Wisconsin’s worker’s compensation system – established in 1911 and part of the “Wisconsin Idea” in politics – has been in place longer than any other in the country.
It has been a national model for other states. Unfortunately, the current state budget bill proposes major changes to the structure of Wisconsin’s nationally-recognized worker’s compensation system. The proposed changes are ill-advised and could have damaging unintended consequences:
• Current structure = great results. Currently, all functions of the WC system are unified within the Department of Workforce Development. National studies show that one of the major factors in the effectiveness of Wisconsin’s WC system is that claims administration, dispute resolution, and law judges function together at this single state agency —an effective “one-stop-shop.” Combined, specialized claims monitoring prompts timely and accurate resolution of issues. Thus, 80-85 percent of workers successfully navigate the system without an attorney and with early return to work rates, low litigation costs, and fewer litigated cases.
• More agencies, not fewer. Those that think this is a mere agency transfer are kidding themselves. More than simply changing the agency name on letterhead, this is a full-blown breakup. The proposal will require employers, insurers, workers and medical providers to deal with multiple state agencies. As it stands now, everyone only interacts with one.
The budget proposal splits up the fully integrated Worker’s Compensation Division at DWD, separating and then replicating functions at the Department of Administration and the Office of the Commissioner of Insurance. While the initial proposal tried to separate out “administrative” vs. “adjudicatory” functions between the two agencies, recent revisions acknowledge the creation of redundancies as both functions will be done at both agencies. Other necessary functions of the WC system, however, would remain under DWD, including the Division of Vocational Rehabilitation (utilized for retraining injured workers) and the Labor and Industry Review Commission (appeals function). How would such an administrative jumble result in a better system than we have now?
• Less efficiency = increased claim costs = increased premiums: The documented efficiency of the WC system is lost by splitting up the Worker’s Compensation Division. It is no exaggeration that such a change could easily result in delays in claim resolution, less effective oversight, greater confusion, and increased litigation. With degraded active claims management at two agencies, more employers and workers will seek counsel. Litigation will occur over issues previously resolvable by the DWD’s specialized expertise. Increased litigation means increased claims costs, which means increased premiums for employers.
• What’s the reason? The current system works well for all stakeholders. Worker’s compensation insurance is a major industry and employer in our state. The system cost to employers is low, as premiums have been very stable (rising less than 2.35 percent on average in the past six years; less than inflation). We have more than 300 insurance companies writing and competing for worker’s compensation insurance business here because of the system’s stability and the corresponding ability to earn profits. (Total premiums collected for worker’s compensation insurance in Wisconsin were approximately $1.75 billion in 2013). Close to $1 billion is paid out every year in worker’s compensation claims. We should all think very hard before changing such a large and important system.
No evidence-based reason has been put forth for these proposed changes. In fact, to the contrary, the Legislative Audit Bureau previously did a study about moving adjudicative functions in a manner similar to what this proposal seeks to do. It concluded that doing so would be unlikely to result in increased efficiency or quality of decisions.
The budget proposal asks the industry to “trust us” without providing any specific suggested improvements to Wisconsin’s already great system. That’s quite a leap of faith when no details have surfaced about how the WC system would be enhanced by breaking it apart among separate agencies. When studies show the great results and efficiencies from our current integrated WC Division, how can splitting it up bring better consequences? When employer premiums go up, what reason will be given for why this change was made? When a system is not broken, don’t “fix” it.
Milwaukee attorney Charlie Domer is a member of the Preserving Worker’s Compensation Coalition.
