Workers’ Compensation Insurance Under a Collective Bargaining

AgreementDWC

Educational ConferenceLos Angeles – Feb 24, 2005

Oakland – March 1, 2005

(An Alternative Workers’ Compensation Insurance System)

California Labor Code

Section 3201.5 of the Labor Code became law in 1994. Section 3201.7 was added in 2004. The sections are customarily referred to as alternative dispute resolution (ADR) or construction carve-out programs.

The law allows Contractors to enter into an agreement with a bona fide organized labor collective bargaining unions in order to provide a system for the delivery of workers’ compensation benefits to employees of union employers. This agreed upon system is separate and distinctive from traditional system, in that the workers’ compensation court is only available as an appellate vehicle and is not a trial component.

The law has six basic requirements1. An alternative dispute resolution system consisting

of ombudsman, mediation and arbitration

2. An agreed upon list of exclusive providers of medical service

3. An agreed upon list of qualified medical evaluators

4. Joint labor management safety committees

5. A light duty, modified job return-to-work program

6. An agreed upon list of providers of vocational rehabilitation services

Union Agreements for Workers’ Compensation Insurance

Collectively Bargained Workers’ Compensation Programs are also known as ADR “Carve-Out” Programs

Insurance provided by commercial insurance companies to union employers who, as part of their collectively bargained agreement with the union, have elected to create their own alternative dispute resolution process designed to eliminate cost drivers associated with the adversarial and litigious statutory system. Self-insured union employers may also participate.

Union Agreements for Workers’ Compensation Insurance

Goals and Objectives of a Collectively Bargained Workers’ Compensation Insurance

Program

• Improve benefit delivery• Promote labor-management cooperation• Reduce Workers’ Compensation claim costs• Reduce employers’ costs• Promote safety• Create more jobs for union members

Components of a Collectively Bargained Workers’ Compensation Insurance Program

• ADR agreement, Ombudsperson, Mediation, and Arbitration

• Agreed list of exclusive medical providers• Joint labor/management oversight committee• Commitment to workplace safety• Early return to work program• Agreed list of vocational rehabilitation providers

Alternative to Statutory Workers’ Compensation

Workers' CompensationAppeals Board

(Appellate Division)

Arbitration

Mediation

Issue not SettledADR initiated

Ombudsperson

Injured Workers

(Insurance Company)Claims Administration

ADR Process

Workers’ CompensationClaims Process – Alternative Dispute ResolutionInjury Employer/Insurer/Ombudsman Notifed

Adjuster AssignedMedical Treatment – Initiate Other Benefits

No Problems Problems

Ombudsman

No ResolutionResolved by Ombudsman

Mediation

No AcceptableResolution

Arbitration

Resolved byArbitration*

Resolved byMediation

Claim Closed- Process Ends

Benefits of a Collectively Bargained Workers’ Compensation Insurance Program

• Reduced litigation• Reduce loss costs• Shorter claim cycle times• Faster return to work• Better medical care

Alternative Workers’ Compensation

0.109

0.299

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Frequency of Litigation

ADR

Control

Source: California Workers’ Compensation Institute (March, 2003)

Alternative Workers’ Compensation

$7,634

$1,607

$(1,000)

$1,000

$3,000

$5,000

$7,000

$9,000

Average PaidClosed Claim Study 2003

Non-ADR

ADR

Source: PointSure Insurance Services/2003

Alternative Workers’ Compensation

4.0

1.0

0.0

1.0

2.0

3.0

4.0

5.0

Average TTD Weeks

Non-ADR

ADR

Source: PointSure Insurance Services/2003

Alternative Workers’ Compensation

221.0

109.0

0

50

100

150

200

250

Average Life Span in Days

Non-ADR

ADR

Source: PointSure Insurance Services/2003

Alternative Workers’ Compensation

Source: PointSure Insurance Services/2003

WORKERS’ COMPENSATIONAverage Time to Case Resolution

Traditional v. ADR(Contested Issues Only)

Process

Traditional

Contested Issue

Pre-Trial

On Calendar

Trial

Decision

Appeal

Case Resolution

M1 M25M22M19M16M13M10M7M4

Litigation

Case Resolution

Process

ADR

Contested Issue

Ombudsman

Mediation

Arbitration

Decision

Case Resolution

M1 M25M22M19M16M13M10M7M4

ADR

Case Resolution