monitoring the key components of legislative reform for injured workers contacts, ... monitoring the...

Monitoring theKey Components ofLegislative Reform

Fifth Edition

OREGONWORKERS’COMPENSATION

January 2001

Oregon Workers’ Compensation: Monitoringthe Key Components of Legislative Reform

Oregon Department of Consumer & Business ServicesDirector, Mary Neidig

Workers’ Compensation DivisionAdministrator, John Shilts

Oregon Occupational Safety & Health DivisionAdministrator, Peter DeLuca

Workers’ Compensation BoardChair, Maureen Bock

Insurance DivisionAdministrator, Joel Ario

Ombudsman for Injured Workers, Maria Carraher

Ombudsman for Small Business, John Booton

Information Management DivisionAdministrator, Dan Adelman

January 2001

Research & Analysis Section350 Winter St. NE, Room 300Salem, Oregon 97301-3881(503) 378-8254

The information in this report is in the public domain and may be reprinted without permission.Visit the DCBS Web site at: http://www.cbs.state.or.us

In compliance with the Americans with Disabilities Act (ADA), thispublication is available in alternative formats by calling (503) 378-4100 (V/TTY).

http://www.cbs.state.or.us

Table of ContentsIntroduction .......................................................................................................................................................................... 1Highlights ............................................................................................................................................................................. 2Safety and health .................................................................................................................................................................. 3Insurance .............................................................................................................................................................................. 10Compensability ..................................................................................................................................................................... 15Claims processing ................................................................................................................................................................. 20Medical ................................................................................................................................................................................. 27Return-to-work assistance .................................................................................................................................................... 31Benefits - permanent disability ............................................................................................................................................. 35Litigation and administrative dispute resolution .................................................................................................................. 39Advocates and advisory groups ............................................................................................................................................ 52

Figures and statistical tables

Safety and healthFigures:

1. OR-OSHA inspections and consultations, 1988-1999 ............................................................................................. 32. Accepted disabling claims and employment, 1987-1999 ......................................................................................... 43. Compensable fatality rates per 100,000 workers, 1987-1999 .................................................................................. 44. Occupational injuries and illnesses incidence rates, private sector, 1987-1999 ....................................................... 55. Accepted disabling claims rate and private sector occupational injuries and illnesses incidence rates, 1987-1999 5

Statistical tables:Accepted disabling claims, employment, and claims rates, 1987-1999 ....................................................................... 6Permanent partial disability claims, 1987-1999............................................................................................................ 6Compensable fatalities, 1987-1999 ............................................................................................................................... 6Occupational injuries and illnesses incidence rates, private sector, 1987-1999 ........................................................... 7Industry total cases incidence rates, 1987-1999 ........................................................................................................... 7OR-OSHA inspections, FFY 1988-1999 ...................................................................................................................... 7OR-OSHA citations, violations, and proposed penalties, FFY 1988-1999 .................................................................. 8OR-OSHA consultations, 1988-1999 ........................................................................................................................... 8Safety and health training programs, 1988-1999 .......................................................................................................... 8OR-OSHA safety and health grant programs, 1989-1999 ............................................................................................ 9Worksite Redesign Program approved project and product grants, 1995-2001 ........................................................... 9Insurer loss prevention consultative programs, 1989-1999 .......................................................................................... 9Employers’ safety committee citations, violations, and penalties, FY 1990-2000 ...................................................... 9

InsuranceFigures:

6. Premium rate changes, 1987-2001 ......................................................................................................................... 107. Workers’ compensation premium breakdown, calendar years 1989 & 1999........................................................ 118. Direct premiums earned and market share, by insurer type, 1987-1999 ............................................................... 11

Statistical tables:Workers’ compensation premiums and rate changes, 1987-2001 ............................................................................. 12Workers’ compensation average premium rate ranking, 1986-2000 ........................................................................ 12Workers’ compensation premium market share, by insurer type, 1987-1999 ........................................................... 12WC insurance plan (Assigned Risk Pool) characteristics, 1987-1999 ...................................................................... 13Assigned Risk Pool tiered rating plan credit, 1991-1998 .......................................................................................... 13SAIF Corporation financial characteristics, 1987-1999 ............................................................................................ 13Private insurers’ financial characteristics, 1987-1999 ............................................................................................... 14Employers and employees, by insurer type, 1999 ..................................................................................................... 14Premium adjustment program for contracting employers, 1991-1995 ...................................................................... 14

CompensabilityFigure:

9. Percentage of disabling claims denied, FY 1989-2000 ......................................................................................... 1510. Major contributing cause study: percentage of disabling cliams initially denied ............................................... 1611. Major contributing cause study: benefit changes due to statute amendments ..................................................... 17

Statistical tables:Total reported claims, FY 1989-2000 ........................................................................................................................ 18Accepted disabling stress claims, 1987-1999 ............................................................................................................ 18Disabling occupational disease claims, FY 1989-2000 ............................................................................................. 18Disabling aggravation claims, 1991-1999 ................................................................................................................. 19

Claims processingFigures:

12. Percentage of claims closed by insurers, 1987-1999 ........................................................................................... 2013. Median days from injury to first closure, 1987-1999 .......................................................................................... 2014. Insurer performance on acceptance or denial and on first payments, 1990-1999 ............................................... 21

Statistical tables:WC claims examiners certified, FY 1991-1999 ........................................................................................................ 23Insurer closure actions, 1987-1999 ............................................................................................................................ 23Insurer closures, by benefit type, 1987-1999 ............................................................................................................. 23Time lag from injury date to first closure, 1987-1999 ............................................................................................... 24Time loss days paid, 1990-1999 ................................................................................................................................ 24Insurer claim acceptance and denial, median time lag days, 1988-1999 ................................................................... 24Insurer timeliness of first payments, 1990-1999 ....................................................................................................... 25Insurer timeliness of acceptance or denial, 1990-1999.............................................................................................. 25Insurer timeliness of filing forms 801 and 1503, 1990-1999 .................................................................................... 25Workers’ compensation information line calls for assistance, 1990-1999 ................................................................ 26Civil penalties issued, 1990-1999 .............................................................................................................................. 26Abuse complaint investigations, FY 1991-2000 ........................................................................................................ 26

MedicalFigures:

15. MCO insurer contracts in effect at the end of the fiscal year, FY 1991-2000 ..................................................... 2716. Medical losses paid by SAIF and private insurers, 1989-1999 ........................................................................... 2817. Medical payments by provider type, 2000 .......................................................................................................... 28

Statistical tables:Managed care organizations, employers, and employees covered, 1993-1999 ........................................................ 30MCO contracts with insurers and self-insured employers, FY 1991-2000 ............................................................... 30SAIF and private insurers’ total paid and medical paid, 1989-1999 ......................................................................... 30Average medical cost after closure, 1990-1999 ......................................................................................................... 30

Return-to-work assistanceFigures:

18. Vocational assistance cases opened, 1987-1999 .................................................................................................. 3119. Preferred Worker contracts started, FY 1988-2000 ............................................................................................. 3120. Employer-at-Injury programs approved, 1993-1999 ........................................................................................... 32

Statistical tables:Preferred Worker contracts started, FY 1988-2000 ................................................................................................... 33Preferred Worker contract costs, FY 1988-2000 ....................................................................................................... 33Preferred Worker premium exemption program, FY 1991-2000 .............................................................................. 33Employer-at-Injury programs approved, 1993-1999 ................................................................................................. 33Vocational assistance, 1987-1999 .............................................................................................................................. 34Vocational assistance plans and return-to-work rates, 1987-1999 ............................................................................ 34Handicapped Workers Reserve claims and costs, FY 1987-2000 ............................................................................. 34

Benefits - permanent disabilityFigures:

21. Maximum PPD benefits, FY 1987-2000 ............................................................................................................. 3522. Cash benefits paid to workers for accepted disabling claims, 1987-1999 ........................................................... 36

Statistical tables:Oregon percentile ranking for maximum benefits, 1988-2000 ................................................................................. 37Maximum PPD benefits, FY 1987-2000 ................................................................................................................... 37Average degrees for permanent partial disability cases, 1987-1999 ......................................................................... 37Average dollars for permanent partial disability cases, 1987-1999........................................................................... 38Permanent total disability, 1987-1999 ....................................................................................................................... 38Cash benefits paid to injured workers for accepted disabling claims, 1987-1999 .................................................... 38

Litigation and administrative dispute resolutionFigures:

23. Hearing request rates on disabling claims closures, 1987-1999 .......................................................................... 4124. Requests for hearing, 1987-1999 ......................................................................................................................... 4225. Median time lag, hearing request to order, all cases, 1987-1999 ........................................................................ 42

Court cases ........................................................................................................................................................................ 44Statistical tables:

Reconsideration requests and orders, 1991-1999 ...................................................................................................... 46Medical dispute requests and orders, 1990-1999....................................................................................................... 46Medical dispute requests, by issue, 1990-1999 ......................................................................................................... 46Vocational dispute requests and orders, 1991-1999 .................................................................................................. 47Administrative penalties for claims processing delays, FY 1991-2000 .................................................................... 47Contested case hearings, requests and orders, 1994-1999 ......................................................................................... 47Contested case hearings requests, by issue, 1995-1999 ............................................................................................ 47Hearings request rates on claim closures, 1987-1999 ................................................................................................ 48Hearings requests, orders, and appeal rates, 1987-1999 ............................................................................................ 48Percentage of hearings orders involving selected issues, 1987-1999 ........................................................................ 48Disputed claim settlements (DCS) at hearings, 1987-1999 ....................................................................................... 49Claims disposition agreements, FY 1991-2000 ......................................................................................................... 49Board review requests, orders, and appeal rates, 1987-1999 .................................................................................... 49Court of Appeals requests and orders, 1987-1999 ..................................................................................................... 50Median time lag days from request to order, 1987-1999 ........................................................................................... 50Median time lag days from injury to order, 1987-1999............................................................................................. 50Board own motion orders and reopened claims reserve costs, 1987-1999 ............................................................... 51Claimant attorney fees and defense legal costs, 1987-1999 ...................................................................................... 51Claimant attorney fees, by appeal level, 1987-1999 .................................................................................................. 51

Advocates and advisory groupsFigures:

26. Ombudsman for Injured Workers contacts, 1988-1999 ...................................................................................... 5227. Small Business Ombudsman inquiries, 1991-1999 ............................................................................................. 52

Statistical tables:Ombudsman for Injured Workers activities, 1988-1999 ........................................................................................... 53Ombudsman for Injured Workers, percent of inquiries by major issue group, 1999 & 2000 ................................... 53Small Business Ombudsman activities, 1991-1999 ................................................................................................... 53

Appendix - Oregon workers’ compensation reform legislation

Safety and health ...................................................................................................................................................................... 54Insurance .................................................................................................................................................................................. 55Compensability ......................................................................................................................................................................... 56Claims processing ..................................................................................................................................................................... 57Medical ..................................................................................................................................................................................... 59Return-to-work assistance ........................................................................................................................................................ 61Benefits - permanent disability ................................................................................................................................................. 61Litigation and administrative dispute resolution ...................................................................................................................... 62Advocates and advisory groups ................................................................................................................................................ 65

1


Introduction

In 1986, Oregon ranked sixth high-est in the nation in average workers’compensation premium rates paid byemployers and had one of thenation’s highest occupational injuryand illness claims frequencies. At thesame time, medical and permanentdisability costs for injured Orego-nians were among the highest in thenation, while benefits were consid-ered among the lowest.

During the 1987 legislative session,major reform legislation, HB 2900,was enacted to improve the workers’compensation system. Three yearslater, Oregon’s premium rate rank-ing had improved a little to eighthposition, but this left much room forimprovement. Workers’ compensa-tion costs remained an urgent prob-lem, and many small employer poli-cies were canceled. These conditionsprovided the impetus for further re-forms which culminated in May 1990with the passage of SB 1197 and SB1198 during a special session of theOregon legislature. The 1991 and1993 legislatures implemented sev-eral refinements to the reforms. Bythe end of 1994, several court deci-sions had lessened the impact ofsome reform provisions. The 1995legislature passed SB 369 in May1995, which contained statutorylanguage that conveyed more clearlythe legislative intent of SB 1197. Italso restored the exclusive remedydoctrine for denied claims, which a1995 court decision had brought intoquestion. Further increases in ben-efits were also adopted. The 1997legislature made few major changes.

The 1999 legislature made some rela-tively minor changes to the workers’compensation system. One signifi-cant change was transferring allclaim closure responsibility to

insurers and self-insured employerseffective mid-2001.The 1999 legislature also allocatedfunds for a study of the effects ofsome of the changes to the workers’compensation law. One purpose ofthe study was to measure the effectson costs and benefits of the “majorcontributing cause” language intro-duced into the law in 1990 and re-vised in 1995. The findings are sum-marized in the compensability sec-tion of this report. The full report canbe found at www.cbs.state.or.us/wcd/docs/finalmcc.pdf.

In addition to these reforms, the leg-islature had the foresight to create theDepartment of Insurance and Financeeffective July 1, 1987 (with furtherrestructuring and a name change tothe Department of Consumer andBusiness Services in 1993). Virtuallyall administrative and adjudicativefunctions of the workers’ compensa-tion system reside in this agency.Throughout the past decade the de-partment has implemented adminis-trative innovations, not explicitlyprovided for by legislation, that havepositively influenced the workers’compensation system. No other statehas the unique opportunities providedby this structure, which renderssafety and health enforcement andconsultative services; regulates theworkers’ compensation system; setsworkers’ compensation insurancerates; resolves disputes administra-tively; and provides a forum forquasi-judicial dispute resolutionwhen litigation cannot be avoided.

Under the leadership of three gover-nors and the legislature, and withmuch assistance from business andlabor, Oregon has become a nationalmodel for workers’ compensationreform and improved workplace

safety and health. The changes intro-duced over the past decade have ledto lower costs to employers andhigher benefits for workers. Oregonhas significantly reduced premiums.Moreover, Oregon’s on-the-job in-jury, illness, and fatality rates con-tinue to fall.

Oregon hasbecome anational

model forworkers’

compensationreform andimprovedworkplacesafety and

health

This document is the fifth report thatcomprehensively describes the goalsof Oregon’s legislative reform, itskey components, and the statisticalmeasures that show the effect reformhas had on the workers’ compensa-tion system through 1999 . The prioredition dealt with changes introducedby legislative reforms from 1987through 1997. This report containsnine sections: safety and health, in-surance, compensability, claims pro-cessing, medical, return-to-work as-sistance, permanent disability ben-efits, litigation and administrativedispute resolution, and advocates andadvisory groups. Each section high-lights a key component of reform andincludes a description of reformgoals, legislative changes, majorfindings, and statistical measures.The appendix includes a summary ofthe reform legislation.

2


Highlightsproved from 85 percent in 1990 to 96percent in 1994. It fell to 93 percentin 1999.

√ The Oregon workers’ compensa-tion system was one of the first in thenation to identify and investigateallegations of inappropriate actionsby employers, insurers, workers, andothers. From FY 1991 through FY2000, over 2500 investigations offraud or abuse complaints wereopened.

√ Almost 991,800 employees, 62 per-cent of Oregon’s workers, are nowcovered for medical services by man-aged care organizations (MCO).

√ Vocational assistance casesdecreased 91 percent from 1987 to1999; costs declined 77 percent. ThePreferred Worker program, whichprovides incentives for employers tohire injured workers, grew 75 percentfrom 1988 to 1996, before droppingalong with the number of PPD cases.The Employer-at-Injury program,which provides benefits to employ-ers who return their injured employ-ees to work quickly, grew from 447programs in 1993 to 10,065 programsin 1998 before declining a little in1999. The decline came mostly fromfewer programs for disabling claims.Nearly 5,100 of the programs ap-proved in 1999 were for nondisablingclaims; as a result, thousands ofclaims were closed before beingclassified as disabling.

√ Maximum scheduled and unsched-uled permanent partial disability(PPD) benefits for injured workersreceived a tremendous boost in 1995.With subsequent increases, the maxi-mum scheduled PPD benefits were309 higher at the end of fiscal year2000 than in fiscal year 1987; un-scheduled PPD benefits were 366percent higher. Maximum PPD ben-efits are now almost at the nationalmedian compensation level.

√ In spite of a 44 percent growth inemployment from 1987 to 1999, thenumber of accepted disabling claimsdropped 37 percent and compensablefatalities 40 percent.

√ Permanent partial disability claimsdecreased 42 percent from 1987 to1999, and the PPD rate per employeedropped 60 percent during the sameperiod.

√ Injury and illness frequencies, asmeasured by the U. S. Bureau of La-bor Statistics, have dropped substan-tially. The lost workday cases inci-dence rate decreased 38 percent from1987 to 1999, while the total casesincidence rate dropped 36 percent.

√ OR-OSHA inspections, at 5,714 inFFY 1999, were the second highestsince the 5,740 inspections in FFY1992, and employees and employerstrained per year reached a record highof over 20,000 in 1999.

√ Workers’ compensation premiumrates have decreased by 57.3 percentsince 1990, saving Oregon employ-ers $5.6 billion in direct costs. Basedon 2000 premium rates, Oregon’saverage workers’ compensation pre-mium rate ranked thirty-fourth high-est in the nation, a significant im-provement from sixth highest in1986.

√ After increasing in 1989 as a resultof changes in SAIF Corporation’sclaims management practices, denialrates on disabling claims have re-turned to a level approximately twoto three percentage points higherpost-reform.

√ The number of time loss days paiddeclined between 1990 and 1999: theaverage (mean) by 44 percent and themedian by 19 percent.

√ Insurer performance on timelinessof acceptance or denial of claims im-

√ After more than twenty consecu-tive years of increases, requests forhearings dropped 60 percent since1989; requests for board review de-clined 51 percent between 1991 and1999.

√ Hearing request rates on disablingclaim closures decreased from 21percent in 1989 to five percent in1999. Permanent disability, whichwas at issue in 46 percent of hear-ings orders in 1987, was at issue inonly 8 percent of the 1999 orders.

√ In 1999, on the average, it took71 days to issue a reconsiderationorder. The median number of daysto issue a medical dispute order was85, and to issue a vocational disputeorder was 28.

√ The median time lag for a requestfor WCB hearing to a hearing orderdropped 45 percent from 1987 to1999, while that for board reviewdropped 77 percent since its peakin 1989.

√ Attorney fees out of claimants’compensation dropped from its peakof $21.4 million in 1991 to $16.0million in 1999. The compositionalso changed very much during thisperiod: on Appellate Review Unitreconsideration from 1.4 percent to5.6 percent, in claim dispositionagreements from 29.9 percent to36.9 percent, at WCB hearings from64.5 percent to 53.1 percent and onboard review from 4.2 percent to 3.8percent.

√ The number of contacts with theoffice of the Ombudsman forinjured workers increased rapidlyover the last few years. In 1999 and2000, the issues that prompted themost inquiries were benefit issues,followed by medical issues, claimprocessing issues and settlement.

3


Safety and health

The best way to reduce the cost, hu-man suffering, and lost productivityassociated with workers’ compensa-tion claims is to reduce workplaceinjuries, illnesses, and fatalities. TheOregon legislature was among thefirst to recognize the importance ofsafety and health in workers’ com-pensation reform. It significantly in-creased the emphasis on safety andhealth in the workplace. The in-creased emphasis was achieved in anumber of ways: by increasing thesafety and health enforcement, train-ing, and consultativestaff; by using penaltiesagainst employers whoviolate state safety andhealth regulations; byrequiring insurer lossprevention consultativeservices; by providingemployer and employeetraining opportunitiesthrough a training grantprogram; by requiringjoint labor-managementsafety committees; andby targeting safety andhealth inspections more effectively.The legislature recognized that im-proved safety and health requires thecooperation of labor, management,and government. The department’sOccupational Safety and Health Di-vision (OR-OSHA) provides leader-ship and support to business and laborthrough a balanced program of en-forcement and voluntary services.

The major legislative changes oc-curred between 1987 and 1991. Morerecent legislative changes have in-volved agriculture. In 1995, smallagricultural employers who had nothad serious accidents and who fol-lowed specified training and consul-tation schedules were exempted fromscheduled inspections. Small agricul-ture employers without high injury

rates were exempted from OR-OSHA’s safety committee require-ments. In 1997, the legislaturetransferred to the department from theBureau of Labor and Industries theauthority for enforcement of the lawthat requires farmworker camp opera-tors to provide seven days of hous-ing in the event of camp closure by agovernment agency. The 1999 legis-lature exempted corporate farms fromoccupational safety and health re-quirements when the farm’s only em-ployees are family members. Also

in 1999, the legislature passed a billdirecting OR-OSHA to notify certainemployers of the increased likelihoodof an inspection, and to focus OR-OSHA enforcement activities on themost unsafe workplaces.

OR-OSHA is monitored through fed-eral OSHA by means of its strategicplan. OR-OSHA developed its stra-tegic plan over 18 months with inputfrom OR-OSHA staff, and Oregonemployers, businesses, and laborgroups. OR-OSHA’s five-year stra-tegic plan was the first to be approvedby federal OSHA and became amodel for other states. In federal fis-cal year 1999, OR-OSHA developedprograms and tools to assist employ-ers toward self sufficiency in safetyand health. One such tool is a web-

based assessment that provides em-ployers and employees with a confi-dential means of evaluating theirsafety and health programs. Once theassessment is completed, employersmay contact OR-OSHA for a consul-tation. OR-OSHA, in conjuction withthe Oregon construction industry,also developed the Joint EmphasisProgram (JEP) to reduce constructioninjuries and fatalities. The programis a cooperative effort with manage-ment, labor, and government to de-sign focused joint training sessions

and communicate safety problemsand solutions through outreachefforts.

