Newt Gingrich’s New Strategy for Workers’ Compensation

In a plan reminiscent of his earlier ideas, the former Speaker of the House is back again advocating an expanded Regan Administration economic plan which would shift the burden from employers and onto the employees. In an effort to eliminate litigation costs Newt Gingrich has proposed a plan that would eliminate employer contributions to employee benefits entirely.

He is suggesting that employees maintain their own economic funds to cover their own needs including medical care and presumably workers’ compensation type benefits. Gingrich is suggesting that employees be “self-insured” for injuries and illnesses and resulting disability freeing the employees of the need to contribute to insurance coverage or Social Security benefits at all.

A recent article in The American Spectator highlights Newt Gingrich’s thoughts concerning the shift of responsibility from the employer to the employee. This builds upon his previous suggestion which was to just eliminate workers’ compensation altogether.

Workers’ Compensation May Become a Creditor in an AIG Bankruptcy

The economically distressed insurer, American International Group (AIG), announced Sunday that it would attempt to obtain a $49 billion bailout form the Federal Government to avoid a complete financial collapse. AIG which represents one of the nations largest workers' compensation insurers and re-insurers is now facing severe economic consequences because of inadequate capitalization.

The US insurance industry represents a huge portion of the nation's financial assets and the instability of the market threatens the backbone of an unregulated workers' compensation national market, The AIG announcement comes on the heels of the failure of Lehman Brothers', the 4th largest financial institution in the United States, statement that it will be filing for bankruptcy after a weekend of failed negotiation seeking a bailout and government support. This cascading economic crash was further reflected by the Bank of America rush agreement to purchase Merrill Lynch for $53.03 billion within the last few days.

The economic woes of AIG, have been longstanding and were triggered by major investigations into the actions of its former chairman, Maurice "Hank" Greenberg's activities and the company's irregularities in the workers' compensation market. This sparked both State and Federal investigations into the company, but did not result in Federal regulation of the financial viability of the workers' compensation insurance program that are mostly State run and regulated.

State workers' compensation programs provide a huge amount of medical, temporary disability and permanent disability benefits to injured workers' and their families. While most of these benefit programs are financed by premiums collected from employers, the programs are administered and ultimately financed, administratively and fiscally, through insurance companies and reinsurers like AIG. State mechanisms that are triggered when the insurance companies or employers become insolvent are mostly if completely reliant upon other insurance companies and employer contributions.

The AIG collapse signals the need for Federal monitoring and regulation of workers' compensation benefits. It has been over 3 decades since a national commission was appointed survey the benefit program that was universally enacted by the States in 1911. The workers' compensation programs may at this time become nothing more than a bankruptcy creditor is a long and non-rewarding litigious process. The Federal Government needs to do more to honor the dignity of its workers.

NJ Workers' Compensation System Purportedly Under Investigation by State Commission of Investigation

New Jersey’s workers’ compensation problems are far from over as the NJ State Commission of Investigation (SCI) has purportedly launched an investigation of the NJ Compensation Rating and Inspection Bureau. The NJ system became the center of media attention following a Star Ledger newspaper series reporting serious problems.

The NJ SCI last performed a comprehensive review of the NJ Workers’ Compensation system 28 years ago following an investigative report in the State Ledger. At that time the SCI reported serious violations which resulted in judicial reviews and changes in the substantive and procedural aspects of the NJ workers’ compensation system.

The NJ Legislature expeditiously held hearings and passed legislation embracing some administrative requested changes, endorsed by Industry, which Governor Corzine has not acted upon. The finance bills and procedural oversight bills remain pending. The silence of the victims at the legislative hearings set an ominous tone to the earlier oversight hearings.

The release of data has always been problematic for the governmental agency charged with compensating victims and financed through insurance company premium payments and regulated by a rating agency that was entirely insurance Industry dominated. This new turn in developments possibly will shed some more light at what is happening in the dark closet.

Lehman Brothers Crisis May Meltdown State Workers’ Compensation Programs

The escalating financial crisis of Lehman Brothers [stock down 94% Jan-Sept 2008], may have a major impact on workers’ compensation throughout the US. Over this weekend the financial gurus scheduled meetings in an effort to avoid a complete crash of Lehman Brothers. In the meantime, the waves of this potential economic meltdown are sending hurricane type surges throughout the US workers’ compensation system.

