Workers' Compensation
Price of Paradise · Hawaii Public Radio · aired 1994-09-11
Guests: Linda Takayama (former Insurance Commissioner); Paul Ables (spokesperson, Hawaii Insurers Council); David Robinson (attorney)
Duration: 1:08:58

[00:00:00] Randall Roth: Aloha and welcome to the Price of Paradise radio show. My guest today are three people who know a lot about Hawaii's Workers Compensation system. David Robinson is a partner in the law firm of Robinson, Ferraro, and Chur. He concentrates solely in the area of personal injury and Workers Compensation law. David is on the board of governors of the Hawaii trial lawyers Association and is chairman of that group's Workers Compensation section. Paul Abels, for 10 years, was president of Pacific insurance, a company that sells Workers Compensation insurance, along with other products. For the past three years, he has served as chairman of the Legislation committee of the Hawaii Insurers Council.
[00:00:38] Randall Roth: Linda Takayama, currently is director- Deputy Director of the State Department of Commerce and Consumer Affairs, and previously served as State Insurance Commissioner. Recently, Governor appointed Linda to a three-person task force, whose job is to work with lawmakers and others to try to come up with a Workers Compensation reform bill for the 1995 legislative session. In preparing for today's show, I talked to a number of people about our Workers Compensation system, and everyone, it seems, feels that it's not working properly. Claimants told me that it's too slow, that they have injuries that aren't getting treated, and therefore are getting worse.
[00:01:14] Randall Roth: The insurance companies are leaving the market. First insurance company of Hawaii, for example, up until last year was writing more Workers Compensation insurance than any other company. They left the market. Since last November, they're not writing any new policies at all. Lawyers on both sides, on the claimant's side and on the defense side, complain that the system is, in their words, screwed up. Businesses are saying the cost of Workers Compensation, which they're required to, to have and pay for, is way too high already. And just in the last several weeks, the insurance industry was asking for rate increases of as much as 83%.
[00:01:50] Randall Roth: Obviously, something is very, very wrong with our Workers Compensation system here in Hawaii. Well, I welcome to the studio David Robinson, Linda Takayama, and Paul Abels. Would somebody please tell me why everything seems so screwed up and yet, we as a community haven't yet been able to quote solve this problem. Linda, any thoughts on this?
[00:02:10] Linda Takayama: Well, the workers' compensation system is an old one. It started back in 1915. And there were two purposes then. One was to take care of workers who were injured on the job, and secondly, to protect, um, business people from lawsuits from their employees who were injured on the job. We've kind of gotten away from those basic principles. There are lots of other players that have crept into the, the system now, um, and and the majority of the costs now are going to some of those other special interest groups. And I think we need to to get back to focusing on the basics.
[00:02:46] Randall Roth: So the the basic agreement way back in time was, look, we won't let the worker sue the employer if the employer will agree to this system that gets the worker compensated quickly.
[00:02:58] Linda Takayama: Right, and I think there's still general agreement among all of the the various groups throughout the state that those are the basics we do need to get back to. We want to take care of workers who are injured on the job and we want to eliminate to the extent possible, unnecessary lawsuits. Um, because that doesn't serve anybody. But today we've got a system that isn't serving any of those purposes. Um, we've got employers, business people, facing huge expenses just for workers' compensation insurance, which by the way, the state requires them to have. And workers themselves are not being well served because they're experiencing long delays and getting their claim settled.
[00:03:37] Linda Takayama: In some cases, this means that what was a relatively minor injury to begin with, becomes aggravated, may even become something that's permanently damaging.
[00:03:45] Randall Roth: Because it's not getting treated because it wasn't treated, it wasn't taking care of. Paul, you're the spokesperson for the insurance industry and at the table today, um, tell us what your thoughts are on Workers Compensation in general.
[00:03:58] Paul Ables: Well, generally, of course, everybody agrees with the basic concept of Workers Compensation that if a guy gets hurt on the job or, or a lady gets hurt on the job, you get them medical attention and you get them back to work as fast as you can. Um, based on that, a lot of things have happened over time. Uh, the people who who try and deal with the problems are fond of saying there's nothing wrong with the statute. And that generally, I think everyone would agree, basically, there's not much wrong with the statute, except that over time there have been some amendments that are problems.
[00:04:35] Paul Ables: And there've been a lot of of, uh, labor department and judicial decisions over time that, to many people seem to have changed the original intent of the statute.
[00:04:45] Randall Roth: Give me an example. What what's one that that is a perfect example?
[00:04:49] Paul Ables: Well, I think I think, uh, there are there are some things that are that occur in the system where someone who repetitively injures an arm or something, uh, gets paid two or three times for the same injury. That's something that's been built into the system over time by, uh, labor department and judicial decisions. Uh, the the issue of part-time workers getting paid full-time as long as they're out on Workers Comp is something that's not built into the law. It's come out as a matter of judicial decisions, and some of those things that seem to be, uh, fairness issues irritate a lot of people.
[00:05:26] Randall Roth: And I assume, in in justifying these requests for large rate increases, you would simply point to the money that you're paying out to claimants?
[00:05:35] Paul Ables: That's in essence what happens. Uh, there's been a lot of noise about the 82% that was asked for in the assigned risk pool, which is, uh, a group of of, uh, employers that no single insurance carrier wants to write on their own. So they're put into a pool and all all carriers share in their experience. In the, in 1993, uh, there were $58 million in premiums paid in by that group of people. And in addition to that $58 million, the insurance carriers had to pay in an additional 73 million out of their surplus
[00:06:08] Randall Roth: These are the problem companies.
[00:06:10] Paul Ables: to take care of the claims that were in that pool.
[00:06:13] Randall Roth: And I read in the newspaper that that increasingly, companies that have never had a claim filed against them, are being pushed into that pool, which which isn't what was originally intended.
[00:06:24] Paul Ables: That's true and that's that really arises out of the fact that the system's in trouble right now and there are a number of carriers that are trying to reduce the amount of the market that they write because they have to pay the losses in the pool based on what their share of the market is.