Consultative ServicesFor the period 1988 to 1992, OR-OSHA consultations increased nearlyfive-fold. The numbers have variedsince then, but have remained around2,000 per year. Also, as a result of a43 percent increase in OR-OSHAstaff subsequent to the passage of SB1197 in 1990 (from 170 to 243), OR-OSHA training of both employersand employees increased greatly.Attendance at public education andconference training sessions hastotaled close to 62,000 over the pastthree years.

Figure 1. OR-OSHA inspections and consultations, 1988-1999

5,620

5,0315,474

5,185

4,562

5,173

5,7145,7405,505

4,8265,134

5,694

2,1302,0501,726

943

1,8281,8542,1532,482

2,0892,493

671502

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Inspections are by FFY; consultations are by calendar year

Insp

ecti

ons,

con

sult

atio

ns

Inspections Consultations

4


From 1989 to 1999, workers’ com-pensation insurance carriers providedmandatory loss prevention consulta-tive services to 17,234 employers.Employers with at least three ac-cepted disabling claims and a claimsrate above the statewide average orwith at least 20 claims were requiredto receive these services. In an OR-OSHA administrative rule, effectiveJuly 15, 1999, insurers assumed theresponsibility for identifying employ-ers needing loss prevention services.As a result, the insurer must offer as-sistance in developing a loss preven-tion plan to each employer with aclaims frequency or severity greaterthan the average for its industry. OR-OSHA will continue to monitor andenforce the requirements of insurersto provide these services, but will nolonger identify which employersmust receive services.

OR-OSHA inspectionsThe number of OR-OSHA inspec-tions increased by 19 percent between1990 and 1992, from 4,826 to 5,740.Inspections decreased in 1997 to4,562. Since then, 1998 and 1999have shown an increase. At OR-OSHA’s current rate of inspections,it would take about 14 years to in-spect all Oregon employers. This isdown 39 percent from the 1997 esti-mate of 23 years. OR-OSHA penal-ties assessed from employerviolations of state safety and healthstandards rose from $2.4 million in1998 to $3.0 million in 1999. The1999 assessment was 58 percenthigher than that in 1988, althoughdown nearly three million dollarsfrom the 1995 high of $5.8 million.

ers. In a recent study, thedepartment’s Information Manage-ment Division surveyed employerswho had been inspected by OR-OSHA and asked them to rate the per-formance of compliance officers. Ingeneral, the ratings of compliance of-ficers were favorable. On about 90percent of the completed question-naires, compliance officers were

rated from good to excellent on gen-eral knowledge of their job and nearthe top on a five-point scale on theirprofessional and personal attributes.Over 95 percent of the respondentsrated the compliance officers as be-ing clear in their ability to explain thereason for the inspection and therights and responsibilities of the firminspected.

Figure 2. Accepted disabling claims and employment, 1987-1999

35,857

39,170

43,66041,033

27,049 25,80227,92228,389

30,56431,53030,74130,78631,479

0

10,000

20,000

30,000

40,000

50,000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Acc

epte

d di

sabl

ing

clai

ms

0.00

0.40

0.80

1.20

1.60

2.00

Em

ploy

men

t (m

illio

ns)

Claims Employment

OR-OSHA grantsSince 1990, OR-OSHA has awardedover $1.6 million in grants to non-profit organizations and associationsto develop innovative occupationalsafety and health training programs.OR-OSHA has also awardedWorksite Redesign Program projectand product grants to develop newsolutions to workplace ergonomic,

health, and safety problems. As ofSeptember 9, 2000, 32 Worksite Re-design project grant applications wereapproved with almost $2.4 million ingrants; 249 product grants were ap-proved, with $1.0 million in grants.

One factor in the success of OR-OSHA’s consultation and enforce-ment activities in reducing injuriesand illnesses is the performance ofits consultants and compliance offic-

Figure 3. Compensable fatality rates per 100,000 workers, 1987-1999

7.1 7.06.2

5.1 5.2 4.9 4.94.0 3.6

2.8 3.3 2.93.3

0.0

14.0

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Fata

lity

rate

5


Notes: The claims rate is the number of accepted disabling claims per 100 workers. The days away from work rate is the number of injuries and illnesses per

100 private sector workers that resulted in days away from work. The lost workday cases rate is the number of injuries and illnesses per 100 private sector

workers that resulted in days away from work or restricted duty or both. The total cases incidence rate is the total number of injuries and illnesses per 100

private sector workers.

Figure 4. Occupational injuries and illnesses incidence rates, private sector, 1987-1999

5.3 5.5 5.4 5.2 4.8 4.7 4.6 4.4 4.6 4.0 4.2 3.5 3.5

5.6 5.6 5.2 4.84.4 4.4 4.4 4.2 4.1

3.8 3.63.4 3.5

0

2

4

6

8

10

12

14

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999Calendar year

Inci

den

ce r

ate

Lost workday casesNonfatal cases w/o lost workdays

11.1 10.610.1

9.1 9.1 9.08.7 8.8

7.8

10.9

7.86.9 7.0

Injury ratesThe numbers and rates of injuries andfatalities have dropped substantiallyover the past several years. From1987 to 1999, employment grew 44percent. In contrast, the number ofaccepted disabling claims decreased37 percent. Compensable fatalitiesdeclined 45 percent between 1987and 1997, to 43 in 1997. This is thefewest recorded in Oregon. Therewere 47 compensable fatalities in1999. As a result, the accepted dis-abling claims rate and the compens-able fatality rate declined by 57percent and 59 percent respectively.Also, as determined by the U. S. Bu-reau of Labor Statistics survey of em-ployers, the lost workday casesincidence rate decreased by 38 per-cent from 1987 to 1999, while the to-tal cases rate dropped by 36 percent.

There is other evidence that employ-ers are reducing hazards, thereby re-ducing the number and cost ofworkplace injuries, illnesses, and fa-talities. A 1995 department studyfound that OR-OSHA consultantsnoted 1,528 serious hazards at 107establishments. Subsequent inspec-

tions of the same establishments re-sulted in citations for 173 alleged se-rious violations. This indicates thatthese employers had reduced serioushazards by 89 percent. A companionstudy found that the same 107 estab-lishments had an 18 percent decreasein accepted disabling injury claimsin the two years following the con-sultation; in contrast, they had a 34percent increase in injuries in the yearprior to the assistance.

It is difficult to quantify how muchthe increase in the safety and healthemphasis alone has decreased work-

related claims and frequencies. Fac-tors such as changes in the definitionof compensability, insurer claimsmanagement practices, and alter-ations in the economy and industrialmix affect changes in both claimsvolume and frequencies. Neverthe-less, the increased emphasis on safetyand health has played a major role inthe reduction of both the number andfrequencies of work-related claims inOregon. The total direct cost savings

to Oregon employers due to the re-duced number of claims has been ap-proximately $5.6 billion since 1990.

Figure 5. Accepted disabling claims rate and private sector occupational injuries and illnesses incidence rates, 1987-1999

2.1

3.5

1.6

3.7 3.83.2

2.8 2.5 2.4 2.3 2.3 2.11.71.81.9

2.6 2.3 2.1

4.8

2.93.0

4.94.3

3.9 3.4 3.33.3

5.6 5.65.2

4.8 4.4 4.4 4.4 4.2 4.1 3.8 3.6 3.4

7.0

10.9 11.110.6

10.19.1 9.1 9.0 8.7 8.8

7.8 7.86.9

0

2

4

6

8

10

12

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Rat

es

Claims rate Days away from work cases Lost workday cases Total cases

6

Oregon Workers’ Compensation: Monitoringthe Key Components of Legislative ReformStatistics

Permanent partial disability claims, 1987-1999

PPD PPD rateYear claims (per 100,000)

1987 12,877 1,1651988 12,336 1,0621989 13,800 1,1361990 13,731 1,0911991 9,980 7931992 9,562 7471993 9,348 7101994 9,531 6911995 9,495 6631996 9,060 6091997 8,060 5211998 7,765 4931999 7,441 466

The number of PPD claims decreased 42 percent between1987 and 1999, and the PPD rate decreased 60 percent.Much of this reduction can be attributed to increasedemphasis upon workplace safety and health.

Compensable fatalities, 1987-1999

Number of Fatality rateYear fatalities (per 100,000)

1987 78 7.11988 81 7.01989 75 6.21990 64 5.11991 65 5.21992 63 4.91993 64 4.91994 55 4.01995 48 3.31996 54 3.61997 43 2.81998 52 3.31999 47 2.9

The number of compensable fatalities decreased 45 per-cent to 43 cases from 1987 to 1997 and increased slightlyto 52 in 1998, dropping to 47 in 1999. The 47 deaths in1999 were the second lowest recorded in Oregon. Thefatality rate in 1999 was 59 percent lower than the 1987rate.

Accepted disabling claims, employment, and claims rates, 1987-1999

Accepted Employ- Claimsdisabling ment rate

Year claims (1000s) (per 100)

1987 41,033 1,105.2 3.71988 43,660 1,161.1 3.81989 39,170 1,214.9 3.21990 35,857 1,258.6 2.81991 31,479 1,258.6 2.51992 30,786 1,280.5 2.41993 30,741 1,317.1 2.31994 31,530 1,378.8 2.31995 30,564 1,431.6 2.11996 28,389 1,487.3 1.91997 27,922 1,547.8 1.81998 27,049 1,575.5 1.71999 25,802 1,597.0 1.6

The number of accepted disabling claims decreasedby 37 percent between 1987 and 1999; employmentgrew 44 percent over the same period. The claimsrate declined by 57 percent over the period.

Note: The 1997 employment figure has been revisedsince the last edition of this report.

7


OR-OSHA inspections, FFY 1988-1999

Federal Percentfiscal Covered inyear Number workers compliance

1988 5,694 147,400 19.4%1989 5,134 167,619 21.8%1990 4,826 158,312 18.9%1991 5,505 164,504 16.5%1992 5,740 201,903 15.3%1993 5,620 248,240 18.1%1994 5,031 265,613 19.2%1995 5,474 227,427 23.4%1996 5,185 195,630 24.6%1997 4,562 182,101 27.0%1998 5,173 152,355 26.6%1999 5,714 169,279 25.6%

OR-OSHA inspections increased by 10.5 percent between1998 and 1999 after reaching their lowest levels in 1997.The percentage of employers inspected who were in compli-ance with all safety and health regulations has generally risensince 1992. The number of workers covered by inspectionsincreased in 1999 after a trend of decreases from 1995 to1998.

Statistics

Occupational injuries and illnesses incidence rates, private sector, 1987-1999

The lost workday cases incidence rate (IR) declined 38 per-cent between 1987 and 1999; the total cases rate dropped36 percent over the same period. The 1999 incidence ratesincreased slightly over the record low rates of 1998.

Total Lost workdaycases IR cases IR

Year (per 100) (per 100)

1987 10.9 5.61988 11.1 5.61989 10.6 5.21990 10.1 4.81991 9.1 4.41992 9.1 4.41993 9.0 4.41994 8.7 4.21995 8.8 4.11996 7.8 3.81997 7.8 3.61998 6.9 3.41999 7.0 3.5

Industry total cases incidence rates, 1987-1999

Agriculture, Transportation,forestry, Con- Manufac- public

Year fishing struction turing utilities

1987 14.2 15.6 16.9 11.31988 12.7 15.6 17.5 10.11989 13.1 16.1 16.8 10.61990 11.7 15.4 15.6 10.71991 10.3 14.1 14.2 10.01992 10.3 13.3 12.9 10.31993 9.8 12.7 12.8 10.71994 9.3 11.8 12.3 9.91995 9.1 11.8 12.3 9.11996 9.1 11.8 10.5 9.11997 8.7 10.2 10.4 11.51998 7.3 8.6 10.3 7.71999 7.2 9.3 10.5 9.8

The industry divisions that have the highest rates of occupa-tional injuries and illnesses had declines in total cases inci-dence rates ranging from 13 percent to 49 percent between1987 and 1999. The agriculture, forestry and fishing sectorhad the largest percentage decrease in total cases incidencerate.

8


OR-OSHA citations, violations, and proposed penalties, FFY 1988-1999Federalfiscal Penaltiesyear Citations Violations ($ millions)

1988 4,336 15,740 1.91989 3,874 12,353 1.51990 3,750 14,006 2.81991 4,452 17,139 2.81992 4,683 19,412 3.21993 4,462 17,621 4.71994 3,960 15,295 4.61995 4,070 15,303 5.81996 3,812 12,434 2.91997 3,251 10,357 3.91998 3,716 11,365 2.41999 4,034 11,435 3.0

OR-OSHA penalties for employer violations of safety andhealth standards were 25 percent higher in 1999 than in 1998,but they were 48 percent lower than the 1995 high of $5.8million. The numbers of citations and violations have be-gun to increase after a trend of decreases from 1992 to 1997.The average penalty per violation increased in 1999 after adrop in 1998.

Statistics

OR-OSHA consultations, 1988-1999Number of Number of Employees

Year requests consultations reached

1988 N/A 502 N/A1989 N/A 671 N/A1990 N/A 943 N/A1991 N/A 1,726 N/A1992 2,800 2,493 343,1161993 2,104 2,089 249,3871994 2,134 2,482 256,6041995 2,157 2,153 231,1131996 1,931 1,854 233,7321997 1,900 1,828 153,9221998 1,876 2,050 218,5651999 2,185 2,130 233,731

OR-OSHA consultations increased nearly five-fold between1988 and 1994 as a result of additional staff and increasedemphasis on the consultative services program. Consultationsdropped 26 percent from 1994 to 1997. The number has sinceincreased 17 percent to 2,130 in 1999. The number of em-ployees reached in 1999 was 32 percent lower than the 1992figure, but was 52 percent higher than the 1997 low of 153,922.

Note: Consultations do not include mandatory loss preven-tion services.

Safety and health training programs, 1988-2000Attendance at

Year training sessions

1998 15,4941999 27,1042000 19,275

Attendance at public education and conference training ses-sions in calendar year 2000 was 29 percent lower than in1999. This drop was largely due to attendance at the 1999Governor’s Occupational Safety and Health Conference,which is held every other year. Training was accomplishedwith the use of ED-NET, conferences, public workshops, andon-site special technical training sessions.

9


Statistics

OR-OSHA safety and health grant programs, 1989-1999Total $

Period Grants awarded1989-91 11 $309,6581991-93 9 271,1001993-95 12 342,7801995-97 12 370,5951997-99 10 325,923

Since the start of the grant program, just over $1.6 millionhas been awarded for 54 approved grants for organizations todevelop innovative safety and health training programs.

Insurer loss prevention consultative programs, 1989-1999Percent of

Year Number employers

1989 2,239 3.3%1990 1,888 2.9%1991 1,582 2.3%1992 1,450 2.1%1993 1,490 2.1%1994 1,500 2.0%1995 1,560 2.1%1996 1,519 2.0%1997 1,392 1.8%1998 1,324 1.7%1999 1,290 1.6%

The percentage of employers requiring insurer loss preven-tion services (three or more accepted disabling claims and aclaims rate above the statewide average, or at least 20 claims)remained about the same from 1992 to 1996. It has declinedslightly each year since, to a low of 1.6 percent in 1999.

Employers’ safety committee citations, violations, and penalties, FY 1990-2000Fiscal Proposedyear Citations Violations penalties1990 128 131 $13,0401991 223 236 24,7301992 891 1,023 61,5301993 781 963 49,4101994 754 927 60,9301995 820 980 146,0701996 703 858 102,8351997 718 878 74,6351998 848 953 139,8551999 1,011 1,147 129,3902000 920 974 139,455

In FY 1992, there was a large increase in all three categories,citations, violations and penalties as a result of new rules thatbecame effective in March 1991. These figures have fluctu-ated since FY 1992, with a substantial increase in penaltiesassessed in FY 1995. All three categories which dropped inFY 1996, bounced back in the next few years.

Worksite Redesign Program approved project and product grants, 1995-2001

Approved Approvedproject Total $ product Total $

Period grants awarded grants awarded

1995-97 6 $364,673 0 $01997-99 17 $1,442,385 66 $753,3121999-01 9 $551,142 183 $287,843

Since the start of the grant program, almost $2.4 million hasbeen awarded for 32 approved project grants and $1.0 mil-lion has been awarded for 249 approved product grants.

Note: The number of grants are the numbers of employersreceiving grants. The 1999/2001 awards are the number ofgrants awarded as of September 9, 2000.

10


Insurance

Although reform began in 1987, thecost of the Oregon workers’ com-pensation system did not decreasesignificantly until after the 1990 spe-cial legislative session. Workers’compensation premium rates havedecreased by 57.3 percent since 1990.Oregon is the only state with rate

decreases for eleven consecutiveyears (1991-2001). Reform legisla-tion and the accompanying rate re-ductions have saved Oregon employ-ers approximately $5.6 billion in di-rect costs. Oregon’s average pre-mium rate ranking dropped fromsixth highest in the nation in 1986 tothirty-eighth highest in 1998 and thenrose slightly to thirty-fourth in 2000.

Oregon’s reforms include provisionsto provide economic incentives toemployers to minimize claims fre-quencies, to institute termination pro-cedures that facilitate continuouscoverage availability for employers,and to ensure the financial integrityof workers’ compensation insurers.Employers are allowed to pay medi-cal claim costs of up to $500 fornondisabling claims and to excludethe costs from their rating experience.The eligibility for Board’s Own Mo-tion relief (aggravation more than 5years after first claim closure) is re-stricted; the claims costs are paidfrom the Workers’ Benefit Fund and

excluded from loss experience. Inaddition, employers are encouragedto hire injured workers who havefailed to return to work after injury(Preferred Workers); employers donot pay premiums for those workersfor three years, and claim costs aris-ing from a new injury during the first

three years of hire are excluded fromratemaking. Employers are also en-couraged to return their injured work-ers to work quickly through the Em-ployer-at-Injury program. In additionto lowering claim costs throughquicker return to work, this programprovides employers with wage sub-sidies, worksite modifications, andobtained employment purchases.

Tiered rating planA tiered rating plan was first man-dated in 1991 for assigned risk plan(Oregon Workers’ Compensation In-surance Plan) employers too small toqualify for experience rating plans.As a result of the rating plan, over 85percent of the employers in the as-signed risk plan in 1998 received thenon-experience-rated credit of 11 per-cent, resulting in an estimated sav-ing of $802,000 in premium forpolicy year 1998. Since the inceptionof the 11 percent credit program, em-ployers have saved over $10.3 mil-lion. In addition, in 1994, a secondtier credit was added to the assigned

risk plan for new small businesses.The additional credit is for 15 per-cent and has resulted in an extra sav-ings of $1.0 million since 1994.

Due primarily to SAIF Corporation’scancellation of thousands of smallemployer policies, Oregon’s Pool

premium, as apercentage ofvoluntary mar-ket premium,increased from3.3 percent in1987 to 11.4percent in 1991.It has sincedecreased to 3.4percent in 1999.Nationally, thepercentage oftotal premiumwritten by

assigned risk plans averages 2.7percent.

Prior to reform, the Oregon workers’compensation insurance market wasexhibiting signs of financial strain.Many small employers covered bythe voluntary market were being can-celed, and the loss ratio (lossesdivided by premiums) for SAIFCorporation and private insurerscombined was over 100 percent.Since the reforms, some dramatic im-provements in the Oregon market areevident. During the period 1987 to1999, the private insurers’ loss ratioimproved from 84.6 percent to 67.3percent. SAIF Corporation’s lossratio improved from 114.4 percent to40.6 in 1998. However, it rose to140.4 in 1999. The 1999 SAIFCorporation and private insurerscombined loss ratio amounted to 95.8percent. Moreover, from 1990 to1999, the SAIF Corporation andprivate insurers combined have paid$764.3 million in dividends.

Figure 6. Premium rate changes, 1987-2001

0.0%

5.2% 6.2%

-3.2%-1.8%

-10.5%

-4.8%-2.2%

-3.7%

14.5%

-12.2% -11.4%-11.0%

-15.6%

-4.3%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Calendar year

Pre

miu

m r

ate

chan

ge

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

Cum

ulat

ive

redu

ctio

n

Premium rate change Cumulative reduction since 1990

11


The increased profitability of theworkers’ compensation insurancemarket has resulted in more compe-tition. In 1986, SAIF and the Lib-erty group had 60 percent of theworkers’ compensation market. Thatpercentage fell to 58 percent in 1994and decreased to 53 percent in 1999.

Reform also allowed the departmentto establish a contracting classifica-tions premium adjustment program toprovide employers subject to contrac-tor class premium rates the economicincentive to enhance safety and healthin the workplace. Over 2,200 employ-ers participated during the first fiveyears of the program.

