Workers' comp in spotlight
By Dan Nakaso
Advertiser Staff Writer
One bill in the state House would create a special investigative insurance unit to clamp down on workers' compensation fraud committed by insurance carriers and employers but not workers.
Another would prohibit the state labor director from implementing administrative rule changes that look similar to workers' compensation bills proposed last year by Gov. Linda Lingle's administration and were ultimately killed by the Legislature.
This session's so-called "handcuff bill" aimed at the state labor director's ability to put workers' comp administrative rule changes into effect would apply only until 2011 when Lingle's potential second term would end.
"Generally speaking, the administration's taking the employers' side and the Legislature's taking the workers' side," said Bob Dove, CEO and president of HEMIC, the state's largest writer of workers' comp insurance. "A polarization between the administration and the Legislature gets to be kind of a winner-take-all type of thing. That doesn't necessarily yield an efficient workers' compensation system."
Almost lost in the discussion over some of the more politically charged bills surrounding workers' compensation is the fact that the overall average cost required to cover medical and disability benefits to injured workers fell last year and dropped again this year.
The state insurance division lowered the overall "lost cost," as it's known, 1.3 percent in 2004 and 3 percent this year, said Carolyn Pearl of the Hawai'i bureau of the not-for-profit National Council on Compensation Insurance Inc., which makes recommendations on lost cost to state insurance officials.
Hawai'i's legislators are considering tinkering with workers' comp laws this session anyway. And a few of the bills carry the potential to streamline the system, cut costs and provide medical treatment to injured workers more quickly and efficiently.
But their passage relies on whether compromise can be found between Democrats and Republicans, unions and management, and the legislative leadership and the Lingle administration, said Rep. Kirk Caldwell, the chairman of the House labor committee that recently spent an entire day hearing testimony on 14 bills dealing with workers' compensation.
"What I'm not going to do is force legislation out of the labor committee and make a statement just to see it die," Caldwell said. "The more difficult and rewarding challenge is to get legislation out of the Legislature and have it signed by the governor. If it's too strong for management, it will die in some other committee. If it's too pro-labor, it will die before the governor. So we need legislation that's balanced."
A model of success
Some of the bills try to emulate parts of a successful workers' compensation program that Oahu Transit Services ran between 1998 and 2002.
Oahu Transit Services, which operates TheBus system, set up new safety programs and gave injured union workers the option of seeing their own physicians or seeking treatment through a centralized managed-care system that cut down on bureaucracy and got employees back to work faster.
Just as important, disputes were handled through a single ombudsman.
"My own view of the workers' comp system is that it is very time-consuming, which can be costly," said Roger Morton, Oahu Transit Services' senior vice president. "You have to wait for treatment. You get shuttled around by the doctors or you might have to wait for an independent medical examination that can take months. Or you have to wait for a hearing that can take eight months, nine months, a year."
Instead, TheBus and the Hawai'i'i Teamsters and Allied Workers, Local 996, agreed to have any dispute heard within 10 days while the worker was treated much faster.
"We had a little reduction in injuries, 5 or 8 percent, but the real reduction was the amount of time that people were off work," Morton said. "We were able to cut our lost time per injury in half."
Hard to calculate
Calculating workers' compensation costs and savings can be complicated and Morton still isn't certain exactly how much Oahu Transit Services saved in the four years and two months that the program was in effect.
"It's difficult to put a figure on it," he said, "but it would be in excess of $1 million annually."
The concept of workers' compensation began in the early 1900s on the East Coast as a compromise between employers and workers, who often spent years in court arguing over who should pay for employees' injuries.
The new system meant workers gave up their right to sue and employers traded potentially expensive jury awards for more modest insurance costs. It spread rapidly across the country.
By 1995, however, Hawai'i's economy was in trouble, unemployment rates were up, and businesses were screaming about rising workers' comp costs.
Among other changes that year, the Legislature capped doctors' fees at 10 percent over the cost of Medicare and proclaimed that the workers' comp system in Hawai'i had been "reformed." The following year, Hawai'i's lost cost rate fell 27 percent.
In recent years, surveys by the Chamber of Commerce of Hawai'i regularly rank workers' compensation as one of the membership's top concerns. Last summer, the California-based Work Loss Data Institute gave Hawai'i's system an "F" grade, primarily because 22.6 percent of injured workers stayed off the job for more than 30 days in 2002 much longer than in other states.
"Hawai'i's workers' comp premiums are No. 3 in the nation," said Nelson Befitel, the director of the state Department of Labor and Industrial Relations, whose ability to implement administrative rules lies at the heart of separate House and Senate bills.
"Our system needs to be overhauled. We need a system that will provide us effective oversight to make sure injured workers are being treated and the system is not abused."
During an interview last week at his office in the Princess Ruth Ke'elikolani Building, Befitel shook his head over the wording of some of the bills, such as the one aimed at cracking down on employer fraud but not fraud by workers. "That blatantly discriminates against an employer just because that person is an employer," Befitel said.
For employer Audrey Hidano, workers' compensation coverage costs anywhere from $11 to $29 for every $100 of gross wages to cover 12 construction workers and six office staff.
"The double-digit rates that we pay have been steadily climbing," said Hidano, who has been running Hidano Construction with her husband for 31 years. "They haven't been drastic increases, just slight, slight ones."
Hidano believes that her increases have been tempered despite employees' injuries because "I mother them when they get hurt."
"I take them to the emergency room of their choice and I make sure they provide the right information, like the name of our insurance provider," Hidano said. "Then I follow up to make sure they're not going to a foot doctor for an eye injury. Then I watch to make sure that if they can come back to light duty, that they're happy to come back to work because they want to work."
But Hidano would like the Legislature to impose caps on such things as the length and cost of vocational rehabilitation.
"A lot of people are still in the plantation mentality, meaning we've got to take care of everybody and be everything to everybody," Hidano said.
Dawn Pasco of Ha'iku, Maui, however, thinks the current system works pretty well.
Pasco, 57, had to give up a lucrative sales merchandising job on Maui after she tripped and tore ligaments in her right knee in 2001, then fell again last year. She also underwent two surgeries for carpal tunnel syndrome that she said was linked to inputting orders on a hand-held computer keyboard.
Her husband, Conrad, 61, was a construction worker in 2000 when a bucket carrying 800,000 pounds of concrete broke loose and tore through his right foot and right arm.
In the emergency room, his arm was stripped down to its shattered bones and ripped of its tendons.
"You know how a turkey leg looks when it's all splintered?" Dawn said. "That's how his arm looked."
But Conrad's foot took the most damage. Surgeons removed everything but his right heel.
"He also has posttraumatic stress syndrome," Dawn said. "He can't be around construction and loud noises anymore. If he's in control of the equipment, he's OK. But if someone else is in control, he can't stand it."
Vocational rehabilitation enabled the Pascos to try new ventures.
She started a business called Aloha Pet Sitters that cares for pets in their own homes while their owners are away. He started a landscaping operation called Maui Silversword Yard Service.
"We've been dealing with nothing but doctors and insurance companies for the past five years," Dawn said.
"But I don't think the system's broke. I think it's working."
Reach Dan Nakaso at email@example.com or at 525-8085.