[00:06:44] Randall Roth: So people who are upset with the system and pointing at you saying that the costs are way too high, you're pointing at the courts or you're pointing at at others, pointing at the costs that you're incurring, saying, it's really not our fault and sooner or later somebody's going to point at the lawyers. So I better let David Robinson say a few things about his perspective on quote, the problem that we have in Workers Comp right now.
[00:07:11] David Robinson: Well, everybody always points at the lawyers, but, uh, if I can back up for just a moment and elaborate on, uh, what Linda said, I don't think we need we should gloss over the basic reasons for Workers Compensation. Imagine the impact on society on the cost to society through other sources, if we didn't have a Workers Compensation system, so that every injured worker that's um, now cannot work due to a disability is simply terminated from his employment. The employer has no responsibility. The person's medical care now becomes a burden on society. Is, uh, goes on welfare or some other type of um, of dole in order to survive.
[00:07:49] David Robinson: So all of these costs that are presently, uh, contained within the Workers Compensation system would have to be picked up someplace else. That's number one. We don't throw victims of of injuries at the job on the scrap heap of society. We take care of them, and that's the basic premise. Now in exchange for employers doing that, we have given the employers immunity from suit. Um, so even if the employee is injured as a result of the employer's negligence, and in Hawaii even gross negligence. Some jurisdictions have exceptions if the employer is grossly negligent the employee can sue them. In Hawaii, the immunity is absolute, except in some cases of sexual race discrimination.
[00:08:29] David Robinson: But basically, the, uh, immunity is absolute, and that is an enormous, uh, plus for the employers, because to have, to be exposed to liability for all, uh, employees that get injured on the job, uh, is a very expensive proposition and the liability insurance would be enormous. Now, I think what's important that I've just heard this morning is that we have a stunning basic agreement among the three of us here.
[00:08:54] Randall Roth: Oh, a scoop. Quick, explain to me what this agreement is.
[00:08:58] David Robinson: Which is that the basic system of Workers Compensation and as Paul said, virtually everybody agrees the basic statute for Workers Compensation is okay. Mhm. There's not a lot wrong with the basic statute, and I have always maintained that the problem with our Workers Compensation system and the problem with our no-fault system for that matter, is that you take a good basic system and start tinkering with it by special interest groups and it gets all out of work.
[00:09:25] Randall Roth: I notice other people in this room nodding their agreement with that statement.
[00:09:30] David Robinson: That's that's what's happened. It's what's happened in Workers Compensation.
[00:09:33] Randall Roth: Well, let me ask you is is this presumption clause, which I would like you to to explain to our listeners, is it something that goes back to the original statute or is this the result of special interests tinkering with the system?
[00:09:48] David Robinson: Okay, the presumption clause is a simple provision in the statute that says that an injury that occurs on the job is presumed to arise out of and in the course and scope of employment. But that that presumption can be rebutted by substantial evidence to the contrary. So, uh, if somebody, uh, reports an injury on the job, lifts lifts a box and goes to their employer and reports that they herniated a disc or have a back injury, uh, it is presumed to arise out of the employment.
[00:10:18] David Robinson: All the insurance company or the employer, uh, needs to do in order to um, uh, rebut that, overcome that presumption is to present evidence that that did not occur from the job.
[00:10:29] Randall Roth: Well, now this sounds this sounds quite reasonable, but I've got a fellow on my right who's not nodding agreement with this one. Paul Abels, what's the insurance companies think about the presumption clause?
[00:10:41] Paul Ables: The presumption language in our statute is not much different than it is in a lot of other jurisdictions, but the way it's been interpreted, uh, in the courts is significantly different and it is not very easy to, uh, to rebut the presumption that it is, uh, a job injury even though there is no objective evidence that anything happened on the job. In fact, there may be some evidence that it occurred away from the job. In fact, when you get in the Department of Labor, you get into the courts, the Department of Labor just frankly, goes on the medical evidence. The guy's hurt, he says it happened on the job, therefore it happened on the job.
[00:11:22] Paul Ables: And that's essentially what happens in the system today.
[00:11:25] Randall Roth: Now Linda, you're part of this task force that's trying to put together a bill for the next legislative session, and I'm sure one of the things you're trying to do is to find points of agreement and points of of disagreement. Is this presumptive clause, is is that simply a source of tension that that no, uh, no compromise is really possible. It's going to leave everybody happy or what are your thoughts on it?
[00:11:51] Linda Takayama: Frankly, I think the presumption clause is in the whole scheme of things, sort of a side issue. Um, as far as state is concerned, um, the burden of proof as to whether an injury occurred on the job or off the job is is and should be on the employer. Now, in in in terms of how um, that uh is carried out in in a dispute resolution between um, the claimant, um, the injured worker, and his insurance company, there are there are things we can do to streamline that dispute resolution process and bring a little bit more fairness into it.
[00:12:26] Linda Takayama: And those are the areas in which we're focusing. We're not looking to dump the presumption clause in any way.
[00:12:33] Randall Roth: So I guess Paul, you would agree with that. There's nothing wrong with it in theory, you're saying, how it's actually working out in the field, that's what you have a problem with.
[00:12:44] Paul Ables: That's where we've had problems.
[00:12:46] Randall Roth: And so perhaps that goes to training or or some sort of tell me, Linda, how do you deal with that problem out in the field as opposed to the statute itself?
[00:12:57] Linda Takayama: Um, a lot of what's happening in Workers Comp today, and one reason why injured workers are not being well served by it is there are delays that are built into the system because, um, frankly, of our own bureaucracy. And we need to begin streamlining some of those processes, um, get the hearings process, um, speed it up a little bit so you don't have to wait a year to get a hearing on your case.
[00:13:23] Randall Roth: You have to wait a year now.
[00:13:25] Linda Takayama: Um, sometimes as long as that. Which of course defeats the the whole basic premise of Workers Comp as you've described is to get some money to the claimant quickly so that the injury can be treated. Um, and so, and so again, you know, we need to focus on what will help the worker out the best. And and if it's, you know, if it means cutting some of the bureaucratic red tape, we'll have to do that.
