COLORADO UNINSURED EMPLOYERS AND A POSSIBLE NEW FUND

BACKGROUND

There has been growing governmental concern in the State of Colorado over uninsured employers. Changes to the Workers’ Compensation Act in 2005 created stiffer fines for employers who fail to comply with mandated coverage for workers’ compensation benefits. The Division of Workers’ Compensation Director is required to impose a fine of $250 per day for an initial offense. The 2005 changes to Colo. Rev. Stat. § 8-43-409 included an increased fine range for companies that were non-compliant for a second time. Those companies now face up to a $500 per day fine. This statute specifically states that the ‘fine’ levied under the statute shall be the ‘penalty’ within the meaning of Colo. Rev. Stat. § 8-43-304, but is in addition to the increase in benefits owed under Colo. Rev. Stat. § 8-43-408.

Colo. Rev. Stat. § 8-43-409 governs the procedures for non-compliant employers. First, the Director is empowered to investigate and notify the non-compliant employer of their right to request a prehearing conference over the coverage issue. Second, if the Director determines that the employer is non-compliant, then the Director must take at least one of the following actions: (1) order the non-compliant employer to cease and desist its business operations while it is non-compliant; and/or (2) assess fines. After a cease and desist order is entered, the Attorney General immediately starts proceedings against the non-compliant employer to stop doing business. Further imposition of any fine under this statute, after appeal time frames have run, can be lodged with the District Court as a judgment. 25% of any fine collected would be directed to the workers’ compensation cash fund under Colo. Rev. Stat. § 8-44-112, with the balance going to the state general fund. Finally, any fine under the statute is in addition to the increased benefits owed by the non-compliant employer under the preceding statute, Colo. Rev. Stat. § 8-43-408. This statute increases ordinary benefit exposure by 50% for non-compliant employers and puts in place a bonding requirement for the non-compliant employer.

 

BALANCING INTERESTS

Significant fines handed down to non-compliant employers have received press attention in the past. As reported in the Denver Post on August 29, 2016, a student run café at the University of Colorado was shut down after it was fined more than $224,000 for not having workers’ compensation coverage. The Complete Colorado, a blog run by local political commenter Todd Shepard, documented a $271,000 fine against a Longmont garden business for failing to comply with coverage requirements, as well as a $516,700 fine levied against fast food restaurant, El Trompito Taqueria. These fine amounts increased quickly as the result of the daily multiplier. The time frames of noncompliance were largely assumed by the Director because the employer could not prove coverage during these intervals. For a small employer to receive such a large fine can effectively put the employer out of business, leaving the injured worker with no practical recourse for benefits.

There are mitigating circumstances that may reduce fines levied against non-compliant employers. For instance, if the employer can show compliance once it has become aware of a lapse in coverage, this will mitigate the fine amount. A non-compliant employer paying benefits, essentially stepping into the shoes of a would-be insurer, also helps mitigate the fine.

The Director is obligated to try to ensure compliance while not effectively forcing employers out of business. This should be done with an eye toward trying to keep injured employees from having no benefit flow or treatment. When an injured worker has no coverage, it forces the injured worker to seek medical treatment through personal healthcare insurance or, or if no health care coverage exists, through self-pay methods, emergency room visits, treatment write-offs and/or charity. Many healthcare insurers reject coverage for treatment of a work injury since that liability should fall on a workers’ compensation carrier or employer. Further losses from unpaid and unreimbursed medical treatment through emergency rooms, write-offs or charity are ultimately passed on to employers and employees at large, who bear the burden of increasing insurance premiums as the result of uninsured employers and their injured employees.

 

LEGISLATIVE CHANGES

Proposed House Bill 17-1119 attempts to address payment for injured workers who do not have coverage through their non-compliant employer. HB 17-1119 is currently a proposed Bill, but is likely to be approved later this year. The Bill was introduced on January 20, 2017, and must still pass the State House and Senate, as well as be signed into law by the Governor.

Coverage:  The fund would cover claims occurring on or after January 1, 2019 that have been adjudicated compensable, where the employer has been determined uninsured and has failed to pay the full amount of benefits ordered. The fund does not cover a partner in a partnership or owner of a sole proprietorship, the director or officer of a corporation, a member of an LLC, the person who is responsible for obtaining workers’ compensation coverage and failed to do so, someone who is eligible for coverage but elected to opt out, or anyone who is not an “employee” under the terms of the Act.

Funding:  The fund is made up of the fines and other revenue collected by the Division that is specifically allocated to the fund, along with any gifts, grants, donations or appropriations. There is also a separate 25% paid to the fund based on benefit amounts owed by non-compliant employers.

Governance:  The fund is run by a board that includes the Director and four individuals representing each of the following: employers, labor organizations, insurers and a claimant attorney.  The board serves for a term of 3 years and may be reappointed with the exception of the initial board members. With regards to the initial board, one member shall serve for an initial term of three years, two members for a two-year term and one member for a one year term.  No one can serve more than three consecutive terms.  Benefits are to be paid at the ordinary rates. If the fund does not have enough money in the fund, the board can reduce the rates.  The board is unpaid.

Powers:  The fund has ordinary powers attendant to handling workers’ compensation claims.  Of interest, the fund has the power to intervene as a party in a case involving an uninsured employer, or other potentially responsible entity. Upon acceptance of the claim into the fund, a lien is created against any assets of the employer and its principles for the amount due as compensation. This lien has priority over all other liens except delinquent tax payment liens.  The lien can be perfected by filing in the appropriate court. Further, the fund becomes something akin to a secured creditor of any insolvent employer for amounts the fund determines may be needed to pay uninsured losses. Payment by the fund does not relieve the uninsured employer of payment obligations for benefits and the fund has the power to pursue any employer who defaults on those payments in District Court.

 

BOTTOM LINE

The proposed legislation creates a small safety net for injured workers of uninsured employers.  Given the ever-increasing costs of medical care, there is a valid question as to whether funding would be adequate to cover workers’ compensation benefits claimed by the injured workers.  Further, it will be interesting to see if respondents may be required to give notice to the fund in cases where liability is being adjudicated on a statutory employer issue. The fund may have a recognizable interest in such litigation, as the burden of paying workers’ compensation benefits would fall on the fund should there be a determination of no coverage. It is not unusual for a carrier or employer to settle potential statutory employer liability on a “denied” basis as opposed to proceeding to litigation, where adjudication might make statutory employer liability clear. The fund intervening in this type of case may prevent pre-adjudication settlement from occurring without some consideration being paid to the fund in the “denied” settlement as well.

DEPARTMENT OF LABOR REPORT

BACKGROUND

In October 2015, National Public Radio (NPR) and ProPublica did a report over the differences between the states npr_propublicaworkers’ compensation laws.  The report found significant differences in the amount and type of benefits in each states workers’ compensation system.  The report focused heavily on recent attempts by states to allow employers to opt-out of workers’ compensation.  These plans generally allow an employer to set-up a benefit system for injured workers themselves.    In particular, it focused on Oklahoma’s opt-out law – a law that was recently struck down by the Oklahoma Supreme Court as unconstitutional.  The report was very damning of these differences and deficiencies between the states’ systems.

