Maine’s Insurance Superintendent Approves Decrease in Workers' Compensation Loss Costs; Paves the Way for Lower Premiums

Maine’s Superintendent of Insurance Eric Cioppa recently announced approval of the National Council on Compensation Insurance, Inc.’s (NCCI) 2018 loss costs for Maine, which proposed an average loss cost decrease of 12%. With this approval, the new NCCI loss costs go into effect for new and renewing policies as of April 1, 2018.

NCCI is the advisory rating organization for Maine workers’ compensation insurance companies.

Loss costs are based on previous and projected losses and benefit payments employers are expected to incur. NCCI provides advisory rates for insurance carriers that offer workers’ compensation coverage in Maine. When such insurers file their rate requests with the Bureau of Insurance, NCCI-approved loss costs are available as a reference.

The loss costs change ranges from -10.4% to -15.1% depending on the industry; the 12% decrease represents an average. According to the Bureau of Insurance, because this is an average decrease, rates for some businesses will go up but most will go down. Also keep in mind that the loss cost decrease is only a recommendation; individual insurers may or may not accept the proposed change in loss costs.

“Maine employers’ efforts to improve workplace safety, return injured workers to their jobs in a timely manner, and control medical costs continues to pay off,” Cioppa stated. “This most recent decrease should result in lower workers’ compensation premiums on average across all industry groups.” Cioppa stated that recently filed NCCI loss costs represent a cumulative decrease of 59.5% since the 1992 workers’ compensation reform, and that if all insurers fully adopt the decrease, Maine businesses could save an estimated $27 million in the year following implementation.

MEMIC, Maine’s largest workers’ compensation insurer, will adopt the rate recommendation. MEMIC reports that this amounts to the largest rate reduction in more than 20 years.

Medicare Set Asides in Workers’ Compensation—The Basics

In workers’ compensation settlements, depending upon the status of the injured worker, interests of Medicare must be protected. If an injured employee has a reasonable expectation of becoming or is a Medicare beneficiary at the time of settlement of the medical portion of a claim, Medicare is considered to be a “secondary payer.” In the event of the settlement of the medical portion of a claim, some settlement funds must be allocated to bills Medicare has paid on behalf of an injured worker. As well, because Medicare is a “secondary payer,” the parties must allocate enough funds to cover future medical expenses related to a work injury before Medicare pays for any bills related to a work injury.

A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is an agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury. Funds placed in a WCMSA must be depleted before Medicare will pay for treatment related to the workers’ compensation injury, illness, or disease.

Funds are either placed in the WCMSA account in one lump-sum or the account is funded with a “structured settlement annuity.” Either way, the administrator of the WCMSA may only use the funds to pay for medical care related to a work injury, leaving Medicare free to cover medical expenses unrelated to the work injury.

There is no provision requiring that a WCMSA proposal be submitted to the Center for Medicare & Medicaid Services (CMS) for review. However, submission of a WCMSA is recommended. Doing so ensures that Medicare will pay for future covered expenses down the road in excess of the approved MSA amount. That being said, CMS will not review every proposal. CMS will only review new WCMSA proposals that meet the following criteria:

• The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or
• The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages is expected to be greater than $250,000.00 

Once the MSA is implemented, Medicare will not pay for medical expenses related to the injury until after all set-aside money has been used properly. Thereafter, Medicare can start paying for items and services related to the work injury. 

Please note that CMS recently created an MSA re-review process. Effective July 31, 2017, submitters can submit a re-review request where CMS has provided an approved amount, but settlement has not occurred and the medical care that supported the approved amount has changed substantially. This process is not available in all situations. For starters, (1) the MSA must have been originally submitted between 1 – 4 years from the date of the re-review request; (2) the re-review must result in at least a 10% or $10,000 change (whichever is greater) from the previously approved amount.