[00:13:52] Randall Roth: Yeah, that sounds easy, doesn't it? That's our show next week. We're going to talk about red tape. David?
[00:13:58] David Robinson: Well, I agree with Linda that the presumption clause is a side issue, but it seems to be a rallying cry for, uh, employers and in the insurance carriers. Uh, I'm the one of the three here. I'm I'm in the trenches. I go to the hearings at the Department of Labor and have to go in with the injured workers, and quite frankly, I have always maintained that the presumption clause barely exists. I, as far as I'm concerned, when I go to hearing at the Department of Labor, I have to prove my case.
[00:14:31] David Robinson: Mhm. I because I know the insurance companies are going to go out there. They have their doctors that they can, um, uh, rely on and they come in with their, uh, medical reports indicating that the injury didn't arise or isn't as a result of the, uh, accident, work or whatever, and uh, you know, they certainly also have the right to bring in witnesses to say that an accident never happened. I have to prove my case, quite frankly.
[00:14:59] Randall Roth: From the tone of your voice, I get the impression that you think the doctors that the insurance companies bring into those hearings are doctors that aren't as objective as they should be.
[00:15:10] David Robinson: Absolutely. And in fact, I maintain that there are two major things wrong with the Workers Compensation system right now. One, Linda's already touched on, which is the, uh, delays in in getting the claims rolling because, um, I think most studies have shown that, uh, delays are going to cause the disability periods to go longer. Um, medical expenses are generally going to continue while things are delayed. The cost to the to the claimant and to the insurance carrier are going to be greater because of the delays. The second I big problem I think is this whole thing of, um, what most people call independent medical examinations, I call them employer medical examinations.
[00:15:49] David Robinson: And it is now over the last few years in particular, it's been growing steadily. Over the last few years in particular, now, it is, um, as a matter of course, the insurance adjusters will order, uh, a section 38679. That's the provision in the in the law, uh, medical examination with one of their known doctors. And we have now doctors in the systems that are making close to a million dollars a year just doing medical examinations, not practicing medicine.
[00:16:17] Randall Roth: Just just doing them for the insurance company.
[00:16:20] David Robinson: For the insurance company. Now, this would be for insurance company for no fault as well as as work comp.
[00:16:27] Randall Roth: But you're suggesting they have a strong economic incentive to, uh, render, um, a diagnosis that the insurance companies like.
[00:16:33] David Robinson: They won't get the business otherwise. And I, I mean, I the last figure I saw was a part-time of this one doctor, at least still practice medicine. He does surgery and and things. He does part-time medical examinations. Quarter million dollars last year was his income from these medical examinations.
[00:16:51] Randall Roth: Well, you notice how we got a finger pointed at someone other than a lawyer now. I'll bet you we have some doctors calling in. In case you're listening, this is the Price of Paradise radio show. I'm Randy Roth and my guests are personal injury lawyer, David Robinson, insurance company spokesperson, Paul Abels, and former state insurance commissioner, Linda Takayama. We're live and your calls are welcome. The number is 955-8821. Neighbor Islanders are invited to call collect. The number again, 955-8821. Well Paul, let me give you the same opportunity.
[00:17:22] Randall Roth: What do you think is most wrong with the current system? Let's talk about what's wrong and then we'll see if we can find some agreement as to how to fix those things.
[00:17:33] Paul Ables: Uh, the biggest the biggest problem we see in the system is the percentage of the cases that just stay in the system. You don't get them back to work, you don't get a a resolution of permanent partial, uh, you cannot, you know, there's a provision in the, in the rules of the state to get an independent medical examination, the Department of Labor does not use that rule. And, and that creates, that creates more controversy.
[00:18:00] Randall Roth: Kind of dueling doctors to where it's a question of who's got the best credentials or credibility.
[00:18:05] Paul Ables: That's the way it's often described. We obviously don't quite agree with that. But yes, there are a lot of doctors who won't participate in medical exams, uh, because they don't want to get involved in the system. And so, it ends up if you want to challenge what's going on in the treatment of an injured employee, you don't have much choice except to use a doctor that you have access to.
[00:18:30] Randall Roth: Okay. In a minute we're going to take some calls, but Linda, I've given these two fellas an opportunity to tell me what's wrong. Any thoughts on what they've said or anything to add to the pile here?
[00:18:43] Linda Takayama: Yes, certainly. Both um, David and Paul are describing, um, the situation as it exists today, and it's a situation that was never meant to be. We've got a situation where it's it's adverse between the employer and the worker. And that was never meant to be the employer wants that worker to get well and get back to work. Instead, the employer has to go out and hire a lawyer because it cannot get its basic rights to get his his injuries taken care of and then it it becomes a war
[00:19:27] David Robinson: Yeah. Between the worker and and his Why is that How did it How did it go wrong? Why did it turn adversarial? It was it's inevitable. I mean, the the insurance companies certainly have to have a right to defend themselves and to defend themselves against claims that they may think are not absolutely correct or a treating physician that they may disagree with. And over time, they started uh sending the claimants out for these so-called independent medical examinations.
[00:20:17] David Robinson: Over And when I first started, which was almost 20 years ago, those were fairly rare. They would use independent medical examinations where they saw something wrong. And that's what the statute says. If they're unhappy with the progress of the case, they have a right to to send this out. Now, if they see a chiropractor involved in the case or or a doctor that they just don't like, within the first three months, they they they send them out to the the the examiner. That's enormous costs.
[00:21:12] Linda Takayama: Um, I think David is is correct, but I don't think that tells the whole story because there's a lot more going on. One one reason why I think um employers and insurance companies are kicking and screaming so hard about um uh some of these claims is is not so much that they don't like the particular doctor or whatever.
