Looking ahead to 2017 in Workers' Compensation

It's been a very healthy workers' comp market for employers in most states. Those with favorable loss and exposure profiles are renewing with flat or reduced rates. A notable exception is Florida, which may be facing double-digit increases.

While this is good news for employers, changes in the legislative and regulatory landscape, a transforming workforce, a shortage of workers in key industries, technological advances, medical inflation, and the growing demand for data are challenges for employers. Here are four legislative and regulatory matters that employers should follow in 2017:

1. Shifting legislative and regulatory policies under the Trump administration

   Although states determine workers' comp laws, a Trump presidency is expected to have a significant effect on the federal regulations that impact workers' safety as well as employers' regulatory compliance. One common theme through most of Mr. Trump's campaign was reducing the federal influence in the workplace; many pundits are anticipating seismic shifts in OSHA and DOL regulations. Some regulations to watch include the new electronic recordkeeping and anti-retaliation law, the hospitalization and amputation reporting law, and the Silica rule. Many are also anticipating changes to the automatic cost of living adjustments for fines. A scale back in fine increases may also be on the table, but the penalty change was a statute and it's not easily rolled back. Expect a shift in the 'burden of proof' back to the whistleblower in such cases, which, under the Obama administration, has focused on the secretary of labor finding there is "reasonable cause to believe that retaliation has occurred."

   Several other areas of OSHA enforcement are considered to be in Trump's crosshairs, including the Joint Employer Doctrine, repeat violations, the Severe Violators Enforcement Program (SVEP), and non-company personnel participation (such as union representatives) in inspections. The Fair Pay and Safe Workplaces Executive Order requiring prospective federal contractors to disclose labor law violations and give agencies guidance on how to consider labor violations when awarding federal contracts is expected to be repealed.

   Overall, a Trump administration is expected to shift the Obama focus on enforcement to one of compliance assistance, similar to that of President George W. Bush.

   Another key area to expect changes is immigration reform, which Trump made the centerpiece of his winning campaign. While it's difficult to predict exactly what changes will be made, there is likely to be an impact on undocumented workers, as well as temporary work visa programs (such as H-1Bs), which allow employers to bring on highly skilled foreign workers. Furthermore, if Trump can persuade industries to bring back jobs that were exported overseas and return jobs to the coal mining industry, there will be implications for workers' comp.

2. Expanding legalization of marijuana

   Election results also saw the expansion of legalization of both medical and recreational marijuana. California, Massachusetts, and Nevada joined Alaska, Colorado, Oregon, Washington, and the District of Columbia in legalizing the drug for recreational purposes, while Arkansas, Florida, Montana and North Dakota joined 24 other states in legalizing medical marijuana. So medical marijuana is now legal in 28 states, and an additional 16 states have laws that allow for limited medical use of the drug
   
   

   
   
   

   In most cases, these limited-medical-use laws mean that only a specific type of cannabis extract can be used. The National Conference of State Legislatures provides a summary of the laws.

   At the federal level, marijuana remains classified as a Schedule I substance under the Controlled Substances Act, where Schedule I substances are considered to have a high potential for dependency and no accepted medical use, making distribution of marijuana a federal offense. This status prohibits assigning a National Drug Code (NDC), which presents difficulties in processing medical marijuana transactions.

   While there is limited legal precedent surrounding marijuana and workers' comp, for the most part, the courts have favored employers. However, in two recent and separate decisions, the Appellate Division of Maine's Workers' Compensation Board affirmed two ALJs' decisions requiring employers to reimburse injured workers for the costs associated with the reasonable and proper use of medical marijuana authorized under the Maine Medical Use of Marijuana Act (MMUMA). It's important to note that in both cases, the injured workers had tried multiple pain management regimes without success. New Mexico requires employers to reimburse employees for medical marijuana, but many other states have passed legislation with provisions that either implicitly or explicitly exempt insurers or employers from responsibility for reimbursement for medical marijuana.

   When workers are injured and suspected to be under the influence of marijuana, the intoxication defense is more difficult than with alcohol. Drug tests can show whether marijuana is present in someone's system, but there's no test to show whether that person is impaired as a result. Traces of the drug can stay in a person's body up to a month, making it more difficult for employers and insurers to pinpoint when the person smoked or ingested the drug.

