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(c) 2016 Jon L Gelman, All Rights Reserved.

Thursday, February 28, 2013

California, Workers' Compensation and The Nuclear Option


There has been a call among eminent commentators in California to invoke “The Nuclear Option,” abolishment of the Workers’ Compensation Act entirely.  The suggestion was aired in response to proposed legislation (AB 1309) that would implement a statutory limitation on extraterritorial coverage for professional athletes and reflects a trend to emasculate the benefit program by incremental “take backs.”  

An analysis demonstrates that the law, proposed by California Insurance Committee Chairman Henry Peres (D-Fresno), may indeed be the triggering mechanism to implode the entire system both in California and in the Nation. It may very well be the sentinel event.

California has had a logarithmically problematic workers’ compensation program for at least the past 3 decades. It has been literally a political football. The promise to provide a simple, economically conservative and expeditious administrative system of benefits has turned into an outright nightmare. Both labor and Industry have tried, to no avail, to meet those noble goals against a tide of crippling economic downturn, new and costly medical modalities, waves of emerging occupational diseases, and an onslaught of outside vendors who are “eating the lunch” of the system.


The situation in California is not unique. It is mirrored nationally. California stands out among the crowd because it traditionally is the “proving ground” or “beta test site” for what will eventually spread and engulf all jurisdictions to the East coast.

Extraterritorial coverage restrictions are not a new concept to workers’ compensation programs. They have been aggressively promoted by several states in an effort to stake out their territory against economic invasion by other jurisdictions. The bottom line is that each state is fighting in the long run for the money and fiscal survival.

The Full Faith and Credit Clause of the United States Constitution permits claimants from obtaining benefits in more than one jurisdiction.  The U. S. Supreme Court in Industrial Commission of Wisconsin v. McCartin (330 U.S. 622 (1947) recognized the validity of successive awards. An employee hired in Illinois performed work in Wisconsin. The employee, who sustained an occupational illness, was permitted to file claims in both states.

The U.S. Supreme Court reaffirmed and enlarged the McCartin Doctrine. “To vest the power of determining such extraterritorial effect in the State itself risks the very kind of parochial entrancement on the interests of other States that it was the purpose of the Full Faith and Credit Clause and other provisions of Art. IV to prevent.” Thomas v. Washington Gas Light Co., 448 U.S.261 (1980).

In opposition to “the separatist movement” that attempts to assert state exclusivity legislation in workers’ compensation, there has been a feverishly growing trend to create uniformity in the delivery of compensation benefits.  The 1972 Report of the National Commission on State Workmen’s Compensation Laws triggered
 an effort to establish minimum uniform national standards.

A major player in that effort have been all the medical insurance plans who have been the target of insidious cost shifting by the workers’ compensation system to avoid economic responsibility of the payment of claims. This includes the American taxpayer who has been a direct victim as a result of the failure by workers’ compensation programs to reimburse the Medicare, Medicaid, Veterans Administration and Tricare insurance programs.

Consistency and reliability of workers’ compensation benefits and data uniformly across that national spectrum of programs has increasingly been mandated by: reporting, rating and reimbursement auditors. The Inspector General of the Centers for Medicare and Medicaid Services (CMS) recognized this deficiency decades ago in a report concerning deficient in enforcement of the Medicare Secondary Payer Act (MSP).

Continued chopping away by individual states so that may carve out their economic territory will merely exacerbate stress on the failing system. President Lincoln recognized that “A house divided against itself cannot stand.” A balanced, consistent, fair and unified rule of law must exist to advance the National interest. The goal is to maintain a safe, secure, stable, healthy, and productive workforce, while balancing the interests of Industry.

The time has come to just come to the realization that individual state imposed exceptions and competition are emasculating the rule. The original simplicity and uniformity of the workers’ compensation program must prevail. The non-competitive nature of the system needs to be restored among the states to avoid workers’ compensation’s very extinction.