The NPR and ProPublica report led to a letter from 10 prominent national legislators to the Secretary of the Department of Labor.  The letter was itself very critical and condemning of the deficiencies reported by NPR and ProPublica.  As a result, on October 5, 2016 the Department of Labor issued a 43-page report over the state of the patchwork of workers’ compensation laws across the country.

THE REPORT

The Department of Labor report outlines the history of the ‘grand bargain’ that is the workers’ compensation system outlining the reasons behind workers’ compensation and how we ended-up with a patchwork system of laws.  In particular, the report focuses on a national commission report from 1972 that identified 5 basic objectives for workers’ compensation programs:

  1. broad coverage of employees and work-related injuries and diseases,
  2. substantial protection against interruption of income,
  3. provision of sufficient medical care and rehabilitation services,
  4. encouragement of safety and
  5. an effective system of delivery of the benefits and services.

This national commission agreed on 19 essential recommendations to accomplish these goals.  The 19 recommendations themselves focused on six specific areas:

  1. compulsory rather than elective coverage with no exemptions for various employers or types of labor,
  2. broadening employee choice for filing claims interstate, either where the injury occurred, or where the employment was originated,
  3. full coverage for work related diseases,
  4. adequate weekly wage replacement benefits and death benefits of no less than 100% of the states average weekly wage,
  5. no arbitrary limits on the duration of benefits and
  6. full medical and rehabilitation benefits without limit or duration.

The report considers the history since 1972, recognizing that employers’ costs and insurance rates grew from 1984 to 1990.  This cost increase created political pressure to change the benefit packages.  The report cites that per $100 of payroll, costs rose to as high as $1.65, but have since dropped to $.98 per $100 of payroll in 2013.  The report goes on and attributes the decreased cost to states passing legislation to reduce the benefit packages to injured workers. In particular, the report cites to various states that have created ‘proof barriers’ to certain types of claims, such as mental impairment claims, and cites to a reduction in benefits for workers with pre-existing injuries or conditions.  The report mentions mechanisms within each state for reduction of indemnity benefit eligibility through application of apportionment, or other fault-based benefit penalties.  There is also reference to disincentives to workers to report a claim, such as drug screening after an accident or injury.  The report is also critical of restricted medical care for injured workers, through either limited medical care provider choices, or reduced reimbursement keeping medical care providers from accepting work injuries.  Finally, the report is critical of the elimination of second injury funds and other ways in which liability for certain injuries or conditions are accepted.

Overall, the Department of Labor report recognizes that some liability for benefits in the workers’ compensation system is being passed on to other programs, including Medicare, Medicaid and Social Security.  This cost shifting to other public aid programs is a primary concern for the Department of Labor.  The report provides a road-map for Federal action in the future in the form of oversight of state workers’ compensation systems, including mandatory minimums of benefits within each system to halt what the report describes as a ‘race to the bottom.’

Of interest, the report tracks each states progress in complying with the 19 core recommendations from the original national commission.  The report shows how each state was doing in 1972, 1980 and 2004.  In 1972 Colorado had complied with 10 of the 19 recommendations and had increased that to 16 of the 19 recommendations by 1980. By 2004, Colorado compliance had dropped, as is the case with most states, to 12.75.  In 2004 no state had met all 19 recommendations.

BOTTOM LINE

The report tacitly recognizes that the Obama administration is on its way out.  Regardless, the Department of Labor is clearly interested in the functioning of state workers’ compensation systems and it is doubtful that the upcoming election will change that dynamic.  Further, state interest in an opt-out structure only increases this negative attention.  Several states that have considered opt-out arrangements have dropped these proposals.  Under any circumstance, it is to be expected that there will be continued call for increased Federal oversight over workers’ compensation.

WORKERS’ COMPENSATION RULES OF PROCEDURE CHANGES Effective 9/14/16

Amendment 69 Colorado

Worker’s Compensation Rules of Procedure Changes

EFFECTIVE 9/14/16

 

 

The Division of Workers’ Compensation recently changed and revised several Rules. These changes became effective September 14, 2016. Employers and carriers participated in public comment, voicing concerns over this change since it will certainly create overpayments.  Frank Cavanaugh of Lee + Kinder, LLC participated in these public comments on behalf of the Colorado Self-Insured Association.

 

Several changes are more substantive than others and track statutory amendments adopted by the legislature in the last session.  For example, changes to Rule 5-5 regarding the filing of final admissions of liability will affect day-to-day claims handling.  Rule 5-5 now requires the physician’s narrative report, along with the M164 and measurement sheets, be attached to the final admission of liability.  In addition, this Rule now requires that the final admission of liability state a position on maintenance medical benefits, making specific reference to the medical report including the name of the physician and the date of the report.  Failure to properly abide by these requirements may void a final admission of liability and potentially lead to imposition of penalties by the Director and/or audit issues. Rules 8-6 and 8-7 also track legislative changes over requests for a change of physician.   An original treating physician’s role remains in place and does not terminate until there is an initial visit with the new physician.  Further, a request for change of physician and a response to the request must now be on a specific form, WC197. Please also be aware that Rules 16 and 18 are undergoing changes and have not yet been finalized.  We will apprise you of these additional changes once they occur.

 

  • Rule 1:

1-1 “Service” is now defined as delivery by US mail, hand delivery, facsimile or, with consent of the party being served, email.

Rule 1-2 contains language from Civil Rule of Procedure 6 over computation of time.  It outlines that you do not count the day of the act; however, you do count the last day in the time period unless it is a Saturday, Sunday or legal holiday.  If that is the case the timeframe moves to the next day.

Rule 1-4 now states that unless it is specifically allowed by the Division documents may not be filed with the division by email.

 

  • Rule 5

Rule 5-2 still requires a statement regarding liability for any claim assigned a WC number, or when the first report of injury should have been filed; however, the first report of injury has to be filed before a notice of contest will be accepted by the Division.

Rule 5-5 requires that the final admission of liability include the M164 form, the physician’s narrative report and the rating sheets.

Rule 5-5 requires that an MMI report include a position on maintenance medical and that a final admission of liability state a position on maintenance medical benefits making specific reference to medical report, including the physician’s name and date of the report.

Rule 5-5 allows for medical only claims, that have been reported to the Division with no PPD, only require the attachment of a narrative report and worksheets if they were supplied by the physician.

Rule 5-5 now requires any safety rule reduction must include the specific facts supporting the reduction on a separate sheet of paper.

 

  • Rule 6

Rule 6-1 organized the requirements for a modified duty offer.  It still requires a copy of the written inquiry to the physician over the modified duty be provided to claimant at the same time as it is provided to the physician and that the claimant be provided 3 business days from the date of the receipt of the offer to return to work or respond.

Rule 6-6 governing terminating temporary disability benefits due to confinement, no longer requires a certified copy establishing confinement.

