Delaware Moves Swiftly to Enact Major Workers’ Comp Reform

The Delaware Senate and House moved swiftly in the past week to pass a bill containing major reforms of the state’s workers’ compensation system and Gov. Ruth Ann Miller immediately signed the reforms into law.

Lawmakers hope the new law — SB 1 — will mean more than $30 million in rate relief for employers. Some estimates project savings could reach up to $43 million annually.

Lawmakers and Minner acted quickly in part to send a message to auto manufacturer DaimlerChrysler, which is considering whether to close a plant in the state that employs about 4,500 workers.

The new law promises to control workers’ compensation costs by imposing fee schedules on physicians and some restrictions on lawyers’ fees. It also promises to encourage certain best practices guidelines for treatments as well as standardize some of the health care forms used by employers, insurers and medical providers.

Under the new payment system, doctors could receive up to 90 percent of the most common charges for medical services while surgery charges by hospitals could be cut by 15 percent.

Attorneys for injured workers will have to have written fee agreements with their clients. The law attempts to limit when a lawyer can collect a percentage of a client’s weekly benefit check.

In an effort to streamline payments to workers, the law authorizes an insurance carrier to make payments of indemnity benefits or health care benefits to a worker without affecting the insurer’s right to later contest the employer’s claim.

Insurers woud be able to halt workers’ compensation benefits to any persons jailed due to a criminal conviction.

The reform law also requires insurance carriers to notify the Department of Labor of cancellation of coverage on a business and enhances penalties for employers violating the state’s mandatory insurance coverage provisions.

The legislation was developed by bill sponsors, Rep. William Oberle Jr., R-Newark, and Sen. Anthony DeLuca, D-Wilmington, who credited the cooperation of labor, medical and insurance representatives.

Minner tried but failed to enact workers’ compensation legislation reforms last year.

The legislation mandates that the state hire a firm, Ingenix, to assist the Health Care Advisory Panel in developing the medical fee schedules and treatment guidelines.

In some of its specific provisions the new law:

— authorizes the Delaware Department of Insurance to order restitution against or for the benefit of self insured employers in connection with findings of insurance fraud.

— directs that a new workers’ compensation rating plan be filed with the Insurance Commissioner within 90 days of the effective date of a medical payment system and practice guidelines, and at least annually thereafter.

— requires that carriers make rate filings 60 days after the adoption of each such rating plan.

— implements procedures for collection of data relevant to the workers’ compensation system in the state, including data concerning injury reports, mandatory insurance requirements and health care treatments and costs.

— clarifies the obligations of independent contractors and subcontractors with respect to maintaining workers’ compensation insurance.

— requires that petitions to the Industrial Accident Board for attorneys’ fees be accompanied by affidavit, and that fees awarded to an employee’s counsel offset any financial obligation the employee otherwise has to such counsel.

— establishes new procedures for attorneys’ fees in workers’ compensation matters. Among other things, it requires that attorneys representing employees have written fee arrangements and limits an attorney’s ability to collect fees from an employee’s periodic benefit payments to special circumstances that are subject to verification and approval by the Industrial Accident Board.

— authorizes employers or insurance carriers to make payments of indemnity benefits or health care benefits without prejudice to the right to later contest the employer’s obligation to pay the expense in question. This section of the Act is intended to streamline payments to an injured worker.

— establishes a Health Care Advisory Panel charged to develop various health care cost containment and efficiency measures.

— provides for a health care payment system intended to control health care costs in connection with workers’ compensation. The system will be developed by the Health Care Advisory Panel. The system is to provide clear schedules of maximum acceptable charges for professional services, hospital services, independent treatment centers, laboratory and pharmaceuticals. Such schedules after adoption will be adjusted annually by reference to the consumer price index. The health care payment system is required to be adopted within six months of the first meeting of the Health Care Advisory Panel.

— provides for the development of health care practice guidelines. Such guidelines will implement best practice standards for treatment standards in workers’ compensation. Such guidelines will be developed by the Health Care Advisory Panel within one year of its first meeting.

— provides for the development of certification standards for health care providers treating employees in the workers’ compensation system. Certification will require such providers to commit to certain standards in order to treat employees without pre-authorization. Such certification shall not be required for an employee’s first treatment by a professional or for treatment by emergency medical personnel.

— provides for the adoption of forms for a consistent and uniform reporting system among employees, employers, insurance carriers and health care providers. Such forms are intended to better facilitate communication about an employee’s condition with the objective of returning the employee to health and employment.

— allows the Industrial Accident Board to offset payment otherwise due to an employee where the Insurance Commissioner has made a finding of insurance fraud and ordered restitution.

— provides for workers’ compensation matters before the Industrial Accident Board to be referred to mediation.

— provides a procedure to suspend workers’ compensation benefits to persons who are incarcerated due to a criminal conviction.

— directs that the Industrial Accident Board, when reviewing a proposal to commute benefits, consider information relating to attorneys’ fees and costs.

— requires that contractors and other parties doing substantial work within Delaware ensure that their employees are adequately insured for workers’ compensation.

— strengthens mandatory insurance provisions by requiring insurance carriers to notify the Department of Labor of cancellation of coverage and requiring employers to either establish that the employer has gone out of business, or is no longer required to maintain workers’ compensation insurance. It also enhances penalties for violating mandatory insurance coverage provisions.

— formalizes a workplace safety program already implemented by the Department of Insurance. The program allows premium credit to certain employers who meet safety standards that are verified by the Department of Insurance.

— authorizes the Office of Workers’ Compensation to engage the firm of Ingenix, Inc. to provide services in connection with the development of health care cost containment measures adopted in the Act. Ingenix is a health care information technology and consulting firm with experience in addressing health care cost containment and affordability issues, both generally and in the specific area of workers’ compensation.