Large deductible premium creditsIn 1996, Large Deductible PremiumCredits (LDPCs) were added as anoption to workers’ compensation inOregon. Few credits were applied in1996, but an estimated $24.4 millionin LDPCs were applied in 1999, 7.9percent of the private insurers’ as-sessable premiums, and 4.1 percentof the total workers’ compensationassessable premiums. Large deduct-ible premium credits allow employersto partially self-insure in return for acredit on their workers’ compensa-tion premium. The insurer adminis-ters all workers’ compensation claimsand bills the employer for costs up toa specified deductible. Just as self-insured employers are assessed onsimulated premiums, insurers and em-

Figure 7. Workers’ compensation premium breakdown, calendar years 1989 and 1999

Percent of earned premium, 1989 Percent of earned premium, 1999

ployers are assessed on premium priorto deductible credits.

Premiums were $599.3 million in1999, down $226.0 million from1990, despite substantial growth inthe workforce during the period.There has been some change in thepercentage distribution among the pre-mium cost components. The percentof earned premium to pay for indem-nity benefits decreased from 45.8percent in 1989 to 33.7 percent in1999; conversely, the percent of pre-mium to pay for medical benefits in-creased from 33.1 percent in 1989 to52.7 percent in 1999. Insurer over-head expenses constituted 13.6 per-cent of premiums in 1999, down from21.1 percent in 1989.

Figure 8. Direct premiums earned and market share, by insurance type, 1987-1999

676.9722.7

792.3 825.3 796.3 802.1737.0 722.1 737.3 727.5 714.1

675.7599.3

0

200

400

600

800

1000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999Calendar year

($ m

illio

ns)

Self Private SAIF

Overhead13.6%

PPD7.4%

Medical52.8%

Claimant atty fees

2.2%

TTD12.9%

CDAs4.7%

PTD0.7%Fatal

2.1%

Denied claims2.2%

Voc rehab1.4%

Fatal1.6%

PPD9.2%

Overhead21.1%

Medical33.1%

Voc rehab3.0%

Claimant atty fees2.1% Denied claims

2.5%

PTD4.5%

TTD22.9%

12


Workers’ compensation premiums and rate changes, 1987-2001Premiums Annual premium

Year ($ millions) rate changes1987 $676.9 14.5%1988 722.7 0.0%1989 792.3 5.2%1990 825.3 6.2%1991 796.3 -12.2%1992 802.1 -11.0%1993 737.0 -11.4%1994 722.1 -4.3%1995 737.3 -3.2%1996 727.5 -1.8%1997 714.1 -10.5%1998 675.7 -15.6%1999 599.3 -4.8%2000 597.5 (est) -2.2%2001 599.4 (est) -3.7%

Workers’ compensation premium rates decreased 57.3 per-cent between 1991 and 2001. Annual premiums decreasedby $226.0 million between 1990 and 1999.

Statistics

Workers’ compensation average premium rate ranking, 1986-2000Rate

Year ranking

1986 6th1988 8th1990 8th1992 22nd1994 32nd1996 34th1998 38th2000 34th

Oregon’s average premium rate ranking improved from 6thhighest in the nation in 1986 to the 38th highest in 1998. In2000, the ranking dropped slightly, to 34th highest.

Note: This premium rate ranking is based on the manual ratesof the 50 states applied to Oregon’s mix of occupations.

Workers’ compensation premium market share, by insurer type, 1987-1999Self-

Year SAIF Private insured1987 37.5% 48.1% 14.4%1988 34.7% 49.1% 16.2%1989 33.6% 51.6% 14.8%1990 28.4% 57.0% 14.6%1991 30.4% 54.8% 14.8%1992 32.4% 51.2% 16.4%1993 34.7% 48.0% 17.3%1994 37.1% 46.8% 16.1%1995 33.2% 50.2% 16.6%1996 32.1% 50.6% 17.3%1997 31.3% 51.6% 17.1%1998 30.2% 54.3% 15.5%1999 33.0% 51.8% 15.1%

Private insurers’ share of the workers’ compensation marketin Oregon was 51.8 percent of the premium volume in 1999.The Liberty group had 38.3 percent of the private market in1999.

13


Statistics

Assigned Risk Pool tiered rating plan credit, 1991-1998Policy Percent of Credityear pool savings

1991 83.3% $1,614,0001992 80.7% 1,268,0001993 80.9% 1,275,0001994 81.1% 1,511,0001995 84.3% 1,707,0001996 86.9% 1,198,0001997 86.1% 936,0001998 85.2% 802,000

The tiered rating plan credit of 11 percent has saved employ-ers over $10.3 million between policy years 1991 and 1998for an average of almost $1.3 million per year.

SAIF Corporation financial characteristics, 1987-1999Dividends

Loss paidYear ratio ($ millions)

1987 114.4 $ 0.51988 134.8 0.61989 104.8 0.01990 69.3 20.41991 72.6 17.71992 79.0 (est) 22.61993 100.4 (est) 32.61994 69.2 29.71995 82.4 80.21996 125.6 50.11997 66.6 69.81998 40.6 121.11999 140.4 211.5

From 1988 to 1998, SAIF’s loss ratio fell 94.2 percentagepoints. However, in 1999 it showed considerable increase toa little over the 1988 figure. SAIF has paid substantial divi-dends to policyholders in the past ten years, reaching $211.5million in 1999.

Note: The 1992 and 1993 loss ratios were estimated by thedepartment because the figures published by SAIF were af-fected to a large extent by reserve adjustment.

WC insurance plan (Assigned Risk Pool) characteristics, 1987-1999

Pool PercentCovered premium of total

Year employers ($ millions) premium

1987 1,935 $19.4 3.3%1988 1,872 20.1 3.2%1989 3,658 28.8 4.2%1990 12,765 71.9 9.8%1991 11,970 71.7 11.4%1992 12,140 50.2 7.7%1993 16,056 48.6 8.0%1994 17,821 53.1 8.7%1995 17,982 49.1 7.9%1996 13,627 34.5 5.6%1997 12,663 26.8 4.5%1998 11,369 21.3 3.9%1999 9,840 17.3 3.4%

Annual Pool premium written increased over 270 percent from1987-1990; it has since dropped 75.9 percent to the lowestlevel recorded. Annual Pool premium as a percent of the vol-untary market premium more than tripled between 1987 and1991, before shrinking to 3.4% in 1999. The national aver-age is 2.7 percent in 1999.

14


Statistics

Private insurers’ financial characteristics, 1987-1999Dividends

Loss paidYear ratio ($ millions)

1987 84.6 $3.61988 80.0 7.11989 83.3 8.41990 69.0 7.61991 61.9 10.01992 65.6 14.31993 66.1 10.11994 72.8 12.51995 68.2 12.51996 65.9 10.31997 61.9 9.41998 70.8 10.31999 67.3 11.6

Private insurers’ loss ratio fell 22.7 percentage points from1987 through 1991, rose slightly through 1994 and has nowdropped to 67.3 percent. Dividends rose from $3.6 million in1987 to $14.3 million in 1992; they were $11.6 million in1999.

Premium adjustment program for contracting employers, 1991-1995

Employers AverageYear participating credit

1991 584 11.2%1992 460 11.2%1993 564 11.8%1994 292 7.4%1995 362 5.7%

Some 2,262 employers participated during the first five yearsof this program. The average credit declined from 11.2 per-cent in 1991 to 5.7 percent in 1995.

Note: More current data are not available from the NationalCouncil on Compensation Insurance.

Employers and employees, by insurer type, 1999Insurertype Employers Employees (est)

SAIF 35,392 418,800Private 44,074 873,700Self 1,830 304,500Total 81,296 1,597,000

At the end of 1999, private insurers covered 54 percent of theemployers and 55 percent of the workers in Oregon’s work-ers’ compensation system.

15


Compensability

One purpose of a no-fault workers’compensation system is to compen-sate injured workers for work-relatedclaims. Limiting claims to those thatare work-related reduces the costs tothe workers’ compensation system.Oregon’s reforms tightened the re-quirements for establishing that aninjury, disease, or aggravation claimis work-related.

Mental stressBy HB 2271 in 1987, men-tal stress claims were re-stricted to those arising outof real and objective em-ployment conditions notgenerally inherent in everyworking situation. Theremust be “clear and convinc-ing evidence” that the men-tal disorder arose out of andin the course of employ-ment. As a result, the num-ber of accepted disablingstress claims dropped 56percent between 1987 and1989.

Definition of compensabilityBy SB 1197 in 1990, the definitionsof compensability for both injuriesand diseases were changed. The re-forms required that a compensableinjury be established by medical evi-dence supported by objective find-ings. In addition, the compensableinjury must be the major contribut-ing cause of a consequential condi-tion for that condition to becompensable. If the compensable in-jury combines with a preexisting con-dition, the resultant condition iscompensable only to the extent thatthe compensable injury is and re-mains the major contributing causeof the disability or need for treatment.Injuries from recreational and socialactivities were excluded. Injuriesarising from the use of alcohol ordrugs were excluded if it is proved

by clear and convincing evidence thatthe drug or alcohol use was the ma-jor contributing cause. (The standardwas reduced to “preponderance ofevidence” by the 1995 legislature.)Likewise, the definition of a com-pensable occupational disease waschanged. To be compensable, the dis-ease must be caused by substances oractivities to which an employee is notordinarily subjected; the employment

must be the major contributing cause;and, the existence of the disease mustbe established by medical evidencesupported by objective findings.These changed definitions of com-pensability are in part responsible forthe dramatic decrease in claims.

Claim denialLargely as a result of a major changein the SAIF Corporation’s claimsmanagement practices, the denialrates of disabling claims jumped infiscal year 1990. Denial rates then re-mained relatively constant throughfiscal year 1992: the denial rate fordisabling claims was 21 percent, andthe denial rate for disabling occupa-tional disease claims was 43 percent.The denial rate of disabling claimsdeclined to 17 percent in fiscal year1993 and remained fairly constantthrough fiscal year 1999.

Changes in the definition of com-pensability may also be responsiblefor the increasing number of deniednondisabling claims. The number ofdenied nondisabling claims reportedby insurers has increased by 73 per-cent since fiscal year 1989. Thechanges in the system can also beseen by comparing the numbers ofdenied disabling and deniednondisabling claims. In fiscal year

1989, 45 percent of the denials weredenials of disabling claims. In fiscalyear 2000, by comparison, 26 percentof the denials were of disablingclaims.

The reforms also allowed insurers todeny a previously accepted claim dur-ing the two-year period following thedate of original claim acceptance.(The 1995 legislature removed thistwo-year limitation when the accep-tance was due to fraud, misrepresen-tation, or other illegal activity by theworker.) They also required thatclaims for aggravation be establishedby medical evidence supported byobjective findings that show that theworsened condition resulted from theoriginal injury. In addition, when aworker sustains a compensable in-jury, the responsible employerremains responsible for future aggra-vations, unless the worker sustains a

Figure 9. Percentage of disabling claims denied, FY 1989-2000

14.1%

21.0% 20.5% 20.8%

17.1% 17.3% 18.0% 17.9%17.0% 17.1% 17.4%

16.4%

0%

5%

10%

15%

20%

25%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000(pre lim)

Fiscal year

Per

cent

den

ied

16


new compensable injury involvingthe same condition. Also, by SB 369in 1995, a doctor’s report must be ac-companied by a claim for aggrava-tion to be recognized as such ratherthan a doctor’s report by itself. Thenumber of aggravation claimsdropped 54 percent between 1991 and1999.

In 1997 the department conducted astudy of the reasons that insurers wereciting in their claim denial letters. Thereasons for the denials were takenfrom copies of the letters sent by in-surers to workers. The denials wereclassified by the statute language thatmost closely matched the languageof the denial letters. The studyshowed that most denials were madebecause the insurer felt the injury didnot arise out of the employment, theemployment conditions were not themajor contributing cause of the in-jury or disease, the insurer was notresponsible for the claim, or there wasinsufficient evidence that the claimwas compensable. The study alsoshowed that denial letters by them-selves often were inadequate to de-

termine why claims had been denied.For better results, a study of claimsfiles was needed.

Major contributing causeThe 1999 legislature allocated fundsfor a study of the effects of changesin the compensability language. Theprimary interest was the major con-tributing cause language that wasadded to the statute through SB 1197in 1990 and revised through SB 369in 1995. The legislators were inter-ested in learning the extent to whichthese changes affected the costs of theworkers’ compensation system andthe benefits paid to injured workers.Since the statute requires physiciansto determine the extent to which amedical condition is due to the com-pensable injury, the legislature alsowanted to know if physicians couldaccurately make such decisions. Afinal goal of the study was to look atthe major contributing cause lan-guage in combination with the exclu-sive remedy language for deniedclaims. It has been asserted in a casebefore the Oregon Supreme Court,Smothers v. Gresham Transfer, Inc.,

that the combination of the majorcontributing cause language and theexclusive remedy language unconsti-tutionally denies injured workers withpre-existing medical conditions a le-gal remedy for their injuries. As ofDecember 2000, the Supreme Courthad not issued its decision.

The department contracted with theWorkers’ Compensation Center atMichigan State University to com-plete the study. They enlisted theservices of several of the country’sleading workers’ compensation re-searchers. They issued their report inOctober 2000. Copies are availablefrom the department or atwww.cbs.state.or.us/wcd/docs/finalmcc.pdf.

The study had a number of facets. Theresearchers looked at a large amountof the department’s claims and costdata from the mid-1980s through thelate-1990s. There is no database thatindicates why claims are denied.Therefore, in order to determine howoften major contributing cause lan-guage is used to deny claims, the re-searchers looked at over 1,500 denialsin the claims files of five insurers andself-insured employers. They alsolooked at national injury rate data andnational workers’ compensation costdata to compare trends in Oregonwith national trends. They also con-ducted a survey of physicians to learntheir perspectives. Finally, they con-ducted a law review of Oregon’s stat-ute and comparable statutes and legaldecisions in other states.

Figure 10. Major contributing cause study: percentage of disabling claims initially denied

1.0% 5.6%7.1%

9.8%11.8%12.8%

0%

5%

10%

15%

20%

7/88 - 6/89 7/92 - 5/95 9/95 - 12/98

Other denials Major contributing cause denials

17


Figure 11. Major contributing cause study: benefit changes due to statute amendments

-6.4%

-13.1%

-16%

-12%

-8%

-4%

0%

1991-94 1996

The researchers found that since thepassage of SB 369, about 42 percentof the denials have cited major con-tributing cause language as the rea-son for the denial. Prior to 1990, thedenial rate of disabling claims wasunder 14 percent; after 1995 it wasnearly 17 percent (see Figure 10). Theresearchers concluded that many ofthe claims denied because of majorcontributing cause would have beendenied for other reasons under thepre-SB 1197 language. Because ofthis, it is very difficult to know thefinancial effects of these statutorychanges.

The researchers conducted econo-metric analyses to estimate the sizeof the benefit changes caused by thelegislation. One of the complicatingfactors in this analysis was the na-tional trend of lower workers’ com-pensation costs that occurred duringthe 1990s. Therefore, the researchershad to determine how much of the de-cline in Oregon’s costs was due tolegislative changes and how much

would have occurred as a part of thenational trends. They concluded thatSB 1197 (the entire bill, not just themajor contributing cause language)resulted in a reduction in benefits ofat least 6.4 percent, and SB 369 re-sulted in a reduction of at least an-other 6.7 percent (see Figure 11). Thissavings was due to a drop in the num-ber of claims; the average cost perclaim remained about the same.

In the physician survey, physiciansreported that the major contributingcause standard is practical. They em-phasized that it requires medical ex-pertise.

The law review showed that the ma-jor contributing cause standard usedin Oregon is also used in three otherstates. It is the highest standard usedbroadly by any state. Courts in otherstates have generally ruled that whenworkers’ compensation benefits aredenied to a certain group of claims,the claimants are not restricted byexclusive remedy clauses. Therefore,these workers are allowed to file civilactions against their employers. Thissuggests that if the Oregon SupremeCourt rules in the same manner asthese other courts, they will find thecurrent workers’ compensation lawunconstitutional.

18


The number of denied nondisabling claims has increased 73percent since FY 1989. In FY 1989, 45 percent of the deni-als were disabling claim denials; in FY 2000, 26 percent ofthe denials were disabling claim denials.

Note: With few exceptions, insurers do not report acceptednondisabling claims to the department.

PercentFiscal Accepted Denied denied Deniedyear disabling disabling disabling nondisabling

1989 40,515 6,640 14.1% 8,0221990 35,918 9,534 21.0% 10,5511991 31,156 8,024 20.5% 12,4261992 28,577 7,522 20.8% 12,9301993 29,125 6,013 17.1% 13,4141994 29,731 6,235 17.3% 13,2511995 29,740 6,535 18.0% 13,3771996 27,373 5,958 17.9% 14,1181997 26,918 5,515 17.0% 14,7591998 26,032 5,354 17.1% 14,9621999 24,857 5,244 17.4% 14,6832000 24,323 4,760 16.4% 13,853

Total reported claims, FY 1989-2000

Accepted disabling stress claims, 1987-1999Accepted stress Stress claims per

Year claims 1,000 ADC1987 196 4.781988 176 4.031989 87 2.221990 71 1.981991 75 2.381992 66 2.141993 71 2.311994 76 2.411995 75 2.451996 79 2.781997 66 2.361998 48 1.771999 60 2.33

The number of accepted disabling stress claims dropped56 percent between 1987 and 1989. Since 1989, the num-ber of stress claims per 1,000 accepted disabling claimshas remained fairly constant.

Disabling occupational disease claims, FY 1989-2000Fiscal Percentyear Accepted Denied denied

1989 3,980 2,041 33.9%

1990 3,496 2,761 44.1%

1991 3,068 2,115 40.8%

1992 3,101 2,293 42.5%

1993 3,212 1,941 37.7%

1994 3,289 2,039 38.3%

1995 3,384 2,083 38.1%

1996 3,247 1,926 37.2%

1997 3,349 1,905 36.3%

1998 3,180 1,685 34.6%

1999 2,766 1,597 36.6%

2000 2,773 1,396 33.5%

In fiscal years 1990-1992, the denial rate for disablingoccupational disease claims was 43 percent. The denialrate has remained fairly constant over the past four years.

19


Statistics

Disabling aggravation claims, 1991-1999

PercentYear Accepted Denied denied

1991 1,847 1,842 49.9%1992 2,100 1,594 43.2%1993 2,012 1,419 41.4%1994 1,868 1,221 39.5%1995 1,563 941 37.6%1996 1,544 963 38.4%1997 1,323 1,023 43.6%1998 1,148 776 40.3%1999 979 701 41.7%

The number of aggravation claims dropped 54 percent be-tween 1991 and 1999. The denial rate which dropped steadilybetween 1991 and 1995 has shown a slight increase thereaf-ter.

Note: The counts are aggravation claims reported to the de-partment by insurers.

20


Claims processing

department to establish a workers’compensation claims examiner pro-gram. This was expected to ensurethat claims examiners fully under-stood claims processing require-ments, thereby enabling them toprocess claims timely and accurately.SB 221 shifted the responsibility forcertification to insurers, self-insuredemployers, and third partyadministrators, charging them with

The 1999 legislature shifted respon-sibility for two important functionsfrom the department to insurers andself-insured employers. SB 220holds insurers and self-insured em-ployers responsible for all claims clo-sures effective July 1, 2001. (Note:The Workers’ Compensation Divi-sion has moved the cutoff date for-ward to January 1, 2001.) Thelegislature also mandated that the de-

Prior to legislative reform, there wereconcerns about claims processing: theevaluation of the extent of disabilitywas inconsistent, the acceptance ordenial of claims and the payment oftime loss benefits were too slow, anddelays in claim closure resulted in un-recoverable overpayments by insur-ers to claimants. These factorscontributed to a controversial claimsprocessing environment that fosteredlitigation.

Permanent disability claimsA number of provisions were enactedto make the evaluation of permanentdisability more consistent. The de-partment was required to promulgatestandards for the evaluation of dis-abilities. Those standards must beused for the initial rating and for allsubsequent litigation of a claim. Themandated use of standards for theevaluation of permanent disability isan important factor in the decliningnumber of awards of permanent par-tial disability on appeal. In 1999, 13percent of PPD degrees were awardedthrough litigation, down from 39 per-cent in 1987.

For many years, only the departmentcould close a claim and rate perma-nent disability. The 1987 reforms al-lowed insurers to close permanentdisability claims, as long as theworker had returned to work. Thisauthority was expanded in 1990 topermit insurers to close a claim whenthe worker’s attending physician re-leases the employee to return to work.The percentage of claims closed byinsurers has increased since 1988,reaching 77 percent in 1999. The re-forms also permitted insurers to ter-minate time loss payments earlier inthe life of a claim, increased theallowed amount of time for insureracceptance or denial of a claim, andpermitted insurers to offset overpay-ments against subsequent benefits.

partment phase out its claim closureactivities in a manner that minimizesdisruption for all concerned.

The other function for which respon-sibility was taken out of thedepartment’s hands was the certifi-cation of claims examiners. SB 1197,which was enacted by the 1990 spe-cial legislative session, required the

administering standards for certifica-tion which the department is requiredto specify by rule. The department isempowered to impose a civil penaltyagainst the insurers if they employuncertified examiners. Thedepartment’s certification programwas terminated in November 1999,at which point there were 1,342certified examiners.

