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Background & Introduction
In 1987 and 1993, in response to rising premiums the Kansas Legislature "reformed" workers compensation. It is clear to even the casual observer that the thrust of both
so-called reforms was to
decrease benefits to injured workers. In hindsight, it is apparent that the reforms were both unnecessary, and failed to produce the intended result
of lowering premiums. The reforms were unnecessary because there are always "peaks and valleys" with regard to premiums. Without legislative
action, premiums would have decreased in subsequent years. Furthermore, evidence clearly exists that the massive reduction in benefits to workers did not lead to a reduction in premiums for Kansas employers. Rather,
medical charges increased, profits for insurance companies increased, administrative costs increased, etc. Premiums are currently rising only at an expected rate.
Senate Bill 181 is, in its simplest form, another attempt to slash benefits to injured workers and their
families. Supposedly, Kansas workers are a great resource to the state. Bills such as S.B. 181 clearly jeopardize the State's commitment to this "great resource."
2. The Kansas AFL- CIO's opposition to S. B. 181
a) As with most areas of law, workers compensation has many parts that make up the whole. It is
difficult to reform singular sections of the law without a study of the entire statute. .In 1993, the Legislature created the Advisory Council to study legislative matters. The Legislature mandated that
five members be chosen to represent the working-class, and five members be chosen to represent business interests.
The Advisory Council (KSA 44-596) is chaired by the Director of Workers Compensation. The
Advisory Council meets regularly, and often calls expert witnesses to discuss pending legislation, as well as drafting legislation to recommend to the Legislature. Because it takes four votes from each
side of the table to make recommendations to the Legislature, there is a tremendous amount of ' 'negotiation". The "wish lists" of all participants are quite lengthy-- including labor, business, the
Division, the medical fee personnel, the fraud and abuse section, insurance carriers, etc. Oftentimes compromises are reached, and oftentimes a significant amount of "horse-trading" takes place with
each party giving up pieces of the pie.
It is first of all the position of the Kansas AFL-CIO that SB 181 should be presented to the Advisory
Council for study. There is no particular reason to presume that the parties who have an interest in this matter cannot reach compromise with each side bargaining for their respective positions. It is respectfully suggested that such an approach produces a more workable statute for those who are
affected by any changes. This would also be consistent with the intent of the Legislature in creating the Advisory Council.
b) As regards Section 1 (c), the bill's apparent intent is to expand offset provisions, thereby further
reducing benefits to injured workers. This was a very hotly contested issue in 1993, and the parties agreed, as part of a package, to the specific language found in current law. The intent was that a
worker should not be able to "double dip" within the system. A worker who has a pre-existing impaimtent (whether or not it has been rated by a physician) will receive an offset in his/her
compensation should he/she further injure that body part. The burden of proof is on the employer to show the extent of any preexisting impaimtent for which they seek an offset.
The bill appears to allow an offset even in those cases where the worker has a condition pre-injury,
which in no way previously affected his life. For example, consider the 30-year-old worker who has never had a problem in his back or knee. Simply because the person is older then 29, there will be
some arthritis present in these body parts. Litigation will now ensue relative to a "preexisting condition". Similarly, if a person has never been restricted from any work activity, a doctor can be
found who will testify that this 40-year-old worker should not have been lifting boxes weighing greater than 40 pounds pre-injury. This was obviously not the intent of the statute when it was
enacted and allowed offsets for preexisting impairments. It is a long, long way from "double dipping." Furthermore, this law would place the burden of proof on the claimant to disprove a negative. This is
not a sound legal principle.
c) The change is set forth in Section 1 (h) continues with the overriding intent of the bill to reduce
benefits for workers. In addition to taking a credit for retirement, the bill seeks to expand the credit for any disability payments the worker might receive. In reality, there should be no offset for either
retirement or disability.
First of all, it is the worker (not the employer) who is paying for the disability or retirement policy. It
is through his labor that he is receiving these benefits. No employer negotiates a wage without regard to fringe benefits and then gratuitously adds fringe benefits after the hourly wage is decided
upon. Some workers, given a choice, will accept lower wages in exchange for fringe benefits. These are employees attempting to plan for their future, and the future of their family. Yet, it is the
employee who takes "instant gratification" by accepting the higher weekly wage without fringe benefits that ends up getting more workers compensation. In short, we believe that the worker who
accepts a lower weekly wage in exchange for fringe benefits should not be punished.
It is also more logical that, if there ~ be an offset, there should be an offset for disability, and not
retirement. Retirement is earned over many years, following many years of service. It is vested after years of service. Disability policies come and go. When this provision was enacted, the fear was that
employees would sit at home, and then collect both retirement and "work disability." Since its passage, the courts have interpreted the law to avoid this scenario. If an injured worker "sits at
home" the law will impute a wage to him. Again, there is simply no reason for the offset of retirement benefits to exist, and is unfair to the worker who has earned his retirement to punish him
by treating him differently within the system
d) As indicated above, in 1993 benefits were further slashed for injured workers and their families.
The Kansas AFL-CIO opposed most of the provisions of the 1993 law. While the Kansas AFL-CIO believed that premiums were too high, it was labor's position that there were other methods of
producing a reduction in premiums besides simply reducing benefits.
One of the things that the AFL-CIO did not oppose in 1993 was a strong incentive that the law gave
for employers to return injured workers to work. It is simply a "carrot and stick" approach. If the employer will take the injured worker back to work, or aid the injured worker to return to work
earning 90 percent of their preinjury wage, the claimant does not receive "work disability". This is quite logical. If a worker does not have to compete in the open labor market to earn wages with his
permanent disability, he should not receive "work disability".