[00:21:50] Linda Takayama: I think what they don't like is having to pay out these huge claims. And in an environment, um as as we had maybe about five or six years ago, um when they were taking in enough premium to cover their costs, you didn't hear as much of um uh these challenges as as you do today. Today we've got a situation where insurance companies are not making money, um they don't want to make payouts, and um that's kind of the adversity has risen to a new level. And unfortunately, it's the worker who comes out on the short end, and that's something we'd like to see changed around.
[00:22:58] David Robinson: So I guess one easy solution, Paul, from your standpoint is if uh your request for an 83% rate increase in in the assigned risk pool were were uh were given. And obviously from the from the community standpoint, that's no solution to simply increase those those rates more and more and more. What are your thoughts on what Linda was just saying? Generally in the past, that's been more or less correct. The insurance carrier said, uh, let me charge enough to take care of the costs and we'll take care of the cost.
[00:23:57] David Robinson: But now, but now you're not going to get those higher rates. The costs have reached the point where businesses can't afford them, and so we have to find some solution to that. I'll also point out that uh some of the people that are most up in arms about the cost of workers comp system don't have insurance policies. They're self-insured. Uh people like the city and county of Honolulu, uh the state is experiencing some big increases in their cost. And the large the large uh uh corporations around town that take care of their own cost on workers comp are all having the same problem with the system.
[00:25:05] Linda Takayama: Well that's that's interesting. So it's not necessarily the insurance company, Linda? Paul's absolutely correct. Um, the and in fact, this is what brought us to conclude that there was something wrong with the system, rather than the rate. Um, the city and county of Honolulu and the state of Hawaii are the largest self-insureds here.
[00:25:40] Linda Takayama: They don't go through insurance companies, they take care of all of their losses on their own. Both of them had reported, um in the last uh three or four years, an average 20% increase in the number in the amount of payouts they were making and other um commercial um uh private self-insureds um are are saying also that they're experiencing higher losses than before, which seems to indicate that there's a systemic problem um which needs to be addressed and and and frankly, you know, the state is probably just as guilty as many of the other um employers in town in that our own workers um who are injured on the job are are not getting their claims processed in faster than anybody else.
[00:26:58] David Robinson: Well, just to to follow up on what Linda said, quite frankly, I think that the poor state employees get the worst shake of anybody in the state of Hawaii when it comes to adjusting their workers compensation cases. The Well, the Department of Personnel Services, which is the workers compensation adjusters for most of the state agencies is it's a travesty. I mean they are uh the epitome of everything bad you have ever heard about bureaucrats with the exception of a few people over there. They simply don't care.
[00:27:54] David Robinson: It is just they are they take bad adjusting they take adversarial adjusting of claims to the absolute extreme and this isn't just me saying this. This was this was a front-page article on one of the state employee union newsletters not long ago, and I've written to the governor about it several years ago, and uh nothing's been done. I mean it's a it's a travesty. So yes, I can see why they would be having the same problems because they simply ignore cases.
[00:28:47] David Robinson: It's an ill-defined problem. Uh, there is some in the system, there is some in in every system where money is available to people. It it frankly, uh there is there is very little in the law to restrict it. If you fought uh a case because you thought it was fraudulent and you won, um the employee might get fined 2500 bucks, but there probably would be no restitution of whatever it been paid out in medicals and and indemnity up to that point.
[00:29:39] David Robinson: But the carriers and the and the self-insureds do try and resist what they what they think are fraudulent claims or appear to be fraudulent claims and very frankly, it's very hard to uh to fight it. Uh, you can go in with with evidence of the guy's activities, indicate that he isn't really hurt very bad and that he ought to be able to work and that comes down to being uh, well, that was one of his good days.
[00:30:29] Linda Takayama: Paul is right, it's almost impossible um to define. Um I think in the last year or so, the Department of Labor reported only something like half a dozen cases of fraud. Um, in my talking to various community groups about um workers' compensation, I I would say that all in in virtually every instance, everybody I've talked to um has some case or another of fraud going on. Whether and it's not necessarily fraud on the part of the workers.
[00:31:19] Linda Takayama: Sometimes it's fraud on the part of uh medical providers who um list a a um uh an injury as a workers' compensation claim, uh rather than a um uh an injury that was done on on somebody's own private time, personal time. Um, I I hear all kinds of stories. My my sense of it is that um I guess maybe the national average is something like um fraud representing 10% of the cases. In California, there's some indication that they are as high as 35%.
[00:32:13] Linda Takayama: Um obviously that adds a cost to the system that shouldn't be there. Um we are looking I know that the various groups that are meeting on this have have looked at uh various ways to to try to control fraud. I don't think it's going to be all that easy to do, um and certainly nothing that we can um uh count on um as a savings in the system, at least not not immediately.
[00:33:00] David Robinson: Most of the people that I've talked to on both sides in the work comp system have agreed that um although obviously there's fraud, there's always going to be fraud. Uh, it is really quite low that any anyone I have seen um uh uh feels I mean they just is a very small percentage.
[00:33:34] David Robinson: There are obviously some shades of of what one can call fraud. There may be some exaggeration of symptoms, um uh that that occur during the course of a case by claimants who don't really understand that it doesn't do them any good to exaggerate their symptoms. But what I think is important to understand that it's not all that easy to commit fraud in a workers' compensation system. a doctor applying the American medical guidelines to the evaluation of permanent impairment to your examination to determine whether you have any permanent impairment and thus whether you'll be entitled to anything. So it's not an an easy proposition to commit fraud.
[00:34:43] Linda Takayama: Uh, we get accused of that a lot. As as I indicated in some of my prior comments, fraud is very hard to prove and um even if you think you have a good case, you frequently don't win. We do get out and investigate what we appear to be fraud cases to us, but Yeah, Linda, is it is it your impression that the insurance companies aren't working hard enough to detect fraud? That's my um my general feeling. Um, there are Why would that be? I would think they would have the biggest incentive of anyone to detect fraud.