Maine Workers’ Compensation Board Issues 2018 Annual Report

The Maine Workers’ Compensation Board (WCB), in conjunction with the Superintendent of Insurance and the Director of the Bureau of Labor Standards, has issued its 2018 Annual Report on the Status of the Maine Workers’ Compensation System. The report can be found online at: http://www.maine.gov/wcb/Departments/administration/troika.html.

The Report notes that dispute resolution continues to perform well. Compliance with the Workers’ Compensation Act is generally high. Claim frequency and compensation rates are stable. The Report states that the WCB, over time, has transitioned from an agency with a primary focus on dispute resolution to one which provides effective regulation and improved compliance and functions as an advocate for both injured workers and the employers for whom they work. 

There are signs of improvement from a financial perspective. Not long ago, Maine was one of the costliest states in the nation for workers’ compensation. According to the Report, Maine’s status has improved when compared to other jurisdictions requiring workers’ compensation. It has moved from one of the most expensive states in the nation to one that is in the average range for premiums and benefits. As an aside, the report notes that some national reports comparing Maine to other jurisdictions continue to fail to account for the very high percentage of Maine employers who are self-insured—about 40%. This is much higher than most states. When comparisons are made on a national basis, they do not account for the self-insured community and, as such, these comparisons do not give an accurate picture of the Maine workers’ compensation market. 

The Board continues to focus on controlling medical costs through the Medical Fee Schedule. In 1992, the Legislature mandated the adoption of a Medical Fee Schedule to help contain healthcare costs within the system. However, it was not until 2011 that one was implemented. The Report highlights the progress Maine has made in controlling medical costs when it adopted a medical facility fee schedule in 2011 and in updating all medical fees each year thereafter. 

The Board continues to strive to address the problem of employee misclassification and is also monitoring the national and state opioid crisis. 

Despite the generally positive trends, the Report does note that more can be done to improve Maine’s workers’ compensation system. Some difficult issues the Board has addressed—and continues to address—include:

• Administrative law judge appointments
• Electronic filing mandates
• Budgetary and assessment matters
• Rule revisions
• Form revisions
• Compliance issues
• Independent medical examiner recruitment and retention
• Workers' advocate resources
• Dispute resolution
• Increases in compliance benchmarks
• Independent contractor predetermination and assessment
• Medical fee schedule updates
• Data gathering and employee misclassification 

Overall, the Report is generally positive. According to the Board’s Executive Director, Paul Sighinolfi, the factors discussed in the Report are “evidence of the Maine workers’ compensation system’s gradual and continued improvement for both injured employees and the business community.”

Potential New Legislation in Maine Touches Issue of Volunteer/Employee Distinction in Maine Workers’ Compensation

Through LD 958, Maine is considering enacting the Uniform Emergency Volunteer Health Practitioners Act (UEVHPA). 

The UEVHPA is model legislation developed in 2006. During declared emergencies, states enacting the model UEVHPA recognize the licensure of physicians and health practitioners in other states if those professionals have registered with a certain registration system. The UEVHPA allows those professionals to come into a state and provide services without having to obtain a license in the state where the emergency has been declared. 

Among other things, the UEVHPA addresses workers’ compensation coverage, providing these volunteers state employee status for workers’ compensation purposes. The UEVHPA provides:

(b) A volunteer health practitioner who dies or is injured as the result of providing health or veterinary services pursuant to this [act] is deemed to be an employee of this state for the purpose of receiving benefits for the death or injury under the workers’ compensation [or occupational disease] law of this state if:

(1) the practitioner is not otherwise eligible for such benefits for the injury or death under the law of this or another state; and 

(2) the practitioner, or in the case of death the practitioner’s persona; representative, elects coverage under the workers’ compensation [or occupational disease] law of the state by making a claim under that law.

Comments to the UEVHPA provide that “some level of benefits should be provided to volunteer health practitioners by the state benefiting from their services.” 