This aspect of the law has been more important than any other in returning injured workers to
productive employment with minimal disruption in their financial life. It is indeed "a good thing" when workers are returned back to work by the employer, especially the employer at the time of injury.
Insurance carriers have emphasized this return to work with their insureds. Self-insured employers have also emphasized a return to work. I do not believe that anyone would dispute that the current
higher percentage of return to work cases since 1993 is due to the economic incentive given employers.
As repeatedly indicated, SB 181 is nothing more then a reduction in benefits to injured workers. In
particular, Section 2 which seeks to amend KSA 44-510e, virtually eliminates work disability. It is a proven fact that by eliminating the financial incentive for returning the injured workers to work,
frequent returns to work will not happen.
How do we know that employers will not take injured workers back to work without the incentive? Because it did not happen before 1993! Also, we have experienced this phenoneman in the voluntary vocational rehabilitation provisions of the law (another 1993 amendment). Whether or not
an employer offers an injured worker vocational rehabilitation is strictly an economic decision, not a moral one. That is, the employer/insurance carrier calculates the cost of vocational
rehabilitation/retraining against the cost of work disability. If vocational rehabilitation is more expensive than the work comp claim's value, the worker does not receive voc rehab.
Again, it is obvious that having injured workers go back to work is a good thing for everyone and the
system itself. By virtually eliminating work disability, we will simply be casting the injured worker out the door without compensation for the injuries, and without vocational rehabilitation benefits. The
injured worker simply cannot compete in the open labor market with injuries as well as the uninjured worker. Thus, the injury will cause economic loss, perhaps for a lifetime. The limited compensation
currently paid in these cases should not be reduced.
e) As regards Section 3 (d), labor has spent a significant amount of time negotiating in the Advisory
Council an appropriate formula for establishing a date of accident when a "series" is involved. This is a very complex area of law, and affects many respondents, insurance carriers, and injured workers.
To avoid unintended consequences, the fomlula must dovetail with the provisions of notice, written claim, and the tiling of timely applications for hearing.
Because of the far-reaching ramifications of this particular change, we would again urge that the parties be permitted to continue negotiations in the Advisory Council.
3 Conclusion
While the AFL-CIO strongly opposes SB .18.1, we do not oppose changes in the system which will
reduce premiums for employers. We do object that all of the proposed changes negatively impact injured workers and their families. To achieve the goal of reducing premiums, we would strongly
urge that the Legislature consider remedies and proposals dealing with the following topics:
1. Why is it in Kansas that we have low benefits and higher then average premiums? This is the
worst of both worlds. It is bad for workers and employers. Ifwe had high premiums and high benefits, or low benefits and low premiums, it would at least represent a policy choice favoring either
employers or workers. (Workers Compensation State Rankings Manufacturing Industry Costs and Statutory Benefit Provisions, Actuarial & Technical Solutions, Inc., 2001 Edition) 1 This should be addressed.
2. Employers' fraud needs to be controlled. Statistically, we now know that the largest percentage of
fraud within the system is committed by employers, not employees. (Division of Workers Compensation "Message from the Fraud Unit", 2001 Statistics; Testimony of Director P. Harness
1/16/02, Joint House and Senate Committee Meeting) It is labor's position that the continuing fraud by employers is extremely costly (e.g. under reporting payroll, misclassirying employees, failing to
secure insurance, etc.). Aggressive pursuit of these premium dollars would result in a substantial reduction of premiums for the responsible employers.
3. Why is it that Kansas continues to have such a poor safety record? Again, it is obvious that if
safety were dramatically improved in Kansas, which would result in fewer injuries, the cost of workers compensation would decline. Without an injury, you would have no medical costs,
hospitalization costs, temporary total paid, permanent partial paid, etc. Unfortunately, Kansas is high in both frequency of injuries and severity of injuries. (Workers Compensation in Kansas, A Report
Prepared for The Kansas Coalition for Workplace Safety, Prepared by Labor Research Association, February 20,2000) It is even respectfully suggested that if benefits were increased to injured
workers, employers would be more inclined to have a safe workplace. Conversely, if it becomes "cheaper" to pay for injuries, the incentive for safety falls. Again, this is a financial issue, and not a
moral one (just like vocational rehabilitation).
4. According to the NCC.I, the cost driver in Kansas workers compensation is not benefits paid to workers, but the cost of medical care which outpaces, and minimizes, every other cost.
1 This study was recently endorsed by the NCCI as valid. It is copyrighted. and accordingly, exact quotations cannot be reproduced herein.
Depending upon the source, medical benefits represent between 55 percent and 67 percent of every
dollar spent in the system. Stated alternatively, all the other benefits totaled together (temporary total paid, permanent partial paid, temporary partial disability paid, permanent total paid, vocational
rehabilitation, the cost of running Division of Workers Compensation, defense attorneys cost, funeral and burial expenses, etc.) do not represent even half the cost of the entire system. This is the cost
driver with which the Legislature should be concerned.
Although premiums in Kansas have risen slightly in the recent past, premiums are not "out of control"
or beyond what is expected. Rather than again reducing benefits to injured workers, we should be dealing with the areas of concern identified above. While these "systemic problems" are more
difficult to deal with and solve, fairness requires that we at least try.
Workers and their families cannot always be the source of balancing the checkbook such that
employers never have an increase in premiums, doctors never take a cut in pay, and insurance companies never have a reduction in profits.
Respectfully Submitted,
Kansas AFL-CIO
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