Lawmakers put changes to workers’ comp on ice, mostly

PHOENIX — State lawmakers are tinkering with the way workers’ compensation operates, but some of the more drastic proposed changes to the system have been put on the back burner, at least for now.

State Rep. Karen Fann, R-Prescott, knew she was facing an uphill battle in passing legislation designed to streamline workers’ compensation, but she decided to push the programs anyway because she says the system needs reform.

The first-term lawmaker said the ideas in her package of three bills heard earlier this month in the House Banking and Insurance Committee have been proposed in past years. However, each time legislators examined the types of reforms she is looking for — including cutting down on workers’ compensation fraud, allowing state and municipal governments to enter into agreements with directed care medical provider networks, and making sure the system covers only “evidence-based medicine” — the proposals were kicked down the road.

But Mike Colletto, director of legislative affairs with the Professional Firefighters of Arizona, said the reforms haven’t been implemented before because they’re bad policy. He has been involved in stakeholder’s meetings on proposed workers’ compensation legislation since the 1980s and opposed the efforts.

“There have often been stakeholders meetings in the past and the Legislature chose not to move forward with it because they saw the reasons not to,” Colletto said. “That’s the reason that it gets so-called kicked down the road, because once they fully reviewed the ins and outs of this complex system, they saw the balance of rights and responsibilities they chose not to move forward.”

Even other Republicans said the sponsor put a lot on her plate with the highly technical, big-change bills.

“Representative Fann, boy, you really know how to bite off a big apple, that’s for sure,” said Rep. Carl Seel, R-Phoenix, during a Banking and Insurance meeting Feb. 6.

One bill (HB 2368) tries to combat fraud in the workers’ compensation system by authorizing insurance carriers and employers processing a workers’ compensation claim access to contribution and wage reports to verify income.

The bill also increases payout for an unemployed person seeking benefits by implementing a modified index for calculating average monthly wages, and allows an injured employee to pursue remedy against the person who further aggravated the employee’s previously accepted industrial injury.

Supporters say the system contains no fraud prevention method now, and allowing insurers and employers to access outside information regarding employment and income will allow them to better combat fraudulent claims. The modified index, supporters say, is a more stable way to calculate wages that doesn’t dip and soar with employment shifts.

The bill was the only one of the three to make it out of the committee, and it now awaits a full vote by the House. Before becoming law, the bill would also need approval from U.S. Department of Labor to allow insurers and employers to access wage reports.

Under another bill (HB 2365) workers’ compensation providers would have to use American College of Occupational and Environmental Medicine’s (ACOEM) occupational medicine practice guidelines to establish evidence-based treatment practices for workers’ compensation cases.

Dr. Mitchell Lichton, a hand surgeon, told the committee that he looked at the ACOEM’s book, and looked up the section about his practice. While it might be good for a new doctor as a guideline, he said it simply isn’t extensive enough as a list of accepted treatment.

“They have here 20 hand wrist and form disorders, of which they will tell you how to treat,” he said. “Instead of going to 11 years of school after high school, I could have learned those 20 and probably been pretty good at it. There’s a lot more than that.”

The third bill (HB 2367) proposed the biggest changes in workers’ compensation and would allow state and municipal governments to enter into medical care networks to provide their workers’ compensation coverage. If the employer decided to use a medical care network, workers would have their option of doctors limited to doctors within that network.

The Arizona Chamber of Commerce and Industry supported the bills, and its lobbyist, Marc Osborn, said allowing state and municipal governments to use medical care networks for workers’ compensation will make the system easier and cheaper, and will allow employers to drive down rates.

“The whole idea is you can provide care in a much more streamlined, cost effective way,” Osborn said. “On behalf of the privately insured, we’ve seen huge benefits. Things like being able to get our employees into a physician in a much quicker manner, which means their injuries get taken quicker, which means they get back to work, and we’re able to negotiate aggressive rates with those providers.”

Detractors agree the networks will drive down costs, but they say the savings will come at the expense of workers, who will have limited options in their doctors and who will use workers’ compensation less.

“I’ve heard today this is going to drive down costs,” said Barry Aarons, a lobbyist for the Arizona Association of Chiropractic and the Injured Workers Pharmacy. “Oh yeah, it’s going to drive down costs — it’s going to drive down costs by driving down utilization. That’s the only way that they have to drive down costs.”

Aarons said the measures are too draconian and he likened using these bills to try to cut down on excesses in workers’ compensation to trying to kill a mouse with a gun meant for an elephant – “You’re going to succeed in killing the mouse,” he said. “But you’re going to have an awful lot of collateral damage on the side.”

Opponents also argue that the proposed changes would constitute a reduction of benefits, which the state constitution says would require voter approval through a referenda.

Article 18, Section 8 of the Arizona Constitution, which established the workers’ compensation system, reads: “The percentages and amounts of compensation provided in house bill no. 227 enacted by the seventh legislature of the state of Arizona, shall never be reduced nor any industry included within the provision of said house bill no. 227 eliminated except by initiated or referred measure as provided by this Constitution.”

Rep. Debbie McCune Davis, D-Phoenix, worried the legislation would make it harder for rural Arizonans to get access to treatment in areas where networks aren’t as robust as they are in bigger cities.

Committee chair Rep. Nancy McLain, R-Bullhead City, was concerned the legislation did not provide an opt out option for employees, as she is required to do with the employees of her janitorial service company.

Because of these concerns and more, Fann decided to ask the committee to hold the last two bills, and they have not had a hearing since. Opponents of the bills plan to keep a lookout for similar proposals to surface in the Senate.