 

  • Rule 7

Rule 7-1 governing closure of a claim through abandonment requires that a new general admission be filed in the event that there is an objection to the final admission of liability file to close the claim for abandonment.

Rule 7-1 does not allow closure of a claim for failure to prosecute to be submitted by email.

Rule 7-1 governing closure by voluntary abandonment no longer requires notification to the claimant of the reopening provisions.

 

  • Rule 8

Rule 8-6 governing when there is a transfer of medical care at claimant’s request, states that the treating relationship with the prior physician terminates upon the initial visit with the new physician.

Rule 8-7 requires a written request for change of physician, and denial of that request, be made under a specific form, WC197.

 

  • Rule 9

 

Rule 9-2 allows the addition of any prehearing issue by any party without permission within 2 business days of setting.

Rule 9-3 allows motions for consideration by the PALJ to be submitted by email.

Rule 9-9 does not allow settlement document amounts to include consideration for issues outside of the jurisdiction of the DOWC.

Rule 9-9 allows that only pro se claimants may withdraw a waiver of advisement hearing within 3 days of signing the settlement documents.

 

COLORADO SUPREME COURT CLARIFIES THE FIREFIGHTER CANCER STATUTE

BACKGROUND

In 2007 the Colorado Legislature enacted a firefighter cancer presumption statute at Section 8-41-209, C.R.S.  The statute created a presumption that certain cancers were caused by work as a firefighter if the individual diagnosed with the cancer worked in the capacity for at least five years. firefighter For the cancer to be deemed a compensable occupational disease, the firefighter would have had to undergo physical examination upon becoming a firefighter that failed to reveal the cancer at that time. The presumption could be rebutted if the firefighter’s employer or insurer could show by a preponderance of medical evidence that the condition did not occur on the job.

This statute is similar to other presumption statutes that sprung up across the country in the wake of firefighters’ and other first responders’ actions during the 9/11 terrorist attacks.  The general premise behind the presumption is that firefighters are exposed to known carcinogens to a greater extent than other occupations and that development of cancer is a known effect caused by exposures to these carcinogens.

A series of cases had been litigated before different ALJs involving varying cancers and exposures wherein employers tried to overcome the presumption of compensability.  The ALJs, the ICAO and the Colorado Court of Appeals in a series of decisions essentially interpreted the presumption statute as being an irrebuttable presumption, requiring the employer to show an alternative cause for claimant’s cancer. The practical effect of this interpretation was to make the presumption statute similar to a strict liability statute. This is due to the fact that it is impossible to demonstrate that an individual’s cancer was in fact caused by something other than work as a firefighter.

THE ZUKOWSKI CASE

Mr. Zukowski began working as a firefighter for the town of Castle Rock in 2000. He underwent a physical examination at the time with his personal physician where there were some concerns raised over moles on his skin. Mr. Zukowski also worked part-time doing construction outdoors and eventually started his own business building decks and furniture. Mr. Zukowski spent a lot of time outdoors running, hiking and cycling when he was not working.

In 2002 Mr. Zukowski had five moles removed and biopsied. In 2008 he developed a mole on his right calf and ultimately in 2011 Mr. Zukowski was diagnosed with melanoma on his right outer calf at the same site where a mole that developed several years earlier. He had several surgeries to remove the mole and returned to full duty work, but made a claim for medical and temporary disability benefits under the presumption statute.  At hearing the parties stipulated that Mr. Zukowski was entitled to the presumption so the only issue is whether the employer overcame the presumption. The employer presented evidence regarding Mr. Zukowski’s known risk factors for developing melanoma including exposure to the sun and a history of abnormal mole growth. The ALJ found that Castle Rock’s burden in trying to overcome the presumption was to prove by medical evidence that claimant’s cancer came from a specific cause not occurring on the job.

On appeal to the ICAO, the ICAO essentially agreed with the ALJ. Castle Rock appealed the ICAO’s decision to the Colorado Court of Appeals, arguing that the ALJ misapplied the presumption when the ALJ determined that risk factor evidence was insufficient to rebut the presumption. The Court of Appeals agreed with the town of Castle Rock, looking at cases from other jurisdictions with a similar presumption statute and concluding that employer may overcome the presumption with specific risk evidence demonstrating that the particular cancer was probably caused by a source outside of work.

The Colorado Supreme Court granted certiorari in Zukowski along with a companion case involving a similar issue.  The Colorado Supreme Court agreed that Castle Rock was not required to establish an alternate cause for the cancer to overcome the presumption. The Colorado Supreme Court further held that in presenting risk factor evidence, which demonstrates the cancer was more probably caused by something other than work, can rebut the presumption.

AFTERMATH OF ZUKOWSKI

The aftermath of the Zukowski decision is not known yet.  I have tried cancer cases similar to Zukowski, where multiple potential employers were liable for the cancer and ultimately won for my client, but only because the last employer in claimant’s employment history was found liable.  I authored an amicus brief for the Colorado Self-Insured Association in Zukowski, so I have a pretty good idea of where these cancer cases are going.

Before Zukowski, firefighter cancer cases were very simple for claimant to prove. Claimant would appear with a doctor who would testify that the firefighter’s particular cancer fell within the types enumerated in the statute. The doctor would offer their opinion that since claimant worked for five years as a firefighter, claimant’s cancer was presumed caused by that work.  There was no amount of alternate risk evidence that would overcome the presumption as interpreted before Zukowski.

After Zukowski, litigating a firefighter cancer case will be much more involved when there are other risk factors to explain the cancer. Further, every risk factor relative to a particular cancer will have to be explored. For instance, the case I tried involved prostate cancer. Claimant had a significant family history of prostate cancer and was clearly predisposed to developing prostate cancer. Further, expert testimony was presented that prostate cancer is not something one would expect to see from exposure to carcinogens as a firefighter. Is predisposition to developing cancer a risk factor after Zukowski? It is certainly not as clear a risk factor as is exposure to sun and developing melanoma, where the cause-effect relationship is clear. Therefore, I believe these cases will become cancer and fact specific.

BOTTOM LINE

Further clarification through litigated cases is required to flesh out the presumption statute. For instance, in my prostate cancer case, claimant had his prostate removed and returned to work as a firefighter. If claimant develops another type of cancer is that an entirely separate claim? If claimant’s prostate cancer spread to a different organ after the prostate was removed, is that a new claim or continuation of the same claim? Is there a medical basis to prove that the cancer has recurred in a different organ or that it is an entirely new instance of cancer?  These questions arising out of the firefighter cancer presumption statute are all still unanswered.

 

COLORADO BALLOT PROPOSED AMENDMENT #69 – POTENTIAL IMPACT ON WORKERS’ COMPENSATION MEDICAL BENEFITS

Amendment 69 Colorado

Colorado State Health Care Initiative 20 (Amendment 69)

 
Background

Initiative 20 got on the 2016 Ballot as Amendment 69.  It was authored by Irene Aguilar, M.D. who is a Democratic member of the Colorado Senate and a primary care physician.  A similar attempt to migrate a state to a single payer system was tried recently in Vermont.  Vermont’s Bill went through the State House and Senate.  It was signed by the Governor in May 2011.  In December 2014, Vermont’s Governor retracted his backing of the single payer program due to a lack of clear funding and the negative effect of the taxes on businesses.  Vermont’s single payer healthcare law, although passed and enacted, has essentially been abandoned.  Similar to Amendment 69, Vermont’s Act 48 purported to integrate workers’ compensation medical benefits into a universal healthcare system.

