SB474: Bill Text

LRB-3474/2

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2005 - 2006 LEGISLATURE

2005 Senate BILL 474

December 13, 2005 - Introduced by Senator Schultz. Referred to Committee on Labor and Election Process Reform.

SB474,2,3 An Act to repeal 102.60 (9); to renumber and amend 20.445 (1) (ha), 20.445 (1) (hb), 20.445 (1) (hp), 102.60 (intro.), 102.60 (1), 102.60 (2), 102.60 (3) and 102.60 (4); to amend 20.445 (1) (t), 102.03 (1) (c) 3., 102.04 (2m), 102.11 (1) (intro.), 102.16 (1m) (b), 102.16 (2m) (c), 102.16 (2m) (g), 102.17 (1) (h), 102.17 (4), 102.18 (1) (bg) 2., 102.18 (1) (bp), 102.23 (5), 102.28 (8), 102.29 (1), 102.31 (7), 102.32 (6) (b), 102.32 (6m), 102.33 (2) (a), 102.33 (2) (b) (intro.), 102.33 (2) (b) 1., 102.33 (2) (b) 2., 102.33 (2) (b) 4., 102.33 (2) (c), 102.35 (1), 102.42 (2) (b), 102.44 (1) (intro.), 102.44 (1) (intro.), 102.44 (1) (a), 102.44 (1) (b), 102.49 (5) (a), 102.49 (5) (e), 102.59 (2), 102.60 (title), 102.60 (5) (a), 102.60 (5) (b), 102.60 (6), 102.60 (7), 102.60 (8), 102.61 (1), 102.61 (1m) (c), 102.62, 102.65 (1), 102.66 (1), 102.66 (2), 102.75 (2), 102.75 (4), 102.81 (1) (a), 102.81 (2), 102.87 (4) and 103.78 (4); to repeal and recreate 102.44 (1) (a) and 102.44 (1) (b); and to create 25.17 (1) (zd), 102.13 (2) (c), 102.17 (1) (d) 4., 102.31 (2m), 102.33 (2) (d), 102.42 (1m) (title), 102.425, 102.43 (9), 102.75 (1m), 102.80 (1m) and 814.75 (24m) of the statutes; relating to: making various changes in the worker's compensation law, requiring the exercise of rule-making authority, and making appropriations.

Analysis by the Legislative Reference Bureau

This bill makes various changes to the worker's compensation law, as administered by the Department of Workforce Development (DWD).

Payment of benefits

Temporary disability exceptions. Under current DWD rules, worker's compensation (compensation) is payable for temporary disability during an employee's healing period, even though the employee could return to a restricted type of work during that period, unless suitable employment within the physical and mental limitations of the employee is furnished by the employer or some other employer. Also, current law does not provide an exception to an employer's liability for temporary disability benefits for when an employee's employment is suspended or terminated during the employee's healing period due to misconduct. Brakebush Bros. Inc. v. LIRC, 210 Wis. 2d 623 (1997).

This bill codifies in statute that DWD rule and clarifies that if an employee refuses without reasonable cause to accept a good faith offer of suitable employment that is within the employee's physical and mental limitations, the employee is considered to have returned to work as of the date of the offer at the earnings the employee would have received but for the refusal. The bill also provides two additional circumstances under which an employer is not liable for temporary disability benefits:

1. When the employee's employment with the employer is suspended or terminated due to the employee's alleged commission of a crime, the circumstances of which substantially relate to that employment, and the employee is charged with the commission of that crime. If, however, the employee is not found guilty of the crime, compensation for temporary disability is payable in full.

2. When the employee's employment with the employer is suspended or terminated due to the employee's violation of the employer's drug policy during the period when the employee could return to a restricted type or work, if prior to the date of injury that policy was established in writing and regularly enforced by the employer.

