State News : Michigan

Under the heading “It isn’t so bad here in Michigan” or “It could be worse and we are working hard to correct it,” the director of the Michigan Workers’ Compensation Agency wrote an article that was published in the Workers’ Compensation Section Newsletter.
We feel that the article by Jack Nolish does a good job of explaining our current situation and what we have and are doing about it to fairly resolve all disputes.
Below please find Jack’s article reproduced with his permission:

Notes from the Director

By Jack Nolish, Director, WCA

I was born on Friday the 13th. My mother told me it was about high noon. As long as I can remember I have not had a fear of that date. Rather, it has provided some very interesting birthday parties. I am not what you might call a Triskaideka­phobiac. I do not fear the number. However, as of this time, I am confronting a 13 that is really causing me a problem. While Magistrate McAree is now on sick leave for a couple weeks, and after the departure of three of our Magistrates recently to Social Security, we are down to 13 magistrates. We had 26 when I took the bench in February, 2004 and that was a reduced number down from 30. Hopefully, McAree will en­joy a speedy recovery and we will get back to 14 in short order. That number is still short of our now authorized number of 17. The Qualifications Advisory Committee has finished inter­viewing candidates and a new list of potential magistrates has gone to the Governor. You are probably aware, however, that the selection of magistrates is made by the Governor with the advice and consent of the Senate. You are also aware that there has been some difficulty with the Governor’s appointments in the last several weeks so it is difficult to know when the bench will be back to its newly reduced “full strength.” This reduction in magistrate positions is already manifesting itself in docket delays and longer periods to reach decisions in cases. Justice delayed is justice denied for all parties. Even at 17, we will have per magistrate docket loads approaching 1,000 in an era where cases are more complicated than ever.

I do wish to congratulate Ken Birch on his appointment by Governor Granholm to serve as Chair of the Board of Magistrates. As you can see from my remarks above, he is coming in to a challenging environment and I wish him well. I look forward to working with Ken to deal with these dif­ficult times.

Although the number of contested case filings continues to be historically low, there has been a recent influx of over 500 contested case filings due to the Delphi bankruptcy and the re-negotiation of the GM Disability hourly pension plan. It will be some time before these complicated matters will be resolved.

We are trying desperately to weather a perfect storm. The confluence of severe state budget reductions; Social Security’s expansion; and the business community’s unwillingness to support funding the WCA through means other than the state general fund, have combined with the upcoming round of magistrate appointments, to produce a situation where the teeter-totter of the adjudication system docket has tottered. We are now understaffed and there is simply no way to put a positive spin on the situation. The next waive of problems comes soon when 6 of the remaining magistrates are up for re-appointment in the end of January, 2011. The expiration of those terms will create further problems in moving the docket and re-appointment or the making of new appoint­ments for those positions is unlikely to occur for several months. You may have heard that there is an election coming but the new administration will not be in place until the first of the year.

The Agency itself has undergone significant reductions including staffing reduced from a peak of over 200 to the present level of 134. You are well aware of the reduction in fixed hearing sites from 14 to 8 and the reduction of tempo­rary traveling magistrate sites from 9 to 3.

We are in the midst of getting information about those staff electing to take the early retirements. I am aware of 10 but the window for acceptance is open through November 5 and over 40% of our over-all staff is eligible under the plan. We have not been advised about replacement options in terms of replacing one for one or some other ratio. Since we have been operating under years of hiring freezes, we have an aging staff with little in the way of next generation replace­ments. I have been director since 12/05 and I have hired one person as a replacement for a retirement and that occurred a couple years ago.

These factors combine to produce serious erosion in the underlying bed rock of Workers Compensation. The 100 year old fundamental concept of simplified, no-fault entitlement to limited benefits for job related injuries being exchanged for the exclusive remedy protection for employers is jeopar­dized when we cannot adjudicate the rights of the parties in a timely fashion.

These personnel problems notwithstanding, when com­pared to the rest of the nation, Michigan’s Workers’ Compen­sation program continues to have relatively low costs. During this political season, you may hear about business costs in Michigan being a significant barrier to economic develop­ment. As for Workers’ Compensation, the facts do not sup­port such a conclusion.

• In its 2008 biennial nationwide workers’ compensation insurance premium study, the Oregon Department of Consumer and Business Services reported that:

• Michigan was below the national median of all states for workers’ compensation insurance premiums.