[00:35:45] Linda Takayama: One would think and there are a couple of them that have started up their own um uh fraud units to to go out and and investigate. Unfortunately, the the laws in our state are set up as such that it's even if um an insurance company went out and detected a case of fraud, built up its evidence and and then tried to get a judgment on it, um it costs them some money to do so. Um even if they win, the money that um uh is is gotten from proving a case of fraud doesn't go back to them. So they're out of pocket and they never really get reimbursed for that. So one of the things we're looking at is is maybe changing that system a little bit to give them a little bit more incentive. Another thing we're looking at is whether it makes any sense to set up a a fraud unit uh within the insurance division, uh maybe rather than the department of Labor, uh which is the usual administrator for workers' compensation. So there are a number of things we're we're looking at. Um, but it does cost money to go after fraud and and and so the question is, you know, how do you get uh recompense for that.
[00:38:00] David Robinson: isn't worth it. If you take a an average back case, which is a a probably if there was going to be fraud it would probably be in a back injury type of a type of a case and would have to be soft tissue because everything else would be objectively confirmed if you had a disc for instance. Um and if the uh soft tissue injury arose to a level of permanent impairment such that the person is giving given an award of permanent partial disability by uh an independent examining physician, you know the average award for that would probably be in the $10 to $20,000 range.
[00:38:35] David Robinson: Now, to me, I mean, I've I've investigated I've hired investigators to investigate a lot of uh claims over the years. I can I can spend $5,000, for instance, uh quite well in investigating a claim and and and I I see no reason in the world why an insurance it is not cost effective for an insurance company to evaluate and work up any claim that they believe really is fraudulent. So the money argument I I don't I don't that doesn't wash with me.
[00:39:04] Paul Ables: But I think you're you're criticizing the law because if I understand Linda correctly, because of where the money comes from and where the money that's saved is going that the the that the insurance company doesn't have that dollar for dollar payoff.
[00:39:18] David Robinson: If the insurance company proves fraud, they are not going to pay out the permanent partial disability and all the other benefits. Uh, you know, if the permanent partial disability alone the insurance company would pay out if a case got to that level would be as I said, be between $10 and $20,000, they save that. They save all the medical uh costs that would have been paid. They save all the temporary total disability and vocational rehabilitation costs.
[00:39:44] Paul Ables: So Linda, I suppose you would say that that there is incentive but it could be a stronger incentive for them to to investigate these?
[00:39:52] Linda Takayama: Um, that's what we're we're looking at. That's what we're hoping. And and Paul may have other things to say with regard to, you know, um sort of good faith type um issues um on on the settling of claims. I think that might have something to do with it. Um I do think that the insurance companies could do a lot of lot more and and some of that criticism is justified against them.
[00:40:17] Randall Roth: Well, let's go back to Bill. Bill.
[00:40:19] Caller: Yes. How does that sound to you?
[00:40:22] Caller: Um, I think they made good points. Um, the economic incentives to to detect fraud aren't as strong as as we might like, but um I think my point was it's not just the economic situation, it's the structural incentive that people tend to want to do their jobs at their desk in familiar environments and field work isn't easy. But if we're going to solve the problem of the economic burden of um all these various programs designed to um ease those slings and arrows of outrageous fate, um people have to accept the fact that um it isn't always easy to do the job and um if we're not going to have simple things like databases to track all the different um payouts so that um people who um are able to understand the system and work it to simply bounce from um one area to another and continue to keep collecting. Um I don't believe that that exists right now and if all the people who who make any form of compensation for all these things had some tracking mechanism to where they can spot people who are obviously writing the system, that alone seems to me would pay for the system. All right and it would also create the possibility of seeing patterns in the community where um basic public health work might reduce the overall exposure of everybody.
[00:41:38] Randall Roth: Your points are excellent points, Bill. I appreciate it. And I appreciate you sticking with this so long while we were getting through our technical problems.
[00:41:47] Caller: Well, I'm sure somebody else has something to say, so um We'll give them a try. Thanks a lot Bill. Oh I thank you.
[00:41:55] Randall Roth: In case you tuned in late, you're listening to the Price of Paradise Radio show. I'm Randy Roth, and my guests are personal injury lawyer, David Robinson, insurance company spokesperson, Paul Abels, and former state insurance commissioner, Linda Takayama. We're live and your phone calls are welcome. Just call 955-8821. Peter from Honolulu, you've been waiting very patiently, you're on the air.
[00:42:15] Caller: Yes, I'm a claimant's attorney and I've been practicing for 40 years here. And I think one of the biggest reasons, the most important reasons for the um high cost of uh uh worker's comp claims is the is the fact that you can't get a claim heard for over a year.
[00:42:32] Caller: Which and the only solution as I can see it is to increase the number of hearing officers. You only get about 20 minutes to a half an hour to present your case, so it's up to the claimant's attorney to be prepared. And so they have thousands and thousands of cases and I think the while the cases are pending, the insurance companies are paying out temporary disability claims. Frequently, they are total disability claims and that increases the cost uh very severely. Secondly, the attorneys have been blamed for increasing the cost of worker's comp claims. Well, my experience has been that the reason claimants come to an attorney such as myself to handle their claim is because the insurance company is slow in paying, or else they are they drag their feet for initially uh in paying the claims because I don't I think that they would not the claimants would not come to an attorney if they were acting otherwise. As far as the attorney's fees are concerned, they come out of the claimant's award at the uh the department level, it's only on appeal that the that the claimant's attorneys can be awarded against the insurance company. So and because the rate that the attorneys are paid, which is between $75 and $85 an hour versus uh what it really costs to maintain a law office you don't make any money in this kind of a case so I thought I Let me get the thoughts of a couple people here at the table, uh Peter and um and see what they have to say, David Robinson?
