Articles | Cases

Workers' Compensation regulatory challenges for employers in 2024


While many of the issues in work comp are familiar and ongoing, there were significant changes in 2023, reflecting broader shifts in the workplace, regulatory and legal actions, technological advancements, and emerging risks. These changing trends offer insights into the challenges employers will face in 2024. This month we'll look at the regulatory trends and next month we'll review the workplace health and safety trends.


Federal regulatory actions - OSHA, NLRB, CMS
OSHA

With hardline enforcement, targeted initiatives, drastically increased penalty authority, new and expanded emphasis programs, an aggressive rulemaking agenda, 20 percent more federal inspectors, and new records for enforcement actions, OSHA needs to be on the radar screen for all employers in 2024. Key issues include:


NLRB

There were many new directives from the National Labor Relations Board (NLRB) in 2023, most focusing on narrowing existing work rules and expanding union protections. From a work comp perspective, the new joint-employer rule, which sets a much broader standard for determining joint employer status, is a lightning rod of dispute. Now marred with legal challenges, the NLRB recently voted to delay the rule's effective date until Feb. 26, 2024. Employers should watch these challenges closely and prepare for compliance with the rule in early 2024. Also, employers should be aware of the multiple Memoranda of Understandings (MOU) issued with other federal agencies, including OSHA, to exchange information discovered during investigations, which may violate other regulations.

Also concerning is that the NLRB general counsel wants to eliminate the current requirement that an employee must suffer an adverse employment action for agency prosecutors to prove illegal anti-union discrimination. Further, the general counsel would like to extend "Weingarten rights," to non-union settings. This gives employees the right to representation in any investigative interview that could reasonably lead to discipline.



CMS

The Centers for Medicare and Medicaid Services (CMS) has been taking more aggressive steps to ensure employers and employees consider Medicare's interests in all work comp cases. In a recent webinar, CMS announced it is considering the expansion of Section 111 Non-Group Health Plan Total Payment Obligation to Claimant (TPOC) reporting to include Workers' Compensation Medicare Set-Aside (WCMSA) information. It made clear that they are looking for reported WCMSA information from all workers' compensation settlements involving Medicare beneficiaries, regardless of whether the Medicare Set-Aside was voluntarily submitted and reviewed by CMS or was a non-submit/evidence-based Medicare Set-Aside. Although reporting TPOC has always included the amount of a WCMSA, RREs have never had to specifically report details of the WCMSA itself. The changes could have a significant impact on Section 111 reporting and WCMSA compliance, and updates on the proposal should be monitored. Employers should work with insurers and their MSA partners to take a hard look at how this affects their practices. CMS projects a January 2025 implementation date.

The average set-aside recommendation in the fiscal year that ended in June was $86,452.67, up 5.98% compared with the $81,571.75 average set-aside in the 2022 fiscal year. The average set-aside recommendation for the 15,743 claims reviewed in fiscal year 2023 was 21.95 percent higher than the average proposed set-aside of $70,887.33.

Another CMS issue potentially affecting work comp is the effort to reduce drug costs by negotiating prices for a variety of different medications with pharmaceutical companies. This could lead to lower costs for comp or lead to higher prices if pharmacies cost-shift. Providers are billing above fee schedules for various medications, and they're pushing back against CMS' plan to roll back temporary pandemic-related price increases. States like Florida are raising their fee schedules, leading to higher costs for some drugs.



Rating bureaus - NCCI and PCRB

Both the National Council on Compensation Insurance (NCCI) and the Pennsylvania Compensation Rating Bureau (PCRB) received approval for revisions that are designed to make the experience mod function more effectively and more accurately capture an employer's loss experience. The changes should make the formula more equitable with best-performing employers getting better mods and poor performers getting worse mods. Those in the middle are likely to see minimal impact. While the mod formula is not changing, the alterations aim to enhance the mod's primary purpose - leveraging past employer experience to predict future losses and appropriately price workers' compensation policies.

The NCCI adjustments will go into effect on each state's regular rate filing date on or after November 1, 2023. The rollout started with Washington, D.C. and West Virginia, and will conclude with Rhode Island on August 1, 2024. A key component of the change is that the new methodology will establish a unique split point for each state based on that state's loss experience, whereas previously there was a uniform split point across all NCCI states. The split point impacts how primary and discounted losses are factored into the mod calculation.

In Pennsylvania, the changes will increase the number of employers that qualify for experience rating and will impact employers across the state beginning April 1, 2024. It's projected 21,000 to 22,000 employers that currently do not have an experience rating will get one.

The changes will impact businesses differently and employers are advised to discuss the implications with their insurance agent.