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Workers' comp reform: Reflections on job well done

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Brooks McCabe Brooks McCabe
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    Robert N. Hart
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Sen. Brooks McCabe, D-Kanawha, is managing member and broker of West Virginia Commercial LLC. He has been involved in commercial and investment real estate for more than 30 years, and he also is general partner of McCabe Land Company LP. He has served in the West Virginia Senate since 1998, and is a special project consultant to The State Journal.

As West Virginia moved into the 21st Century, it began to realize the full extent of the problem it had with its workers' compensation system. Industry had been complaining for years about the generous benefits, bureaucratic processes, lax oversight, ever-expanding interpretations of the program by the court system and most importantly, cost. 

The crisis hit full force when industry, labor, medical providers and current benefit recipients all realized the system was quickly moving toward insolvency. The cash was running out at the same time the workers' compensation premiums were some of the highest in the nation. The system was not just broke, it was an unmitigated disaster. 

Previous legislative attempts to fix the problems had not gone well and there was real trepidation on the part of senior legislators to jump into the quagmire once again. As more and more information came out about how the program was being operated, it became clear that the only way out was a complete systematic overhaul. Workers' compensation is a specialized area of administrative law that can be complex and full of nuisances. In West Virginia, it was contentious from the moment an accident occurred. It was a practice of law that was not for the fainthearted. Many of the cases ended up before the West Virginia Supreme Court with most of those being found in favor of the claimant. The money running through the system was staggering. 

All this was occurring while the economy in West Virginia was sputtering along in a very fragile condition. It became clear early on that a real fix would impact almost everyone who operated within and around the workers' compensation arena. At the end of the day, after the system had been redefined and reorganized, more than $200 million per year was removed from the system. This is serious money, and it was worth fighting to preserve by those who were its recipients. The business community assumed it was being wasted by excessive benefits, many of which were being provided to those whom, in a fair system, would not have qualified. Fraud and abuse was certainly part of the problem, but in hindsight, it was only one of multiple problems causing the hemorrhaging of cash. Workers' compensation in West Virginia was an example of how a poorly operated system, flushed with cash, can be a temptation causing good people to take advantage of an opportunity largely because it is there for the taking.  

The system had moved from an administrative insurance program into one in which most all of the claims were litigated. The cost of the workers' compensation premiums was one thing; the cost of defending every case from legal challenges was another. The prevailing opinion of many was that if you stayed within the legal system you would ultimately appear before the Supreme Court and there the odds were perceived to be in the claimant's favor. 

Litigating everything means that the plaintiff and defense lawyers all get compensated. As do all the experts needed to support the positions of both sides. The system was made even more expensive by the backlog of cases and poor administration of the program. The expansive definitions of terms like "permanent and total disability" allowed an increased number of claimants to receive full lifetime benefits causing a significant increase in premiums. Fixing the system meant that almost everyone associated with workers' compensation would make less money in the future, and in many cases, a lot less money. 

Workers' compensation had become the biggest impediment to business growth and development in West Virginia. The massive problems were able to be solved because everyone recognized the system was quickly failing. The golden goose was dying. All the constituent groups came to the table with experienced and able representatives with a common purpose of fixing the multitude of problems. Everyone knew they would all feel the pain. The million-dollar plaintiff lawyers specializing in workers' compensation would be a thing of the past, as would the large and profitable workers' compensation departments in the corporate law firms. Rehab specialists, chiropractors and medical doctors could no longer expect to treat patients for extended periods of time without thorough reviews. Workers could no longer expect to rely on workers' compensation as a way out of a contracting industry in a rural area. Employees in the Workers' Compensation Division would have to stand the test of private-sector scrutiny and either perform to a higher standard or move on. 

Workers' compensation reform was a game changer for West Virginia. Within 10 years the state moved from having one of the worst systems in the country to one of the best. Its premium structure went from one of the highest to one of the lowest. West Virginia showed how to privatize what had, for close to 100 years, been an important state agency and how to do so with compassion for the affected employees. It showed that poor public policy execution over an extended period of time can be corrected if everyone admits they are part of the problem and are willing to feel some of the pain necessary to right the course. Most importantly, it shows that if the state of West Virginia has the will to fix its problems, it has capacity and expertise to do so. Workers' compensation reform in West Virginia was a job well done.