The 3rd meeting of the Interim Joint Committee on Labor and Industry was held on Tuesday, September 15, 2009, at 3:15 PM, in Room A of the Conference Center at Kentucky Dam Village State Resort Park. Senator Alice Forgy Kerr, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative Rick G. Nelson, Co-Chair; Senators Julian M. Carroll, Denise Harper Angel, and Jerry P. Rhoads; Representatives Will Coursey, C. B. Embry Jr., Bill Farmer, Richard Henderson, Charlie Hoffman, Dennis Horlander, Joni L. Jenkins, Mary Lou Marzian, Tom Riner, Jim Stewart III, and Brent Yonts.
Guests: Commissioner Dwight Lovan, Department of Workers’ Claims; Secretary Helen Mountjoy, Education and Workforce Development Cabinet; Carol Roberts.
LRC Staff: Linda Bussell, Carla Montgomery and Betsy Bailey.
Chair Kerr thanked guests and committee members for attending the meeting at Kentucky Dam Village State Resort Park. She recognized former Representative and current Labor Cabinet Secretary, J.R. Gray who welcomed those in attendance to western Kentucky. He spoke briefly on his history with the Labor and Industry committee, of which he was chair for several years. Chair Kerr recognized several specific guests in the audience and thanked the Labor Cabinet for organizing the committee meeting and Labor Management Conference. She introduced Commissioner Dwight Lovan, Department of Workers’ Claims, to present an update on the feasibility study on the adoption of the 6th edition of the American Medical Association’s (AMA) “Guides to the Evaluation of Permanent Impairment.”
Commissioner Lovan presented his findings based on discussions with individuals within the medical, legal, business, and labor communities. Twelve states have adopted the 6th edition of the AMA Guides to medical impairment. Commissioner Lovan stated that he has been in contact with the advisory council on workers’ compensation in Tennessee and is utilizing Tennessee’s experience with the new edition. Tennessee adopted the 6th edition on January 1, 2008. Few states are still studying the adoptability of the 6th edition. Most states have either adopted it or continue to use the 5th or other editions. Colorado uses the 3rd edition and Texas uses the 4th edition. Commissioner Lovan has used information published in the journal of the International Association of Accident Boards and Commissions which has conducted a study on the accuracy of different interpretations of the editions amongst physicians. He continues to communicate with employers, labor representatives, attorneys, and physicians who are dealing with the issue. Case analysis has been presented on the occurrence of patients in Kentucky, particularly Bowling Green, Owensboro and Paducah, who travel to Tennessee for medical treatment. Doctors in these cases are able to provide insight into the differences between the 5th and 6th editions. It has been reported that processing with the 6th edition can take 4 to 5 times longer than with the 5th.
Chair Kerr asked how many doctors in Kentucky have been trained to use the 6th edition of the AMA Guides. Commissioner Lovan said a training session was held in February 2008 with approximately 75 people in attendance and 35 of those in attendance being physicians. A physician would need nearly 40 hours of training to practice the methodology of the 6th edition. Chair Kerr asked why the methodology or process of the 6th edition takes longer than other editions. Commissioner Lovan said the evaluation process is dramatically different than in previous editions and it takes a longer time to complete. The extended time it takes for completion of an evaluation may have to do with the learning curve and experience of the physician with the new process, but it also has to do with the thoroughness of the examination of the patient.
Representative Yonts asked if Commissioner Lovan anticipates presenting a recommendation to the legislature in January. He responded yes and did not plan to promulgate a regulation on this issue.
Senator Carroll asked why the methodology of the 6th edition varies so drastically from the other editions and what economic impact the adoption would have. Commissioner Lovan said according to the 6th edition the primary reason for the change is that the 6th edition methodology is based on how an international health organization determines disability. In prior editions, disability is a legal determination and impairment is a medical determination. The 6th edition combines disability and impairment and considers how each affects work performance and daily living. There are multiple economic impacts with the 6th edition, but the full extent of the impact is not known. Some of the controversy seems to relate to the changes to impairment ratings for certain body parts such as the spine. These changes may result in a significant reduction of disability of impairment ratings in that area. Commissioner Lovan stated that his report submitted to the legislature in January 2009 does have physicians’ analysis and comparison of the disability ratings using the 5th versus the 6th. This analysis is an attempt to show the real dollar impact. Senator Carroll asked if the workers’ compensation trust fund has been affected by the effort to balance state budgets. Commissioner Lovan replied yes.
Senator Rhoads asked how using the 6th edition would affect the real dollar and multiplier formulas. Commissioner Lovan used the example of a cervical spine fusion as having the most dramatic impact, where a 25% impairment rate and a 1.51 multiplier would result in a 28.75% disability rating using the 5th edition. Under the 6th edition, a cervical spine fusion would rate 4% to 7% in impairment ratings. An impairment rating of 4% with a 1.65 multiplier would result in a 2.85% disability rating. There is a 25% difference between the 5th and 6th edition for cervical spine fusion.
