A bill that may be introduced in the coming weeks would eliminate the 107-year-old schedule that determines benefits for employees suffering partial permanent disabilities on the job and replace it with a whole-person approach that could raise costs for the workers’ compensation system significantly.
Rep. Andy Boesenecker, the Fort Collins Democrat who is set to sponsor the proposal with Jefferson County Democratic Rep. Sheila Lieder, continues to talk with both opponents and proponents about potential changes before introducing the bill. But both backers and likely opponents said in interviews that they view the reform as more seismic to the regulatory framework protecting injured workers than anything that’s been done in decades.
The draft bill obtained by The Sum & Substance proposes two major changes. First, it would repeal the schedule-of-injuries model that dictates the amount workers will receive for everything from the loss of an arm to the partial loss of a toe and would calculate future injuries based on a model that considers the body as a whole person. Second, it would remove the current cap on the amount of workers’ compensation benefits that claimants can receive.
An analysis of the proposal done by National Council on Compensation Insurance estimated that the changes will increase the cost of the Colorado workers’ compensation insurance system between 13.1% and 14.5% — a figure that rises to 17.6% to 19.5% when self-insured companies are included. While the Feb. 22 study did not estimate the potential boost to workers’ comp insurance premiums because of the changes, the addition of as much as $195 million in costs to a roughly $1 billion system in this state inevitably will boost rates.
Conflicting views on the bill
Stephanie Tucker, president-elect of the Workers’ Compensation Education Association, said that while she expects a “short-term spike” in costs if the bill becomes law, there is nothing to indicate that the recent trend of declining premiums won’t continue over time. Pinnacol Assurance, the largest provider of workers’ compensation policies in the state, has reduced premiums for the past seven years straight.
And the change is needed to help injured workers who now are compensated less than they are in a number of other states to refocus their lives after suffering injuries that, while leaving them partially disabled, could force them to exit the only career they have known, she said.
“This just tips the balance of the cases a little bit to make it much more fair,” Tucker said. “It’s a short-term increase that’s well worth it for the individuals.”
But leaders of industries ranging from construction to restaurants say the change would disrupt a system that’s given them certainty not just in their insurance costs but in safety programs targeted to avoid specific injuries. And it would come at a time when businesses are dealing with increased costs ranging from inflation of materials to a boost this year in minimum wages that’s already made it more difficult to function.
“The schedule-of-injuries model has been a core framework to the workers’ compensation system in Colorado for over a century and is a critical component to providing both transparency and certainty for injured workers and employers,” Pinnacol CEO John O’Donnell said. “This is a complex proposal that could, if introduced in its current form, have significant implications. Pinnacol is committed to ensure that benefits for injured workers are balanced alongside cost certainty and other impacts to the workers’ compensation system.”
Schedule of injuries
The schedule of injuries defines the compensation that will be given to employees injured on the job who become partially disabled but are able to return to work in some form. Some examples: The loss of an arm above the hand including the wrist merits 208 weeks (four years) of pay; total blindness of one eye results in 104 weeks of compensation; the loss of a thumb and the metacarpal bone is paid at 50 weeks and the loss of a ring finger at the distal joint equates to four weeks of pay.
Tucker, an attorney at The Babcock Law Firm, said that the current system doesn’t value properly what specific injuries might mean to specific workers.
For example, she represented a seasoned and well-paid electrician who injured the wrist on his dominant hand in such a way that he could never work as an electrician again. While certain types of workers could suffer the same injury and return to their careers, he had to retool his life — a financial calculation not contemplated in the schedule of injuries.
“The idea of a schedule is just not a fair system,” Tucker said. “We want to treat everyone as a whole person.”
Under the draft form of the bill, compensation for such injures going forward would be calculated at either the temporary total disability rate specified in current law or 50% of the state maximum temporary total disability rate at the time of maximum medical improvement, whichever is greater. That change would account for the lion’s share of the increase in costs to the workers’ compensation system, according to the NCCI report.
Colin Larson, director of government affairs for the Colorado Restaurant Association, acknowledged that some injuries may affect individuals more than the schedule of injuries may contemplate. But the schedule is long-established in law and puts each employee and each company on an equal plane, and upending that could raise the cost of workers’ compensation insurance for a typical small- to medium-sized restaurant — one with about $300,000 a year in payroll costs — by more than $500 a year in an industry that already operates on a very low profit margin, he said.
“There’s been an entire system set up around the expectation that ‘This is how much you as a business are set up to pay,’” said Larson, a former legislator who has been involved in workers’ comp reform debates before. “It’s impossible to put a monetary amount on certain things. But it’s impossible to have a functioning insurance system if certain things are limitless.”
To that end, the bill would seek to remove the cap on accumulated benefits for employees who will return to work, in the same way that Colorado law does not cap benefits for permanently disabled workers who can’t work. Those caps currently are $113,372.35 for a worker that is 19% or less disabled and $276,741.83 for those with a disability of 20% or more, Tucker explained.
The way the caps now function, some workers may blow through their maximum benefits before they can return to work, which can hobble their ability to provide for their households, Tucker said. Particularly if they need to get retrained for a new profession because of their injury, this change could give the workers a cushion to transition into a new life.
“It would treat folks who have these injuries more equitably,” she said.
But in combination with the removal of the schedule, the removal of the caps could lead to much greater costs, which in turn would lead to much greater insurance premiums, said Dave Davia, CEO of the Rocky Mountain Mechanical Contractors Association. His organization looked at two of the more typical injuries for the construction field — disabilities to the wrist and to an upper body extremity — and estimated that the bill could increase the amount of payments to workers who suffered them by seven to 10 times.
That would have ramifications beyond just workers’ compensation policy prices, as such large payouts could affect the experience modification rating of companies when it comes to workplace safety, Davia said. And developers sometimes bar companies with high ratings — those companies with the greatest history of injuries — from even bidding on jobs because of the risk to the job, he noted.
“We think the schedule needs to stay in the current statute and structure,” Davia said. “The schedule gives us predictability. It helps us in managing our risk, both from a safety protocol perspective and an EMR perspective.”
The discussion about changing the workers’ compensation benefits system comes as Pinnacol officials told the Denver Business Journal earlier this year that they would like to work with legislators to allow the state-chartered insurer of last resort to be more competitive. The company would like to be able to sell policies outside of the state and to sell other lines of insurance, which state law currently bars it from doing.
If it is introduced, the workers’ compensation reform bill also will add to a growing list of hotly debated proposals that the Legislature is considering and will consider, including a bevy of bills on housing affordability and an effort to redefine “harassment” in state law. The legislative session can end no later than May 8.