Prescription and nonprescription drug treatment. Under current law, an employer or insurer is liable for providing medicines as may be reasonably required to cure and relieve an injured employee from the effects of an injury sustained while performing services growing out of and incidental to employment. This bill makes the following changes relating to the liability of an employer or insurer for the cost of drugs used to treat an injured employee:

1. The bill requires a pharmacist or other person licensed to prescribe and administer drugs (practitioner) to substitute in place of a prescribed drug a drug product equivalent, which is defined as a drug that has been designated as the therapeutic equivalent of another drug by the federal Food and Drug Administration, if in the professional judgment of the pharmacist or practitioner the drug product equivalent is therapeutically equivalent to the prescribed drug and if the charge for the drug product equivalent is less than the charge for the prescribed drug. A drug product equivalent may not be substituted, however, if the prescribed drug is a single-source patented drug for which there is no drug product equivalent or if the prescriber determines that the prescribed drug is medically necessary and indicates that no substitution may be made for the prescribed drug. A drug product equivalent also may not be substituted if the injured employee requests that a specific brand name drug be used to treat the employee's injury and pays the difference between the average wholesale price of the lowest-priced drug product equivalent that the pharmacist or practitioner has in stock and the average wholesale price of the brand name drug.

2. The bill limits the liability of an employer or insurer for the cost of a prescription drug dispensed for outpatient use by an injured employee to the average wholesale price of the prescription drug, plus a dispensing fee of $3 per prescription order and any applicable state or federal taxes. In addition, the employer or insurer is liable for reimbursement to the injured employee for any out-of-pocket expenses incurred by the injured employee in obtaining the prescription drug.

3. The bill prohibits a pharmacist or practitioner from collecting from an injured employee any charge that is in excess of the liability of the employee for a brand name drug under the bill or the liability of the employer or insurer for a prescription drug under the bill, but permits a pharmacist or practitioner to collect from an injured employee the cost of a prescription drug dispensed to the employee, subject to the liability limits under the bill, if the employer or insurer denies or disputes liability for the cost of the prescription drug.

4. The bill limits the liability of an employer or insurer for the cost of a nonprescription drug to the usual and customary charge to the general public for the nonprescription drug.

Compensation pending judicial review. Under current law, a party that is aggrieved by an order or award made by the Labor and Industry Review Commission (LIRC) may commence an action in circuit court for a review of the order or award. The commencement of an action for review does not relieve the employer from paying compensation when the action involves only the question of liability as between the employer and one or more insurance companies or as between several insurance companies. Recently, in Bosco v. LIRC, 2004 WI 77, 272 Wis. 2d 586, the Wisconsin Supreme Court held that the worker's compensation law unambiguously requires the employer, not the employer's insurer, to pay compensation pending judicial review when the employer's liability is not is dispute and the only issue on appeal is who will pay the benefits and that the employer, independent from the insurer, is subject to penalties for failing in bad faith to pay compensation in that situation. This bill requires a party that has been ordered by DWD, LIRC, or a court to pay compensation to continue paying compensation as ordered when an action for judicial review involves only the question of liability as between the employer and one or more insurance companies or as between several insurance companies.

Travel for treatment or rehabilitation. Under current law, when the employer has notice of an injury and its relationship to the employee's employment, the employer must offer to the employee his or her choice of certain types of practitioners licensed to practice and practicing in this state for treatment of the injury. The employer may also agree to the employee choosing a qualified practitioner not licensed in this state. Similarly, under current law, an injured employee may be entitled to receive vocational rehabilitation services from DWD under the federal Rehabilitation Act of 1973 or, if DWD cannot provide those services, from a private rehabilitation counselor. Currently, an employee who travels to receive treatment or vocational rehabilitation instruction is entitled to reimbursement for the expense of that travel. This bill sets the rate of reimbursement for that travel at the same rate as is provided for state officers and employees.

Permanent disability payments. Current law requires compensation for permanent disability to begin within 30 days after the end of the employee's healing period, if the employer or insurer concedes liability for the injury and if the extent of the permanent disability can be determined based on a minimum permanent disability rating promulgated by DWD by rule. This bill requires compensation for permanent disability to begin in that situation within 30 days after the end of the employee's healing period or the date on which compensation for temporary disability ends due to the employee's return to work, whichever is earlier.

Under current law, DWD may direct an employer or insurer to pay unaccrued compensation for permanent disability or death benefits to an injured employee or the employee's dependents in advance if DWD determines that the advance payment is in the best interest of the injured employee or the employee's dependents. This bill permits an injured employee or the employee's dependents to receive not more than three advance payments per calendar year.