Figure 12. Percentage of claims closed by insurers, 1987-1999

35.9%28.3% 28.8% 32.0%

48.2%57.6% 56.9% 58.3% 58.2% 60.9%

66.1%71.6%

76.8%

0%

25%

50%

75%

100%

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Per

cent

clo

sed

Figure 13. Median days from injury to first closure, 1987-1999

158156150153155151148152

176184181170169

0

40

80

120

160

200

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Med

ian

days

21


median number of days from injuryto first closure has remained fairlyconstant since 1992. The averagenumber of time loss days paid de-clined 44 percent from 1990 to 1999;the median changed little since 1992.(From mid-1995, the average timeloss days is affected by the limit of14 days on retroactive time loss im-posed by the 1995 legislature.)

The reforms, through SB 1197, in-creased the allowed number of daysfor acceptance or denial of a claimfrom 60 to 90 days. This was done so

ing that condition. HB 2971 alsostates that an insurer’s or self-insuredemployer’s failure to appeal or seekreview of a determination order, no-tice of closure, reconsideration order,or litigation order does not precludethem from subsequently contestingthe rated condition in the order, un-less they have formally accepted thatcondition.

Time lags and insurer timelinessAfter peaking in 1990, the averagenumber of days from injury to firstclosure declined 20 percent, from 277days in 1990 to 222 days in 1998. Itincreased to 232 days in 1999. The

that insurers could make better deci-sions. The median number of days toaccept a claim has increased from 31days in 1990 to 49 days in 1999. Overthe same period, the median numberof days to deny a claim has increasedfrom 35 days to 62 days. These in-creases result in longer periods of un-certainty for workers and for themedical providers who have providedmedical services to the injured work-ers.

Insurer performance, measured bythe timeliness of making firstpayments, acceptance or denial of aclaim, filing the first report of injury

The department also heightened itsmonitoring of claims processing ac-tivities in several areas. Performanceaudits of insurers are now conductedon a triennial cycle. Also, computer-ized claims processing statistics arenow monitored quarterly to ensurecompliance with timeliness require-ments for payment of compensation,claim acceptance or denial, and claimclosure. The department issues civilpenalties to those insurers and self-insured employers who do not meetacceptable standards in these areas.The number of citations issued in

Modified notice of acceptanceThe 1997 legislature passed one billthat affected the claims process. ByHB 2971, insurers and self-insuredemployers are required to modify no-tices of acceptance when medical orother information changes a previ-ously issued notice of acceptance. Atthe time of claim closure, they arealso required to issue an updated no-tice of acceptance that specifies thecompensable conditions. Also, if acondition is later found compensable,the insurer or self-insured employermust reopen the claim for process-

1998 was double the number issuedin 1990. In each of the past threeyears, the penalty amounts for thesecitations have totaled about $250,000.

Concerned about increases in denialrates, the department conducted a de-nied disabling claim study in late1991 and early 1992. As a result ofthat examination, the SAIF Corpora-tion changed its claims handling pro-cedures. The examination alsorevealed the need for reasonable in-vestigation standards; in June 1992,the department promulgated stan-dards for all workers’ compensationinsurers.

Figure 14. Insurer performance on acceptance or denial and on first payments, 1990-1999

7.2%7.4%6.8%5.5%

4.9%3.9%4.0%5.8%

8.5%

14.6%

19.9%

15.0%12.8%

11.0% 11.7% 11.6% 11.8% 12.1% 12.6% 12.8%

0%

5%

10%

15%

20%

25%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Per

cent

unt

imel

y

Acceptance/denial First payments

22


(Form 801), and requesting claimdetermination (Form 1503),improved between 1990 and 1993.Insurer performance has declinedslightly since 1993. (It should benoted that the 1995 legislature sub-stituted the mailing date for thereceipt date for purposes of timeli-ness.)

Workers’ Compensation information lineThe department has an injured workerhotline, the “workers’ compensationinformation line,” that answers work-ers’ questions about their claims,describes workers’ rights and respon-

sibilities, and helps them understandthe workers’ compensation system.The number of calls to the informa-tion line exceeded 13,700 in 1999. Italso received 7,930 calls from insur-ers, medical providers, attorneys,employers, legislators, and others.

Through the reforms, the departmentexpanded its efforts to eliminateabuse from the workers’ compensa-tion system. It was one of the first inthe nation to implement a programto identify and investigate allegationsof inappropriate actions by employ-ers, providers, insurers, workers, andother parties. A toll-free hotline

allows the public to report abuses.From fiscal years 1991 through 2000,over 2,500 investigations of fraud orabuse complaints were opened. Infiscal year 2000, the most frequentcomplaints received were failure toreport/improper reporting of claims-related documents by employers,insurers, and medical providers;workers collecting benefits whileworking or able to work; improperclaims processing by insurers ormedical providers; and employerpressure to not file a claim or harass-ment of workers for filing a claim.

23


Statistics

WC claims examiners certified, FY 1991-1999Fiscal Examiners Number of certifiedyear certified examiners at year-end

1991 519 5021992 422 9281993 530 9761994 570 1,1141995 633 1,2111996 616 1,2531997 707 1,3701998 606 1,3541999 728 1,346

During the first two years of the program, 941 examinerswere certified. Many of the later certificates were issued forexaminers being re-certified for another two-year period. Thecertification process was eliminated by SB 221. At the endof the program, November 22, 1999, there were 1,342 certi-fied examiners.

Insurer closure actions, 1987-1999Insurer Total % of total

Year closures closures closures

1987 18,153 50,587 35.9%1988 14,194 50,223 28.3%1989 14,053 48,732 28.8%1990 14,884 46,488 32.0%1991 18,483 38,351 48.2%1992 19,876 34,506 57.6%1993 19,256 33,823 56.9%1994 20,192 34,631 58.3%1995 20,742 34,657 59.8%1996 20,583 33,784 60.9%1997 20,924 31,649 66.1%1998 22,051 30,789 71.6%1999 22,185 28,898 76.8%

The percentage of claims closed by insurers has grown steadilysince 1988, reaching 77 percent in 1999. SB 220, passed in1999, phases out the department’s role in closing claims. ByJanuary 1, 2001, insurers, self-insured employers and thirdpart administrators will handle all claims closures.

Note: Total closures exclude miscellaneous insurer orders.

Insurer closures, by benefit type, 1987-1999

Year TTD Percent PPD Percent

1987 18,153 53.8% 0 0.0%1988 14,194 41.9% 0 0.0%1989 13,742 44.3% 311 2.2%1990 13,415 46.0% 1,469 10.3%1991 15,827 60.3% 2,656 25.9%1992 15,731 67.9% 4,145 42.9%1993 15,021 65.9% 4,235 45.0%1994 15,448 67.5% 4,744 49.4%1995 14,548 62.5% 5,166 55.0%1996 14,235 65.1% 5,033 56.5%1997 14,048 68.1% 5,131 63.7%1998 14,765 74.5% 5,878 76.0%1999 14,784 77.6% 5,984 80.8%

Insurer PPD closures increased from 2 percent of all PPDclosures in 1992 to 81 percent of all PPD closures in 1999.All closures will be by insurers, self-insured employers andthird party administrators from January 1, 2001.

24


Statistics

Time lag from injury date to first closure, 1987-1999

Average MedianYear days days

1987 255 1691988 260 1701989 271 1811990 277 1841991 271 1761992 241 1521993 231 1481994 229 1511995 232 1551996 228 1531997 224 1501998 222 1561999 232 158

The average and median days from injury to first closurepeaked in 1990. The average dropped 20 percent from 1990to 1998 and rose a little in 1999. The median number of dayshas remained fairly constant since 1992.

Time loss days paid, 1990-1999Closure Average Median year days days

1990 101 211991 92 191992 81 171993 76 181994 72 181995 68 181996 62 161997 58 151998 58 171999 57 17

The average time loss days paid declined 44 percent between1990 and 1999. The median number of time loss days paidhas varied only slightly since 1992.

Insurer claim acceptance and denial, median time lag days, 1988-1999Year Accepted Denied

1988 33 491989 35 431990 31 351991 35 391992 40 451993 34 481994 40 481995 43 501996 44 601997 50 661998 52 641999 49 62

By SB 1197 in 1990, the time allowed for insurers to make anacceptance or denial was extended from 60 days to 90 days.The median number of days for acceptance increased 58 per-cent between 1990 and 1999; the median number of days fordenial increased 77 percent over the period.

25


Statistics

Insurer timeliness of first payments, 1990-1999Year Percent timely1990 80.1%1991 85.0%1992 87.2%1993 89.0%1994 88.3%1995 88.4%1996 88.2%1997 87.9%1998 87.4%1999 87.2%

Insurer performance on timeliness of first payments to claim-ants improved between 1990 and 1993; it has declined slightlysince 1993.

Note: These data are self-reported by the insurers.

Year Percent timely

1990 85.4%1991 91.5%1992 94.2%1993 96.0%1994 96.1%1995 95.1%1996 94.5%1997 93.2%1998 92.6%1999 92.8%

Insurer timeliness of acceptance or denial, 1990-1999

Insurer performance on timeliness of acceptance or denial ofclaims improved from 1990 to 1994; it has declined a littlesince 1994.

Note: These data are self-reported by the insurers.

Insurer timeliness of filing forms 801 and 1503, 1990-1999Form 801 Form 1503

Year percent timely percent timely1990 59.2% 53.7%1991 78.9% 64.8%1992 93.3% 84.7%1993 92.2% 88.2%1994 92.8% 87.0%1995 89.4% 83.7%1996 91.9% 88.3%1997 91.3% 86.8%1998 89.9% 84.6%1999 90.4% 85.1%

Insurer performance on timeliness of filing reports of occu-pational injury or disease (Form 801) and requests for deter-minations (Form 1503) improved greatly between 1990 and1993. Performance has declined slightly since 1993.

26


Workers OtherYear calls calls1990 23,263 N/A1991 21,475 N/A1992 15,181 N/A1993 18,243 N/A1994 19,678 7,5751995 17,503 6,6991996 16,938 7,7011997 15,737 8,4251998 14,960 8,0981999 13,711 7,930

Workers’ compensation information line calls for assistance, 1990-1999

In 1999 there were 13,711 calls from workers to the workers’compensation information line with questions about theirclaims, the claims process, or the workers’ compensation sys-tem. The hotline also received 7,930 calls from insurers, medi-cal providers, attorneys, employers, legislators, and others.

Civil penalties issued, 1990-1999Penalty

Year Citations amount

1990 407 $158,3251991 420 156,7751992 506 163,1011993 621 166,6501994 679 197,0251995 525 139,3251996 491 140,8501997 629 244,1751998 813 254,9251999 790 248,725

In 1998, the department issued the largest number of cita-tions since at least 1990. The number of citations was almostdouble the number in 1990. The amount of these penaltiesexceeded $250,000. The number and amount of penalties fellslightly in 1999.

Abuse complaint investigations, FY 1991-2000Fiscalyear Opened Closed

1991 243 2231992 237 2591993 342 3981994 255 2431995 250 2531996 244 2151997 211 1941998 244 2871999 231 2222000 252 237

The number of complaints received of inappropriate actionsby employers, providers, insurers, workers, and other partiespeaked in fiscal year 1993. It dropped 25 percent the nextyear and has shown only a slight variation since then.

Statistics

27


Medical

During the 1980s, one of the majorcost drivers of the workers’ compen-sation system, in Oregon andthroughout the nation, was the rap-idly increasing cost of medical care.This trend was also prevalent in thegeneral health care market, but theevidence suggested that the problemwas worse in the workers’ compen-sation system because there werefewer effective cost controls. Whilemedical providers have long been re-quired to charge workers’ compen-sation insurers the same fees for thesame service provided to other pa-tients, there were few mechanismsprior to 1990 to control unnecessaryutilization of diagnostic tests andtreatments.

Fee SchedulesThe department has had medical ser-vices fee schedules since 1982. Theseschedules have been subsequently ex-panded through administrative rules.Medical fee schedules now includeanesthesiology, surgery, radiology,laboratory and pathology, medicine,physical medicine, evaluation andmanagement, multidisciplinary ser-vices, durable medical equipment,and pharmacy. The medical feeschedules establish the maximum al-lowable reimbursement (ceiling) forservices. From 1986 to 1995, the ceil-ing was set at the 75th percentile ofusual and customary fees. However,by SB 369 of 1995, new fee sched-ules are to represent the reimburse-ment generally received for servicesprovided in the general health careindustry. The transition to this newmethodology is still in progress. In1997, the department also adopted theFederal Resource Based RelativeValue Schedule (RBRVS) to deter-mine the maximum level of reim-bursement for medical servicescovered by the fee schedule.

The department implemented a hos-pital fee schedule using AdjustedCost-to-Charge Ratios (CCRs) onJanuary 1, 1991. In July 1992, thedepartment began publishing revisedCCRs on a semi-annual basis for allgeneral, acute-care hospitals in thestate. The department uses the term“hospital” as defined by the Officeof Health Policy to decide what fa-cilities are legally considered hospi-tals in the state; specialty hospitals,such as rehabilitation centers, psychi-atric hospitals, or juvenile hospitals

of-return analysis) is computed andused for one year. Rural hospitalsmay be excluded from imposition ofthe CCR based upon a determinationof economic necessity.

Medical payment reportingIn 1991, the department began re-quiring that the insurers with the larg-est numbers of claims report theirmedical payment data to the depart-ment. In 1999, approximately 82 per-cent of total medical payments werereported to the department; over 80

are excluded from these regulations.The CCR is the percent of the amountthat insurers reimburse Oregon hos-pitals for treating injured workerscovered by workers’ compensationinsurance. The process for comput-ing the CCR includes informationfrom each hospital’s audited finan-cial statement and Medicare Cost Re-port (HCFA 2552). The ratio allowsall hospitals to recover the cost ofproviding facility-related services toinjured workers plus a reasonable rateof return on their capital asset baseand an allowance for bad debt andcharity losses. The CCR is revised an-nually at a time based on thehospital’s fiscal year and is currentlypublished twice yearly under WCDBulletin 290. In March of every year,a new growth factor (used in the rate-

percent of these payments were forservices subject to fee schedules. Onaverage, reimbursements for servicessubject to the fee schedule were re-duced 18 percent. A portion of thosereductions was due to disallowingtreatment for non-compensable con-ditions, although the majority of thereduction results from applying thefee schedule maximums. On average,hospital charges subject to the cost-to-charge fee schedule were reducedby more than 35 percent.

Managed care organizationsThe reforms introduced managedcare into Oregon’s workers’ compen-sation system by limiting the typesof providers who qualify to be attend-ing physicians; allowing workers’compensation insurers to contract

Figure 15. MCO insurer contracts in effect at the end of the fiscal year, FY 1991-2000

6

38

50

6269

7379 79 78

85

0

40

80

120

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Fiscal year

Con

trac

ts

28


Figure 17. Medical payments by provider type, 2000

Pharmacy5.5%

Medical doctor29.8%

All other medical13.0%

Radiologist3.4%

Medical supplies

1.5%

Hospital inpatient

14.8%

Hospital outpatient

22.9%

Chiropractor2.6%

Physical therapist

6.4%

with department-certified managedcare organizations (MCOs); and re-quiring workers covered by such con-tracts to obtain treatment within theMCO (except under certain condi-tions). The attending physician actsas the gatekeeper for most treatmentand indemnity benefits. All other caremust be provided upon referral fromthe attending physician.

Most MCOs in Oregon contract withmedical providers who agree to termsand conditions established by theMCOs in return for the opportunityto treat injured workers covered bythe MCOs. The terms and conditionsdiffer by MCO, but they must includetreatment and utilization standards, aswell as peer review. Each panel ofproviders must include eight types ofmedical service providers: chiroprac-tors, naturopaths, acupuncturists, os-teopaths, dentists, optometrists,podiatrists, and physicians. As ofJune 30, 2000, there were eight certi-fied MCOs in Oregon that had con-tracts with workers’ compensationinsurers and self-insurers. In total,there were 85 insurer and self-insurerMCO contracts in effect at that time.Contracts in effect October 1, 1999,covered 52,048 Oregon employersand 62 percent of the state’s coveredwork force.

By SB 369 in 1995, the legislatureallowed insurers to require an injuredworker to receive treatment in anMCO prior to the acceptance of theclaim. If, however, the insurer even-tually denies the claim, the insurermust cover the services until theworker receives notice of the denialor until three days after the denialnotice is mailed. Consequently, mostenrollment dates continue to coincidewith the claim acceptance dates.

MCO contracts. The findings indicatethat, after controlling for severity andother differences, disabling claimscovered by MCO contracts had lowermedical, TTD, and PPD costs thanclaims not covered. Medical costswere reduced 12 percent, TTD costsby 10 percent, and PPD costs by 18percent. These reductions resulted ina 13 percent savings in total cost forMCO-covered disabling claims.

The department conducted a studyduring 1998 of the effectiveness ofmanaged care in Oregon’s workers’compensation system. The studygroup consisted of workers injuredsince July 1995 whose disablingclaims closed during the last fourmonths of 1997. The study includeda comparison of medical, timeloss,and permanent disability costs forworkers covered and not covered by

The study also included a medicaltreatment satisfaction survey of thesame workers. The findings showedfew differences in satisfaction be-tween the workers covered by MCOcontracts and the workers not cov-ered.

Palliative CareThe 1990 reforms eliminated mostpalliative care after the worker be-comes medically stationary. Pallia-tive care is treatment aimed atrelieving symptoms rather than im-proving the worker’s underlying con-dition. Workers can receive palliativecare only if they are determined tohave permanent total disability, whenit is necessary to monitor prescrip-tion medication or a prosthetic de-vice, or when the attending physicianfeels the palliative care is necessaryfor the worker to continue current em-ployment. The restrictions on pallia-tive care affected both new andexisting claims and had an immediate

Figure 16. Medical losses paid by SAIF and private insurers, 1989-1999

$165.9$176.3

$162.6$158.5$155.4$165.1$161.0$155.9$153.2

$185.7$191.4

$0

$40

$80

$120

$160

$200

$240

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Notes: “Other medical” includes other andunspecified provider types. Percentagesderived from data reported under WCD Bulletin220.

29


impact on some workers who hadbeen receiving ongoing palliativetreatments. SAIF’s medical paymentsfor palliative care in the first sixmonths after the medically stationarydate dropped more than 30 percentfollowing the 1990 reforms. Al-though only SAIF’s data are availablefor pre-reform comparisons, the re-strictions on palliative care contrib-uted to the 20 percent decrease inmedical costs between 1989 and1991.

Attending physiciansThe 1990 legislation also placed lim-its on who can be an attending physi-cian. Outside MCOs, a chiropractorcannot be the worker’s attending phy-sician except for 12 visits or 30 days,whichever comes first. These limita-tions, restrictions on palliative care,and the use of MCOs have had an im-pact on the distribution of medicalpayments by provider type. In 2000,hospitals and medical doctors eachreceived about a third of the work-ers’ compensation medical payments.Physical therapists and pharmacieseach received about 6 percent, radi-ologists 3 percent and chiropractors3 percent of the payments. Based onSAIF’s payment data, the most dra-matic change in the distribution ofmedical payments by provider typeaffected chiropractors. The propor-

tion received by chiropractorsdropped from 16 percent of total pay-ments prior to 1990 to 3 percent after1990.

Twenty-four-hour coverageLegislation to implement a 24-HourCoverage Pilot Program was pro-posed by the department and passedby the legislature in August 1993. Thelegislation authorized the director toapprove pilot plans by July 1994 andto operate the program until July1998. Financial support of $336,000to develop and launch the programwas obtained by the departmentthrough a grant from the RobertWood Johnson Foundation. The ap-proved pilot plans linked the medi-cal benefits of workers’compensation and group health insur-ance. The goal of these plans was toenhance the delivery and improve thecost effectiveness of medical servicesfor workers and employers.

The pilot plan provided a broad net-work of participating doctors and hos-pitals. Enrolled employees used thenetwork for all medical services. Forconvenience and consistency of care,most plans asked employees tochoose a general practitioner as theirprimary care physician. For mostmedical care, employees paid a mod-

est copayment when the treatmentwas received and the 24-hour planpaid the remainder. Employees paidno copayment, however, if the treat-ment was for a work-related condi-tion. Doctors and hospitals submittedthe insurance claims to the 24-hourplan and received a uniform paymentfor both work-related and other ser-vices.

By the end of 1995, only five of theapproved plans had enrollments, withjust 14 participating employers. A1996 evaluation of the program foundthat the low enrollment was duelargely to Oregon’s success in cur-tailing workers’ compensation costs.While employers remained curiousabout the 24-hour coverage, the con-trol of both workers’ compensationand group health costs had reducedtheir interest in participating. Theyalso noted one of the major advan-tages to participating in the pilots wasthe ability to direct injured workersto selected medical providers imme-diately. However, the 1995 legisla-tion permitting treatment at MCOsfrom the day of injury removed thisadvantage. Total program enroll-ments were not sufficient for a validstatistical evaluation of the pilotplans, and the department phased outthe program.

30


Managed care organizations, employers and employees covered, 1993-1999Date Employers Employees

1-93 26,211 (38.3%) 393,900 (30.7%)11-93 28,320 (40.0%) 462,500 (35.1%)12-94 33,083 (44.8%) 484,000 (35.1%)10-96 40,128 (51.8%) 648,500 (43.6%)10-97 47,200 (59.3%) 902,900 (58.3%)10-98 52,608 (64.7%) 971,200 (61.5%)10-99 52,048 (63.7%) 991,800 (62.0%)

Sixty-two percent of Oregon workers and 64 percent ofemployers are covered by MCOs.

