008 in Colorado, and the number that came from Pinnacol. He discussed different types of claims and benefits and provided greater detail on medical benefits, payments, treating physicians, and the process of deviating from workers' compensation physicians. Mr. Summers explained in more detail the benefits associated with Temporary Total Disability (TDD), and how monetary payments are calculated. He further explained the process of an injured worker returning to work and the rules governing an injured worker's benefit being reduced. He continued to discuss the process of an insurance company paying claims, and the scenarios that would result in a change of benefits.
10:09 AM
Ms. Brandee Galvin added to the discussion with details on the benefits for a worker who has achieved MMI. She explained the two levels of physicians, and the guidelines they must follow, and noted that Colorado uses an older edition of the AMA guides. Ms. Galvin discussed impairments related to injuries to the head or extremities, as well as injuries to the trunk of the body (whole person injury). She also explained the rating system and various calculations, including the use of a person's age. Ms. Galvin discussed differences in impairment ratings and the claimant's ability to earn wages. She also provided statistics on the number of claimants. She discussed the process for resolving disputes between parties, a hearing process that uses administrative law judges instead of the courts. She clarified that these hearings are intended to cost less than typical litigation, noting that unresolved disputes can be appealed to the Colorado Court of Appeals. She provided statistics on the number of claims that actually go to litigation.
10:20 AM
Committee questions began. Senator Mitchell asked about the positive nature of Colorado's workers' compensation system, and why Colorado uses an older edition of the AMA Guides. Mr. Summers explained the nature of the guidelines. Representative Gardner asked about multiple appeals. Ms. Galvin explained that the disputes can be in regard to multiple parts of the claim, where one segment of the claim is appealed and resolved, but then another aspect of the claim is disputed. Rep. Gerou asked about subsequent injury funds, self-insured employers, medical policy, and the division's pre-hearing unit. She also asked if all insurance companies to go through the same process. Mr. Tauriello explained the aspects of the different programs. Mr. Summers explained the pre-hearing conferences and noted the similarity to mediation.
Senator Mitchell asked about multiple appeals and the standard process. Ms. Galvin explained the notion of substantial evidence. Senator Mitchell asked the panel for more information about how Colorado compares to other states in terms of the workers' compensation process. Mr. Summers explained many states look at Colorado's workers' compensation process in a favorable manner. Senator Mitchell continued with questions more focused on Pinnacol Assurance and asked if the division had any positive or negative feedback on Pinnacol Assurance. Mr. Summers explained that the division's views of Pinnacol were neutral.
Mr. Simon asked about the number of employers who don't have insurance and additional questions on benefits. He also asked how long the appeals process could take. Mr. Tauriello provided explanations on the number of uninsured, noting there is no concrete way of measuring the actual number of employers who do not provide workers' compensation. Mr. Summers answered questions regarding vocational rehabilitation, noting it is voluntary and not often provided. He explained some details on Permanent Partial Disability. Ms. Galvin stated that, on average, the appeals process is 18 months, and working with the Supreme Court usually takes six to nine months beyond that. She offered a few statistics on the number of claims that do go to appeals. Mr. Simon asked the same questions on Partial Temporary Disabilities and cost-of-living adjustments (COLAs). Mr. Summers stated there are no longer COLAs.
Representative Pace asked the panel about the history of workers' compensation in Colorado and the 1914 incident at Ludlow. Mr. Summers thought the changes in law made in 1915 were due to Ludlow. Representative Pace asked about the ranking of Colorado's benefits awarded compared to the benefits actually paid out. Mr. Summers noted that the data shows Colorado workers tend to have less frequent accidents than workers in other states, so benefits per employee are smaller. Representative Pace asked if any data show Colorado be safer for workers. Mr. Tauriello noted the reduction in the frequency of claims in Colorado. Representative Pace continued with a question about the list of insurers that deal with workers' compensation and asked if it is legal for insurers to give incentives to claims adjusters for a decrease in claims. Mr. Summers said the Workers' Compensation Act does not address this.
10:43 AM
Representative Ryden asked about Special Funds and asked why some were discontinued. Mr. Tauriello explained the purpose for certain funds. Representative Ryden asked about extended claims. She also asked how many employees were covered by self-insured employers. Mr. Tauriello answered in terms of statistics on premium market shares. Representative Ryden asked about the number of claims in terms of percentages of the self-insured. Mr. Tauriello answered that about 20% of claims came from employees in self-insured plans. Discussion also ensued about pre-existing injuries.
10:50 AM
Mr. Meersman asked about the number of employers who are insured through Pinnacol. Mr. Tauriello explained that the division did not track data by employees. He discussed the difficulty in coming up with a market share number. Mr. Ross explained Pinnacol had a 57.4% share of all workers' comp insurance premiums paid, but that did not account for the self-insured. Mr. Ross said that Pinnacol estimates that it represents about one million employers of the estimated 2.5 million total workers in Colorado. Mr. Meersman asked about future changes to Pinnacol and potential legislation. Mr. Summers explained they normally stay neutral on bills, but occasionally take positions.
Senator Mitchell asked about the ranking and the nature of the state's employment base, in terms of worker safety. Mr. Summers responded that the nature of the workplace in Colorado does have an effect on worker injuries. Senator Mitchell asked if the panelists had any knowledge of a practice where an insurer provides financial incentives to claim adjusters for denying claims. Mr. Summers replied that he did not know of any such practice, but he also stated that bad faith claims to exist in Colorado.
Mr. Simon referred to the list of about 100 carriers, and asked if any stand out with having a significant share of the market, other than Pinnacol. He asked if there is a statute that denoted incentives for Pinnacol to be the insurer of last resort. Mr. Tauriello stated Liberty Mutual and AIG have some market share, but much less than Pinnacol He also noted that Section 8-45-101 (5)(f), C.R.S., gives Pinnacol an exemption from the one percent insurance premium tax rate for companies with a home office in Colorado.
11:00 AM
Dr. Lynn Parry asked about independent medical examiners and a possible conflict of interest. Mr. Summers discussed a rule in place that deals with that issue and two opposing rules that are currently being examined. Senator Harvey asked for a list of the 100 insurers and also asked if Colorado has the most self insurers. Also, he asked if Colorado should contract out its workers compensation coverage to a private company. Mr. Tauriello responded that self-insuring might be less expensive because of the large number of state employees and the potential for economies of scale savings.