 

Overview

 Section 1332 of the Affordable Care Act (ACA) allows a state to obtain a waiver from the ACA, if the state sets up a system that provides the same level of coverage.  Amendment 69 creates a single-payer system for health care in Colorado known as ColoradoCare.

 

Funding

ColoradoCare would be funded by a 6.67% payroll tax upon employers and a 3.33% tax on employee income.  Other income sources would also be subject to the premium tax including rents, interest, dividends, capital gains, pensions and annuities.  Certain income would not be subject to the premium tax.  Maintenance and unemployment are not subject to the tax.  In addition, the first $33,000 of Social Security or pension payments are not subject to the premium tax and the same is true for the first $60,000 for those filing jointly.  Those who are self-employed or whose income is from investments would be subject to a flat 10% of that income as a premium tax.  ColoradoCare would not be subject to TABOR (Colorado’s Taxpayer Bill of Rights) limits on new tax increases.  The premium tax would be deductible from income taxes.  The premium taxes are capped at $350,000 for individuals and $450,000 for those filing jointly.  Increased funding, if necessary, would come from members.  A “member” is someone who is 18 years old and has lived in Colorado for a continuous year.

 

Amendment 69 purports to raise 21 billion dollars by 2019.  For comparison, the 2016 total state budget is approximately 25 billion dollars.  The Amendment would nearly double State tax collection.  The projected savings to businesses and individual is supposed to come from the removed need for employer and individual contributions to private plans, reduced administrative costs from private plans and general fraud prevention.  Figures offered in support of Amendment 69 place current premium estimates for private health plans at a monthly contribution of $278 (employer) and $139 (employee) for an employee making $50,000 a year.  These figures go up to $556 and $278 monthly for an individual making $100,000 a year.  There are other ancillary purported savings from various sources based on no required co-pays or deductibles.

 

Governed

ColoradoCare would be operated by an interim board of 15 members appointed by the Governor and legislative leaders.  This board would then develop an election process to create a new Board of Trustees and to formulate rules to ensure the board’s operation.  It would also apply for the exemption from the ACA.

The interim Board would be replaced within three years with an elected 21-member Board of Trustees.  The trustees would be elected from seven state districts of comparable size.  The trustees would be charged with establishing purchasing authority for medications and medical equipment and with establishing an ombudsman’s office for beneficiaries and providers.

 

Coverage

ColoradoCare would provide a comprehensive benefit package.  It includes emergency and trauma services; primary and specialty care; hospitalization; prescription drugs; medical equipment, mental health and substance use services; chronic disease management; rehabilitative and habilitative services and devices; pediatric care, including oral, vision, and hearing services; laboratory services; maturity and newborn care; and palliative and end of life care.  There are no deductibles, or co-payments and any potential co-pay requirements would have to be approved by the Board of Trustees.  The “member” would choose a primary care provider.  A beneficiary traveling or living temporarily out of state is still covered.

ColoradoCare would serve as a supplement to Medicare.  For any other healthcare plan in effect ColoradoCare would be a secondary payer.

 

Delivery of Services

ColoradoCare will assume payment of health services.  The interim Board and the Board of Trustees are charged with implementing payment and billing systems, handling quality and value concerns and any cost saving mechanisms.

 

AMENDMENT 69 AND INTEGRATION OF WORKERS’ COMPENSATION MEDICAL COVERAGE

Amendment 69 integrates workers’ compensation medical coverage into ColoradoCare.  ColoradoCare offers this as an overall cost savings, citing statistical data affixing a 59% medical cost component for benefits paid under the workers’ compensation system.

 

General Considerations

Colorado Workers’ Compensation

Under Colorado workers’ compensation laws, an employer must obtain coverage for workers’ compensation insurance by becoming self-insured, obtaining coverage through a commercial insurer, or through the quasi-governmental entity, residual market insurer, Pinnacol Assurance.  Medical benefits are part of the benefit package provided under Colorado’s workers’ compensation system. Medical benefits are the most expensive component of the benefit package, accounting for over 50% of the total workers’ compensation costs to employers and carriers.  Workers’ compensation is an exclusive remedy to an injured worker.  The injured worker cannot pursue the case in District Court against an employer so long as the employer has complied with the Colorado Workers’ Compensation Act.

 

Medical Care in Workers’ Compensation vs. ColoradoCare

There is no coordination between the proposed Amendment 69 and the Colorado Workers’ Compensation Act.  ColoradoCare simply steps in as a payer for work injuries.  By the same token, there is no coordination between recovery for injuries from a third party.  ColoradoCare simply has recovery rights against third parties, presumably for amounts paid as a result of injury.  Therefore, workers’ compensation third party recovery rights remain intact for benefits not covered under ColoradoCare.

Medical benefits under workers’ compensation are different than those provided under ordinary health insurance.  Workers’ compensation is an event-based coverage, meaning that coverage is dependent on the event of a work injury and extends first so long as treatment continues to cure and relieve the effects of the injury to a point that treatment plateaus.  Medical coverage is then extended for modalities to maintain claimant’s level of function.  The goal of medical treatment under workers’ compensation is to get the worker back to work as quickly as possible and at an optimal level of function. The injured worker has no payment obligation for medical care.  Under the circumstances, the employer and carrier are the primary stakeholders in the workers’ compensation system.  Colorado allows the employer to maintain a degree of medical management of workers’ compensation claims that includes selecting the authorized treating physician in the first instance.  Barring a change of physician that same physician serves as a gatekeeper, making necessary referrals and medically managing the claim to a point of maximum medical improvement and, in certain circumstances, determining a medical impairment for claimant’s injury or condition.  Providers under the Colorado Worker’s Compensation Act generally follow medical treatment guidelines established for most injuries or conditions and are reimbursed under a medical fee schedule aligned with the services provided.

Health insurance is treatment based and extends for the length of the coverage without regard to the cause of the injury, or condition. Health insurance coverage is significantly less structured in approach to care and providers are reimbursed under different systems and rates. Further, there is less emphasis on treatment directed at an individual’s level of function.

Medical providers under the workers’ compensation system generally have accreditation as level I or level II.  This training emphasizes treatment for functional gain and returning the injured worker to work within safe parameters.  Many of these medical care providers are experts in occupational medicine and\or are board certified in physical medicine and rehabilitation.  These providers have a working familiarity with medical treatment guidelines that are designed to foster the goals of treatment directed at functional improvement and returning an injured worker back to work.  Further, only level II providers can provide a medical impairment rating for work injury or occupational disease.  Treatment by a non-level II primary care physician would require a referral to a level II physician to provide a medical impairment rating.  Given the circumstances, integrating medical care under ColoradoCare, with less emphasis on functional improvement and returning an injured worker back to work, will likely extend and increase the cost of this care.