Statistics

MCO contracts with insurers and self-insured employers, FY 1991-2000

Fiscal Self-insuredyear Insurers employers Total

1991 3 3 61992 16 22 381993 20 30 501994 25 37 621995 28 41 691996 32 41 731997 35 44 791998 36 43 791999 33 45 782000 36 49 85

At the end of FY 2000, there were 85 MCO contracts in ef-fect with insurers and self-insured employers. Eight certifiedMCOs have contracts with insurers and/or self-insured em-ployers.

Note: These figures are based on reports submitted by MCOsand may change as new data are reported.

SAIF and private insurers’ total paid and medical paid, 1989-1999

Total MedicalYear paid paid Medicalpaid ($ millions) ($ millions) percent

1989 $427.8 $191.4 44.7%1990 418.0 185.7 44.4%1991 379.9 153.2 40.3%1992 380.2 155.9 41.0%1993 376.1 161.0 42.8%1994 383.0 165.1 43.1%1995 360.9 155.4 43.1%1996 358.1 158.5 44.3%1997 352.7 162.6 46.1%1998 367.1 176.3 48.0%1999 347.5 165.9 47.7%

Between 1989 and 1991, medical payments by SAIF and pri-vate insurers fell by 20 percent. Since then, the payments haveremained fairly constant. Also, between 1989 and 1991, medi-cal payments declined from 45 percent to 40 percent of allpayments by these insurers. The percentage has grown since,reaching 48 percent in 1998 and 1999.

Average medical cost after closure, 1990-1999

Year SAIF Non-SAIF1990 $273 N/A1991 179 $1191992 162 1601993 189 1461994 173 1651995 201 1671996 190 1561997 178 1761998 220 2111999 190 191

The average medical cost after closure dropped more than 30percent following the 1990 reforms.

31


Return-to-work assistanceworkers most in need of vocationalassistance, those who qualify formore costly retraining, continue to beserved. Although return-to-workcases were only 164 in 1999 com-pared to 3,680 in 1987, return-to-work rates for completed vocationalcases are at historically high levels.

In 1990, the Handicapped WorkersReserve, which provided reimburse-ment of some claims costs as an in-centive to employers to hire disabledworkers, was phased out, while in-centives under the Preferred Worker

aggravation reopenings; and ex-tended eligibility for the Employer-at-Injury Program to acceptednondisabling claims, one result ofwhich has been to preclude manynondisabling claims from becomingdisabling. Annual changes to admin-istrative rules have further expandedbenefits under the ReemploymentAssistance Program. Overall, the ef-fect of legislation has been to de-em-phasize vocational assistance for in-jured workers and to expand and re-fine employer incentives to returninjured workers to work.

Preferred WorkersWorkers automatically receive a Pre-ferred Worker card when they have apermanent partial disability, have notrefused suitable employment withtheir employer at injury, and cannotreturn to regular work. An employerhiring a Preferred Worker is eligible

A fundamental goal of the Oregonworkers’ compensation law is to re-turn injured workers to work asquickly as possible. This is also aneffective strategy to reduce workers’compensation claims costs. The Or-egon workers’ compensation systemhas had numerous return-to-workprograms as the legislature has at-tempted to find better and more cost-effective ways of getting injuredworkers back to work. Although thespecifics have changed over theyears, two primary programs havebeen used: vocational assistance to

help workers overcome barriers tosuccessful return to work, and the Re-employment Assistance Program (in-cluding Preferred Worker and Em-ployer-at-Injury Programs) to provideincentives to employers who hire in-jured workers.

Vocational assistanceIn 1987, the legislature significantlyrestricted eligibility for vocational as-sistance: workers who can return totheir employer at injury or to anyother job that pays at least 80 percentof their job at injury do not receivevocational assistance. As a result, thenumber of new vocational assistancecases decreased by 91 percent from1987 to 1999, and the total cost ofclosed cases decreased by 77 percentduring the same period. Costs de-creased at a slower rate because the

to receive exemption from workers’compensation premiums for theworker for a period of three years,plus at least one of the followingforms of assistance: wage subsidy,worksite modification, or obtainedemployment purchases. If the workersustains a new injury, the claims costsare reimbursed by the department tothe insurer. The number of Preferred

Program were enhanced. In 1993, ad-ministrative rule amendments ex-panded reemployment benefits forPreferred Workers and created theEmployer-at-Injury Program, whichoffers incentives to employers to re-turn injured employees to light dutybefore claim closure. By SB 369 in1995, the legislature restricted eligi-bility for vocational assistance under

Figure 18. Vocational assistance cases opened, 1987-1999

7307558141,0711,1921,1881,3331,2771,4321,879

2,2472,363

8,506

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Cas

es o

pen

ed

Figure 19. Preferred Worker contracts started, FY 1988-2000

1,886 1,933 1,977

2,3262,575 2,579

2,838 2,729

3,3073,163

2,986

2,519

1,963

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Fiscal year

Con

trac

ts

32


Worker contracts increased 75 per-cent from 1988 to 1996, droppingalong with PPD cases in recent years.Not quite one-third of the workerswho receive Preferred Worker cardsare expected to use the card to find ajob. During the ten years of the pre-mium exemption incentive, almost9,400 workers have been hired usingthe card.

The Employer-at-Injury Program isavailable to workers who have anopen claim, have not been releasedto regular work, and who can returnto a light duty job. Assistance in-cludes wage subsidy, worksite modi-fication, and early-return-to-work

StudiesA 1995 department study of the la-bor market experience of injuredworkers whose claims first closed in1991 confirmed that workers who areable to return to their job at injury aremore likely to suffer fewer breaks inemployment and increase their wagesthan workers who cannot. Similar re-sults were found for Preferred Work-ers who used their benefits and dis-abled workers who completed a vo-cational training plan. Workers whosettled their claims by a Claim Dis-position Agreement (CDA) had sig-nificantly lower return-to-work rates.

A current study, in progress, looks atwage records reported to the Employ-ment Department through the firstquarter of 1998, for disabled work-ers with injuries in 1991 and 1992.Among workers who were deter-mined able to return to regular work,about two-thirds were employed in1998, four to six years after injury.Faring even better were workers whoreturned to light duty through the Em-ployer-at-Injury Program: nearlythree-quarters were employed in1998. For other workers who wereunable to return to their regularwork—generally because of the se-verity of their disabilities—use ofreturn-to-work assistance was asso-ciated with higher rates of reemploy-ment. This finding held true both forthe use of Preferred Worker benefitsand completion of a training planunder vocational assistance. Workerswho settled their open claim via aCDA had the lowest long-term reem-ployment rate, at 37 percent. Statis-tics on average days from injury tosettlement and average medical costssuggest that this group of injuredworkers had injuries as complex asthose suffered by Preferred Workers.However, the workers making up thisgroup were not identified as PreferredWorkers, and thus were ineligible toreceive reemployment assistance.purchases. Following six years of

steady growth in use of the program,1999 brought a leveling off in workerplacements and expenditures for lightduty. The decline came mostly fromfewer programs for disabling claims.In 1999, there were 4,361 programsfor disabling injuries and 5,082 formedical-only (nondisabling) injuries.

In 1990, workers’ reinstatementrights were strengthened, though withnew restrictions, to assist injuredworkers to return to work with theiremployer at injury. SB 369 added fur-ther restrictions to reemployment andreinstatement rights. These provi-sions are monitored by the OregonBureau of Labor and Industries.

Figure 20. Employer-at-Injury programs approved, 1993-1999

447 2,3993,739 4,310 4,450 4,986 4,361

5,082

1,767 3,905

5,079

0

2,000

4,000

6,000

8,000

10,000

12,000

1993 1994 1995 1996 1997 1998 1999

Calendar year

Pro

gram

s

Disabling claims Nondisabling claims

33


Preferred Worker contracts started, FY 1988-2000Fiscal Total costyear Contracts ($ millions)1988 1,886 $3.01989 1,933 2.71990 1,977 3.21991 2,326 4.21992 2,575 5.81993 2,579 6.31994 2,838 8.51995 2,729 9.01996 3,307 10.81997 3,163 11.21998 2,986 11.61999 2,519 10.62000 (prelim) 1,963 8.9

The number of Preferred Worker contracts started increased 75 per-cent from 1988 to 1996, dropping in recent years along with PPDcases. Total dollars spent on assistance since 1988, including wagesubsidy, worksite modification, obtained employment purchases,premium exemption and premium relief, stand at $96 million.

Note: Data for the most recent years are revised as reimbursementrequests are received and paid.

Statistics

Preferred Worker premium exemption program, FY 1991-2000

Fiscal Cards Workersyear issued hired1991 4,181 1,5211992 3,529 1,1101993 3,079 9901994 3,293 9661995 3,584 1,1101996 4,189 1,1001997 3,499 9511998 2,920 7331999 2,801 5352000 2,419 359

For workers who receive a Preferred Worker card, not quite one-third are expected to use the card for employment. ID Cards issuedhave declined along with PPD claims.

Note: This table uses a running count of hires by the year of IDCard issue. The counts of cards issued have been adjusted for re-scinds since the last report.

Preferred Worker contract costs, FY 1988-2000

Worksite PremiumFiscal mods exempt Wage subsidiesyear ($ millions) ($ millions) ($ millions)

1988 $0.4 - $2.61989 0.2 - 2.41990 0.2 - 2.61991 0.8 $ 0.0 3.01992 2.2 0.3 3.01993 2.3 0.7 3.11994 3.1 1.7 3.51995 2.2 3.0 3.61996 3.0 2.8 4.51997 3.0 3.0 4.61998 3.3 2.9 4.71999 2.5 3.5 4.02000 2.1 3.1 3.4

Despite a recent decline, expenditures for worksite modificationshave increased fivefold compared to 1988. Obtained employmentpurchases totaled $3.7 million from 1988 to 2000. The cost of pre-mium relief, the predecessor of premium exemption, reached nearly$1 million in total costs for the life of the program.

Employer-at-Injury programs approved, 1993-1999

Total costYear Workers Employers ($ millions)1993 447 141 $0.41994 2,399 726 3.01995 3,739 1,189 5.01996 6,077 1,346 7.51997 8,355 1,508 9.91998 10,065 1,781 11.81999 9,443 1,835 10.6

Following six years of steady growth in use of the program, 1999brought a leveling off in worker placements and expenditures forlight duty, but the decline came mostly from fewer programs fordisabling claims.

34


StatisticsVocational assistance, 1987-1999

Cases Cases Total costYear opened closed ($ millions)1987 8,506 8,959 $38.41988 2,363 5,977 30.91989 2,247 2,951 22.51990 1,879 2,333 21.41991 1,432 2,300 26.21992 1,277 1,760 20.41993 1,333 1,494 18.01994 1,188 1,291 15.11995 1,192 1,296 14.51996 1,071 1,130 13.81997 814 844 11.11998 755 733 10.21999 730 650 8.8

The number of new cases opened dropped by 91 percent from 1987to 1999, while the total cost of closed cases decreased by 77 per-cent. Costs excludes eligibility determinations and CDA amounts.Currently, most cases either end by CDA soon after eligibility or goon to receive training services.

Note: Data for cases closed and total cost will change wheneverredeterminations result in reopened eligibility.

Vocational assistance plans and return-to-work rates, 1987-1999

DEP Training RTWYear plans plans rates

1987 3,334 1,041 74.0%1988 2,050 852 73.8%1989 786 717 68.3%1990 362 731 69.6%1991 213 908 78.3%1992 111 703 79.8%1993 61 595 78.0%1994 58 467 78.8%1995 52 466 85.3%1996 37 450 90.7%1997 20 378 83.7%1998 6 338 85.0%1999 4 292 84.5%

The number of vocational assistance cases in Direct EmploymentPlans (DEP) declined to just 4 cases by 1999. The return-to-work(RTW) rate for workers who completed their program has been athistorically high levels the last five years, peaking in 1996.

Note: Data will change whenever redeterminations result in reopenedeligibility.

Handicapped Workers Reserve claims and costs, FY 1987-2000Fiscal New Total costsyear claims ($ millions)

1987 380 $ 9.81988 312 12.11989 222 11.81990 200 10.71991 0 9.01992 0 6.41993 0 4.51994 0 3.81995 0 2.61996 0 1.81997 0 2.11998 0 2.01999 0 2.22000 0 1.7

Beginning in May 1990, no new applications were accepted. Costsfor approved claims will steadily decline.

35


Benefits - permanent disability

ity, both for scheduled and unsched-uled injuries. From 1992 until repealunder SB 369 in 1995, the value of adegree was tied to the statewide av-erage weekly wage, thus providing anannual adjustment for PPD benefits.Since then, the legislature has enactedincreases at each session, taking ef-fect at two-year intervals.

The value of a scheduled degree (forbodily extremities, vision, and hear-ing) has increased from $125 in 1987to the current value of $511.29 perdegree. As a result, scheduled PPDbenefits increased by 309 percent,and Oregon’s national percentileranking for maximum scheduled PPDrose from the tenth percentile in 1988to the 49th in 2000. Benefits for un-scheduled disabilities (to the back andother body parts and systems notnamed in statute) have also risen, by366 percent for maximum benefits,from 1987 to 2000. Oregon’s maxi-mum unscheduled PPD, which wasfar below the national average at theeighth percentile in 1994, shot up tothe 47th percentile by the beginningof 1998. In 2000 it dropped slightlyto the 46th percentile. Also notewor-thy is the establishment in 1991 of a

Prior to legislative reform, Oregonwas continually singled out as a statewith one of the nation’s most costlyworkers’ compensation systems, andyet, with woefully inadequate perma-nent disability benefits for injuredworkers. The Oregon reforms notonly intended to reduce system costs,but also included provisions to in-crease the permanent partial disabil-ity (PPD) benefits to injured workers,to provide a benefit structure thatcompensates those more severely in-jured with more equitable awards,and to ensure that injured workersreceive their benefits faster.

National RankingsOf seven maximum indemnity ben-efit categories capable of nationalpercentile ranking, four of Oregon’sexceeded the national median as ofJanuary 2000. Those categories be-low the national median includescheduled and unscheduled PPD,both of which are now very close tothe median values; and survivors’benefits for spouses without children.

Since 1987, the legislature has en-acted several changes to the value ofa degree of permanent partial disabil-

tiered structure for unscheduled dis-ability, which compensates the moreseverely injured at higher degree val-ues. The 1995 legislature redefinedthe tiers to make higher benefitsavailable to more workers.

Average PPD awardsAlthough the national median formaximum benefits has been a usefultool, comparing PPD benefits amongstates is difficult. Most states com-pute PPD benefits as a function of theindividual worker’s weekly wage, notthe fixed amounts used in Oregon.Other states provide larger maximumbenefits only for high wage workers.For this reason, when the worker’swage is taken into account, maximumbenefits for low-wage workers appearrelatively generous compared to mostother states. For unscheduled ben-efits, however, the maximum is apoor indicator of benefit generositybecause only about one percent ofclaims qualify for upper-tier benefitvalues. About 72 percent of Oregonunscheduled claims fall into the low-est tier, and benefits for these claimsare among the lowest in the country.Unlike maximums, benefit levels inthe lowest tier have failed to keep

Figure 21. Maximum PPD benefits, FY 1987-2000

98.2

87.287.287.280.680.680.6

63.660.6

66.7 67.4

58.658.6

27.827.827.824.0

138.2138.2138.2130.4130.4

149.0

130.4

68.965.762.669.6

60.5

32.032.032.032.032.0

0

30

60

90

120

150

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996(1s tha lf)

1996(2ndhalf)

1997 1998(1s tha lf)

1998(2ndhalf)

1999 2000(1s tha lf)

2000(2ndhalf)

Fiscal year

Max

imum

PP

D b

enef

its

($th

ousa

nds

)

Scheduled PPD Unscheduled PPD

36


pace with inflation over the past twodecades. Determining whether in-jured workers are actually receivinghigher average and more equitablebenefits subsequent to reform is notstraightforward. The average degreesawarded for both scheduled and un-scheduled PPD awards have de-creased: scheduled by more than halfto about 16 degrees currently, and un-scheduled by about one third, to 48degrees. Average dollars awarded forscheduled PPD have increased by 88percent since 1989’s low point. Con-versely, the average dollars for un-scheduled PPD continued to declineuntil benefit increases began to takeeffect following the 1991 legislation.A primary reason for this is that mostunscheduled PPD is awarded at thebottom tier value for degrees, and val-ues for the lowest tier of benefits haveincreased relatively slowly. There area number of factors, however, thatcomplicate the use of the change inaverage degrees and dollars awardedto draw conclusions about averagebenefits to injured workers. Claimssettled by claims disposition agree-ments most certainly involve casesfor which permanent partial disabil-ity is compensated, but are not in-cluded in the above PPD data.Moreover, standardization of proce-

dures for disability rating and pos-sible changes in injury severity andreturn-to-work patterns may also con-tribute to the decline in average de-grees awarded.

Examining the median lag times fromdate of injury to initial closure orother orders for increased PPD, aswell as the number of cases reachingeach appeal level, provides insightinto whether injured workers are re-ceiving their benefits faster. The me-dian lag times in 1999 from date ofinjury to initial closure and to recon-sideration order are significantlyshorter than the lag times from injuryto hearings or board review. Also, thenumber of cases reaching these ap-peal levels has decreased dramati-cally. For example, 42 percent ofunscheduled degrees were awardedon appeal in 1987, compared toaround 10 percent at reconsiderationor appeal currently. The implicationis that injured workers, on average,are receiving their benefits faster.

Indemnity dollarsHistorically, permanent total disabil-ity claims, although small in number,have been a large portion of indem-nity dollars. From 1988 to 1999, thenet number of PTD awards declined

93 percent, compared to an overalldecrease in disabling claims of 41percent. Law amendments affectingPTD benefits include the mandatesfor standards for evaluating perma-nent disability, the legalization ofclaims disposition agreements, andthe redefining of gainful employ-ment. Changes in insurer claims man-agement practices, shifts in Oregon’sindustrial mix, and increased empha-sis on workplace safety and health areother contributing factors.

Combined cash benefits for time loss,PPD awards, claims dispositionagreements, and PTD and fatality in-demnity benefits is one measure ofbenefits available to injured workers.Average cash benefits paid to injuredworkers per accepted disabling claimincreased by 10 percent, from $6,781in 1987 to $7,456 in 1992, but havebeen up and down since. Averagecash benefits stand at $7,390 in 1999.Decreases in average days of timeloss paid, average degrees of PPDawarded, and the number of PTDawards contribute to the relatively flattrend line in average cash benefitspaid, despite legislated increases inPPD benefits and automatic inflationadjustments for other benefits.

Figure 22. Cash benefits paid to workers for accepted disabling claims, 1987-1999

$ 272.3$ 287.7

$ 301.3$ 283.5

$ 265.3$ 234.7 $ 226.3 $ 229.7 $ 227.2

$ 210.1 $ 203.4 $ 198.7 $ 199.9

0

80

160

240

320

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

($ m

illio

ns)

37


Statistics

Oregon percentile ranking for maximum benefits, 1988-2000

Benefit 1988 1994 1996 1998 2000

TTD 68 73 71 74 74Sch. PPD 10 33 48 46 49Unsch. PPD 6 8 46 47 46PTD 70 73 75 74 74Death-no child 28 25 27 22 26Death-child 86 88 88 91 91Burial 78 43 67 81 85

In 2000, Oregon’s maximum indemnity benefits were above thenational median in four of the seven benefit categories. Those be-low the median included compensation for scheduled PPD, unsched-uled PPD (both very close to the median), and death with no chil-dren.

Maximum PPD benefits, FY 1987-2000

Maximum MaximumFiscal scheduled unscheduledyear PPD PPD

1987 $24,000 $32,0001988 27,840 32,0001989 27,840 32,0001990 27,840 32,0001991 58,560 32,0001992 58,577 60,5031993 60,601 62,5921994 63,631 65,7231995 66,722 68,9151996 (1st half) 67,402 69,6171996 (2nd half) 80,640 130,4001997 80,640 130,4001998 (1st half) 80,640 130,4001998 (2nd half) 87,168 138,2241999 87,168 138,2242000 (1st half) 87,168 138,2242000 (2nd half) 98,168 149,033

Between fiscal years 1987 and 2000, maximum scheduled PPD ben-efits increased 309 percent and unscheduled benefits increased 366percent.

Average degrees for permanent partial disability cases, 1987-1999

Scheduled UnscheduledYear PPD PPD

1987 36.1 69.41988 33.6 68.01989 28.4 65.21990 27.6 63.61991 23.5 57.31992 20.8 55.51993 20.0 57.91994 18.8 55.91995 19.0 53.01996 17.6 52.01997 17.3 49.91998 16.3 49.81999 15.9 48.0

Both average scheduled and unscheduled PPD degrees have de-creased since HB 2900; CDAs, standardization of disability rating,claim severity, and changes in return-to-work patterns are factorsin this decline.

