Call to Order and Roll Call
The 1st meeting of the Interim Joint Committee on Labor and Industry was held on Thursday, June 20, 2013, at 10:00 AM, in Room 131 of the Capitol Annex. Representative Rick G. Nelson, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Rick G. Nelson, Co-Chair; Senators Chris Girdler, Denise Harper Angel, Ernie Harris, Dennis Parrett, and Mike Wilson; Representatives Lynn Bechler, Regina Bunch, Denver Butler, Jeffery Donohue, C.B. Embry Jr., Toby Herald, Dennis Horlander, Joni L. Jenkins, Adam Koenig, Mary Lou Marzian, Tanya Pullin, Tom Riner, Jim Stewart III, and Brent Yonts.
Guests: Dwight Lovan, Commissioner, Department of Workers’ Claims; Ray Gillespie, Secretary, Kentucky Individual Self Insurance Guaranty Fund; Albert Cates, Vice President, Castellini Company; Judy Long, HealthSmart Casualty Claims Solutions; Peter McFarland, Vice President and Financial Advisor, UBS Bank; and Gary Davis, Kentucky Coal Self Insurance Guaranty Fund.
LRC Staff: Carla Montgomery, Matt Ross, Adanna Hydes, and Betsy Nickens.
Report and Update on the Workers’ Compensation Black Lung Claims Relating to the December 2011 Ky. Supreme Court Decision Vision Mining v. Gardner
Commissioner Dwight Lovan, Department of Workers’ Claims, gave a presentation regarding the action the department has taken as a result of the Supreme Court decision, Vision Mining v. Gardner, on the consensus process for coal workers’ pneumoconiosis (CWP) claims. CWP is commonly referred to as black lung disease. Under the consensus procedure in HB 348, enacted in 2002, a panel of three “B” reader physicians was used to interpret x-rays, and benefits would be awarded based on the consensus of the panel. A showing of clear and convincing evidence was necessary to overcome the consensus reached by the panel. The consensus process was used from July 14, 2002 until June 2010 when the process was declared unconstitutional based on Vision Mining v. Gardner.
Commissioner Lovan stated from July 2002 through June 2010, a total of 2309 CWP claims were filed. Of those, 1612 claims completed panel evaluations and 1569 claims reached consensus. Negative consensus was reached on 1291 of those claims. Positive consensus was awarded to 263 claims and further broken down into three categories, category one (211 claims), category two (45), and category three, including progressive massive fibrosis (7). Category three/progressive massive fibrosis claims or “complicated CWP” receive total disability awards.
The Supreme Court’s December 22, 2011 decision in Vision Mining v. Gardner affirmed the Court of Appeals decision that found the consensus process was unconstitutional because it treated CWP differently than it treated other occupational pneumoconiosis claims. CWP claims were held in abeyance since 2010 until the Supreme Court ruling. The Department of Workers’ Claims began using the same provisions used for other pneumoconiosis claims, which is to undergo a university evaluation. CWP claims are filed and processed at the University of Kentucky and at the University of Louisville, where x-rays and medical histories are evaluated by a B reader and a pulmonary specialist. Initially, 10 cases were submitted based on the type of evidence involved, then any claim with evidence of progressive massive fibrosis, and finally those that were filed first. A total of 142 claims have been referred for university evaluation, 57 claims are pending appointments, 54 claims have appointments scheduled, 41 claims have completed the evaluation process, and 547 claims continue to be temporarily assigned to the chief Administrative Law Judge, which includes all new cases.
Internal logistical issues at the universities have held up the process, as well as an increase in filings in 2012 and 2013. Commissioner Lovan stated that a B reader physician has been specially trained and certified by the National Institute of Occupational Safety and Health in classifying x-rays of pneumoconiosis, but based on the Supreme Court decision a B reader may not be necessary. A full pulmonary exam is required of any other occupational disease claims and is mandatory to receive income benefits because an impairment rating, based on the American Medical Association (AMA) Guides to the Evaluation of Permanent Impairment, must be given. In the past, an impairment rating was not necessary for awarding CWP benefits. A positive x-ray reading under the AMA Guides does not have an impairment rating, not even progressive massive fibrosis.
