Phoenix Partners, Inc.

BUSINESS JOURNAL

   Over the years, this legally mandated insurance has become an employee expectation, a perceived right rather than a benefit of employment. And from the employer's point of view, it has been a growing pain in the bottom line.

   It's a complex issue, even somewhat emotional, and may require a creative mixture of legislative reform and education.

    When the 1995 PHH Fantus Report found Michigan's workers' compensation rates higher than key competitor states, business groups began joining together to look for reasons and reforms. Sen. Mike Rogers, R-Brighton and Chairman of the Senate Committee on Human Resources and Labor, drafted a sweeping reform bill (SB895) in the last Legislature, which passed in the Senate but died in the House.

    Ann E. Parker, director of government relations for the Small Business Association of Michigan (SBAM), has been working with several other statewide business associations in defining and dealing with the issue.

    "With the new legislative session just starting up, that's why we timed the distribution of this 'Workers' Compensation 101' booklet to hit now as the Legislature's coming back, trying to get it on people's radar screen so that it's an issue the business community would like to address in the next two-year term," Parker said. "I think one-fifth of the House are new members and may not have been exposed to this issue."

    SBAM has no argument with the law's intent, "The process was originally set up to be a temporary mechanism," Parker said. "Employees paid into a system such that medical reimbursement and other true costs assigned to the disability could be recovered and then you would come back to work."

    But in 1965 the Legislature extended compensation beyond 500 weeks to a lifetime.  A 1996 Michigan Self- Insurers Association survey found Michigan is significantly higher in long-term claims (See chart) than the national average.

    Thomas J. Najar, business insurance consultant with Phoenix Partners Inc., said, "In Michigan, all you need is one practicing physician .... All you need is one and you have a legitimate workers' comp claim. Other states have a much more stringent threshold," requiring insurance company physician confirmation. Some states clearly define the time allowed and money limitations for recipients, Najar explained.

    It isn't all bad news, however.

WORKERS' COMPENSATION
PER-EMPLOYEE BENEFIT COSTS

(States identified as competitive in PHH Fantus Report)

     Ohio                      $534
       Michigan               $418
       Kentucky              $385
       Alabama               $372
      Wisconsin             $285
      South Carolina       $283
      North Carolina       $242
      Indiana                  $177

Source: National Foundation for Unemployment and workers' compensation

    "We're one of the few states that has a capitated amount for procedures that are work-related. It's an attempt to reduce costs," Najar said.   "Now Michigan is a little bit better to do business in than it was.   Unfortunately, at the same time, what the state did is to increase the weekly amount an employee can collect if they're injured."  Parker and Najar expressed concerns about recent Michigan Supreme Court and Appeals Court rulings, which the "101 booklet" summarized as follows: "The courts have approved claims for workers who were able to return to work but refused to do so because they chose to live in other states; developed mental problems from ordinary events of employment; were injured after starting fights or being drunk on the job."

    Whatever solutions are crafted need to deal with the judiciary's view of the law's intent. "The courts are misinterpreting," Parker said. "Maybe they (the statutes) need to be tweaked or clarified or wordsmithed to make it absolutely clear what the legislative intent of that language was so the courts do not continue to misinterpret."

    Parker is hoping that Rogers gives legislative reform another try. "We're trying to fix it (the law) because, apparently, the judicial branch isn't seeing it the same way the legislative branch is," Parker said. "I don't know exactly that the statute is wrong; it's just not being applied exactly how it was intended."

    Jami Des Chenes, Rogers' legislative aid, expressed agreement that judicial interpre- tations might be brought into line with intents by clarifying and rewriting portions of the law.

    "The senator will be deciding if he wants to reintroduce that bill (SB895), or change it in some way," Des Chenes said "We're really still at the drafting stage."

    In the meantime, the insurance market is soft. In the last two years, Najar said, rates charged by Accident Fund Company, the largest workers' compensation provider in Michigan, have gone down 15 percent. Most of the other providers' rates have come down as well. And although lower rates will have some impact, this in no way solves the problems inherent in workers' compensation.

Although Najar does not argue the wisdom of or need for legislative reform, he advocates a long-term commitment to educating both employees and employers.    "I look at it from both sides of the fence, being a consultant," Najar said. "Employees, over the years, have for whatever reason felt that comp is a right, And it is a no-fault act

    Using this educational approach with a client over the last five years, Najar said, the client has seen claims drop by two-thirds. "What's that done to the total cost of their insurance? It's dropped it about 15 percent gross," Najar said. "Nothing else has changed. It's the same employer, same management. Michigan hasn't changed. But it's a long process."

But there is another ray of hope on the horizon, Najar said. It's called 24-hour insurance. The 1997 Insurance Market Review & Forecast put together by Johnson & Higgins calls 24-hour insurance "integrated disability management" and predicts that employers will begin moving toward providing group health, disability and workers' compensation in one comprehensive package. Limited pilot programs are under way in several states, and insurers are beginning to work together to coordinate claims management even when coverage's are not consolidated.

    The original state workers' compensation law grew out of a need to protect workers injured in the workplace. "The reason we have workers' comp," Najar said, "is because when somebody was injured before -- say they lost a limb -- they were just gone. They never worked again. They couldn't work and there was no way for that employee to make a living in the future. So we have legislation that was enacted to protect the injured employee."

Times change, however. It took several years to draft and compromise the original law so that it was acceptable to all parties. But according to the "101 booklet," the "bill was passed at a special session of the Michigan Legislature in February 1912." Governor Chase S. Osborn signed the bill into law on March 20, 1912.

                                       BJ

Used with permission of the Grand Rapids Business Journal© 1996 Gemini Publications.