38


Average dollars for permanent partial disability cases, 1987-1999Scheduled Unscheduled

Year PPD PPD

1987 $3,939 $6,7831988 3,898 6,7111989 3,623 6,4921990 3,760 6,3361991 4,280 5,7101992 4,969 5,5471993 5,313 5,9441994 5,513 5,9671995 6,055 5,9391996 6,146 6,1311997 6,645 6,4261998 6,601 7,0001999 6,815 7,000

Average scheduled PPD dollars awarded have increased by 88 per-cent since 1989. Average unscheduled PPD declined after the pas-sage of HB 2900, but benefit increases beginning in 1992 haveresulted in an upward trend, taking the 1998 and 1999 averagesbeyond the peak of 1987. Average degrees and dollars are calcu-lated by tallying each claim’s awards; averages may change asclaims receive more PPD through claim reopening or litigation.

Permanent total disability, 1987-1999Net

Year Grant Rescind number1987 204 27 1771988 209 14 1951989 139 15 1241990 81 36 451991 68 22 461992 47 5 421993 26 13 131994 36 9 271995 32 17 151996 17 6 111997 20 5 151998 16 6 101999 24 11 13

The net number of PTDs decreased by 93 percent between 1988and 1999. CDAs, legalized in 1990, have played a prominent rolein sustaining the historically low counts of PTDs.

Cash benefits paid to injured workers for accepted disabling claims, 1987-1999Benefits Averagepaid benefits

Year ($ millions) per claim

1987 $272.3 $6,7811988 287.7 7,0101989 301.3 6,9001990 283.5 7,2381991 265.3 7,4001992 234.7 7,4561993 226.3 7,3511994 229.7 7,4711995 227.2 7,2061996 210.1 6,8741997 203.4 7,1651998 198.7 7,1171999 199.9 7,390

Average cash benefits paid (current dollars) increased 10 percentfrom 1987 to 1992, but the trend line has been down and up since.Cash benefits include time loss, PPD, CDA, PTD and fatality in-demnity benefits, but exclude non-cash benefits such as medical,vocational rehabilitation, and attorney fees.

39


Litigation and administrative dispute resolution

tal reconsideration of a claim closurebefore proceeding to a hearing. Bylaw, the mandatory reconsiderationprocess can take only 18 workingdays if there is no dispute over im-pairment findings. When there is adispute about impairment findings,the department appoints an indepen-dent medical arbiter to examine theworker. Even in the absence of sucha dispute, the department may appointa medical arbiter if it finds that medi-cal information available is insuffi-cient to determine disability. In 1999,66 percent of the reconsiderationcases included medical arbiter exams.An additional 60 calendar days is al-lowed for the medical arbiter process.When a medical arbiter is involved,no medical evidence subsequent tothe arbiter’s report may be used in liti-gation before the Hearings Division,the board, or courts. This reduces theuse of forensic medical experts. Thereforms also allow the assessment ofan insurer penalty when, on recon-sideration, an insurer’s rating of per-manent disability is increased by atleast 25 percent. In 1999, there were25 of these penalties.

By SB 369 of 1995, the legislaturemade four changes to the reconsid-eration process: it required the re-quest for reconsideration of a closureto be within 60 days of the closure; itrequired the hearings request to bewithin 30 days of the reconsideration;at hearing, it prohibited contesting anissue that was not raised at reconsid-eration or did not arise out of the re-consideration; and, it prohibitedadmission of evidence at hearing thatwas not submitted at reconsideration.In 2000, the Oregon Supreme Courtruled that in a small number of casesthis prohibition of additional evi-dence at hearings was an unconstitu-tional deprivation of workers’ rightsto due process. Specifically, in PTDcases at hearings, oral testimony

about workers’ willingness to workand their job-seeking progress had tobe permitted.

The number of reconsideration re-quests jumped in 1995 because of thereduction in the appealable period.Since 1995, the number of reconsid-eration requests has fallen 36 percent.This decline is due to declines in thenumber of claim closures and in thepercentage of closures for which re-considerations are requested.

The 1997 legislature made twochanges to the reconsideration pro-cess. In 1995, the decision inGuardado v. J.R. Simplot Company,137 Or App 95, raised the possibilitythat a single closure could have tworeconsiderations. To eliminate thispossibility, the 1997 legislature, in SB118, limited the reconsideration pro-cess to one reconsideration per clo-sure. The bill included modified timeframes for conducting the reconsid-eration. The 18-working-day require-ment now begins when all partiesrequest a reconsideration or waivetheir rights to a request. Also in 1997,by SB 119, the legislature providedadditional time to allow workers toattend rescheduled medical arbiterexaminations, suspending all disabil-ity benefits. If the worker fails to at-tend and cooperate with the arbiterexamination without good cause, theworker will not have a further oppor-tunity to attend and will forfeit thesuspended benefits. The reconsidera-tion record will be closed and the or-der on reconsideration issued, basedon the existing record. Issues arisingout of the reconsideration order maybe addressed and resolved at a hear-ing at the Workers’ CompensationBoard.

Medical disputesPrior to 1990, there were voluntaryadministrative review processes in

During the period preceding reform,more claims each year required someform of litigation. Two key goals ofreform were to ensure that injuredworkers receive the benefits and ser-vices to which they are entitled, with-out litigation when possible, and toresolve litigated disputes faster. Anumber of provisions, particularlywith regard to permanent disabilityratings, were enacted to reduce liti-gation. For example, the departmentwas required to establish standardsfor the evaluation of permanent dis-ability that are to be consistently ap-plied by the department and insurerswhen they close claims and at all lev-els of litigation.

WCD administrative disputeresolutionOregon has expanded its use of ad-ministrative dispute resolution pro-cesses. This reduces the number ofclaims that are litigated in a formalhearing or court setting. Thedepartment’s Dispute ResolutionSection provides assistance throughinformal and formal mediation andnegotiation. When these processes donot resolve the dispute, the depart-ment issues an administrative orderthat can be appealed as a contestedcase hearing before the director or theHearings Division, depending onwhich forum has jurisdiction.

Before the 1990 reforms, the depart-ment had some alternative disputeresolution processes available to re-solve disputes administratively.There was a voluntary reconsidera-tion process available for parties whodisagreed with the disability benefitamount awarded at closure. This pro-cess was rarely used until it was mademandatory by the 1990 reforms.

Claim closure disputesBy SB 1197 in 1990, the legislaturerequired that a party seek departmen-

40


place to help resolve disputes aboutmedical treatment and fees. Theseprocesses were used infrequently.The 1990 reforms made the reviewprocesses mandatory before a con-tested case hearing can be requested.The intent of the legislature was toresolve the majority of these matterswith medical experts so that only themost adversarial cases would go tohearing. Court decisions affecting thedepartment’s jurisdiction in some ofthese issues reduced the use of theseprocesses.

By SB 1197, the 1990 reforms elimi-nated most palliative care after theworker becomes medically station-ary. Palliative care is treatment aimedat relieving symptoms rather than im-proving the worker’s underlying con-dition. Workers can still receivepalliative care under certain condi-tions: if they have permanent totaldisability; when it is necessary tomonitor prescription medication or aprosthetic device; or when the attend-ing physician feels the palliative careis necessary for the worker to con-tinue current employment. Disputesabout the necessity for palliative careare filed with the department.

The number of medical dispute reso-lution requests peaked in 1992 at1,518. Following the Court ofAppeal’s decision in Meyers v.Darigold,123 Or App 217, in Octo-ber 1993, the department lost juris-diction over disputes involvingproposed medical treatment. As a re-sult, the number of requests fell to466 in 1994. SB 369 restored this ju-risdiction, and the number of requestsrose again.

By SB 728, effective October 23,1999, the 1999 legislature transferredto the Hearings Division responsibil-ity for disputes when compensabil-ity of the underlying medicalcondition is at issue or when the

causal relationship between the ac-cepted condition and the medical ser-vice is at issue. These compensabilityissues are resolved before other medi-cal issues such as medical servicesor the appropriateness of treatmentare resolved. Those cases wherecompensability or causality are ac-cepted at the Hearings Division arethen sent back to the Medical ReviewUnit (MRU) for resolution of themedical service dispute. At MRUthey are recorded again as fresh re-quests. The number of medical dis-pute resolution requests grew byabout 100 in 1999 over 1998. Mostof this increase is due to the additionof compensability and causalitycases.

SB 369 subjected dissatisfaction withthe action of a managed care organi-zation regarding the provision ofmedical services, peer review, or uti-lization review to the medical disputeresolution process. In 1999, 14 per-cent of the requests involved MCOs.

Medical dispute orders, other than or-ders involving Insurer Medical Ex-aminations (IME), can be appealedthrough the contested case hearingsprocess. (IME disputes are appealedto the Hearings Division.) In 1999,13 percent of the orders were ap-pealed.

Vocational assistance disputesIn contrast to medical disputes, par-ties with vocational assistance dis-putes frequently used mediation andarbitration processes prior to the re-forms. These processes were not no-tably changed by the 1990 reforms.The number of requests for the reso-lution of vocational disputes fell 69percent from 1991 to 1999. Most ofthe decline is the result of the declinein the number of vocational assis-tance cases. The percentage of voca-tional assistance cases (eligible andineligible) that had at least one voca-

tional dispute remained at about 20percent until it dropped to 16 percentin 1999.

The Rehabilitation Review Unitattempts to resolve disputes throughagreements. In 1999, 61 percent ofthe vocational disputes filed with thedepartment were dismissed orresolved through agreements; 39percent required a formal administra-tive order. The median time to resolvea vocational dispute was 28 days. Ofthe 1998 and 1999 orders issued, 21percent were appealed to the director.

In 1990, the legislature changed theforum for penalties against insurersfor unreasonable claims denial or de-lay in benefits. Before SB 1197, aworker seeking a penalty against aninsurer had to request a hearing at theboard. If the hearings referee assesseda penalty, the worker received theentire amount, and the insurer wasrequired to pay the worker’s attorneyfees. Under SB 1197, two changeswere made. First, if the sole issue iswhether the insurer has unreasonablydelayed benefits, the worker nolonger proceeds to a hearing at theboard. Instead, the worker files a re-quest for penalty with WCD, and theissue is resolved through an admin-istrative process. The second changeis the way in which attorney fees areaddressed. Under SB 1197, the in-surer pays just the penalty, which isshared equally by the worker and theattorney. The insurer does not pay anadditional attorney fee. This changeoffers less incentive for attorneys tolitigate delays of a few days. At thesame time, the department has en-hanced its insurer audit and penaltyactivities, assessing civil penalties fordelays in payments to workers.

Contested case hearingsThe process for appealing adminis-trative orders is the contested casehearing. By SB 369, the legislature

41


took jurisdiction for appeals of voca-tional service dispute orders and mostmedical service dispute orders fromthe Hearings Division and made themcontested cases. With this change inlaw, the number of requests for con-tested case hearings jumped from 90in 1994 to 274 in 1995. The numberpeaked in 1996 before falling to 181requests in 1999. Most contested casehearings involve appeals of medicaldispute orders or vocational assis-tance dispute orders. In 1995, mostof the orders at contested case hear-ings were vocational assistance dis-putes, but as the number of vocationalassistance disputes has fallen, so hasthe number appealed. Prior to 1998,Appellate Review Unit orders con-cerning timeliness of reconsiderationrequests and jurisdictional questionswere appealed as contested cases.However, a 1998 Court of Appealsdecision, James Jordan v. BrazierForest Products, determined that allAppellate Review Unit decisionswere reconsideration orders and,therefore, appealable to the board.This eliminated the flow of appealsfrom ARU to contested case hearings.

In 1999, HB 2525 revised the con-tested case hearings process. It cre-ated a centralized Hearing Officerpanel within the Employment Depart-ment. The panel consists of the ad-ministrative law judges from severalagencies. Effective January 2000,contested case hearings are sent tothis panel.

Workers’ Compensation BoardThe reforms included a number ofprovisions to speed the process offormal litigation. The 1987 legisla-ture reduced the time allowed to re-quest a hearing following claimclosure from one year to 180 days.As mentioned above, the appealableperiod was further reduced by SB369. The board was required to sched-ule a hearing or board review for adate no later than 90 days after the

Notes: Prior to the implementation of the reconsideration process, closures were appealed directly to hearings.

1995 is split into six-month periods to show the effects of SB 369.

The 1999 rate is preliminary.

receipt of a request. The hearing orboard review cannot be postponedexcept in extraordinary circum-stances beyond the control of the re-questing party. An order must beissued within 30 days of the hearingor board review. Also, legislationlimited the submission of additionalmedical reports and findings to theboard in appeals of reconsiderationorders; this reduces time delays forthe development of additional medi-cal evidence. In addition, the num-ber of board members was expandedfrom three to nine with the appoint-ment of six temporary board mem-bers in September 1989. The 1991legislature phased out the six tempo-rary board members and added twolimited duration members and twopro-tem members. In 1993, the twopro-tem positions were abolished,and the two limited duration boardmembers were made permanent fora total of five permanent board mem-bers.

In 1987, the Hearings Division wasrequired to establish an expeditedclaim service to resolve informallythose claims where compensability isnot an issue and the amount in con-troversy is $1,000 or less, or wherethe only matters unresolved are at-torney fees or penalties. The 1995legislature went one step further. Itprovided for mediation by a private

party when the only issue to be re-solved is insurer responsibility. Thisservice has not been used.

MediationFor years the Workers’ Compensa-tion Board’s Hearing Division hashelped parties settle disputes — onan ad hoc basis as well as throughmass settlement conferences. Withformal mediation, the board now of-fers the parties the help of trained ad-ministrative law judge (ALJ)mediators. This mediation programis voluntary. About 90 percent of thecases that are mediated are settled.The majority of the cases being me-diated are complex cases: mentalstress claims, occupational diseaseclaims, cases that have a claim forpermanent total disability benefits,and cases that also include claimsunder ORS Chapter 659 (civil rightsand unlawful employment practices),the Americans with Disabilities Act,or other employment-related issues.Over 40 percent of mediations in-clude issues in addition to workers’compensation issues. Many of thelatter collateral issues are settled inconjunction with the workers’ com-pensation case settlement. The boardalso has entered into an agreementwith the Court of Appeals to providemediation services in workers’ com-pensation cases pending before thecourt.

Figure 23. Hearing request rates on disabling claims closures, 1987-1999

N/A

4.6%4.4%4.7%5.7%6.2%7.2%8.0%8.2%9.3%8.2%

21.1%20.3%

24.0%

0%

5%

10%

15%

20%

25%

30%

1987 1988 1989 1990 1991 1992 1993 1994 1995(a)

1995(b)

1996 1997 1998 1999

Calendar year

Clo

sure

to

hear

ing

42


Hearing requests and appealratesPrior to reform, the number of hear-ings requests increased for more than20 years, reaching its peak of 27,549in 1989. The number has since fallen,and the number of requests in 1997was 11,266, 41 percent of the 1989figure; requests thereafter have lev-eled off at slightly above 11,000. Oneof the reasons for the decline has beenthe reconsideration process, whichhas cut the hearings request rate oninitial disabling claim closures. Theappeal rate on claim closures hasfallen from 21 percent in 1989 to lessthan 5 percent in 1999. The 1999 ratereflects a reconsideration request rateon initial closures of 15 percent anda hearing request rate of 31 percenton reconsideration orders.

The number of pending cases at hear-ings peaked in June 1987 at 15,664;

by the end of June 2000, pendingcases had dropped to about 5,400, adrop of 65 percent. The median timelag from hearings request to orderdropped almost 50 percent from 224days in 1987 to 114 days in 1988;thereafter it has been fluctuating be-tween 116 and 147 days, beingaround 122 days most of the time.The board review median time lagfrom request to board order in 1999declined to 125 days, a 77 percentreduction since the peak in 1989.

The goal of reducing litigation in-cluded the goal of reducing the ap-peal rates from each level of review.The percentage of reconsiderationsthat have been appealed has droppedfrom 53 percent in 1992 to 31 per-cent in 1999. The hearings appeal ratehas been between 9 percent and 11percent each year from 1991 through1999. The appeal rate of board orders

has been between 18 percent and 20percent since 1993, well below 28percent appeal rate of 1992. (Note:The 1987 reform legislation changedthe review standard to be adopted bythe courts. The de novo review wasreplaced by a review of the record forsubstantial evidence supporting theboard’s decision and for errors oflaw.) Many of the appeals of boardorders deal with precedent-setting re-form issues. The number of these is-sues has decreased.

The composition of the issues liti-gated at hearings has changed signifi-cantly subsequent to reformlegislation. In 1987, permanent dis-ability was at issue in 46 percent ofthe hearings cases; by 1999, the per-centage had dropped to 8 percent.Claim denial was at issue in 25 per-cent of the orders in 1987. After peak-ing at 49 percent in 1993, it droppedto 43 percent in 1999. In 1987, in-

surer penalties were atissue in 15 percent of theorders; in 1999 thepercentage was 8percent. Disabilityevaluation standards,administrative penaltyprovisions, and the man-datory reconsiderationprocess have played arole in altering the com-position of the issuesresolved.

Figure 24. Requests for hearing, 1987-1999

23,316

11,08411,05911,26612,351

14,86216,52716,422

20,397

17,490

19,673

24,018

27,549

0

6,000

12,000

18,000

24,000

30,000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999Calendar year

Hea

ring

req

uest

s re

ceiv

ed

Figure 25. Median time lag, hearing request to order, all cases, 1987-1999

133 125 119 121 124 124121122120

147

116114

224

0

50

100

150

200

250

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Med

ian

day

s

43


Claim disposition agreementsThe reforms allowed for an alterna-tive method of settling acceptedclaims. The 1990 special session au-thorized compromise and releasesettlements (Claims DispositionAgreements or CDAs) of claims ben-efits, except for medical services. Theagreements are entered into by claim-ants and insurers; they are reviewedand approved by the Workers’ Com-pensation Board. In fiscal year 2000,3,049 CDA requests were filed and3,078 approving orders were issued.The settlements for fiscal year 2000amounted to $37.6 million, an aver-age of $12,218 per agreement.

One reason for reducing litigation isthat claimants retain a higher propor-tion of their overall awards when theypay less in attorney fees. In 1995, bySB 369 the legislature made threechanges that worked to reduce claim-ant attorney fees: it limited fees in re-sponsibility disputes; it prohibited theHearings Division from awardingpenalties and fees for matters arisingunder the review jurisdiction of theDCBS director; and, it limited feesfor the reversal of a denial prior to ahearings decision to those cases inwhich the denial is based on com-pensability of the underlying condi-tion. In the reconsideration process,attorney fees are limited to 10 per-

cent of the increased award. Attor-ney fees paid in 1999 resulting fromreconsiderations totaled almost$918,500; proceedings before theHearings Division and on board re-view amounted to $9.15 million.Claimant attorney fees from allsources (reconsiderations, hearings,board review, and CDAs) increasedfrom $16.6 million in 1989 to $21.4million in 1991; since then fees havegradually decreased and have leveledoff around $16 million in the lastthree years. Attorney fees connectedwith lump-sum settlements (CDAsand disputed claim settlements) haveaccounted for a growing share ofclaimant attorney fees, rising fromroughly one-fourth of fees in 1989 to56-61 percent of all fees since 1991.In February 1999 (for the first timein nearly 10 years), the Board raisedthe maximum out-of-compensationfees for a claimants’ counsel, payablefrom increased awards. The maxi-mum is 25 percent of the increase,not to exceed: (a) Awards at Hear-ings - permanent total disability,$12,500 from $4,600; permanent par-tial disability, $4,600 from $2,800;temporary disability, $1,500 from$1,050; disputed claim settlements,25 percent of the first $17,500 (from$12,500) and 10 percent of the re-mainder; and (b) Awards on BoardReview - permanent total disability,

$16,300 from $6,000; permanent par-tial disability, $6,000 from $3,800;temporary disability, $5,000 from$3,800; and, claim disposition agree-ments, 25 percent of the first $17,500(from $12,500) and 10 percent of theremainder.

Two additional provisions in 1995 bySB 369 were expected to directlyreduce litigation. One allowed Hear-ings Division ALJs and the board toimpose attorney sanctions for appealsthat are frivolous, made in bad faith,or for harassment. The other provi-sion required workers who believethat a condition has been omittedfrom a notice of acceptance to notifythe insurer and not merely allege ade facto denial in a hearings request.

Appellate decisionsA number of appellate decisions havetended to narrow the scope of reform,particularly in terms of the director’sauthority to resolve disputes admin-istratively. Some of the major deci-sions are listed below. It is importantto note that of these decisions, allbut four (SAIF v. Herron, U-Haul ofOregon v. Burtis, Altamirano v.Woodburn Nursery, and WelliverWelding Works v. Farmen) werereversed by the 1995 legislature in SB369.

44


Colclasure v. Washington CountySchool District, 317 Or 526 (1993):The Supreme Court ruled that, whenreviewing a Director’s decision on avocational dispute, the hearings ref-eree may make independent findingsof fact.

Safeway Stores v. Heather Smith,122 Or App 160 (1993):The Court of Appeals ruled that whilethere is a limitation on evidence thedirector may consider in a reconsid-eration, there is no comparable limi-tation on evidence a referee may con-sider at a hearing on the same issue.

Leslie v. U.S. Bancorp, 129 Or App1 (1994):The Court of Appeals ruled that thelaw does not preclude a party fromraising an issue at hearing that wasnot raised in the preceding reconsid-eration.

Meyers v. Darigold, 123 Or App217 (1993):The Court of Appeals ruled that thedirector has jurisdiction in medicaltreatment disputes only if a party“wishes,” otherwise, the dispute maygo to hearings.

