Delaware Legislature Adopts Workers’ Compensation Reform Bill

June 24, 2013

Delaware lawmakers last week passed workers’ comp reform legislation (HB 175) that seeks to curb rising workers’ compensation costs. The bill has been sent to Gov. Jack Markell, who is expected to sign it.

The Delaware Senate passed the legislation, “An Act to Amend Titles 18 and 19 of Delaware Code Relating to Workers’ Compensation,” on June 19. Earlier, the state House unanimously passed the measure on June 6. The bill would implement legislative recommendations brought forth by the Delaware workers’ compensation task force.

The task force was created last February by the state’s General Assembly and the governor through House Joint Resolution No. 3 to recommend steps that the state could take to stem future significant increases in workers’ comp rates.

In May, the task force published a report that recommended a number of steps designed to control medical costs in the workers’ comp system, ensure that rate applications from insurance carriers are scrutinized, speed the return to work of injured workers, and improve workplace safety.

The bill notes that the permitted workers’ compensation loss cost ratios, used to determine workers’ compensation rates, have increased by over 30 percent in Delaware over the last two years.

The following are the legislation’s main proposals:

• Section 1 of the Act expands the responsibilities and resources of the Data Collection Committee, which is overseen by the Department of Insurance. The section provides the committee with more frequent updates on medical cost drivers for the Delaware workers’ compensation market as a whole, and allows the Committee to review company-specific medical cost information and direct examinations of companies that do not appear to be exercising sufficient oversight over medical costs.

• Section 2 of the Act implements a number of changes to Delaware’s medical cost control provisions for workers’ compensation recipients, including a two-year inflation freeze on fees that would otherwise be entitled to an annual inflation increase, a reduction in the annual inflation increase allowed for hospitals treating workers’ compensation patients (which exceeded the inflation increase allowed for other providers), inclusion of many procedures on the state’s current medical fee schedule which were previously exempted, and new cost control provisions for pharmaceuticals, drug testing, and anesthesia.

• Section 3 of the Act imposes more responsibility on insurance carriers to ensure that employers are complying with their responsibilities to provide doctors with a complete list of job opportunities that an injured employee might be able to fill while still unable to perform his or her previous job. This is an important step in getting injured workers back into the workplace more quickly, which impacts the length of time they receive workers compensation.

• Section 4 of the Act creates a statute of limitations for parties who wish to appeal a utilization review decision. The Delaware Supreme Court recently ruled that such a statute of limitations must be created by statute and not by regulation.

• Section 5 of the Act makes three changes to Delaware’s workplace safety credit program: it requires that the program be more rigorous with respect to inquiring about past injuries in a workplace before awarding the credit, it allows insurance company safety inspections which are at least as rigorous as those performed by the Department of Insurance to substitute for the Department’s inspections, and it requires that companies be compliant with their ‘back to work’ responsibilities for injured employees before being eligible for the credit.

• Section 6 of the Act provides the Data Collection Committee with the authority to direct the examinations called for in Section 1 of the Act.

• Section 7 of the Act reforms the procedure used to scrutinize industry-wide rate requests submitted by the workers compensation insurance industry, creating an advocate in the rate-setting process for Delaware businesses and establishing a process where that rate advocate can gather the information necessary to advocate for businesses and effectively present their arguments with respect to rates to the hearing officer making recommendations to the Department of Insurance.

• Section 8 of the Act requires that both the workers compensation industry and the Department of Insurance specifically consider each of the reforms created by this Act and by new regulations accompanying this Act when setting rates in 2013.

• Section 9 of the Act continues the existence of the Workers Compensation Task Force so that it can chart the impact of the reforms it recommended and make further recommendations for cost savings as necessary.

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