Workers’ Compensation is an employer funded benefit program. Even self-insured companies purchase reinsurance for economic protection. The reliance upon insurance companies to operate workers’ compensation programs in the US is vital.

Major insurance companies such as AIG [stock down 79% Jan-Sept 2008], the nations largest insurer, are intricately involved in operating and funding the nation’s workers’ compensation program. AIG’s shares fell 30% on Friday as the Lehman Brothers fiscal crisis continued to escalate. Congress Waxman has expressed concern over AIG’s premium charges. AIG’s decline was based on their questionable credit default swaps, covering loses on securities based on mortgages.

As this economic crisis continues to domino the question will be whether State the insolvency mechanisms in place will be sufficient to react to keep the system afloat and provide an adequate benefit flow to the workers’ compensation system. It is doubtful that the beneficiaries of the compensation system, and its administrators, will think kindly of becoming creditor in a bankruptcy reorganization scheme paying ten cents on the dollar.

This unfortunate economic scenario brings new life to a call for the reevaluation of the entire failing US workers’ compensation program and the need to look at a Federal approach to co-ordination and delivery of benefits.

CMS Tightens Its Policy on Implant Devices and Restricts Early Termination of the WCMSAs

CMS, on August 25, 2008 issued its 11th Policy Memorandum on WCMSA (Workers’ Compensation Set Aside Accounts). If the pricing for implantable devices are NOT included in the WCMSA proposal then CMS will utilize its own pricing methodology. Additionally, CMS has rescinded its 7/11/05 memorandum and will no longer accept early termination of agreement requests.

The Integrity of Periodic Payments in Workers' Compensation

Yet again the basic theme of workers' compensation, "periodic payments," was reiterated by a Judge of Compensation. This philosophical premise, periodic payments, is the basic foundation upon which workers' compensation is structured and flies directly in the face of those who advance a legislative change to promote CMS workers' compensation set aside agreements.

In denying an application to commute an award, NJ Workers' Compensation Judge Philip A. Tornetta declared, "The essence of the scheme of the Workmen’s Compensation Act is to provide weekly compensation, in lieu of wages, to the injured employee during the period of disability and commutation of the payments is out of the normal course. Verra v. The Mayor and Council of the City of Hoboken, 70 N.J. Super. 422 (App. Div. 1961). In the exercise of his or her discretion when determining if commutation should be permitted or precluded, the compensation judge should be guided by the express language of N.J.S.A. 34:15-25. Harrison v. A & J Friedman Supply Co., 372 N.J. Super. 326 (App. Div. 2004). " See Piskoroz v. Beno Stucco Systems Corp. CP 2006-6559 (NJ Div of WC).

Note: Despite restrictions on confidentiality of records, the NJ DWC posts reserved, unpublished decisions on its web site.

Honoring Human Dignity in Workers' Compensation

In accepting the Democratic nomination for presidency of the United States, Barack Obama declared that he envisioned “….an economy that honors the dignity of work.” The State legislatures had many goals in mind when they crafted a system for compensating injured workers.

One of the goals was to relieve the injured worker of the burden of paying for their own medical care. The pendulum is swinging back to the 1911 era when the majority of workers are no longer covered for medical care. Uncompensated medical care is now a $42.9 Billion burden on governmental programs.

Generally speaking workers’ compensation was to provide a summary, efficient and economical administrative system of benefits for injured workers. One of the program’s major purposes was to avoid the tedious, costly and unpredictable results of the civil justice system. State laws created a system of a certain and reliable flow of benefits which gave support and dignity to the workforce that complemented their strong work ethic.

As the workers’ compensation expanded, salaries, pensions and benefits became unstable. The process became entangled into legalities and the assertion of a growing number of defenses became more troublesome. Consequently the system became entangled in the tedium of collateral issues and escalating delay.

This progression of events impacted the system with resulting frustration and the workers with a loss of self-esteem. It is time, that on this Labor Day, we reflect on the past and follow the vision of the future and embrace the concept, that the dignity of work and workers, should be honored.