The model UEVHPA, as drafted, may work for some states. However, adoption of the UEVHPA without modification in Maine presents certain conflicts. A significant issue is that these individuals are volunteers, and Maine law finds volunteers not to be covered under workers’ compensation. See Harlow v. Agway, 327 A.2d 856, 859 (Me. 1975) (“An essential element in creating an employer-employee relationship, and consistent with the purposes for which the Work[ers’] Compensation Act was enacted, is payment, or expected payment, of some consideration by an employer to an employee, thus excluding from coverage purely gratuitous workers who neither receive, nor expect to receive, pay or other remuneration for their services.”). 

The model UEVHPA as written is at odds with longstanding Maine workers’ compensation law. A handful of other states which, like Maine, also exclude volunteers from workers’ compensation coverage have offered carve outs for the workers’ compensation coverage provision. Time will tell whether Maine will follow suit if this legislation is adopted. As a practical matter, it seems Maine would likely follow the other states, which also exclude volunteers from workers’ compensation coverage. This would allow this legislation to peacefully coexist with longstanding Maine law.

Permanent Impairment and the 18% Threshold – What It Means and What to Expect in the Coming Years

Permanent impairment has been in the news in recent months. With the Law Court’s decision in Bailey v. City of Lewiston (2017 ME 160), it has held that an established permanent impairment rating is not subject to revision, even in the face of changed medical circumstances. In Somers v. S.D. Warren Co. (Maine Workers’ Comp Board [WCB] App. Div. No. 17-38 [November 13, 2017]), the Appellate Division held that the WCB may not revise a previously established permanency rating in an upward manner.

With the recent focus on permanent impairment, it is worth addressing the current permanency threshold and what it means for ongoing benefits.

Permanent impairment is “any anatomic or functional abnormality or loss existing after the date of maximum medical improvement that results from the injury” (39-A M.R.S.A. § 102). Maximum medical improvement is defined as, “the date after which further recovery and further restoration of function can no longer be reasonably anticipated, based upon reasonable medical probability.”

For injuries on or after January 1, 1993, permanent impairment no longer means additional benefits for an injured worker, but it plays a significant role in determining how long partial incapacity benefits can be received (the level of permanent impairment does not come into play for total incapacity benefits, which must be paid for the duration of disability).

If permanent impairment is below the applicable threshold, injured workers may not receive partial benefits beyond 520 weeks. However, if permanent impairment exceeds the threshold, benefits may continue for the duration of disability.

The permanent impairment threshold for injuries is as follows:

• Injuries from January 1, 1993, to December 31, 1997, the threshold is 15%
• Injuries from January 1, 1991, to December 31, 2001, the threshold is 11.8%
• Injuries from January 1, 2002, to December 31, 2003, the threshold is 13.2%
• Injuries from January 1, 2004, to December 31, 2005, the threshold is 13.4%
• Injuries from January 1, 2006, to December 31, 2012, the threshold is 12%

For injuries on or after January 1, 2013, if, at 520 weeks, the partially incapacitated employee is working, earning 65% or less of his average weekly wage, and permanent impairment attributable to the injury is “in excess of 18%,” partial incapacity benefits may be required beyond 520 weeks so long as the employee continues to work and earn less than his average weekly wage. Regardless of the extent of permanent impairment or level of earnings, partial incapacity benefits may be extended beyond 520 weeks if the employee proves “extreme financial hardship due to inability to return to gainful employment.”

We are just over five years into a new permanent impairment threshold. In less than five years, those employees with injuries in early 2013 will be involved in litigation over cessation of benefits. The changes for injuries on or after January 1, 1993, will not begin to have a major impact until approximately 2022 or 2023, when the first group of employees with 2013 injuries will be involved in litigation over permanent impairment and cessation of benefits. Still, the threshold has an immediate impact when valuing cases for settlement purposes and planning for the future. Expect to see increased instances where individuals claim financial hardship, or continuing cases where employees try to allege they have 18% or more whole person permanent impairment. With this increased permanency threshold, generally only more serious injuries and/or injuries involving permanency from a psychological sequela will exceed the threshold.

