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State lawmakers are introducing a workers’ compensation proposal that business and labor leaders alike regard as the most significant change to the system in 18 years.

Workers’ comp bill moving in both chambers

Rep. Tim Mahoney, DFL-St. Paul, who chairs the Jobs and Economic Development committee, has been a critic of the Workers’ Compensation Advisory Council, although he’s never amassed the support to eliminate it. (Staff photo: Peter Bartz-Gallagher)

Relatively late in the legislative session — and long after policy committee deadlines have passed — state lawmakers are introducing a workers’ compensation proposal that business and labor leaders alike regard as the most significant change to the system in 18 years.

Nearly all workers’ compensation proposals come to the Legislature as recommendations from the 12-member Workers’ Compensation Advisory Council (WCAC), which is evenly divided between business and labor members. The heads of the Minnesota Chamber of Commerce and Minnesota AFL-CIO are the council’s co-chairs.

Earlier this month, the council concluded strenuous negotiations with a unanimous proposal to increase benefits and reduce costs in the $1.3 billion system. Under the accord, maximum weekly benefits would grow by just under 8 percent, though job rehabilitation services would be subject to new limits. On Tuesday morning, bills based on the WCAC recommendations passed their first hearings in both the House and Senate.

Shar Knutson, president of the Minnesota AFL-CIO, said Minnesota lags other Midwestern states when it comes to the amount of compensation workers receive on a daily basis. Although Minnesota would still trail states like Wisconsin and Illinois, she said, the compromise with the business community is an improvement.

“We have an agreement and we are moving the agreement,” Knutson said. “We feel it is a good bill because we’ve gotten good things for workers. The chamber has worked closely with us and they’ve gotten some good things too.”

The House bill that passed the Jobs and Economic Development committee Tuesday was referred to the Ways and Means Committee. Shortly afterward, the Senate bill passed the Jobs, Agriculture and Rural Development Committee and will be heard in the Rules Committee before arriving on the floor.

The bill’s chief House author, Rep. Tim Mahoney, DFL-St. Paul, who chairs the Jobs and Economic Development committee, has been a critic of the WCAC, although he said he’s never been able to amass the support to eliminate it. The WCAC was created in 1995 as a means of removing workers’ compensation policymaking from the Capitol, where it had been subject of pitched legislative battles between business and labor.

Response to political pressure?

The WCAC, with its even balance between business and labor, has kept the peace for nearly 20 years but hasn’t yielded many significant proposals. Some Capitol observers believe that the WCAC was feeling pressure from Mahoney and other critics to advance significant legislation or run the risk of being dissolved.

Mahoney said the politics of the compromise are a mystery to him. “I think there was a significant amount of pressure,” Mahoney said, “but it’s not the first time pressure has been put on them. I don’t know why they acted this year versus any other year. But I’m glad that they acted.”

The proposal would increase the maximum weekly compensation amount, which currently stands at $850. The new amount would be 102 percent of the statewide average weekly wage. For the period from Oct. 1, 2012, to Sept. 30, 2013, that would mean an increase to $916 a week, according to the state Department of Labor and Industry.

The 102 percent figure is part of the compromise that was reached after intense negotiations. Capitol Report reported earlier this month that talks almost ran off the tracks when labor pushed for a 105 percent statewide average weekly wage.

Another major proposal would allow workers to make claims for injuries that are purely of a mental nature, such as post-traumatic stress disorder. The proposal would apply to occupational injuries and personal injuries. Minnesota is among an increasingly small number of states that don’t include PTSD in their workers’ compensation laws. In pushing for the provision, a number of advocates have referred to the Red Lake Indian Reservation school shootings in 2005, after which some employees were diagnosed with PTSD.

The bill would also increase the cost of living adjustment  from 2 percent to 3 percent, and make workers eligible for such an adjustment increase three years after their injury rather than the four years in current law.

The emergence of workers’ compensation compromise has caught a variety of affected groups by surprise, and the initial proposal was amended by the WCAC before it received its first hearing. Hospital interests quickly objected to changes to the reimbursement of medical costs that would have been costly to hospitals. The bill that is advancing in the Legislature calls for DLI to study of the effects of the hospital issue and report its findings to the WCAC by the end of the year.

In the House and Senate committees on Tuesday, the provision that sparked the most controversy was the bill’s proposed limitation on job development services to help injured workers find new employment. Currently, there’s no limit on the amount of time a worker can receive job services. The bill imposes a six-month limit.

Blowback from job trainers, local governments

The agreement has drawn dissent from job trainers. Steve Hollander, who is the legislative chair of the Minnesota Association of Rehabilitation Providers, said it often takes more than six months for injured workers to get placed in a new job. He said vocational rehabilitation costs are low — only about 3 percent of the cost of the workers’ compensation system.

“Cutting off these services at six months will produce little cost savings but potentially significant harm,” Hollander said.

Laura Bordelon, the Minnesota Chamber of Commerce’s senior vice president of advocacy, said having a time limit should carry a cost savings for the workers’ compensation system.

“To go from having no limitations to some degree of limitations must have cost savings. That’s our expectation,” Bordelon said.

Amendments to increase the limitation from six months to a year were offered in both committees. Rep. Kim Norton, DFL-Rochester, saw her amendment fail on a voice vote shortly after she withdrew her motion for a roll call. Sen. Lyle Koenen, DFL-Clara City, withdrew his amendment after Republicans and DFLers expressed opposition. House and Senate members both expressed hesitation to crack open the compromise between business and labor.

While the workers’ compensation bill has the full support of business and labor, it isn’t receiving a warm reception from local governments. Robyn Sykes, executive director of the Minnesota Counties Insurance Trust, said public sector jobs such as police work and fire-fighting carry a higher potential of PTSD than most private sector jobs. She said the bill would allow employees to make claims for PTSD that originated prior to employment. For example, she said a police officer who was involved in a car accident as a child could make a PTSD claim if they experienced mental suffering from witnessing a car accident while on duty.

“This benefit should only be for those very extreme and unusual situations,” Sykes said. “It should be for the exception, not the rule.”

The League of Minnesota Cities, which also has an insurance trust for its member cities, has calculated that the increase in benefits and the PTSD coverage will increase costs, although it’s uncertain how much. Gary Carlson, the league’s director of intergovernmental relations, said it’s difficult to project the PTSD costs, because no one knows how many claims might be made successfully.

“We haven’t taken a strong position against it. We’ve just been raising some of the cost concerns that could result from it. It could be a fairly minuscule impact. It could be less than 1 percent of the premium. It could be 5 to 6 percent of premiums. It’s hard to know,” Carlson said.

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