[00:44:02] David Robinson: Uh, well, you made some some good points. Uh, the length of time to get a hearing is a major problem that uh the uh Department of Labor has been trying to address and I I have some ideas of of my own on that. But let me touch first on the uh question of attorneys because uh um the attorneys have been blamed uh and I don't Yeah, don't get defensive. Well, no, I I I You're not a defense lawyer. The the um uh governor in his uh state of the state address last year actually made the comment that uh uh the uh cases where attorneys were involved in worker's compensation uh cost more than where they're not involved. That was picked up by the um uh the newspapers, uh reported that again. Well, especially because he was a claimant's lawyer when he was practicing. Before he became the governor he was a claimant's attorney and I don't understand him making that statement and although it may be true, I the the only conceivable way it could be true if you're talking about claimant's attorneys is if the claimant's attorneys are getting the claimant the benefits that they are entitled to by law and the insurance companies are taking advantage of the claimants who aren't represented by counsel and that would be the only way the cost would be higher. A claimant cannot be paid more than he's entitled to by law, and if it takes the claimant's attorney a claimant's attorney to prove that, um you know, then so be I hear what you're saying now, Linda Takayama, are you going to defend your uh your boss? Uh Well, I I don't think he needs defending. Um, maybe there's some explanation as to um why he made the statement he did. There was a close claims study done in December which, by the way, I ordered, um specifically to find out where these cost drivers were coming from. What it found was that those cases with attorney involvement, whether it was the insurance company's attorney or the claimant's attorney, um basically ended up costing about double what um a case without attorney involvement would cost. And David would say that's because people are are getting their benefits. and I would agree with him that we've got a system today where claimants feel compelled to go to an attorney to get their basic entitlements. That should not happen. Even when it's black and white and they don't need an attorney. I see. That's correct. Other close claims studies in other states have found that um if you compare cases with attorneys and without attorneys, the amount of money on benefits going to the claimant is the same. The additional cost is only the cost of attorney involvement and and and and so, you know, basically again, you know, the worker really isn't coming out any better, except that with without an attorney, he doesn't get his basic rights, and that's that's not a good system. Claimant's attorneys' fees come out of their money. They they they cannot be an increased cost on the system at all because the claimants pay their attorneys out of their own pocket. Right, right. Okay, Peter, thank you for your call. We're talking about the lawyer's role in this and and the next person on our list of people who have called in is Dick Miller, who's a professor at the law school teaches insurance law. Dick, are you there? I'm there, Randy. I bet you've got a few comments about what we've been talking about. Well, I think it's it's really interesting uh try to figure this out is not dissimilar to the trying to figure out what's wrong with the uh auto insurance system.
[00:47:30] Paul Ables: And I guess the question I have for the panel is to what extent does the problem, I think exists that exists in auto insurance, that is, uh rather overreach compensation of small injuries on the one hand and undercompensation of really serious injuries, to what extent does that exist in the worker's comp system. Um I think uh at the low end the soft tissue injuries, the availability of uh massage therapy and uh chiropracti and so forth uh can push up the costs enormously. On the other hand, worker's compensation, the maximum uh earnings payout is really horribly low. It's the average weekly compensation of the state, which is just something over 400 bucks is all you can get even if you were earning, let's say, $1,000 a week. So uh to what extent is that are these two problems similar?
[00:48:17] Randall Roth: Who wants to fill that one, David Robinson?
[00:48:20] David Robinson: Well, I I I think they are similar in many respects in terms of what I said originally, which is that the a lot of the problems have arisen as a result of tinkering with the system. Our no-fault system is a good basic uh system and it has been tinkered with to the point where now um you have insurance adjusters uh telling doctors how to treat patients and denying uh care, denying uh diagnostic studies. They have taken the worker's compensation medical fee schedule and regulations and applied it to the no-fault arena. I wrote an article for the Hawaii Trial Lawyers Association newsletter some years back when I heard that they were thinking of doing that and I said, what's going to happen is the minute they do that, the um insurance commissioner's office is going to be backlogged for uh hearings so far beyond the realm of conceivability that that we're not going to be able to properly administer no-fault claims. That has happened within a year of of the passage of the no-fault. And Linda Takayama is is nodding, I guess you agree with that, Linda? Oh yeah, except it happened in less than a year, David. Um the So, so the legislature sometimes tinkers with these laws without realizing what the practical impact is going to be, Linda? It it it's a little tough and I think everybody's at fault for that, because you look at a a little piece that you think is the bandaid solution for what seems to be the problem at the time. Um in in the case of um no-fault and worker's compensation, when we looked at at that, um the the issue seemed to be to bring medical costs down. Um and and so we thought that the worker's compensation schedule um was lower than what we were currently paying for no-fault, which was basically no-cap, blue sky. Um and and and so this brought it under some control, but you're right, in exchange for that, there was a lot more involvement on the part of the insurance division and they immediately got swamped. Um I think that that the treatment plans now are at one point was backed up four months, we're down to one month. Um so there's some improvement. But what I I guess I really wanted to say is that um some attention needs to be paid to um medical costs and how much they have risen over over uh the years.
[00:50:37] Linda Takayama: Um the Department of Labor um indicates that in the period between 1977 and 1992, medical costs rose 1700%. At the same time, claims rose 32%. And the total number of employees in the state rose 55%. So, you know, we need to take a look at what does what does that mean? A 1700% increase in medical costs. Now, you know, some of that may be perfectly well justified, there have been a lot of advances made in um in in health and and um the way medical claims are treated. Um but, you know, that's a big enough number, we ought to take a look at it.
[00:51:13] Randall Roth: I might just add we had a program a few weeks ago on on healthcare reform and our experts at that time said that we haven't peaked that there probably will be another explosion in terms of medical cost generally, and I assume that that would be reflected in the worker's comp and no-fault arena as well. Wonderful. Um there was a study done nationally last year which seemed to indicate that our medical fee schedule was the highest in the nation. And it was um primarily as a result of, you know, the historical look at what medical costs are um at at these national studies that are indicating, you know, we're we're way off the charts um in comparison to other states. That the Department of Labor um has agreed that, you know, we ought to take a look at overhauling the medical fee schedule in in its entirety and make sure that we we get back on track. There's no reason on earth that um a doctor ought to be able to um charge a higher fee for worker's compensation cases than he does for regular cases that walk in the door.
[00:52:17] Randall Roth: It sounds to me as though, at least that's part of what's going on. Paul, you're with the company, the insurance industry that's paying for this. Is that a a problem or is that not a problem?