Recent Appellate Division Cases: Benefits Reduction Due to Erroneous Calculations, Improper Communications with § 312 Examiner

Penalties for Reducing Benefits After Years of Improper Calculations

In Puiia v. Rumford Paper Co. (Me. WCB App. Div. No. 17-34), the Maine Workers’ Compensation Board (WCB) Appellate Division will hear oral argument in a case in which the employee sought the imposition of penalties based on the employer/insurer’s reduction of incapacity benefits. The employee had been paid 100% partial benefits pursuant to a March 2008 Decree that stated, “The employee is entitled to 100% partial benefits (limited by the statutory maximum) for the period November 28, 2006, through the present, and continuing.”

Per the above order, the Employee began paying weekly compensation of $574.08. On June 30, 2018, the Employer filed a Modification of Compensation, increasing benefits to $596.42 per week effective July 1, 2008, the date the maximum weekly benefit amount (§ 211) was adjusted. Similar increases were made on July 1 of each year through 2013. However, effective July 1, 2014, the Employer reduced weekly compensation at a rate from $655.78/week to $492.96/week. The reduction was made because the Employer had incorrectly calculated benefits by including fringe benefits (under § 102(4)(H) fringe benefits are not to be included in the benefit calculation if the resulting benefit amount exceeds 2/3 of the State Average Weekly Wage (SAWW) at the time of injury). In this case, the employee’s full compensation rate was an amount in excess of 2/3 of the SAWW. Therefore, by operation of § 102(4)(H), fringe benefits cannot be included in the weekly benefit amount. The administrative law judge (ALJ) found, “[t]he fact that Employer erroneously did so for years does not require it to continue to make the same computational error.”

The WCB found that the Employer/Insurer correctly calculated benefits in accordance with the payment order in the 2008 Decree, resulting in a reduction of her benefits effective July 1, 2014. There was therefore no legal basis for the imposition of penalties under §§ 359 or 360.

Alleged Improper Communication with § 312 Examiner

In Leclair v. Twin Rivers Paper Co., LLC (Me. WCB App. Div. No. 17-19), the issue before the Appellate Division is “[w]hether a violation of Board Rule Chapter 4 regarding communication with a § 312 examiner is sufficient to disqualify that examiner automatically or whether such disqualification is dependent on a finding of actual bias.” 

WCB Rules c. 4 § 3 provide in relevant part:

Contacts with the employee by the Board-appointed independent medical examiner will be limited to the scheduling of examinations and actual examinations. All communication between the examiner and the parties must be in writing and, except for questions which a party requests that the examiner address in the report, may only occur by agreement or with the permission of the hearing officer. Any such communication must be received by the Board and copied to all opposing parties not later than fourteen (14) days prior to any examination and must clearly and conspicuously state that the communication has been agreed to by the parties or approved by a hearing officer. Communications that comply with this subsection will be forwarded to the examiner through the Office of Medical/Rehabilitation Services. Communications received by the Board on or after the date of the examination will only be forwarded to the examiner with prior approval of a hearing officer. 

In this case, involving an alleged gradual injury to the lungs and respiratory system, the employee was evaluated by a § 312 examiner. The § 312 examiner found the upper airway sensitivity to be an occupational injury. The WCB adopted these findings. The employer/insurer objected to the admissibility of the § 312 examiner’s report because, according to the ALJ, “employee brought with him to the examination written materials which were not submitted to the [insurance medical exam] IME consistent with Board rules.” However, the ALJ also noted that at this deposition, the § 312 examiner testified that the written materials the employee brought to the § 312 exam “made no difference to his diagnosis and causation opinion.”

The decision is expected to shed light on whether the WCB Rule at issue is a zero-tolerance provision or whether actual bias must be demonstrated to disqualify a § 312 examiner. 

Remaining Issues

The Appellate Division will also take up other issues during the February session, including sufficiency of findings to support ongoing causation, refusal of suitable work, and a change in circumstances in the context of work capacity, among others. The Appellate Division is set to hold additional sessions this year in April, June, September, and December.