The cost and duration of medical care is also directly tied to increased indemnity cost per claim.  Without emphasis on returning to work within restrictions potential entitlement to wage replacement benefits will increase. In addition, an injured worker’s eligibility for indemnity benefits is capped depending on the amount of medical impairment assigned for an injury or occupational disease.  To the extent an injured worker uses amounts under the applicable cap as wage replacement benefits, it may prevent the injured worker from receiving a full award of medical impairment benefits.  It is likely that incorporating medical care for work injuries or occupational diseases under ColoradoCare will have the indirect effect of creating increased exposure for indemnity benefits on these claims.  There is evidence of this from Vermont where private carriers were either unable, or unwilling, to offer an insurance product to cover indemnity benefits for Vermont’s workers’ compensation system without having medical benefits controlled under that system.

 

Safety Incentives in Workers’ Compensation vs. ColoradoCare

Workers’ compensation insurance premiums are a function of gross wages paid under specific job classifications and factored by an experience modifier.  Therefore, there is strong incentive for employers to maintain a safe workplace, reducing work injuries and occupational diseases.  This, in turn, reduces premiums by lowering the experience modifier.  Integration of workers’ compensation medical benefits into a universal health care system reduces or eliminates employer incentive to ensure a safe workplace as there is no financial ramification tied to a higher experience modifier.

 

Indemnity Obligations Under the Colorado Workers’ Compensation Act

Notwithstanding Amendment 69’s integration of medical benefits into ColoradoCare, other benefits under the Colorado Workers’ Compensation Act are still required to be covered by employers.  These benefits include wage replacement, medical impairment, disfigurement and dependent benefits. ColoradoCare does not integrate or eliminate these other benefits.  Therefore, passage of Amendment 69 would require a mixed model benefit package, with publicly funded medical benefits provided under a different regulatory structure combined with privately funded benefits through a different insurance product.  In an official report to the Vermont Legislature from Vermont’s Director of Healthcare Reform dated January 15, 2016, this type of mixed model is discussed.  Private carriers in Vermont determined that private indemnity coverage required a new insurance product to cover indemnity portions of workers’ compensation claims.  Private carriers operating in Vermont were not interested in offering this product due to the connection between the lost ability to manage the medical component of the work injury or occupational disease and the resulting indemnity obligations.  Removing medical management of the claim would likely increase the amount of indemnity owed on that same claim.

 

Legal Issues Regarding Integration of Workers’ Compensation Medical Benefits into ColoradoCare

 

HIPPA

In general, the HIPPA privacy rules do not apply to workers’ compensation insurers, administrative providers or employers.  These entities are allowed access to otherwise private records to coordinate medical care and to deal with work-related issues, like restrictions and return to work options.  In Colorado, there are close connections between medical care providers, employers and workers’ compensation carriers and/or self-insured employers.  The employer selects the authorized providers for work injuries in the first instance and forms are generated for return to work options.  In addition, there are specific provisions for a change in medical care provider and authorization to treat for a work injury or occupational disease.  Amendment 69 does not address these matters.  Presumably, the entities involved in workers’ compensation matters would remain immune from HIPPA privacy issues, particularly in light of medical treatment and return to work issues connected to wage replacement benefits and permanent total disability benefits.

 

Exclusive Remedy

Colorado has a very strong exclusivity provision that immunizes employers from a lawsuit filed by an employee for a work injury or occupational disease.  This is part of the trade-off under the workers’ compensation no-fault system.  Removal of medical benefits as part of the benefit package under the workers’ compensation system could, through other legislation or interpretation of the exclusivity provision, erode or eliminate workers’ compensation as an exclusive remedy.  Amendment 69 does not address exclusive remedy concerns.

 

ERISA

The Employee Retirement Income Security Act (ERISA) is a federal statute that regulates private-sector, employer-sponsored benefit plans, including health care coverage.  ERISA protections specifically supersede any and all state laws in so far as they may now or hereafter relate to any employee benefit plan.  29 U.S.C. 1144(a).  Workers’ compensation is an exception to this preemption clause, meaning that states have the right to regulate workers’ compensation.  Once medical benefits under workers’ compensation are integrated into a single payer system, medical benefits may no longer be offered for the purpose of complying with the workers’ compensation benefit package and may now be preempted by ERISA laws.  There is no clear precedent over this issue and Amendment 69 is silent on this issue.

 

Treatment and Medical Impairment Under the Colorado Workers’ Compensation Act

Section 8-42-101, C.R.S. of the Colorado Workers’ Compensation Act requires every employer to supply certain medical benefits, including certain conditions for supplying those benefits given the nature of employment and the condition.  Further, it identifies accreditation process as a requirement for a physician to provide primary care and to provide an evaluation for potential impairment of an injured worker.  ColoradoCare would be the payer for work injuries.  Amendment 69 is silent as to its overall effect on the Colorado Workers’ Compensation Act.  Therefore, integration of the medical benefit component in the workers’ compensation system into ColoradoCare would likely require large-scale revision of the Colorado Worker’s Compensation Act, including revision of statutes and rules regarding physicians and determination of medical impairment.

 

Multi-Jurisdictional Employers

Workers’ compensation laws differ from state to state.  Currently, different state requirements and interpretations of when an injury or occupational disease is work-related creates risk for liability for uninsured loss for employers doing business in multiple jurisdictions.  Integration of medical benefits into ColoradoCare compounds this problem.  By its terms, a “member” is someone at least 18 years old, who has lived in Colorado as a primary resident for one continuous year.  Colorado has one of the fastest-growing populations of any state in the country and many of those individuals are moving to Colorado for employment.  If one of these individuals, 18 years old or older, is hurt at work but not a “member” of Colorado Care, that individual would not be eligible for medical coverage for a work injury.  This would leave the employer obligated to fill the gap in coverage or be subject to penalties as an uninsured employer.

 

Existing Claims

There is no provision in Amendment 69 for how existing claims would be integrated into ColoradoCare.  ColoradoCare would simply assume responsibility for payment of medical benefits for injuries arising out of or within the course and scope of employment.  This is a substantive change in the law and would be given prospective application.  Therefore, integration of medical benefits into ColoradoCare creates a different payer, but is unclear as to what it does to the status of any existing medical care provider for any existing workers’ compensation claim.

 

Litigation

Passage of Amendment 69 and the integration of medical benefits into ColoradoCare will spawn significant litigation over the issues identified above.  This litigation would not be limited to hearings in the Office of Administrative Courts, but would involve District Court actions in both the state and federal systems over a myriad of potential situations.  This litigation will be a significant cost to employers in Colorado and will potentially disrupt “… the quick and efficient delivery of disability and medical benefits to injured workers at a reasonable cost to employers.”  Section 8-40-102, C.R.S.

 

ELECTION LANDSCAPE

The Initiative vs. Legislative Process

Initiative 20, (appearing on the 2016 Ballot as Amendment 69), is an example of Colorado’s flawed initiative process.  Initiative 20 needed only 86,492 signatures to get on the Ballot, but received 158,831 signatures.  This demonstrates the ease with which it got on the Ballot and a level of support for Amendment 69.