[00:52:29] Paul Ables: The whole issue of uh medical costs is a problem and how you go about controlling them. Uh, they've risen dramatically, but also in the systems uh, where you have um guaranteed payment and and particularly in worker's comp, no real limitation on the payments, there's an opportunity for that to be abused and it's being abused. The mechanisms we have for challenging them don't always work very well. Uh, I think we've talked about IMEs and the fact that they're not really independent medical exams and that's a problem. I see, you acknowledge that. We're talking about the You wait, wait, wait. Yeah, I acknowledge why I've I've never argued with that. Our claim our claimant's lawyer over here smiling from ear to ear. But go ahead. I have we have long advocated that they that the Department of Labor should have true independent medical exams. Mhm. Instead of the the dueling doctors. The the the area in uh in uh automobile now where we challenge treatment plans, uh we get accused of having uh adjusters practicing medicine. What we have is people that have dealt with a lot of medical claims who look at treatment plans and know that they're obviously not appropriate for the nature of the industries injuries that are being described. A lot of them are being challenged. I I think the interesting part of that is a lot of the challenges are being decided in favor of the insurance carrier.
[00:53:50] David Robinson: The the problem we have in both the no-fault and work comp, though in in in passing all these regulations to try to control costs, and giving the the power to uh insurance adjusters to to try to do that, is that we're trying to create a menu for treating people that that have been injured. And human beings aren't automobiles. Uh, we have a lot of cultural differences in Hawaii where people react to Western medicine very differently from those of us born and raised in the in the United States and that has to be taken into consideration. There's all sorts of variables involved and you can't just set down a set script or menu to say, okay, if you treat more than these amount of times uh within 120 days, then uh this is going to happen or that is going to happen and the insurance adjusters are going to automatically try and I to get an IME or or deny the treatment plan.
[00:54:45] David Robinson: And one thing I want to caution about um uh yes, the the medical costs have to be addressed. There's no question about that. I I heard something like, you know, well over 50 cents of every dollar in worker's compensation goes to the medical service providers. I I I think. 41%. 41%?
[00:55:02] David Robinson: Um, but in any event, that's a very sizable amount. I have heard that what the legis what the legislature is going to be looking at is the fee schedule and I've I've heard things such as Medicaid plus 10% for the fee schedule and a big caution on that is that if if that happens, we're going to lose even more well-qualified doctors from the worker's compensation system, Mhm, than we have already and the ones that are going to be left are going to be the ones that can't make it in the general practice and are going to be trying to figure out even more ways to work the system. So as we try to cap the the rates for worker's comp insurance, we lose insurance companies. As we try to cap the amount that doctors can make, we lose doctors and and the claimants are the ones that lose out.
[00:55:53] Randall Roth: Yeah, Dick Miller, your question set off a storm of conversation here. That sure did. I I don't think anyone ever uh addressed themselves about at the high end. Uh people who are really seriously permanently disabled uh adequately compensated in the system.
[00:56:07] David Robinson: The the work comp system is not necessarily a fair system. It's a very basic system to get basic benefits to injured workers. It doesn't make them whole. There's no question about that. Okay. Thank you, Dick. Okay. Pleasure.
[00:56:20] Randall Roth: We've got a caller from Maui, Bob. You're on the air.
[00:56:24] Caller: Thank you. I I think I'm one of the little uh less uh important ones here because I'm one of the claimants, you know, and I have been hurt on a job and I can't seem to get things done. I want to go back to work. I want to get off the system and I just can't seem to get the system to do anything for me. What What what can't you get done, Bob? I I get one doctor bounces me to another doctor who says he can't get something to the insurance company approves uh to have some work done. And So they won't they won't
[00:57:00] Randall Roth: reach you until they've gotten some sort of
[00:57:03] Caller: I have I have been treated. I went to a doctor and I was tre- treated. They uh gave a prescription for physical therapy. I have been doing physical therapy and then he wanted a second opinion from another doctor and I went to see the other doctor and he wanted a test run and uh in the meantime the first doctor has stopped the prescription for the physical therapy until he gets the second opinion from the uh uh the second doctor.
[00:57:39] Caller: The second doctor cannot do anything until he gets the okay from the insurance companies to now run the test that he wants uh uh I guess it's a cat scan and MGI or something of this sort you know.
[00:57:57] Randall Roth: How long has this been going on?
[00:58:00] Caller: Since May.
[00:58:01] Randall Roth: Okay.
[00:58:01] Caller: And I want to I want to work. I'm I want to be one of these type of people that I want to work. I don't I don't want to be out of work.
[00:58:16] Randall Roth: I can hear that. I you know, I can I can hear that, I know you mean that. Uh, Paul Abels, is what what do you what's your reaction to this?
[00:58:29] Paul Ables: Uh, it sounds like he's got a a complicated problem because he's being referred out and uh whether the insurance carrier is getting the paperwork that they need in order to process it or whether uh the insurance carrier itself is allowing the paperwork to be buried is very hard to say without looking to claim. Both things happen. Sometimes the carrier is asking for information in order to process a request for some other treatment and they don't get it and sometimes, uh and it uh a claim's adjuster may uh not respond in the in the fashion they're supposed to.
[00:59:14] Randall Roth: David Robinson, Bob's problem should actually be one of the easier ones to address. His is treating primary treating physician should put a written request to the insurance company for the consultation and that consultation doctor puts a written request to the insurance company.
[00:59:33] David Robinson: The insurance company has five working days to respond in writing by denying it or approving it. If they deny it, they have to have a reasonable medical basis to deny it and the Bob then has a right to request a hearing at the Department of Labor. And Mao we is still running fairly fairly good that he should be able to get into a hearing within a reasonable period of time. If they don't answer, it's deemed approved automatically.
[01:00:08] Randall Roth: Bob, that sounds like pretty good advice. I think you need to have your physician put in that specific request. Is that right, David?
[01:00:19] David Robinson: That's right.