• Michigan insurance premiums are significantly lower in cost than Alabama and Mississippi, states that are often mentioned as low cost labor states.

• Based on the 10th Edition of Workers Compensation Research Institute (WCRI) studies, Michigan’s workers’compensation program is described as… “a competi­tive asset for the state…” Michigan is in a study group consisting of Indiana, Wisconsin, Minnesota, Iowa, Ten­nessee, Pennsylvania, Texas, Maine, Florida, California, Maryland, North Carolina and some additional refer­ences to Louisiana, Ohio and Kentucky. The core study group represents some 60% of all WC benefits paid in the country.

• WCRI concludes: “The Michigan workers’ compen­sation system provided a better value proposition for both employers and injured workers.”

• Michigan indemnity costs per claim with more than seven days of lost time that were lower than the study states, including several states that Michigan often competes with for business.

• The average medical cost per claim was 34% lower than the median studied states.

• The duration of disability benefit payment was 5 to 6 weeks shorter than Massachusetts and Pennsylvania; 15 weeks shorter than Louisiana.

• Michigan has lower costs overall as Michigan employ­ers paid 20% less for workers’ compensation costs for an average case than the median of the comparison states (IN; IL; WI; MN; IA; TN and PA. Not in the study but with the same result were KY and OH.)

• Michigan has lower medical costs and utilization per claim than typical when compared to the 14-state study group including lower prescription drug utiliza­tion and costs.

• Medical costs grew at a slower rate than the typical state.

• Michigan WCA has a national leadership role in Elec­tronic Data Exchange (EDI). In its continuing efforts to cut operational costs and improve customer service:

• We have six insurance groups currently (represent­ing 10 individual insurance companies) filing various mandated insurance forms electronically, including the Accident Fund (the state’s largest writer of work­ers’ compensation policies).

• When fully implemented next year, approximately 50% of all insurance filings received by the agency will be electronic. Last year, we had 293,964 such filings. Over the last 4 years, we have gone from 0% to 36% electronic. Since we have over 200 companies writing WC coverage in Michigan, those that write relatively few policies will still need to have a paper filing option available.

• Now in the works is the implementation of systems for electronic filing of claims information. Please remember, however, that we are working with a COBAL programmed mainframe computer system that is some 20 years old.

• The Health Care Services division, now down to only two people, is developing a web-based system for filing of the Annual Medical Payment Report and the renewal of the Certification of a Carrier’s Professional Health Care Review Program. This will reduce paperwork and staff requirements once it is operational. I think many of you know, however, that getting a new system operational can present “challenges.” Our cost containment rules and process continues to be a successful tool in keeping medi­cal costs well under control.

• CMS, Medicare, continues to be a significant cost fac­tor in terms of both time and money. Although the total number of cases delayed awaiting resolution of CMS issues has gone down for the first time since we started tracking the numbers, in 2010 as of 9/9, over $9,000,000 has been placed in set-aside accounts and conditional payment reimbursements have totaled over $350,000. These payments have occurred in 642 of the 4,204 redemptions that occurred in the time period and are in percentage equivalent of what we have seen in the last three years of tracking.

• We have been advised that CMS will have a new contractor in place in about 2 months that will be handling the set-asides and conditional payments. I suspect there will be some transitional issues but hope things will move smoothly.

• The new contractor is: “Medicare Secondary Payer Recovery Contractor” found by Googling MSPRC.

Lastly, in the good news/bad news column is the fact that since we began using the state Average Weekly Wage in 1982 as a factor in the determination of weekly wage loss benefits, the AWW has gone down from the 2009 figure of $834.79 per week to 2010 figure of $828.73. This has resulted in a reduction in the maximum weekly benefit rate being capped at $748, down from $752. This is good news for those pay­ing weekly benefits, not so good for those entitled to receive them. WCRI has reported that our rate capping system has resulted in Michigan injured workers’ benefits being lower than what they would be in other states in about 1/3 of our cases.

The Workers’ Compensation Agency and indeed Workers’ Compensation itself faces significant challenges in the com­ing years. It will be several months before the new adminis­tration comes into office and whatever impact that may have becomes evident. At this juncture, we do not know if there will be any restructuring or other significant changes. Stay tuned …