Maximum compensation amounts

Maximum weekly compensation rates. Under current law, temporary and permanent disability benefits and death benefits are subject to maximum weekly compensation rates specified in statute. Specifically, the maximum weekly compensation rate for temporary disability, permanent total disability, or death benefits is 110 percent of the state's average weekly earnings as of June 30 of the previous year for injuries occurring before January 1, 2006, and 100 percent of the state's average weekly earnings as of June 30 of the previous year for injuries occurring on or after January 1, 2006. This bill continues the maximum weekly compensation rate for temporary disability, permanent total disability, and death benefits at 110 percent of the state's average weekly earnings as of June 30 of the previous year for injuries occurring on or after the effective date of the bill.

Currently, the maximum weekly compensation rate for permanent partial disability is $242. This bill increases that maximum weekly compensation rate to $252 for injuries occurring before January 1, 2007, and to $262 for injuries occurring on or after that date.

Supplemental benefits. Under current law, an injured employee who is receiving the maximum weekly benefit in effect at the time of the injury for permanent total disability or continuous temporary total disability resulting from an injury that occurred before May 13, 1980, is entitled to receive supplemental benefits in an amount that, when added to the employee's regular benefits, equals $233. This bill makes an employee who is injured prior to January 1, 1985, eligible for those supplemental benefits beginning on January 1, 2006, and an employee who is injured prior to January 1, 1987, eligible for those supplemental benefits beginning on January 1, 2007. The bill also increases the maximum supplemental benefit amount for a week of disability occurring after the effective date of the bill to an amount that, when added to the employee's regular benefits, equals $321 and increases the maximum supplemental benefit for a week of disability occurring after January 1, 2007, to an amount, that when added to the employee's regular benefits, equals $338.

Work injury supplemental benefit fund

Death or disability payments. Current law requires an employer to pay into the state treasury $10,000 in each case of injury resulting in death or in the loss or total impairment of a hand, arm, foot, leg, or eye. Those payments are deposited in the work injury supplemental benefit (WISB) fund, which is a fund that is used to pay compensation when an otherwise meritorious claim is barred by the statute of limitations, when the status or existence of the employer or insurer cannot be determined, or when there is otherwise no adequate remedy. This bill increases those payments to $20,000.

Traumatic injuries. Under current law, an application for compensation that is not filed within 12 years from the date of the injury or from the date that compensation, other than treatment expenses, was last paid, whichever is later, is barred by the statute of limitations, except that in cases of occupational disease or in cases of traumatic injury resulting in the loss or total impairment of a hand or any part of the rest of the arm proximal to, that is, toward the trunk from, the hand or of a foot or any part of the rest of the leg proximal to the foot, any loss of vision, any permanent brain injury, or any injury causing the need for a total or partial knee or hip replacement (traumatic injury) there is no statute of limitations. In cases in which there is no statute of limitations, benefits or treatment expenses becoming due 12 years after the date of the injury or after the date that compensation was last paid, whichever is later, are paid not by the employer or insurer, but rather by DWD from the WISB fund. This bill requires the employer or insurer, rather than DWD from the WISB fund, to pay benefits or treatment expenses becoming due 12 years after that date in cases of traumatic injury. The bill also includes among the traumatic injuries that are not barred by the statute of limitations any traumatic injury that causes the need for an artificial spinal disc.

Illegally employed minors. Under current law, if an injury is sustained by a minor who is permitted to work without a work permit, the employer is liable for double the amount of compensation otherwise recoverable, up to $7,500, and if a minor is injured while employed in employment that is prohibited to minors generally or to minors of the minor's age, the employer is liable for treble the amount of compensation otherwise recoverable, up to $15,000 (increased compensation). If, however, the employer is misled into employing a minor illegally because of fraudulent written evidence of age presented by the minor, the employer is required to pay the increased compensation to the WISB fund rather than to the minor.