Commissioner Lovan said he has formed a work group comprised of physicians, attorneys for employees and businesses, professors, and individuals working in insurance, labor, and coal industries to bring recommendations to the legislature. So far, the work group has recommended adding universities beyond UK and UofL and providing a funding mechanism for the universities to provide assistance in managing CWP claims.
In response to questions from Representative Yonts, Commissioner Lovan said there is currently one B reader at each university and they are not required to be certified radiologists. The B reader and the university’s participating pulmonary expert examine the claimant and receive their medical and occupational histories, as well as their exposure history. At present, blood gases are not included in the examination.
Report and Update on the Workers’ Compensation Self Insurance Guaranty Funds
Commissioner Lovan gave an overview of the Workers’ Compensation Self Insurance Guaranty Funds. The self insurance guaranty funds were established by the General Assembly in 1996. Three separate funds were established, for individual self insured employers, coal employers, and self insured groups. All individual employers who self insure their workers’ compensation liability are approved and regulated by the Department of Worker’s Claims. The self insured employers are required to be members of the guaranty fund.
If a self insured employer becomes insolvent or declares bankruptcy and is unable to pay its workers’ compensation, the commissioner may call the security deposit, which would be a bond, letter of credit, or escrow account, of the self insured and turn it over to the appropriate guaranty fund. The guaranty fund then begins to administer the workers’ compensation claims and pay the claimant appropriately. If the security deposit is insufficient to pay all the workers’ compensation claims, then the members of the guaranty fund may be assessed to help pay the remaining workers’ compensation claims.
All self insured groups are approved and regulated by the Department of Insurance. The groups are made up of individual self insured employers. The groups are members of the group guaranty fund but the individual members of each group are jointly and separately liable for defaults on payments of workers’ compensation claims.
Following Commissioner Lovan, Co-Chair Nelson introduced Secretary Ray Gillespie, Kentucky Individual Self Insurance Guaranty Fund, and guests. Secretary Gillespie reported the guaranty fund has insured 169 firms since its creation in 1997. At this time, the fund insures 110 firms, not counting coal entities. Judy Long, Claims Consultant, HealthSmart Casualty Claims Solutions, works as a third-party consultant for Kentucky’s guaranty funds. Ms. Long reported HealthSmart handles 128 open claims. Peter McFarland, Vice President and Financial Advisor, UBS Bank, discussed the fund’s investments that are limited by statute. Albert Cates, Vice President, Castellini Company, explained his supporting role to the guaranty funds and complimented Ray Gillespie on his job as secretary.
In response to questions from Representative Yonts, Secretary Gillespie and Commissioner Lovan explained the “920 Fund”, based upon KRS 342.920. Any fines the Department of Workers’ Claims collects can be used if surety is insufficient for pre-1997 claims not covered by the guaranty funds.
In response to a question from Senator Parrett, Ms. Long stated that of the 128 open claims with HealthSmart Casualty Claims Solutions, 109 are Fruit of the Loom claims.
Kentucky Coal Employers Self Insurance Guaranty Fund
Co-Chair Nelson introduced Gary Davis, Kentucky Coal Employers Self Insurance Guaranty Fund, who presented information for the committee. The coal guaranty fund was created in 1996. The Board of Directors includes members from Alliance Coal, Arch Coal, James River Coal, Patriot Coal, and TECO Coal. Once a member leaves the fund, they are subject to being assessed for three years. Former self insured members still subject to assessment are Consol Energy and Massey Coal Services. The guaranty fund utilizes the investment management services of UBS Bank (Peter McFarland) as well as third party claims administration through HealthSmart (Judy Long) and American Mining Insurance. General Legal counsel services are provided by Walther, Gay and Roark. Fister, Williams and Oberlander serves the fund as the independent CPA firm. Actuarial services are done by Complete Actuarial Solutions (CASCO).
Mr. Davis reported the coal guaranty fund is currently administering claims for Quaker Coal, Golden Oak Mining, Lodestar Energy, Horizon Natural Resources, and Manalapan Mining.
There being no further business the meeting adjourned.