Senator Rhoads asked if physicians would be reluctant to train for use of the 6th edition after the AMA recently incorporated numerous corrections. Commissioner Lovan said a recent study suggested that 50% to 60% of current physicians performing evaluations for injured workers will not want to do exams under the 6th edition.
Representative Yonts asked if physicians will be required to perform the expensive Functional Capacity Evaluation (FCE) under the 6th edition. Commissioner Lovan stated that while the FCE is not required, many physicians may chose to do the evaluation to feel comfortable to support their findings of impairment.
Chair Kerr asked that the rationale be explained for the changes in the determination of cervical/lumbar impairments. Commissioner Lovan stated that a medical difference of opinion between the authors of those sections of the 5th and 6th editions is the cause for the changes.
A motion and second were made on the minutes of the previous meeting and the minutes were approved. Chair Kerr introduced Secretary Helen Mountjoy, Education and Workforce Development Cabinet, and Chair of the Unemployment Insurance (UI) Task Force.
Secretary Mountjoy addressed the committee with an update on the work of the Unemployment Insurance Task Force. The unemployment rate for the month of July in Kentucky was 11%, the highest rating in 25 years. In Kentucky, 227,431 people are unemployed. She stated that Magoffin County has the highest rate of unemployment at 19.6%. In the month of August, $87 million was paid in regular unemployment insurance benefits. She stated that the average amount of employer contributions for the year is $400 million. Including regular benefits, EUC and FAC funds which are federally funded, and the extended benefits, Kentucky has paid $1,040,617,326 in UI benefits, year to date. Kentucky currently owes the federal government $383,500,000. $300,000,000 has been requested for the final three months of federal funding, which expires December 31, 2009.
The task force anticipates making recommendations to Governor Beshear at the end of October 2009. Recommendations from the consultants under contract to the task force will be made by September 30. Small groups have branched off from the task force to study specific issues more in depth. One such issue being studied is a waiting week which could save $40 million per year. Secretary Mountjoy emphasized the goal of reemployment and the establishment of a system that is easily understood by employees. The task force is studying a program titled “Georgia Works” which places unemployed citizens in jobs with private businesses who hire them for part time employment for 24 hours per week for a period of eight weeks. The program has maintained a 66% hiring rate of participants during the five years of the program.
The task force has concluded that savings would not be effective in reevaluating the contributions of voluntary contributors. There are approximately 85,000 employers in Kentucky. In 2009, 202 employers used voluntary contributions to lower their tax rate Only 12 voluntary contributing employers had a buy down of over $30,000 while five employers were above $100,000. The loss to the trust fund results in $40,000,000 which is only 1%.
In the area of reimbursing employers, the task force has concluded that reevaluating this section of the system would not result in significant savings. There are 1,918 reimbursing employers which includes governmental entities (75%), private schools and colleges, and health care and social services organizations (25%). The benefits that were charged against reimbursing employers in 2008 amounted to 1.5% of the total benefits paid for the year. Federal statute obligates Kentucky to offer the option of being a reimbursing employer.
On October 13, the task force will hold its next meeting. A small group meeting on employer rating will be held on October 23.
Representative Farmer asked if the requested funds for the remaining months of the year will sustain the current level of benefits. Secretary Mountjoy said the amount requested should be sufficient according to analysis and the formula used to determine the required funds. If the amount should be insufficient, additional funds can be requested.
Secretary Mountjoy explained that the taxable wage base was instituted in 1982 when $8,000 represented 50% of the average annual wage in Kentucky. Now it averages only 25%. Several other states have raised their taxable wage base.
Representative Yonts asked about the continuing eligibility requirements and audits that may be performed. Secretary Mountjoy explained that a person must continue to present evidence to their caseworker in order to continue receiving benefits. Other states have been successful in instituting random audits that people are in fact seeking work. She said that this method will most likely be included in recommendations.
Representative Yonts asked about recommendations to increase the taxable wage base. Secretary Mountjoy said the task force is waiting for the recommendations from the consultants under contract. It is anticipated that the consultants’ recommendations will allow that the taxable wage base should be indexed.
Representative Yonts asked about UI modernization provisions of the federal stimulus bill. One consultant is looking specifically at the elements contained in the stimulus modernization package to see what it would cost Kentucky in the short term and long term.
Representative Hoffman asked how the task force would address the issue of misclassification of employees preventing payment of taxes to the UI system. Secretary Mountjoy said the task force will be addressing issues on a long list in order to clear up any issues of ambiguity and unfairness.
Senator Kerr emphasized the importance remembering the nearly 228,000 Kentuckians that are currently unemployed. She thanked Secretary Mountjoy for her presentation and hard work as the Chair of the Unemployment Insurance Task Force.
Carol Roberts, a workers’ compensation claimant from Owensboro, spoke to the committee about issues within the Workers’ Compensation system. Ms. Roberts informed the committee about the complications and difficulties that she has encountered while litigating reopenings and medical fee disputes. Ms. Roberts discussed post award issues such as being denied medical treatment to which claimants may be entitled to according to the original award and the inability to find legal representation for post award claims. Ms. Roberts suggests that a system should be reviewed to help post award claimants receive proper legal representation for post award matters.
There being no further business, the meeting adjourned.