This bill eliminates the requirement that an employer pay increased compensation to a minor who is illegally employed. Instead, the bill requires the employer of an injured minor who is permitted to work without a work permit to pay an amount equal to the amount recoverable by the minor, but not to exceed $7,500, to the WISB fund. Similarly, the bill requires the employer of a minor who is injured while employed in employment that is prohibit to minors generally or to minors of the minor's age to pay double the amount recoverable by the minor, but not to exceed $15,000, to the WISB fund. In addition, the bill eliminates the requirement that an employer pay increased compensation to the WISB fund when the employer is misled into employing a minor illegally because of fraudulent written evidence of age presented by the minor.

Surcharges and assessments. Current law requires employers that are subject to the worker's compensation law to keep records of all accidents causing death or disability of an employee while performing services growing out of and incidental to the employee's employment, requires insurers and self-insured employers to keep records of all payments made under the worker's compensation law, and requires reports based on those records to be furnished to DWD at the times and in the manner as DWD may require by rule or general order. An employer or insurer that fails to keep those records or to make those reports is subject to a forfeiture of not less than $10 nor more than $100 for each offense, which under the Wisconsin Constitution must be deposited in the school fund.

This bill requires an employer or insurer that fails to keep those records or to make those reports to pay a surcharge, instead of a forfeiture, and directs those surcharges to be deposited in the WISB fund. The bill also provides that interest shall accrue on the amount of a surcharge that is not paid within 90 days after the date on which notice of the surcharge is mailed to an employer or insurer at the rate of 1 percent per month and that all interest payments received shall be deposited in the WISB fund.

Under current law, each insurer and self-insured employer is required to pay to DWD an annual assessment that is used to cover the costs and expenses incurred by the Council on Worker's Compensation, DWD, and LIRC in the administration of the worker's compensation law (annual assessment). Current law requires those annual assessments to be paid on such dates as DWD prescribes. This bill provides that interest shall accrue on annual assessments that are not paid within 90 days after the date prescribed by DWD for payment at the rate of 1 percent per month and that all interest payments received shall be deposited in the WISB fund.

Hearings and procedures

Reports considered substantial evidence. Under current law, the circuit court may set aside an order or award made by LIRC if the order or award depends on any material or controverted finding of fact that is not supported by credible and substantial evidence, which has been defined in case law as "that quantity and quality of evidence which a reasonable man could accept as adequate to support a conclusion." DeGayner v. DNR, 70 Wis. 2d 936 (1975). Recently, the Wisconsin Supreme Court held, in Gehin v. Wis. Group Ins. Bd., 2005 WI 16, 278 Wis. 2d 111, that medical reports that are not corroborated by in-person testimony do not constitute substantial evidence.

This bill provides that certified medical reports and records, certified reports of experts concerning loss of earning capacity, and certified reports of industrial safety specialists that are admitted or received into evidence by a DWD hearing examiner constitute substantial evidence as to the matter contained in those reports or records.

Necessity of treatment standards. Under current law, DWD has jurisdiction to resolve disputes between health care providers and insurers or self-insured employers over the necessity of treatment provided to an injured employee. DWD may exercise that jurisdiction when confirming a compromise or stipulation agreed to between the insurer or self-insured employer and the employee, when making its findings following a hearing on a contested case, or when exercising its jurisdiction under a necessity of treatment dispute resolution process set forth in the statutes. Before determining necessity of treatment under the statutory necessity of treatment dispute resolution process, DWD must obtain a written opinion on the necessity of the treatment in dispute from an expert selected by DWD. Before determining necessity of treatment when confirming a compromise or stipulation or when making its findings of fact on a contested case, DWD may obtain such a written opinion.

This bill requires DWD to promulgate rules establishing standards for determining the necessity of treatment provided to an injured employee and requires those standards to be applied by experts in rendering opinions as to necessity of treatment and by DWD in determining necessity of treatment.

Penalties for bad faith. Under current law, if DWD determines that the employer or insurer suspended, terminated, or failed to make payments or failed to report an injury as a result of malice or bad faith, DWD may include a penalty not to exceed the lesser of 200 percent of total compensation due or $15,000. Current law also permits DWD to increase the payment that is due an injured employee by 10 percent if the employer or insurer inexcusably delays in making payment (increased payment).