[01:00:20] Caller: Well, how do you get the physician to move?
[01:00:24] Randall Roth: Well, that's well, that's a whole another problem.
[01:00:27] David Robinson: If he doesn't move in five days, Bob, what I'm hearing is it's his problem, not yours.
[01:00:34] Caller: Yeah, well, I'm sitting here. I'm I haven't had any treatment in the last week and a half because they have denied the prescription. I'm, you know, I'm still working.
[01:00:48] Randall Roth: Bob, I'm going to ask Paul Abels to give you specific advice on what to do and then we need to move on.
[01:00:58] Paul Ables: Okay. Well, uh exactly what David told him to do. The the problem becomes, it sounds like he has the problem that I described in the first place, and that's that the doctor won't do what he needs to do. The five day restriction is on the insurance carrier. That starts when the doctor sends in the request, but the doctor never sends a request, then nothing's going to happen.
[01:01:28] Randall Roth: Oh so it is Bob's problem, if that request isn't sent in. Okay, Bob, there you go.
[01:01:36] Caller: Okay.
[01:01:36] Randall Roth: Thank you. Uh another caller, Richard from Maui. Richard, you're on the air.
[01:01:42] Caller: Hi. Um I'm an employer and pay quite a bit of money for workman's comp and I'm concerned about the increase. Uh
[01:01:51] Randall Roth: Richard, can you give us just some ideas to how much you pay, you know, whether it be as a percentage of the compensation that you're paying to the worker and some other way give our listeners a sense for how much this is?
[01:02:10] Caller: Well, um I estimate um it it depends uh each year on whether it's commercial or more residential, because commercial rates are higher. Um, but it's it's between 30 and 40,000 a year.
[01:02:25] Randall Roth: And how how many employees do you have?
[01:02:28] Caller: Um, three to six employees.
[01:02:30] Randall Roth: Okay. So it's a lot of money. It's a big chunk per employee. Okay.
[01:02:37] Caller: It is, and I feel that it's the workman workers' comp situation is multifaceted. Um, of course, when you have attorneys, it's going to be adversarial because that's you know, how they run their their profession is an adversarial type of thing. So, if if we could um redesign the system to eliminate the attorneys involvement.
[01:03:01] Randall Roth: Oh, fine. I mean, you know, I I realize they have to make a income, but you know, certainly they can do that some other way. If we didn't have to have attorneys representing people, we would save that cost if the system was able to evaluate a person's. Richard, we've only got a a minute. I'm going to let David respond to that and then I want to get your response, and then we we just have to get going.
[01:03:36] David Robinson: Well, the system was originally designed not to have to have attorneys involved and it and it should still run where the majority of cases don't have attorneys involved. Uh, but um as we've talked earlier, it has evolved into an adversarial situation and uh where claimants can't get their benefits, then the result is that they go hire attorneys.
[01:04:03] Caller: Well, um medical costs are high because of malpractice. If there was some way of having um like I think it was Bill earlier mentioned, a database that um determined a rate on an individual's um history of both injuries and safety as well as the employer's history of of injury and safety, and encourage both of both groups to get more training for safety and um keep the costs of running the system down. Maybe even consider a state funded insurance program for the high risk.
[01:04:40] Randall Roth: When you were talking about safety, Linda Takayama was nodding her head. I think she she agrees with that. Richard, we we need to get going. We're down to the last minute or so, but I appreciate your call.
[01:04:57] Caller: Well, thank you very much.
[01:05:00] Randall Roth: Uh we do just have a minute or two and I wanted to to give each of you an opportunity to point something else out that that ought to be on the table, that people who are trying to understand this workers' compensation controversy, that they really ought to know about. Linda, is there anything in particular that you'd want to add?
[01:05:27] Linda Takayama: I just want to pick up on um the caller's last point, and that is the safety issue. The easiest way to get costs down in the workers' compensation system is not to have accidents or injuries at all. And to the extent that workplace safety programs, and and greater awareness of safety in the workplace so that these accidents don't happen in the first place, um that's probably one way we can protect the worker and keep the cost down.
[01:06:02] Randall Roth: Paul, any uh other issues that should be out there for people to be thinking about?
[01:06:09] Paul Ables: Uh I think we've pretty well covered the the gamut of things that appear to be problems. Uh I uh we have a lot of people who agree that what we're trying to do is get injured workers taken care of and get them back to work and there seems to be a lot of uh things that are in the system that aren't working well to do that. I think for instance, you have something like mandatory vocational rehab. The statistics indicate 75% of the dollars spent on vocational rehab are spent on evaluation and very little spent on actual doing, actually doing vocational rehab. So, some things really have to be looked at in areas like that.
[01:07:01] David Robinson: All I want to stress is not to forget the claimants in this whole thing. They- as I said before, the the benefits that the claimants receive are very very basic. It's just medical care, low uh uh wages of temporary total disability. Uh people try to live off that, their families are falling apart, they're being evicted from their their houses, their mortgages are being foreclosed. The permanent partial disability they get, nowhere near makes up for the loss of future income that they are going to have as a result of not being able to compete in the normal labor market. We don't have a lost wage system. It's a a- a money based upon an artificial formula. So the the benefits that go to the actual claimants are not out of line, they are not outrageous. It's other parts of the system, the administration of it that needs to be adjusted.
[01:08:08] Randall Roth: David, Linda, Paul, thank you very much for being on the show.
[01:08:13] Paul Ables: Thank you.
[01:08:14] Randall Roth: My guests this week were attorney David Robinson, insurance company insurance company spokesperson Paul Abels, and former state insurance commissioner Linda Takayama. This week's show was produced by Suzy Ross with technical assistance from Jeff Ilardi. Join us next week when Pacific Business News editor George Mason and former director of the State Department of Commerce and Consumer Affairs Robbie Om talk about our chances of reinventing government and perhaps privatizing some of its functions. As always, we'll be live and your calls will be welcome. You've been listening to the Price of Paradise Radio Show. I'm Randy Roth. Aloha.