Tuesday, December 18, 2012

NJ Carve Outs - Another Evolutionary Step

There are many who doubt that alternatives to workers' compensation can or should be permitted to exist, for various reasons. The evidence grows every legislative season, however, that discontent with business as usual is growing and that more states are looking to offer other ways to administer benefits more efficiently.

"Carve-outs" have been in existence now in California for about 20 years. Slow to be accepted at first, as of 2010, the California Division of Workers' Compensation reported that 24 carve-out programs were operating in the state, primarily in the construction industry. The programs included 1,177 employers with a combined payroll of $1.98 billion and 32,350 full-time employees. 

There are other carve-outs too covering public safety unions and more recent legislation has expanded carve-outs for other industries.

Of course you are familiar with Texas Work Injury Insurance Programs (WIIPs), more commonly referred to as non-subscription plans, the context of which are the subject of exportation to Oklahoma and Tennessee presently and which have been the topic of study by recent publications.

Now New Jersey is looking at alternative workers' compensation in the form of carve-outs.

New Jersey Assembly Labor Committee Chairman Joseph Egan, a New Brunswick Democrat and business manager for the International Brotherhood of Electrical Workers Local 456, filed Assembly 3423 on Nov. 19.

Senate Labor Committee Chairman Fred Madden, D-Turnersville, filed identical legislation in the form of Senate 2201 on Oct. 1.

The bills would allow employers and unions to establish alternative dispute-resolution procedures for injury claims through collective bargaining. The systems would operate outside of the New Jersey Division of Workers' Compensation and be governed by a board with an equal number of employers and union representatives.
  • Unions and employers or groups of employers would have to agree as part of the union contract that all injury claims be submitted to binding arbitration. Decisions by arbitrators could be appealed to the New Jersey Superior Court. Treating physicians would also be selected from a list agreed upon by the union and employers.
  • Employers would be required to create light-duty, return-to-work programs.
  • Both the unions and employers would be required to create occupational safety and health committees.
  • Employers with group health plans would be allowed to integrate group health care with treatment for injured workers.
  • Injured workers would receive the same level of benefits guaranteed them under the state workers' compensation system.
As commented in the WorkCompCentral story covering this development, some programs are good, some are bad - the devil is in the details, or more particularly, how many good physicians will participate in the program.

Both California and Minnesota have experienced similar issues with their carve-out programs and commentators for both have said that they work well when physician lists include treaters who will actually participate. Carve-outs, of course, fail like traditional work comp when there is a dearth of participating physicians because failure to treat delays the claim which thus delays recovery begetting increased claim cost.

The New Jersey proposal though, as noted above, would permit the integration of group health care to treat injured workers. How well this works would depend upon the carve-out plan and presentation, reimbursement between group plan and carve-out plan, etc. But at least participants would have the option to deal with the potential of health care integration, which may become more of an issue as the Affordable Care Act comes more into effect over the next two years.

Regardless I believe the evidence is clear that a trend towards offering business and labor an alternative to traditional workers' compensation is growing and spreading across the nation. Carve-outs, WIIPs, and other creative ways of more efficiently providing benefits to injured workers and still giving employers exclusive remedy protection are simply an evolution of work injury protection philosophies.

We'll see more states following suit.

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