Amendment 69 is really in the form of a new statutory act.  Ordinarily, such legislative proposals take the form of a bill with a legislative sponsor, committee assignment, public comment and discussion and debate that allows for amendment, etc., before it is passed and potentially enacted by signature of the Governor.  Amendment 69 would never have appeared in ordinary legislative process as it appears on the Ballot.  Instead, as an initiative, Amendment 69 is non-legislation that alters the Colorado Constitution through a simple popular vote.

Outlook

The proponents of Amendment 69 spent a great deal of money getting it on the Ballot and may not have the resources to advocate further for its passage.  Virtually all business organizations oppose Amendment 69 for reasons identified above.  Further, former Democratic Governor Bill Ritter, and current Democratic Governor John Hickenlooper do not support Amendment 69.  Very limited polling data shows stronger than expected support for this Amendment.  In this unique election cycle, it is difficult to forecast whether or not this will pass since it is connected to the demographics of the people coming out to vote.

Legislative Mid-Session Update 2016

The 2016 legislative session is half over. The deadline for introduction of bills has come and gone; however, late bill introduction is very common. This is a brief summary of some of the introduced legislation of interest to clients:

Workers Compensation

Right now there are no pending bills regarding workers’ compensation. It is anticipated that there will be a bill introduced regarding first responders and compensability of posttraumatic stress disorder. A joint bill arising from discussions between Pinnacol Assurance, WCEA and CSIA is also a possibility, along with a bill from Pinnacol Assurance to allow it to establish a separate corporate entity that could write policies outside of Colorado.

Other Bills of Interest 

Senate Bill 16–056

This bill broadens the protections of the state whistleblower laws by including state employees disclosing information that is not subject to public inspection under the Colorado Open Records Act, when the disclosure is made to state entities that are designated as whistleblower review agencies. This bill is in the Judiciary Committee.

Senate Bill 16–070

This bill prohibits an employer from requiring any person, as a condition of employment, to become or remain a member of a labor organization, or to pay dues, fees or other assessments to a labor organization or to a charity organization or other third-party in lieu of a labor organization. Further, any such agreement violates these prohibited activities and are deemed void. This bill was originally assigned to the Business, Labor & Technology committee. After several amendments, the bill passed out of Senate and was sent to the House where it is assigned to State, Veterans & Military Affairs and will likely die.

House Bill 16-1002

In 2009 a bill passed known as the Parental Involvement in K-12 Education Act. This allowed an employee subject to the Family Medical Leave Act to take leave from work to attend various academic activities with, or for, the employee’s child. The leave was limited to 6 hours per month and 18 hours in any academic year. The employer was allowed to restrict the use of the leave in cases of emergency for the employer, or where the employment situation could endanger a person’s health or safety if the employee were absent. Further, the leave was limited to 3 hour increments at any time and required the employee to submit written verification from the school of the activity. The bill had a sunset provision repealing it effective September 1, 2015. This bill re-creates the 2009 bill with a couple of changes. It expands the type of academic activities to include attendance with school counselors. It also requires school districts and charter schools to post information about this statute on their websites. This bill was assigned to the Education committee in the House and eventually passed through the House without amendment. When introduced into the Senate it was assigned to State, Veterans & Military Affairs where it was postponed indefinitely.

House Bill 16 – 1078

This bill concerns whistleblowing protection for public employees not employed directly by the state. The bill prohibits county, municipality or local education providers from imposing disciplinary action against an employee for statements made by the employee about the local government that the employee believes shows a violation of state or federal law, a local ordinance or resolution, or a local education policy provider regarding waste, misuse of public funds, fraud, abuse of authority, mismanagement or danger to the health or safety of students, employees or the public. The bill would allow the employee to file a written complaint with the Office of Administrative Courts alleging some form of disciplinary action that the employee believes violates the whistleblower protection and would allow the employee to seek injunctive relief and damages. If the employee loses at the administrative hearing level, the employee would still have the ability to file a civil suit District Court. This bill was introduced and assigned to the local government committee in the House where an amended version was referred to appropriations. As there will be a fiscal note attached to the bill and given the Office of Administrative Courts involvement, the bill stands virtually no chance of passing.

House Bill 16 1114

This bill eliminates current employment verification standards requiring an employer to attest that it verified the legal work status of an employee and has not knowingly hired an unauthorized alien. It additionally eliminates the requirement for an employer in Colorado to submit documentation to the director of the Division of Labor in the Department of Labor and Employment that demonstrates the employer complied with federal employment verification requirements. This bill was assigned to Business Affairs and Labor where no activity has been taken and it will likely die.

House Bill 16 – 1154

This bill purports to clarify the definition of “employer” to only include a person that possesses the authority to control an employee’s terms and conditions of employment and has the ability to actually exercise that authority directly. The bill eliminates a franchisor from being considered an employer of a franchisee’s direct employees unless the franchisor has control over those employees. This bill was assigned to Local Government where no activity has been taken and it will likely die.

House Bill 16 – 1202

Current law requires employers to examine the legal work status of any newly hired employee within 20 days by using paper-based forms for identification. This bill would require employers to participate in the Federal e-verification program to determine work eligibility for newly hired employees. It then requires the employer to maintain documentation of this practice and submit it to the director of the Department of Labor and Employment. If an employer fails to do this it would be subject to a fine of up to $5000 for the first offense and up to $25,000 for the second offense, along with suspension of the employer’s business license for up to 6 months for continued offenses. This bill was assigned to the State, Veterans & Military Affairs where it was postponed indefinitely and will likely die.

SUBROGATION – SALE OF THE LIEN

BACKGROUND

Colorado’s workers’ compensation subrogation statute, located at S 8–41–203, C.R.S., is poorly worded and has become more complex through legislative revisions over the years. At its heart, the statute allows payment of compensation under the Colorado Workers’ Compensation Act to operate as an assignment of a cause of action against another person or entity “not in the same employ” whose negligence or wrong produced injury or death for which benefits are paid. The right of subrogation applies to all compensation including medical, hospital, dental, funeral and other benefits. The assigned and subrogated case includes the right to recover future benefits. It extends to money collected from the third party that produced injury for all economic damages, physical impairment and disfigurement. The assigned and subrogated cause of action does not extend to money collected for non-economic damages awarded to the injured worker for pain and suffering, inconvenience, emotional stress or impairment of quality of life.

People familiar with workers’ compensation subrogation are aware of judicial apportionment between the injured worker and the carrier. Further, the carrier is responsible for any prorated share of fees and costs the injured worker incurred in obtaining a settlement or judgment from the third-party, should the carrier elect to not pursue the matter on its own. This can lead to significant uncertainty for the carrier in trying to determine whether to pursue the third-party on its own or come to an agreement with the injured worker for a percentage of gross or net recovery. In most circumstances the workers’ compensation case is open and moving forward while the third-party case is pending, whether filed or not. What to do with the third-party case is a complicated, multifaceted decision-making process; however, at least in some circumstances, the decision can be simplified by selling the recovery rights (although not technically a lien, I will refer to it as a lien in this article) to the defendant in the third-party case.

