Workers' compensation 1991 to date: 25 years in review

Issue July/August 2016 By James Edward Ramsey

Where did all the cases go?

For all those unfamiliar with workers' compensation in Massachusetts, our field has experienced a significant transformation over the past 25 years.

This article will provide some insight into those changes, including statistics, analysis and commentary.

Massachusetts has one of the oldest workers' compensation systems in the country. We in Massachusetts like to say it is the oldest, having been created in 1911.1 We celebrated our 100-year anniversary on July 28, 2011.2

Historically the Massachusetts economy has included many industries, such as a combination of industrial, manufacturing, agricultural, construction, service and high-tech. As with many states, construction in Massachusetts has seen many cycles of expansion and contraction. Like most states following the 1990 recession, many jobs were lost to the economy and several sectors changed significantly.3 It appears that the precipitous decline in manufacturing has been partially offset by a significant growth in the service sector industry.4 Unfortunately, on average, service sector jobs tend to be less well paid and of a shorter duration. At the same time Massachusetts was experiencing the recession, it was also undergoing legislative reforms.

In 1991, then Gov. William Weld signed into law a comprehensive reform of the workers' compensation system. It was the third change in a relatively short period of time. The reform was designed to address many perceived faults within the system primarily by employers/insurers. Prior to this last reform there was a perception that the laws were anti-employer/insurer. The 1991 reforms swung the proverbial pendulum in the opposite direction - some would say too far.

As we look back now almost 25 years later, the year 1991 was the pinnacle of claims filed and corresponding litigation. Below is a snapshot comparing 1991 to 2014 at the Department of Industrial Accidents (DIA).5

The combination of the then ongoing recession, changing workforce and new legislative reforms shifted the landscape of workers' compensation, leaving fewer cases filed and drastically reducing the amount of litigation. The changes to the economy and loss of jobs have been dealt with in other articles by other authors.8 The focus here is on workers' compensation.

A summary of the relevant 1991 reforms to M.G.L. Chapter 152 included the following changes:

As for the legislative changes, the data suggest a correlation. In a review of the 1991 changes, the most significant legislative change was the increase of the pay without prejudice period (PWOP) expanding from 60 days/120 days to 180 days/365 days. This simple change has permitted insurers greater flexibility in evaluating and paying claims. The increased decision-making timeframe has allowed many insurers to pay claims that would previously been denied and thrust into litigation. Further, by lengthening the PWOP period, minor injuries had sufficient time to resolve and workers return to work who may have otherwise still been recovering at the 60-day mark.

Are the lack of claims filed and decline in litigation solely a result of the insurers paying more claims and injuries healing or a result of fewer injuries? Could there be a corresponding factor of workplace safety or other factors afoot?

An employer must notify the DIA of any injury that removes the employee from the workplace for five or more days.9 This is done on a Form 101 (FROI, First Report of Injury). In 1991, there were 54,158 injuries reported. In 2014, there were 31,384 reported. This translates to a 42-percent reduction in the number of injuries reported between 1991 and 2014. This could be a result of work place safety, a changing work force or other causes. The data shows a net loss of 22,774 injuries being reported. Less injuries reported loosely translates to less available claims for possible litigation.

The impact of the legislation, however, becomes apparent when we cross reference the litigation/claims filed with the FROI data. If we were to assume a direct correlation between the two (FROI and cases filed), then 91 percent percent of all reported injuries on the Form 101 resulted in some type of litigation in 1991. Again, if we assume the same direct correlation, as of 2014, only 40 percent of all reported injuries resulted in litigation.10 This is an oversimplification. Under further analysis, as of 2014 the amount of claims by the employee represented 80 percent of the litigation (10336 out of 12535 total cases) and the Form 108 complaints only 15 percent (1873 out of 12535).11 In 1991, the amount of claims by the employee represented only 55 percent of the litigation (27158 out of 49725 total cases) and the Form 10812 complaints were 23 percent of the litigation (11450 out of 49725 total cases).13 Using the figures from the chart above the ratio in 2014 between claims and complaints is significantly different at 5.36. Contrast that to the 1991 ratio of 2.37.14 Following the 1991 reforms, litigation initiated by the insurer has been significantly reduced, whereas there has been a corresponding increase in the employee-initiated litigation.

There can be several explanations for the shift in claims:

The 1991 legislative reforms. I suggest there is a clear correlation with the extension of the PWOP period. The data can be interpreted as showing that the Legislature's equipping insurers with the ability to timely adjust more claims has directly resulted in less litigation solely by the insurer. Of the remaining claims, the employee has overwhelmingly been forced to litigate to seek additional benefits when the insurer has terminated.

Implementation of the impartial examiner. This reform removed the "dueling-doctors" and provided both parties with a medical opinion from a doctor assigned by the DIA that had prima facie impact. The additional medical certainty may have led to more cases being resolved.

Implementation of conciliations. The assignment of conciliators at the start of the dispute resolution process has resulted in a substantial number of litigated claims being resolved, and staying resolved, early on in the process. The DIA administration has made a concerted effort to streamline and expedite the process and to a great degree has been successful as compared to pre-1991 dispute resolution.

Shift away from dangerous industries. The fewer injuries lasting five or more days could suggest that the economy's shift away from manufacturing and construction accounts for some of this difference.

Workplace safety. It is possible increased workplace safety has reduced injuries resulting in a loss for more than five days (thus not triggering the reporting requirement).

Fear. I would be remiss in not noting that with fewer available jobs, an employee's reluctance to report an injury or working injured likely plays a role in the reduction.

The ultimate answer to these questions will vary based on the role you play in the system, employee, insurer, employer, industry or labor, to name a few. There has been very little change in Chapter 152 in the past 25 years, other than regulatory reform and minor adjustments. In 2015, and again in 2016, there is a move to significantly alter the current system. The Legislature is in the process of reviewing proposed changes. A few proposed reforms will significantly increase the employee's benefits with few benefiting the employer/insurer. Could it be that the pendulum is about to swing the other way?

As a defense attorney with 20 years of experience, I suggest restraint to our legislative leaders. Based on the above statistics from the Workers' Compensation Advisory Council, it is argued that the Legislature should remain cautious with the entreaties toward any radical changes. Massachusetts need not abandon its place as the founder and leader in worker's compensation solely to be able to claim it is "doing more" or "provides the most benefits." As with all things, a balanced compromise is the best solution.