Jefferson v. Sam’s Cafe, 123 OrApp 464 (1993):The Court of Appeals ruled that thedirector’s authority in medical treat-ment disputes is limited by statue totreatment the claimant “is receiving,”therefore disputes over proposedtreatments must be decided at theHearings Division.

Allen v. SAIF, 320 Or 192 (1994):The Supreme Court ruled that a medi-cal bill paid untimely constituted a“de facto denial” for which attorneyfees could be assessed under ORS656.386(1), rather than the provisionsof ORS 656.262(10). Under ORS656.262(10), attorney fees had beenlimited to half the penalty amount on

U-Haul of Oregon v. Burtis, 120 OrApp 353 (1993):The Court of Appeals ruled that medi-cal treatment for a pre-existing de-generative condition was compens-able if a compensable injury causedthe pre-existing condition to needtreatment, as long as the injury wasthe major contributing cause of theneed for treatment.

Suzanne Robertson, 43 Van Natta1505 (1991):The Court of Appeals ruled that theterm “objective findings” does notmean solely physically verifiable im-pairments. Such a finding may alsobe based on the physician’s evalua-tion of the worker’s subjective com-plaints, in this case a description ofthe pain she was experiencing.

Court Casesissues of delays or refusal to pay com-pensation. One intent of this provi-sion had been to assure that attorneyfees did not exceed the value of theinterest involved in an issue. The ef-fect of this decision may have beento convert many instances of un-timely payment to de facto denials,thus increasing the potential for largeattorney fees.

England v. Thunderbird, 315 Or633 (1993):The Supreme Court ruled that disabil-ity rating rules, adopted by the De-partment of Insurance and Financepursuant to 1987 law changes, wereinvalid because they failed to con-sider all factors used to determine lossof earning capacity.

SAIF v. Herron, 114 Or App 64(1992):The Court of Appeals ruled that 1990amendments raising the dollar valueof a degree of PPD were subject toORS 656.202 and thus were to beapplied based on the date of injuryrather than the date of award.

Stone v. Whittier Wood Products,124 Or App 117 (1993):The Court of Appeals ruled that long-standing department rules basing thecomputation of temporary partial dis-ability benefits on the actual modi-fied work wage were invalid sincethey failed to consider the worker’s“earning power at any kind of work”as specified in statute.

Altamirano v. Woodburn Nursery,133 Or App 16 (1995):The Court of Appeals held that thedepartment had impermissibly inter-preted the 30-day limitation on at-tending physician status for chiro-practors as applying only to the ini-tial claim. The court reasoned that themeaning of “claim” includes requeststo reopen a previously closed claim;thus there may be multiple 30-day pe-riods for a single injury.

Welliver Welding Works v.Farmen, 133 Or App 203 (1995):The Court of Appeals held that thelegislature had intended that voca-tional assistance eligibility decisionsbe based on the claimant’s wage atthe time of the original injury. Thedecision invalidated a departmentrule that used the wage at the time ofaggravation in reopened claims.

Errand v. Cascade Steel RollingMills, 320 Or 509 (1995):The Supreme Court ruled that the ex-clusive remedy provisions of Oregonworkers’ compensation law are op-erative only for claims that are foundto be compensable under workers’compensation law. Employers’ im-munity from civil suits only extendsto injuries that are compensatedthrough the workers’ compensationsystem. Thus, workers whose claimsare work-related but not compensableare not precluded from pursuing civilactions.

45


More recent cases concerninginterpretations of legislativereform include the following:

Messmer v. Delux Cabinet Works,130 Or App 254 (1994):The Court of Appeals ruled that thefailure to appeal a determination or-der bars the later denial of conditionsrated in that order. To reverse thisruling, SB 369 contained languagestating that the payment of permanentdisability did not preclude insurersfrom contesting compensability. InDelux Cabinet Works v. Messmer,140 Or App 548 (1996), the Court ofAppeals stated that this language,despite the legislature’s intent, did notreverse the earlier court decision thatthe failure to appeal did preclude laterdenials. By HB 2971, the 1997 legis-lature revised the law to specificallyoverturn the Messmer decisions.

SAIF Corporation v. Walker, 145Or App 294 (1996):The Court of Appeals considered themeaning of the change in the defini-tion of an aggravation in SB 369. Thecourt reviewed the legislative historyand determined that a symptomaticworsening is not sufficient to estab-lish an aggravation; instead, proof ofpathological worsening is required.(The Supreme court affirmed thedecision.)

Fister v. South Hills Heath Care,149 Or App 214 (1997):The Court of Appeals considered acase in which claimant testimonyabout a closure that was not submit-ted at reconsideration was presentedand admitted at the hearing. The courtruled that, because there was no ob-jection at the hearing, the evidencecould be considered by the ALJ and,on review, by the board.

SAIF Corporation v. Shipley, 326Or 557 (1998):The Supreme Court dismissed aboard order that a claimant’s claimfor medical services was compens-able. The hearing had initially in-volved the issue of aggravation andargued that the medical treatmentswere related to the original acceptedcondition. The board held that themedical services claim was compens-able. The court found that the properjurisdiction was the directors’ reviewnot the board. Because there is nostatutory provision of the board toremand to the director, the only cor-rect action for the board was to dis-miss the case.

O’Neil v. National Union Fire, 152App 497 (1998):The Court of Appeals ruled that thedepartment’s contested case hearingsprocedures had been followed as

written. The claimant had argued thatthe department was required to con-duct a full-scale contested case pro-cedure at a contested case hearing; thedepartment had instead followed amore limited procedure. The courtdetermined that this procedure is con-sistent with ORS 656. 327(2).

Koskela v. Willamette Industries,Inc., 331 Or 362 (2000):The Oregon Supreme Court ruledthat, for a small number of cases, theSB 369 amendment of ORS656.283(7) to prohibit at hearing evi-dence that was not a part of the re-consideration process was an uncon-stitutional deprivation of a worker’sdue process rights. Specifically, inPTD cases, a worker should have theopportunity to provide oral testimonyabout his willingness to work and hisefforts at finding work.

Smothers v. Gresham Transfer,Inc., (2000, currently before theSupreme Court):The Oregon Supreme Court has heardarguments that the combination of themajor contributing cause languageand the exclusive remedy languageunconstitutionally denies injuredworkers with pre-existing medicalconditions a legal remedy for theirinjuries. As of December 2000, theSupreme Court has not issued its de-cision.

46


Statistics

Reconsideration requests and orders, 1991-1999Requests Orders Time

Year received issued lag days (mean)1991 6,137 5,996 651992 6,678 6,518 451993 6,099 6,027 581994 6,019 6,033 611995 6,924 6,568 621996 5,907 6,301 661997 4,724 4,795 681998 4,653 4,585 701999 4,450 4,543 71

The mandatory reconsideration process began in mid-1990. Thenumber of requests jumped in 1995 as SB 369 shortened the timelinesduring which a reconsideration request could be made. Requestshave since dropped as the number of closures has fallen. The lagtime has increased as the percentage of disputed closures going to amedical arbiter has increased.

Medical dispute requests, by issue, 1990-1999

Change ofattending Palli- Treat- Medical

Year physician Fees IME ative ment service

1990 92 756 73 159 92 -1991 95 803 58 204 226 -1992 81 815 31 209 382 -1993 51 438 23 70 294 -1994 36 254 33 44 99 -1995 63 312 23 45 298 -1996 36 310 16 84 236 341997 32 306 12 43 212 2741998 40 33 8 30 214 4771999 31 49 24 55 172 574

In December 1996, the new category “Medical Service” was addedto bring the issue categories more in line with statute. Many issuesformerly called “Palliative” or “Fees” are now categorized as “Medi-cal Service.”

Medical dispute resolution requests and orders peaked in 1992 andthen declined sharply after a court decision limited the department’sjurisdiction. SB 369 reversed this decision and the numbers in-creased. In 1999, by SB 728, authority for determining the com-pensability of the underlying medical condition or the causal rela-tionship between the accepted condition and the medical servicewas transferred to the Hearings Division. These, included in thecounts of medical disputes, are the reason for the increase in dis-putes in 1999.

Medical dispute requests and orders, 1990-1999Request to order

Year Requests Orders lag days (median)

1990 1,172 310 281991 1,386 969 1121992 1,518 1,412 631993 876 987 441994 466 467 331995 741 469 391996 716 856 1201997 879 817 611998 802 816 891999 905 820 85

47


Statistics

Vocational dispute requests and orders, 1991-1999Request to order

Year Requests Orders lag days (median)

1991 2,068 2,139 411992 1,644 1,725 291993 1,493 1,519 251994 1,390 1,375 241995 1,348 1,303 281996 996 1,037 351997 877 881 321998 718 716 261999 640 681 28

The number of requests for the resolution of vocational disputeshas fallen 69 percent from 1991 to 1999. The decline resultedchiefly from the decrease in the number of vocational assistancecases. The percentage of vocational assistance cases (eligible andineligible) that have had at least one vocational dispute has re-mained at about 20 percent each year throughout this period untildropping to 16 percent in 1999.

For the past seven years, one-third of the requests for penaltiesresulted in penalties.

Administrative penalties for claims processing delays, FY 1991-2000

Fiscal Penalty Penaltiesyear requests assessed

1991 468 2081992 438 1651993 443 1401994 350 1731995 320 1011996 398 1281997 347 1221998 311 811999 275 822000 234 80

Contested case hearings, requests and orders, 1994-1999

Request to orderYear Requests Orders lag days (mean)

1994 90 107 1721995 274 169 1251996 311 373 1171997 273 279 891998 209 190 1241999 181 183 152

After the passage of SB 369, the number of requests for contestedcase hearings jumped. SB 369 precluded appeals to the HearingsDivision in vocational service and medical service disputes. Thenumber of requests declined 42 percent between 1996 and 1999.

Contested case hearings requests, by issue, 1995-1999

Decision level appealed 1995 1996 1997 1998 1999Benefits Section 15 23 24 25 7Compliance Section 25 19 20 10 13Dispute Resolution SectionAppellate Review Unit 39 55 52 2 -Medical Review Unit 67 132 90 102 104Rehabilitation Review Unit 117 61 77 70 56Miscellaneous 11 21 10 0 1

In 1995, most of the requests were appeals of vocational assis-tance disputes. As the number of vocational assistance disputesfell, so did the number appealed. A 1998 court decision deter-mined that all Appellate Review Unit decisions were reconsidera-tion orders and, therefore, appealable to the board. This eliminatedthe flow of appeals from ARU to contested case hearings.

48


Statistics

Hearings request rates on claim closures, 1987-1999

Rate, Rate, Rate,Appeal closure to recon to closureyear reconsideration hearings to hearings

1987 - - 24.0%1988 - - 20.3%1989 - - 21.1%1990 - - N/A1991 16.8% 49.0% 8.2%1992 17.3% 53.4% 9.3%1993 17.1% 48.1% 8.2%1994 16.7% 47.8% 8.0%1995 (1st half) 16.3% 44.3% 7.2%1995 (2nd half) 16.9% 36.9% 6.2%1996 15.8% 36.1% 5.7%1997 14.6% 32.4% 4.7%1998 14.5% 30.6% 4.4%1999 14.8% 30.9% 4.6%

Prior to the mandatory reconsideration process, over 20 percent ofclosures were appealed to hearings. Since the introduction of thereconsideration process, the percentage of closures appealed to re-consideration has declined slightly from 17 percent to 15 percent,and the percentage of reconsideration orders appealed to hearingshas dropped from over 50 percent to 31 percent in 1999. As aresult, the percentage of closures that are appealed to hearings hasdropped to five percent.

Hearings requests, orders, and appeal rates, 1987-1999

AppealYear Requests Orders rate

1987 20,397 23,680 7.3%1988 23,316 26,386 8.2%1989 27,549 24,890 7.8%1990 24,018 25,073 6.6%1991 19,673 21,368 11.0%1992 17,490 19,580 11.4%1993 16,422 16,888 10.2%1994 16,527 15,751 10.2%1995 14,862 16,798 9.2%1996 12,351 13,341 10.4%1997 11,266 11,596 11.2%1998 11,059 11,271 10.5%1999 11,084 10,846 10.5%

Requests for hearings peaked in 1989. The numbers have fallensince, with requests in 1999 just 40 percent of the 1989 figure. Theappeal rate for board review of hearings orders has changed verylittle since 1991.

Note: The requests and orders include stipulations received with-out a prior hearing request (about 6 percent of total requests and 5percent of orders).

Percentage of hearings orders involving selected issues, 1987-1999Permanent Claim Insurer

Year disability denial penalty

1987 46.1% 24.5% 14.6%1988 39.7% 24.5% 16.4%1989 31.9% 32.3% 16.6%1990 33.3% 34.8% 14.6%1991 18.2% 43.7% 10.0%1992 15.7% 40.9% 7.5%1993 12.6% 48.7% 10.3%1994 11.6% 44.7% 12.5%1995 10.4% 39.4% 12.1%1996 11.5% 38.2% 8.4%1997 10.1% 46.6% 5.9%1998 7.6% 42.9% 7.2%1999 7.8% 42.5% 7.8%

Due to the introduction of the mandatory reconsideration processfor disputed claim closures, the percent of hearings in which per-manent disability was an issue fell sharply from 1990 to 1991. In1999, less than 8 percent of the hearing orders involved permanentdisability.

49


Statistics

Disputed claim settlements (DCS) at hearings, 1987-1999

DCS AmountYear cases ($ millions)

1987 3,778 $18.21988 4,139 21.61989 4,365 22.51990 5,374 29.11991 6,021 32.61992 4,942 25.71993 4,700 24.81994 4,100 20.81995 4,455 22.21996 4,001 19.11997 3,846 19.01998 3,921 20.31999 3,721 19.6

The number of disputed claim settlements has decreased gradually,but at a pace slower than that of the corresponding hearings orders.

Claims disposition agreements, FY 1991-2000

CDAFiscal CDA approval Amountyear requests orders ($ millions)

1991 2,307 1,729 $28.51992 3,075 2,965 46.71993 3,492 3,383 46.11994 3,292 3,216 41.91995 3,487 3,399 43.11996 3,854 4,037 49.21997 3,304 3,250 44.41998 3,136 3,184 40.91999 3,172 3,124 39.12000 3,049 3,078 37.6

Except for the fiscal year in which CDAs were first introduced,the number of requests for CDAs and the total dollar amountawarded were the lowest in FY 1999; the number of approvalswas lowest since FY 1992.

Board review requests, orders, and appeal rates, 1987-1999Appeal

Year Requests Orders rates1987 1,719 1,222 29.6%1988 2,151 991 12.8%1989 1,944 1,576 13.6%1990 1,653 3,067 17.2%1991 2,346 2,064 23.8%1992 2,230 2,487 27.9%1993 1,726 1,931 19.5%1994 1,599 1,814 20.1%1995 1,553 1,655 17.8%1996 1,381 1,676 17.9%1997 1,307 1,229 18.2%1998 1,187 1,358 18.5%1999 1,141 1,147 19.1%

The number of requests for board review peaked in 1991; the 1999number of requests was 49 percent of the 1991 figure. The percent-age of board orders appealed peaked at 30 percent in 1987. In 1999,19 percent of board orders were appealed.

50


Court of Appeals requests and orders, 1987-1999

Year Requests Orders

1987 362 2871988 127 2831989 214 1081990 528 1781991 491 3321992 695 2471993 377 2851994 365 2391995 288 1721996 300 1751997 224 1601998 251 1301999 219 126

Court requests peaked in 1992. In 1999, the number of requestswas 32 percent of the 1992 figure.

Note: Orders exclude remands where the court did not rule on theprimary issue.

Median time lag days from request to order, 1987-1999

Year Hearings Board Court

1987 224 259 3351988 114 306 3231989 116 548 2811990 147 458 2981991 133 264 2931992 125 255 3211993 119 256 2951994 121 238 2861995 124 204 2991996 120 163 2881997 122 160 3181998 121 134 3301999 124 125 343

The median time lag for hearing orders in 1999 was 55 percent thatof 1987, and the board review lag has fallen 77 percent since itspeak in 1989.

Note: The time lags are for all order types.

Median time lag days from injury to order, 1987-1999Year Hearings Board Court

1987 758 1,067 N/A1988 677 1,098 1,6061989 602 1,320 1,4971990 617 1,169 1,7521991 659 978 1,5121992 655 1,047 1,5491993 598 966 1,4431994 561 870 1,4021995 574 817 1,4901996 532 763 1,2471997 502 723 1,4841998 488 716 1,3301999 485 685 1,446

The time lags from injury to order have declined substantially since1987.

51


Statistics

Board own motion orders and reopened claims reserve costs, 1987-1999B.O.M. Reserve costs

Year orders ($ millions)

1987 612 $0.01988 724 0.21989 703 2.21990 962 2.71991 1,135 4.81992 1,003 3.91993 927 3.51994 845 3.71995 751 3.91996 659 2.71997 616 3.61998 639 3.81999 593 3.9

The number of board own motion orders peaked in 1991; ordershave declined steadily since, except for a slight increase in 1998.The Reopened Claims Reserve was effective January 1, 1988. Re-imbursements to insurers for own motion claims costs peaked in1991 at $4.8 million. Other than in 1996, reimbursements havebeen between $3.5 and $3.9 million a year since 1992.

Claimant attorney fees and defense legal costs, 1987-1999

Claimant Defenseattorney fees legal costs

Year ($ millions) ($ millions)

1987 $14.4 N/A1988 16.3 N/A1989 16.6 $23.41990 17.8 26.11991 21.4 26.91992 21.3 28.21993 19.8 27.21994 18.8 25.71995 20.0 27.41996 17.6 25.31997 16.1 24.31998 16.2 24.11999 16.0 24.0

The $16 million in attorney fees from claimants’ compensation isthe lowest since 1987, despite the fact that effective February 1999,the Board raised the maximum out-of-compensation fees to theclaimant’s counsel from increased awards by ALJs and the Board.(See text for details.) Defense legal costs in 1998 and 1999 werejust above the record low value of 1989.

Claimant attorney fees, by appeal level, 1987-1999

Hearings Board CDA ReconYear ($ millions)($ millions)($ millions)($ millions)

1987 $14.2 $0.2 - -1988 16.0 0.3 - -1989 16.0 0.7 - -1990 15.9 1.0 $0.9 $0.01991 13.8 0.9 6.4 0.31992 12.5 1.1 7.1 0.71993 11.1 1.2 6.6 0.81994 10.4 1.1 6.5 0.81995 10.9 0.8 7.3 1.01996 9.1 0.9 6.7 1.01997 8.5 0.8 6.0 0.81998 8.9 0.8 5.7 0.91999 8.5 0.6 5.9 0.9

In 1999, 53 percent of the claimant attorney fees came from Hear-ings and 37 percent from CDAs.

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Advocates and advisory groups

Small Business OmbudsmanThe office of Small BusinessOmbudsman for Workers’ Compen-sation was created during the 1990special session to advocate for and toeducate small businesses. The officehad over 5,000 inquires in 1999. Ithad also conducted more than 160outreach programs from 1991through 1997. Contacts for outreachprograms have been increasing rap-idly over the last few years.

Injured workers and employers oftenfind the workers’ compensation sys-tem confusing or inaccessible. Or-egon is one of the few states that hasrecognized that the comprehensibil-ity of and access to the system areessential elements in workers’ com-pensation reform. Therefore, a num-ber of advocates and advisory groupsare at work in Oregon.

Ombudsman for Injured WorkersThe 1987 legislature created theWorkers’ Compensation Ombuds-man (now called Ombudsman forInjured Workers) as an independentadvocate for injured workers who arestruggling to resolve the dispositionof their claims. Recognizing the im-portance of the ombudsman, the 1990special session added two positionsto the office, increasing the staff tofive. Since the inception of the office,the number of annual contacts withthe office increased over five-foldthrough 1996. The accounting proce-dure of the number of contactschanged from 1997, and comparisonof the pre-1997 numbers with thenumbers for 1997 and after is not pos-sible. The current procedure includesa count of all incoming and outgoingtelephone calls, in addition to mailcontacts and walk-ins; each case mayhave several contacts, especially tele-phone calls, both incoming and out-going. However it is seen that evenon this basis there has been a 36 per-cent increase of contacts over the lastthree years. In 1999 and 2000 the is-sues that promptedthe most inquirieswere benefits,medical issues,claim processing,and settlements.

The 1995 legislature reduced themembership of MLAC from 14 to 10members and included specific issuesfor mandatory reporting to the legis-lature.

The 1990 special reform session alsoestablished the Joint Legislative TaskForce on Innovations in Workers’Compensation. The task force was di-rected to reexamine the role of theworkers’ compensation system and to

Management-Labor AdvisoryCommitteeIn recognition of the success of thegovernor’s labor-management com-mittee in crafting the 1990 reforms,the legislature created the Manage-ment-Labor Advisory Committee.This committee reaffirms that laborand management are the principalparties in the workers’ compensationsystem. The committee periodicallyreviews disability rating standardsand advises the department on work-ers’ compensation matters such asadministrative rules and legislation.