This bill increases the maximum penalty for malice or bad faith to the lesser of 200 percent of total compensation due or $30,000 and permits that penalty to be imposed for each event or occurrence of malice or bad faith. The bill also prohibits DWD from ordering an increased payment on an inexcusably delayed payment if DWD imposes a penalty for an event or occurrence of malice or bad faith that causes the delayed payment. In addition, the bill prohibits DWD from ordering interest on an overdue payment if DWD imposes such a penalty.

Program administration

Separate funds for worker's compensation purposes. Under current law, annual assessments paid by insurers and self-insured employers are deposited in the general fund and credited to certain program revenue appropriations of DWD. This bill provides that those annual assessments paid shall constitute a separate nonlapsible fund designated as the worker's compensation operations fund and that moneys in that fund may be expended only for worker's compensation purposes and may not be used for any other purpose of the state. The bill similarly provides that moneys in the self insured employers liability fund, the WISB fund, and the uninsured employers fund under current law may be expended only for the purposes of those funds and not for any other purpose of the state.

Final practitioner's report fees. Under current DWD rules, if an injured employee has a period of temporary disability of more than three weeks or a permanent disability, the insurer or self-insured employer must submit to DWD a final treating practitioner's report. This bill also requires that report to be submitted when an injured employee has undergone surgery to treat his or her injury, other than surgery to correct a hernia. The bill permits a treating practitioner to charge a reasonable fee for the completion of that report, but prohibits a treating practitioner from requiring prepayment of that fee. The bill also permits an insurer or self-insured employer that disputes the reasonableness of such a fee to submit that dispute to DWD for resolution under the statutory health service fee dispute resolution process.

Confidentiality of records. Under current law, the records of DWD relating to the administration of the worker's compensation law are subject to inspection and copying under the open records law, except that records that reveal the identity of an employee who claims worker's compensation benefits, the nature of the employee's claimed injury, the employee's past or present medical condition, the extent of the employee's disability, the amount, type, and duration of any benefits paid to the employee, or any financial information provided to DWD by a self-insured employer are confidential and may not be disclosed except to the employee who is the subject of the record, to an insurance carrier or employer that is a party to any worker's compensation claim involving the same employee, to a court of competent jurisdiction, to the subunit of DWD that administers child support or a county child support agency, or to the Department of Revenue. Also, under current law, a record maintained by DWD that contains employer or insurer information obtained from the Wisconsin Compensation Rating Bureau (bureau) is confidential and not open to inspection or copying unless the bureau authorizes inspection or copying of that information.

This bill extends the confidentiality and disclosure provisions that are applicable to the records of DWD under current law to the records of LIRC. The bill also permits DWD and LIRC to release confidential information to a government unit, an institution of higher education, or a nonprofit research agency for purposes of research, prohibits a government unit, institution of higher education, or nonprofit research agency from permitting inspection or disclosure of that information unless authorized by DWD or LIRC (and by the bureau if the information was obtained from the bureau), and requires a government unit, institution of higher education, or nonprofit research agency that obtains such information for purposes of research to provide the results of that research to DWD or LIRC (and to the bureau if the information was obtained from the bureau) free of charge.

Professional employer organization and employee leasing organization reports. Under current unemployment insurance law, a "professional employer organization" is defined in part as any person who contracts to provide the nontemporary, ongoing employee workforce of a client under a written leasing contract. This bill requires a professional employer organization or an employee leasing organization that enters into an employee leasing agreement with a client to submit to DWD, within ten working days after the effective date of the agreement, a report disclosing the identity of the client, the effective date of the agreement, and such other information as DWD prescribes and a professional employer organization or an employee leasing organization that intends to terminate an employee leasing agreement to notify DWD of that termination no later than 30 days prior to the termination date of the agreement. Under the bill, when an employee leasing agreement is terminated, termination of the client's coverage under the worker's compensation insurance policy of the professional employer organization or employee leasing organization is not effective until 30 days after the professional employer organization or employee leasing organization has given notice of the termination of that agreement to DWD.

General coverage

Employee wellness events or activities. Finally, current law specifies that an employer is not liable for compensation when an employee sustains an injury while engaging in a program designed to improve the employee's physical well-being, if participation in the program is voluntary and uncompensated. This bill extends that exception to exclude from coverage injuries sustained while an employee is engaging in an event or activity, as well as a program, designed to improve the employee's physical well-being.