   Some employers are abandoning pre-hire drug testing because too many applicants fail. Moreover, no tolerance drug policies are being put to test. Courts have upheld the termination of injured workers who test positive for medical marijuana under drug-free workplace policies, even though many employers struggle with policies to accommodate its use. It's prudent for employers to establish a clear policy and communicate it effectively to employees.

   This is a fluid area and employers should understand the laws in each of the states where they do business, work with insurance and legal counsel to determine responsibilities related to medical marijuana treatment, and update employee handbooks to clarify company policies related to marijuana, as well as stay abreast of all relevant legal decisions.

3. Focus on opioids and rising prescription costs

   The rising costs of legacy claims for opioid-dependent injured workers are a concern to all parties involved in workers' comp. Addicted workers are less likely to return to work, costs for opioid addiction treatment are rising, and comp insurers and employers pay benefits to injured workers for longer periods of time, up to and including death benefits to surviving family members if a worker dies from an overdose - as is mandated in several states.

   Opioid control measures have helped reduce utilization among newer claims, but costs overall are up - a sign that older claims tend to be driving the utilization. Opioid addiction also comes with a host of side effects, which add to the costs of treatment.

   Employers should expect more action from the states on controlling this trend. For example, on October 31, the New York State Workers' Compensation Board announced a new process for hearings addressing opioid issues relating to the treatment of injured employees. Insurers can request a hearing to consider whether an injured worker should continue to be treated or weaned off opioids.

   Employers should work with their insurance company and advisors to identify claims where there could be opioid abuse. Moreover, to help contain rising medical costs, employers should work to identify the best available physicians in their area to provide care for employees who have suffered work-related injuries and illnesses, and avoid physicians who dispense drugs.

4. State actions

   In 2016, state legislative activity related to workers' compensation was fairly moderate across the country according to the 2016 Workers' Compensation Issues Report: Fall Edition by the National Council on Compensation Insurance, Inc. (NCCI). While more than 700 bills addressing workers' compensation were introduced, only about 10% were enacted and "none of the enacted laws made significant systems changes." A common thread was increased activity around the gig economy, with several states introducing legislation dealing with "qualified market contractors." As more and more work is being performed by workers outside of the traditional employer-employee relationship, regulations aimed at improving the safety and benefits for such workers becomes a focal point.

   Here is a snapshot of some states to watch based on current activity. Please note that the regulatory and legislative landscape changes rapidly, so it is a good idea to stay abreast of proposed changes.

   • Florida - The Associated Industries of Florida and the Florida Chamber of Commerce created task forces to seek legislative action in response to recent Florida Supreme Court rulings and significant rate increases. A circuit court judge has recently blocked the hike in rates because of violations of Florida's Sunshine Law. The Florida Office of Insurance Regulation filed a notice of appeal on November 28 and the rate hike is scheduled to go into effect while on appeal.
   • Illinois - Governor Rauner is continuing to include workers' compensation reforms with budget negotiations.
   • North Carolina - A state audit of the Industrial Commission has determined that while the agency has improved its oversight of workers' compensation claims, it still is not meeting identification and investigative targets. Among the key findings in the latest audit are:
     • The commission continues to struggle to identify all noncompliant employers, including those not having a system to detect noncompliance.
     • The commission is not completing its investigative process in a timely fashion, "making recovery of medical costs and lost wages more difficult for injured workers."
     • Inadequate oversight of investigation and penalty cancellation process "increases opportunity for noncompliance."
   • Oklahoma - Proponents of the opt-out law have vowed to fight the Supreme Court's ruling finding the law unconstitutional. In the meantime, the Supreme Court is developing steps to mandate employers to be compliant with its ruling.
   • Rhode Island - The Department of Labor and Training is developing a proposed rule to add massage therapy guidelines and compound drug reimbursement to its medical fee schedule.
   • Texas - The Division of Workers' Compensation is proposing an increase in claimant's attorney fees for the first time in 25 years.