LIEN SALE EXAMPLE

I recently had a case where sale of the lien made sense. The injured worker’s claim had been closed by settlement. Therefore, the total amount of potential recovery was known. The case involved a car accident where the injured worker was hurt in a rear-end collision. The total amount of insurance to cover the loss and liability of the negligent driver was also clear. The injured worker was pursuing the negligent driver in the third-party case and the workers’ compensation carrier elected to not bring its own cause of action. In settlement discussions in the third party case, it was clear that the negligent driver’s carrier would offer little or nothing to settle the case despite clear liability. The third-party carrier was willing to go to trial over causation of injuries that were largely compensated under the workers’ compensation system. Given these circumstances, I spoke directly to counsel for the injured worker to try to broker a deal on a percentage of potential recovery. We could not come to an agreeable percentage. I advised counsel for the injured worker that I was in discussions with the negligent driver’s carrier to have it buy my carrier’s lien. Since I could not come to an agreement with the injured worker’s attorney, I simply sold my client’s subrogation lien to the defendant in the third-party case. This guaranteed recovery for my client. The third-party case went to trial and the injured worker recovered no damages. The defendant in the third-party case submitted trial briefs asserting some set-off against potential damages based on the lien it purchased. The trial court held off any determination of a set-off. In the workers’ compensation case we had paid approximately $100,000, split evenly between medical and indemnity benefits. We sold the lien for $30,000. At issue before the trial court in the trial briefs was the value of the purchased lien. Was the purchased lien worth $100,000 set-off against billed medical, lost wages and permanent impairment claimed as damages in the third-party case? In the alternative, was the lien worth $30,000 as some undivided lump sum that can be set-off against all awarded damages? It is clear why the trial judge elected to not answer these questions, but let the jury come back with a decision on damages. The trial judge would have a difficult time figuring out what the defendant purchased from the workers’ compensation carrier and what it was worth. The jury saved the trial judge that headache since they found liability, but no damages. Regardless of the trial judge’s ultimate conclusion, my client’s had successfully recouped 30% of their lien and halted their exposure for on-going litigation expenses.

RAMIFICATIONS OF THE SALE

Counsel for the injured worker tried mightily to argue that respondents should reimburse the injured worker out of the $30,000 sale proceeds to account for its share of attorney fees and costs in the unsuccessful attempt to recover against third-party. Counsel for the injured worker was unsuccessful in all of his attempts. There was simply no legal basis to require the workers’ compensation carrier to pay for a share of unsuccessful litigation by the injured worker. That stated there is an appeal to the argument that it is unfair for the workers’ compensation carrier that did not actively participate in the negligent third-party case, to derive benefit from selling its lien without paying for the work done in the third-party case, even though it was unsuccessful.

BOTTOM LINE

Sale of the workers’ compensation lien is a viable option of recovery for respondents holding a subrogation lien; nevertheless, sale of the lien should only be done in certain circumstances. Sale of the lien when the workers’ compensation case is still open would not be recommended. Sale of the lien, for practical purposes, reduces any amount that could be used to settle the third-party case. This makes it more likely that that case will go to trial where the lien value will be used against the injured worker. This is not a good position for the workers’ compensation carrier. The workers’ compensation carrier still has obligations to claimant under the workers compensation system and in an open workers’ compensation case it should probably not sell its lien to the defendant in the third party case.

As a result of the lien sale in my specific case, there are rumblings in the claimant/plaintiff bar that they may try legislatively to prevent the sale of liens generated from workers’ compensation cases. As of now, no such legislation has been introduced.

We always recommend discussing this legal strategy with your counsel prior to embarking on this path. Whether the sale of a subrogation lien is viable depends largely on the specific facts of each case.

Overview of General Liability, Workers’ Compensation, and Employment Law ­Issues in K-12 Educational Institutions

This article, written by Of Counsel Frank Cavanaugh and Associate Jenna Zerylnick, examines tort liability, workers’ compensation, and employment law issues that pose unique challenges and create exposure to K-12 school districts. The article also provides examples and practice tips for attorneys practicing in these areas.

Public schools play an important role in our society as education providers and serve a parens patriae1 function. They also offer a valuable social opportunity for children and are a significant part of most communities as employers. According to the Colorado Department of Education, there are 178 independent K-12 school districts in Colorado. These districts vary in size and, as a whole, are among the largest employers in Colorado, employing a variety of employees in many jobs. K-12 schools are public entities and therefore are subject to various federal, state, and local regulations. K-12 school districts face tort, workers’ compensation, and employment liability unique to their role in our state.

This article discusses a great breadth of topics, providing a highlight of key issues that create liability exposure unique to K-12 school districts.

Click to read the entire article that was published in the October 2015 issue of The Colorado Lawyer: Education Law_Colorado Lawyer 10-15

 

THIRD-PARTY RECOVERY (2 – 4 – 6 – 8 Let’s Go Subrogate!)

LetsBeFrankW

As you are probably aware, the Colorado Workers’ Compensation Act has a statute giving a subrogation right to the payer of workers’ compensation benefits. This statute is § 8-41-203, C.R.S. Although referred to as a subrogation lien, it is actually a right of recovery that operates as an assignment. Once benefits are paid under the Act, that payment also assigns a right of recovery to the payer against a third party that may be responsible for the injury that generated a claim for which benefits are paid.

The right of recovery is independent of the injured worker’s right against the third party, meaning that the payer can bring its own cause of action, but the action is still derivative of the underlying workers’ compensation claim. This situation creates tension between the payer and injured worker relative to potential liability of a third party.

This short article gives an overview of what can be recovered along with some data over recoveries. Future articles will flesh-out workers’ compensation recovery problems.

What Can Be Recovered?dollar

The statute outlines what can be recovered. It states that the right to recovery exists to “all compensation and all medical, hospital, dental, funeral, and other benefits and expenses to which the employee or, if the employee is deceased, the employee’s dependents are entitled … for which the employee’s employer or insurance carrier is liable or has assumed liability.” The payer gets a right to recover future benefits paid and the right of recovery “…extends to money collected from the third party causing the injury for all: economic damages, physical impairment and disfigurement damages.” There are certain specific limitations to these recovery categories, but the statute makes a special exemption from recovery for amounts collected for “…noneconomic damages awarded for pain and suffering, inconvenience, emotional stress, or impairment of quality of life.” These amorphous damage categories cannot be subject to recovery by the payer in a workers’ compensation case.

As you can imagine, the struggle in subrogation in workers’ compensation is determining a fair distribution of any third party settlement or judgment between the injured worker and the payer of benefits since there is rarely, if ever, enough in settlement or judgment to fully compensate the injured worker and the payer. One mechanism to determine some of the allocation issues is known as a Jorgensen hearing, named after the case where this method of allocation was set forth. These hearings will be covered in greater detail in newsletters to come.

