CARVE-OUTS IN WORKERS COMPENSATION

Is a Carve-out in your future

George KingstonSenior Consultant

Bickmore Risk Services

• California law inspired by Bechtel carve-out in Massachusetts

• SB 983 enacted 1993 Construction only• SB 853 enacted 1994 Narrowed the

definition of “in the business of construction”

• 2004 LC 3201.7 enacted• 1999 there there were 12 carve-outs

operating

History of Carve-outs

Carve-Outs in California• Currently about 23 approved 5201.5

carve-outs• Currently 2 approved 3201.7 carve-

outs

3201.5 vs. 3201.73201.5 Construction The Department of Industrial Relations and the courts of this state shall recognize as valid and binding any provision in a collective bargaining agreement between a private employer or groups of employers engaged in construction, construction maintenance, or activities limited to rock, sand, gravel, cement and asphalt operations, heavy-duty mechanics, surveying, and construction inspection and a union that is the recognized or certified exclusive bargaining representative that establishes any of the following:

3201.7 All other employers Except as provided in subdivision (b), the Department of Industrial Relations and the courts of this state shall recognizeas valid and binding any labor-management agreement that meets all of the following requirements: (1) The labor-management agreement has been negotiated separate and apart from any collective bargaining agreement covering affected employees. (2) The labor-management agreement is restricted to the establishment of the terms and conditions necessary to implement this section. (3) The labor-management agreement has been negotiated in accordance with the authorization of the administrative director pursuant to subdivision (d), between an employer or groups of employers and a union that is the recognized or certified exclusive bargaining representative that establishes any of the following:

Features of Carve-Outs 3201.5 3201.7ADR ADRExclusive medical providers Exclusive medical providersExclusive list of QMEs Exclusive list of QMEsJLM Safety Committee JLM Safety CommitteeReturn to work program Return to work programVR Program VR ProgramCoordination with Group Benefits Coordinate with Group BenefitsDrug Testing Drug TestingIncentive Programs Incentive programsRestriction of Attorneys

What is a Carve-Out1. Remove a WC program from the State

mandated WC system2. Improve Benefit Delivery3. Limit litigation 4. Controls Medical Treatment5. Resolve disputes Quickly6. Control medical treatment7. Improve Safety Efforts

What is a Carve-Out1. Remove from State Mandated System• Alternative dispute Resolution• State WC Judges do not jurisdiction over claims• Arbitrators replace WC Judges• Substitute private PD raters for state raters• Substitute private VR vendors for state VR• Eliminate State QME process

What is a Carve-Out2. Improve Benefit Delivery

• Control mediator and arbitrator response time

• Control Examining physician response time

What is a Carve-Out3. Limit Litigation

• Restrict attorney involvement• Limit medical legal examinations• Prompt benefit delivery• Reduced conflict• Reduced need for defense attorneys

What is a Carve-Out4. Control Medical Cost

• Limit physicians that can treat• Limit Physicians that can act as a

QME or IME• Limit changes in Treating Physician• Limit over treatment over utilization

What is A Carve-out5. Resolve Disputes Quickly

• Alternative Dispute resolution• Ombudsman• Mediator• Joint Labor Management Committee• Use private raters rehab vendors • Eliminate long waits associates with WC

Judges• Incentivize Quick response form mediators,

arbitrators and others

What is A Carve-Out6. Control Medical Treatment

• Establish exclusive medical provider panel

• Establish exclusive examiner Panels• Limit changes in treating phuysician• Limit examining physicians• Limit second opinions

What is A Carve-Out7. Improve Safety Efforts

• Required Safety Staffing• Required Minimum Safety Standards• Drug Testing• Safety Inspection Program• Incident and Near Miss Reporting• Management Reports

What a Carve-out Isn’t• Method to reduce employee benefit • Method to avoid WC obligation• Proven method to reduce WC costs

Alternative Dispute Resolution1. Ombudsman

Gate KeeperFirst level of dispute resolution

2. Mediator3. Arbitration replaces WC Judge

Appeal from decision of MediatorSame rules as hearing before a WC Judge.

4. WCABFull court in San Francisco

5. State Court of Appeals

Possible Carve-Out Components• Return to work incentives• Mandatory return to work • Increased indemnity benefits• Financial incentives to physicians• Drug testing• Safety programs

LACCD Carve-out• 23 signatory construction unions• 2000 Employers• Limits employee to one change of PTP• Limits employee to one second opinion• Limits physicians to MPN and group panel• Attorney involvement barred until arbitration• No control of PTP• Established a JLMC• Established Alternative Dispute Resolution

City of Los Angeles• Covers service and engineers union

members• Establishes an ADR with

Ombudsman• There are no other features to this

Carve-Out

City of Long Beach• Peace Officers and Firefighters• List of specialists for IME• City MPN for treatment• IME has sole discretion to select

specialist for review of case• IME decision is final without appeal• No other features• No ADR

What to consider• Analyze current WC program• Recognize weaknesses and problems• Determine what feature of carve-out will

resolve problem areas• Establish benchmarks for comparison• Establish expectations• Avoid anecdotal performance

measurements• Be suspicious of unsupported claims