How Much Recovery Can Be Expected?

Colorado is not a very favorable state for third-party recovery of workers’ compensation benefits. Other states allow the payer to get paid first from any third party recovery, before an injured worker gets paid. Colorado does not allow this, but there are other reasons for low third party recovery. For instance, it is rare that an injury results entirely from the fault of a third-party. There is usually some degree of fault that can be assigned to the injured worker and to other potential non-parties that reduce the overall recovery, and sometimes even to the employer. If a carrier is pursuing a third party claim either with or without the injured worker, the worker’s and employer’s actions can reduce recovery. Further, to the extent that benefits were potentially overpaid, those amounts may not be successfully claimed as damages against a third party. A payer’s failure to mitigate its loss in the workers’ compensation claim by overpaying can also reduce recovery. Finally, and most importantly, judges and/or juries are not receptive to a payer (usually an insurance company) that paid benefits under a limited benefit package, trying to seek those amounts back from a third party.

A survey of the Jury Verdict Reporter from 2002 through present day shows that when a payer went as far as a jury verdict to try and recover against a third party, the amount claimed in recovery vs. the amount actually recovered was only 21%. Please note this is a limited sampling of recovery cases. In these cases defendants obviously felt strongly enough about their position to take the case to trial. Further, the Jury Verdict Reporter is not comprehensive of all cases taken to trial and the facts of each case are different. Taking all of these issues into account, this still demonstrates a less than favorable environment for recovery. If you would like a breakdown of this data, case by case, please email fcavanaugh@leekinder.com and I will forward it to you.

Bottom Line

Workers’ compensation is complicated and recovery of benefits paid only compounds the complication. It requires someone who understands workers’ compensation and liability matters. We have handled all aspects of recovery cases, including defending against them. Watch for future recovery topics in future newsletters. In the meantime, if you have any questions about this topic, please do not hesitate to call or email us.

Reimbursement and Recovery

LetsBeFrank

Reimbursement and Recovery – Medical Care Providers

Increasing costs of medical care have created reimbursement and recovery incentive for providers. Often times medical care secondary to an injury, whether work related or otherwise, becomes the subject of recovery and reimbursement attempts by the providers, as the providers are not inclined to provide care that is not their liability. This article explores and discusses the various means healthcare providers can assert and recover liens, including intervening in workers’ compensation claims.

Workers’ Compensation
Under the Colorado Workers’ Compensation Act, Sec. 8-42-101, C.R.S., an injured worker cannot be responsible for bills or reimbursement to a medical care provider, so long as the medical care was received for a work injury. The workers’ compensation carrier or self-insured employer also has an automatic assignment of any amounts paid in a workers’ compensation claim that allows it to recover amounts directly against any third party responsible for the injury.

A problem arises when treatment is received for a work injury, but the claim is denied, meaning the carrier or self-insured employer are contesting liability. Often in these cases, the carrier or self-insured employer may try to settle on a denied basis, meaning that they are not admitting liability for the claimed injury. If medical care has been provided for the injury, the provider may seek reimbursement against the injured worker, making such a settlement a risky proposition for the injured worker and his attorney. In addition, the medical care provider has an arguable ability to intervene in the underlying workers’ compensation case as an interested party. Recent statutory changes that make the injured worker not responsible for medical bills also make the workers’ compensation insurer liable for medical care for treatment to the injured worker in the event that the claim is ultimately deemed compensable. I have successfully intervened in workers’ compensation cases on behalf of a large hospital where it was undisputed that the injured worker was hurt working, but the employer was uninsured. This created statutory employer liability for a general contractor that was denying the claim and attempting to settle the case on a denied basis. Obviously, the carrier for the statutory employer was attempting to settle the case without regard for medical treatment the injured worker received. I managed to intervene in the matter and attend a settlement conference. In this way, I was able to get some reimbursement for medical care provided to the injured worker. Therefore, be cautious in settling a claim on a denied basis when you are aware that there are medical care providers that expect reimbursement.

Hospital Liens
Hospitals have a lien on any third party recovery, when the lien is properly perfected with the Secretary of State. It is simple to determine if a medical lien exists on a claim by simply accessing the Secretary of State’s website and checking for any UCC filings by known medical care providers to any plaintiff or claimant. If a case is settled without regard to the hospital lien, the hospital can collect reimbursement against the individual or entity that ignored its lien. Further, the hospital can receive attorney’s fees paid if the statutory lien is violated. Historically, hospitals have not been very efficient in filing a lien with the Secretary of State; however, I strongly recommend that the status of liens be determined prior to any settlement of a workers’ compensation case or liability suit.

Assignments
Medical care providers often require a patient (or representative of the patient) to sign a document before receiving care. This document is in the form of a guarantee for payment; however, this document will also include an assignment from the patient to the medical care provider for any rights or proceeds asserted or collected against a third party responsible for the injury. Sometimes these assignments include assignments of any claim to workers’ compensation benefits. Such an assignment is ineffective as workers’ compensation benefits cannot be assigned to a third party. Regardless, if an injured worker settled the workers’ compensation case on a denied basis, or for amounts that were not yet realized as workers’ compensation benefits, payment of this amount to the injured worker rather than to a medical care provider may be a breach of an assignment. In fact, recent case law has recognized that there is an entirely new cause of action for breach of an assignment. This cause of action is similar to a breach of contract in that the assignment arises out of a contract. The individual or entity that breaches an assignment has to be made aware of the potential assignment before a breach can be claimed. Therefore, to the extent that any medical care provider has supplied a treatment document signed by the injured individual, that document should be examined for any assignment from the injured individual to the medical care provider. Keep in mind that this problem is not unique to workers’ compensation claims, but to any liability claims as well.

Other Methods of Recovery – Spousal Necessity Doctrine
Medical care providers have other potential avenues of recovery for treatment supplied to an injured individual. In particular, there is an old statute in Colorado, as well as in other States, that makes a spouse individually responsible for payment for necessities of the other spouse. Case law interpreting this statue has made a spouse responsible for legal fees, housing costs and other bills that have been incurred by the other spouse. Although there is no case directly on point, I have managed to obtain a judgment against a spouse for medical treatment as a necessity under this particular statute.

Other Methods of Recovery – Custodial Care
Custodial responsibility is a mechanism by which a medical care provider can obtain reimbursement. For instance, individuals in the custody of a law enforcement agency are not primarily responsible for medical care. Instead, the entity that has placed the individual in custody is responsible for medical care. There are instances when an individual may be in custody, but not under arrest. If medical treatment is needed while that individual is in custody, but not under arrest, the entity placing the individual in custody is responsible for the medical care. I have successfully obtained a judgment against a law enforcement agency for treatment a hospital provided to a criminal that was not yet arrested, but that I argued was in custody.

Bottom Line
Any carrier or employer has to be conscious of medical care providers that have provided treatment for any claimed injury. With medical care costs continuing to rise, medical care providers are much less likely to write-off, or ignore, avenues for reimbursement and they are growing more aware of any potential for reimbursement through possible insured losses.