Figure 27. Small Business Ombudsman inquiries, 1991-19995,164

4,514

3,7113,5453,8773,7273,7313,655

1,934

0

1,000

2,000

3,000

4,000

5,000

1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Inqu

irie

s

Series breakFigure 26. Ombudsman for Injured Workers contacts, 1988-1999

48,931

41,920

36,041

30,01929,36127,88523,62523,707

17,961

9,7025,3155,523

0

10,000

20,000

30,000

40,000

50,000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Calendar year

Con

tact

s

develop recommendations for a morefair, just, and cost-effective system.In its report to the sixty-sixth Legis-lative Assembly, the task force rec-ommended a number of bills thatwould allow for the development ofalternatives to the current workers’compensation insurance system. Theprincipal alternative was to allow foremployers to provide a combined 24-hour health insurance benefits and in-demnity benefits coverage rather thanthe traditional workers’ compensa-tion coverage.

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Statistics

Small Business Ombudsman activities, 1991-1999Outreach

Outreach programYear Inquiries programs contacts

1991 1,934 33 4951992 3,655 40 6001993 3,731 27 4051994 3,727 31 4651995 3,877 15 2251996 3,545 16 2401997 3,711 28 4201998 4,514 N/A 5401999 5,164 N/A 855

This program was implemented in the fall of 1990. The number ofinquiries increased through 1995, then declined in 1996. It hassince increased 46 percent. Outreach program contacts have in-creased rapidly over the last three years, the count doubling itselffrom 1997 to 1999.

Ombudsman for Injured Workers activities, 1988-1999

OutreachOutreach program

Year Contacts programs contacts

1988 5,523 761989 5,315 1061990 9,702 181991 17,961 751992 23,707 711993 23,625 01994 27,885 301995 29,361 11996 30,019 54

1997 36,041 N/A 1401998 41,920 N/A 3111999 48,931 N/A 420

The number of contacts with the injured worker ombudsman of-fice increased six percent a year between 1992 and 1996. The countprocedure for contacts changed from 1997, to count all telephonecalls, mail contacts and walk-ins, so that pre-1997 counts cannotbe compared to the recent counts. However, it is seen that con-tacts have increased rapidly in the last three years.

Series break

Ombudsman for Injured Workers, percent of inquiries by major issue group, 1999 & 2000

Major Issue Group 1999 2000

Attorney 2.1% 1.5%Benefit 22.5% 21.9%Claim processing 11.9% 16.5%Denials 7.8% 7.4%Medical 15.2% 14.6%Orders & appeals 8.7% 7.9%Settlements 12.1% 13.0%Unable to contact 0.3% 1.8%Work release 7.7% 7.0%Other issues 11.8% 8.5%Total 100.0% 100.0%

Looking at inquiries grouped by issue, benefit issues were the mostfrequent in both 1999 and 2000. Medical, claim processing, andsettlements are the next most important issues.

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Appendix - Oregon workers’ compensation reform legislation

The road to significant workers’ compensation legislative reform has been long and arduous. The legislative reformof Oregon’s system began during the 1987 legislative session with the passage of two bills, HB 2271 and HB 2900.These early legislative reforms, together with signs of financial strain on the workers’ compensation insurancemarket, provided the impetus for further major reform efforts by the passage of SB 1197 and SB 1198 during aspecial session of the Oregon legislature in May 1990. Refinements to the reforms were enacted during the 1991 and1993 legislative sessions. In 1995, SB 369 clarified some of the earlier legislative intent that had been subject toseveral court rulings. Small reforms were implemented in 1997. Along the road to reform, the department also hasimplemented administrative reforms, not explicitly provided for by legislation, that have contributed to reductionsin accident frequency, claims cost control, and resource efficiencies. A chronology of Oregon’s reform legislation isprovided below.

1995654.154 (1) Exempted small agricultural employers (10or fewer employees) from scheduled inspections by OR-OSHA, providing such an employer: 1) has not had acomplaint filed in the prior two years, or a serious acci-dent; 2) receives a consultation once every four yearsand corrects any hazards found within 90 days; and 3)has a minimum of four hours training annually on agri-cultural safety rules and procedures at a course conductedor approved by DCBS. (HB 3019)

654.176 (1) Exempted small agricultural employers (10or fewer employees) from OR-OSHA safety committeerequirements unless such an employer has a lost work-day cases incidence rate in the top 10 percent of all ratesfor employers in the same industry. (HB 2541)

656.622 Established a Worksite Redesign Program, in-cluding engineering design work and occupational healthconsulting services, to prevent the recurrence of on-the-job injures. (SB 369)

1997656.796 Repealed this section. Abolished the State Ad-visory Council on Occupational Safety and Health(SACOSH). SACOSH was established to assist the di-rector in the development of occupational safety andhealth policies and programs. OR-OSHA’s extensive useof external and internal committees in establishing poli-cies and programs eliminated the need for this advisorycouncil. (SB 135)

658.790 Transferred enforcement authority of the lawthat requires farmworker camp operators to provide sevendays of housing in the event of camp closure by agovernment agency from the Bureau of Labor andIndustries to the department. (SB 38)

Safety and health

1987654.086 Increased penalties against employers who vio-late the state safety and health act. (HB 2900)

654.090 (4) Expanded the purposes of ORS Chapter 654to promote more effective safety and health educational(consultative) efforts. (HB 2900)

654.097 Required insurers and self-insured employersto provide safety and health loss prevention consultativeprograms that conform to department standards. (HB2900)

1989654.191 and 705.145 Established the Occupational Safetyand Health Grant program to fund organizations and as-sociations to develop innovative education and trainingprograms for employees in safe employment practices,with funding not to exceed $400,000 per biennium;funded from civil penalties assessed by OR-OSHA. (HB2982)

1990654.176 (1) Required that all employers with more thanten employees establish a safety and health committee,and that employers with ten or fewer employees estab-lish safety committees if the employer has experienced alost workday cases incidence rate in the top 10 percentof all rates for employers in the same industry, or is sub-ject to a premium classification in the highest 25 percentof premium rates. (SB 1197)

1991654.086 Mandated increases in penalties to federal maxi-mums against employers who violate occupational safetyand health standards. (HB 3017)

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1999654.005 Exempted corporate farms from safety and healthrequirements when the farm’s only employees are fam-ily members. (HB 2402)

654.003, 654.035, 654.067, 654.071 Provided that OR-OSHA schedule inspections by predominantly focusing

Insurance

1987656.262 (5) Allowed employers to pay for medical ser-vices up to $500 for nondisabling claims, and excludedthese medical costs from modifying the employers’ ex-perience rating. (HB 2900)

656.622 (8) Excluded claim costs incurred as a result ofan injury sustained by a Preferred Worker during the firsttwo years of hire from data used for ratemaking or indi-vidual employer rating. (HB 2900)

656.625 Established the Reopened Claims Reserve forreimbursing to insurers the additional amounts of com-pensation payable to injured workers for board own mo-tion cases; excluded own motion claims costs from lossexperience. (HB 2900)

1990656.052 (4) Increased the liability of corporations, andthe officers and directors thereof, as noncomplying em-ployers. (SB 1197)

656.427 Enacted amendments to insurance coverage ter-mination procedures to better assure continuous cover-age availability for employers to minimize the magnitudeof noncomplying employers. (SB 1198)

656.622 (8) Extended from two to three years from hirethe exclusion from ratemaking for the Preferred Workerclaim costs arising from injury or occupational disease,and changed to a premium exemption program. (SB 1197)

656.730 (1)(a) Mandated a tiered rating scheme forinsureds too small to qualify for experience rating plansin the assigned risk pool. (SB 1198)

656.752 (2)(b) Amended the statutory purpose of SAIFCorporation to make insurance available to as many Or-egon employers as inexpensively as possible consistentwith sound insurance principles. (SB 1198)

Allowed for the director to establish a contracting classi-fication premium adjustment program which providedemployers subject to contractor class premium rates theeconomic incentive to enhance safety in the workplace.(SB 1197)

1991746.230 and 746.240 Subjected the SAIF Corporation tothat portion of the Insurance Code governing unfair claimssettlement practices and undefined trade practices. (SB24)

1993656.018, 656.403, 656.850, 656.855, and 737.270 Estab-lished director’s authority to regulate employee leasingcompanies. Specified fees and methods of licensure bythe director; specified who is responsible for workers’compensation coverage and basis for experience rating;required leasing companies to assure leased workers areproperly trained in safety matters required under ORSChapter 654; and required reporting of client employersto the director and other statistical information to the ap-propriate rating bureau. (HB 2282)

1997656.018(5) & 656.850(1) Clarified the definition of em-ployees of temporary employment companies and theirexclusive-remedy provisions. (SB 699)

656.307(1)(b) Required that insurers submit claim clo-sures of pro rata and paying agent claims to WCD forredetermination. All parties have the right to request re-consideration. (SB 116)

656.593(6) & (7) Allowed workers to release insurer li-ability in a third-party action that exceeds $1 million.(SB 484)

656.790 Increased the Workers’ Benefit Fund reservesto 12 months of anticipated expenditures. (SB 484)

resources on the most unsafe places of employment. OR-OSHA will notify employers with the most unsafe placesof employment that they have an increased likelihood ofinspection, and that employers may designate attorneysto act as representatives during inspections. (HB 2830)

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1999656.170, 656.172, and 656.174 Allowed for the directorto establish a process for up to two construction tradesunions to receive authorization to collectively bargainagreements for workers’ compensation benefits. This billis established as a pilot project where eligibility for suchagreements will end January 1, 2002. The bill also re-quires a status and project report to the Seventy-FirstLegislative Assembly. (HB 2450)

656.430(7) Removed the “same industry” requirementto be included in a self-insured employer group. (SB591)

656.506 Made permanent the policy that the Workers’Benefit Fund will maintain a target balance of 12 monthsof anticipated expenditures. (SB 213)

656.530 Eliminated the 75 percent reimbursement ofworkers’ compensation premium for rehabilitation facili-ties from the Workers’ Benefit Fund. (SB 288)

656.612(5) Required director to use rulemaking processto establish workers’ compensation premium assess-ments. (SB592)

737.318 Required insurers to give notice to employers ofthe right to appeal the results of a premium audit. (HB3055)

737.017, 737.225, 737.265, 737.270, 737.355, and737.560 Authorized the director of the Department ofConsumer and Business Services to license one or morerating organizations for workers’ compensation insuranceunder the Insurance Code. Specifies services to be pro-vided by the workers’ compensation rating organization.(SB 280)

746.147 Prohibited an insurer or agent from quoting pro-jected net insurance premiums that are not guaranteed inthe policy. (HB 2021)

Compensability

1987656.266 Placed on the worker the burden of proving thatan injury or occupational disease is compensable and ofproving the nature and extent of any disability. The workercannot prove compensability simply by disproving otherexplanations. (HB 2271)

656.802 (3) Restricted mental stress claims to those aris-ing out of real and objective employment conditions notgenerally inherent in every working situation, and re-quired “clear and convincing evidence” that the mentaldisorder arose out of and in the course of employment.(HB 2271)

1990656.005 (7) Redefined a compensable injury to requirethat it be established by medical evidence supported byobjective findings. In addition, the compensable injurymust be the major contributing cause of a consequentialcondition. If the compensable injury combines with a pre-existing condition, the resultant condition is compens-able only to the extent that the compensable injury is andremains the major contributing cause of the disability orneed for treatment. Excluded injuries from recreationaland social activities. Excluded injuries that arose fromthe use of alcohol or drugs if it is proven by clear andconvincing evidence that the drug or alcohol use was themajor contributing cause. (SB 1197)

656.262 (6) Allowed insurers to deny a previously ac-cepted claim at any time up to two years from the date ofclaim acceptance if the claim is accepted in good faith,but it is later determined not to be compensable or thatthe insurer is not responsible for the claim. (SB 1197)

656.273 Required that claims for aggravation be estab-lished by medical evidence supported by objective medi-cal findings that the worsened condition resulted fromthe original injury. (SB 1197)

656.308 Specified that when a worker sustains a com-pensable injury the responsible employer shall remainresponsible for future aggravations unless the worker sus-tains a new compensable injury involving the same con-dition. (SB 1197)

656.802 (1) & (2) Changed the definition of occupationaldisease, and provided that compensable diseases mustbe caused by substances or activities to which an em-ployee is not ordinarily subjected or exposed, and thatthe employment be the major contributing cause. Theexistence of the disease must be established by medicalevidence supported by objective findings. (SB 1197)

1995656.005 (2)(b) Excluded from definition of “beneficiary”

57


a person who intentionally caused the compensable in-jury or death of the injured worker. (SB 369)

656.005 (7)(a)(B) Decreed that a combined condition wascompensable only as long as and to the extent the other-wise compensable injury was the major contributing causeof the combined condition or the need for treatment. (SB369)

656.005 (7)(b)(C) Reduced the standard of proof requiredto show that the major contributing cause was consump-tion of alcoholic beverages or a controlled substance, to“preponderance of evidence” from the previous “clearand convincing evidence.” (SB 369)

656.005 (7)(c) Changed the previous definition of “dis-abling injury” to specifically exclude those injuries whereno temporary benefits were due and payable, unless therewas a reasonable expectation that permanent disabilitywould result from the injury. (SB 369)

656.005 (19) Expanded the definition of “objective find-ings” to be verifiable indications of injury or disease, andexcluded physical findings or subjective responses tophysical examinations that were not reproducible, mea-surable, or observable. (SB 369)

656.262 (6)(a) Authorized the denial of an accepted claimto be issued at any time when the denial was for fraud,misrepresentation, or other illegal activity, to be provedby a preponderance of evidence. Changed the standardof proof for a back-up denial based on evidence uncov-ered after acceptance that the claim was not compens-able or the insurer was not responsible, to “preponderanceof evidence” from “clear and convincing evidence.” (SB369)

656.262 (6)(d) Required that an injured worker who be-lieved that a condition had been incorrectly omitted fromthe acceptance notice, or that the notice was otherwisedeficient, to first communicate in writing to the insureror self-insured employer the worker’s objections. Pre-cluded a worker who failed to comply with this require-ment from taking the matter up at a hearing. (SB 369)

1997656.027 Exempted certain landscape contractors (soleproprietorships, partnerships, corporations and limited li-ability companies) from coverage requirements. (HB2038)

656.126(2) & (7) Exempted extraterritorial coverage re-quirements for workers employed in another state buttemporarily working in Oregon. (SB 544)

1999656.012 & 656.018 Repealed most of the sunset provi-sions from SB 369, except for the exclusive remedy pro-visions. These provisions were extended until December31, 2004. (SB 460)

656.630 (Note) Directed the Center for Research on Oc-cupational and Environmental Toxicology (CROET) toprovide a report for the legislature’s assessment of theneed for modifying the compensability criteria for hepa-titis B and C. (HB 3629)

(Budget note) The legislature directed the agency toundertake a study of the impact of the major contribut-ing cause and combined conditions on the workers com-pensation system and provided $250,000 in limitationfor contract costs. (HB 5012)

Claims processing

1990656.160 Declared injured workers not eligible for timeloss benefits during periods of time while incarceratedfor a crime. (SB 1197)

656.214 (5) and 656.726 (3)(f) Required the department’sdisability evaluation standards to be used for the initialrating and for all subsequent litigation; altered the defi-nition of earning capacity to be used in calculating dis-ability. (SB 1197)

1987656.268 (4)(a) Allowed insurers to close permanent dis-ability claims as long as department evaluation standardswere applied and the worker had returned to work. (HB2900)

656.268 (14) Allowed for insurer offsets against awardsfor overpayments. (HB 2900)

656.726 (3)(f) Allowed the director to provide standardsfor the evaluation of disabilities and altered the criteriafor the evaluation of unscheduled disabilities. (HB 2900)

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656.126 Authorized offset of out-of-state compensationpaid for the same injury or illness as in Oregon, fromOregon compensation. (SB 369)

656.206 (1)(a) Defined “gainful occupation” as one thatpays wages equal to or greater than the state mandatedhourly minimum wage. (SB 369)

656.212 (2) Authorized basing of temporary partial dis-ability rate on the wages used to calculate temporary to-tal disability. (SB 369)

656.262 (4)(b) Decreed that payment of wages by a self-insured employer be deemed timely payment of tempo-rary disability benefits. (SB 369)

656.262 (4)(f) Decreed that temporary disability com-pensation is not due and payable unless authorized bythe attending physician; limited retroactive authorizationto 14 days. (SB 369)

656.262 (14) Required injured workers to cooperate andassist the insurer or self-insured employer in the investi-gation of claims for compensation. (SB 369)

656.262 (15) Required the director to suspend for non-cooperation, all or part of compensation due a worker,and authorized the insurer or self-insured employer todeny the claim if the non-cooperation continued for an-other 30 days. (SB 369)

656.265 (1) Tripled the time for filing of a claim to 90days. (SB 369)

656.268 (1) Authorized claim closure before the worker’scondition became medically stationary if the acceptedinjury ceased to be the major contributing cause of theworker’s combined or consequential condition or, if with-out the approval of the attending physician, the workerfailed to seek medical treatment for a period of 30 daysor failed to attend a closing examination. (SB 369)

656.273 (3) Required that a claim for aggravation be inwriting in a form and format prescribed by the director.(SB 369)

656.726 (3)(f)(D) Required that impairment be the onlyfactor to be considered in evaluating a workers disabilityif the worker has returned to, or the attending physicianhas released the worker to, regular work at the job held atthe time of injury. (SB 369)

656.262 (4) Specified various situations for which timeloss payments are not due or may be suspended by insur-ers. (SB 1197)

656.262 (6) Increased the amount of time for insurer ac-ceptance or denial of a claim from sixty to ninety days.(SB 1197)

656.268 (4)(a) Expanded insurers’ authority to closeclaims when the worker has become medically station-ary and the worker has returned to work or the attendingphysician has released the worker to regular or modifiedemployment. (SB 1197)

656.726 (3)(f)(B) Mandated that impairment be estab-lished by a preponderance of medical evidence based onobjective findings. (SB 1197)

656.726 (3)(f)(C) Required the director to adopt tempo-rary rules amending the standards for the evaluation ofdisabilities when the director determines that standardsdo not adequately address the worker’s disability. (SB1197)

656.780 Required the director to establish a workers’compensation claims examiner certification program. (SB1197) (Repealed by SB 221 in 1999.)

1991656.622 (3) Clarified that a worker may not waive eligi-bility for preferred worker status by entering into a claimsdisposition agreement. (HB 3040)

1993192.502 Amended public records law exemptions to ef-fectively end access to claims histories by employers,information services, commercial interests, and othersusing that information to discriminate against injuredworkers in hiring. Information will still be released forclaims processing purposes, other government agency en-forcement needs, research projects, to workers and theirrepresentatives, and when necessary for the director tocarry out responsibilities under the law. (HB 3069)

1995656.012 (3) Declared that provisions of workers’ com-pensation law be interpreted in an impartial and balancedmanner. (SB 369)

656.018 (6) Clarified that the exclusive remedy provi-sions and limitations on the liability provisions of thischapter apply whether the injuries or diseases were com-pensable or not. (SB 369)

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1997656.262(b)(F) Required that the notice of acceptance bemodified by the insurer or self-insured employer whenmedical or other information changed a previously is-sued notice of acceptance. The amendment was fully ret-roactive, regardless of the date of injury. (HB 2971)

656.262(4)(c) Prevented public officials from receivingtemporary disability in addition to wages. (SB 484)

656.262(7)(c) Required that when an insurer or self-in-sured employer determines that a claim qualifies for clo-sure, the insurer or self-insured employer must issue anupdated notice of acceptance that specifies the compens-able conditions. If a condition is later found compens-able, the insurer or self-insured employer must reopenthe claim for processing that condition. The amendmentwas fully retroactive, regardless of the date of injury. (HB2971)

1999656.212(2) Eliminated the two-year aggregate maximumfor receipt of temporary partial disability payments. (SB729)

656.268(1) Made insurers and self-insured employersresponsible for closing all claims and for determiningthe extent of permanent disability. (SB 220)

656.268 (Note) The department will phase out thedepartment’s own claim closure activities. Insurers andself-insured employers will assume responsibility forclosing all claims no later than June 30, 2001. (SB 220)

656.277(1) Required that a request by a worker for re-classification of an accepted nondisabling injury that theworker believes has become disabling must be submit-ted to the insurer or self-insured employer. Prior to this,these submissions were made to the department. (SB 220)

656.740 Streamlined the hearing and appeal processwhere subjectivity is an issue. (SB 289)

656.780 Eliminated the department’s responsibility forthe certification of workers’ compensation claims exam-iners, claims examiner training programs, and continu-ing education courses. The department establishedstandards for certification of claims examiners. Insurers,self-insured employers, and third party administrators ad-minister the standards. (SB 221)

Medical

1987656.245 (3)(a) Reduced the number of attending physi-cians an injured worker could select during the life of aclaim from five to three, unless otherwise authorized bythe director. (HB 2900)

656.245 (4) Allowed the director to exclude from com-pensability any medical treatment deemed to be unsci-entific or unproven. (HB 2900)

656.248 (9) Allowed the director to establish a fee sched-ule for specific inpatient hospital services based on diag-nostic related groups. (HB 2900)

656.252 (1) Expanded the scope of medical rules to re-quire insurer audits of billings for medical services, in-cluding hospital services. (HB 2900)

656.254 (3) Expanded sanctions against health care prac-titioners who failed to comply with rules adopted underthe statute. (HB 2900)

656.325 (1) Limited insurer medical examinations to threeper each opening of the claim unless otherwise autho-rized by the director. (HB 2900)

656.327 (3)-(5) Allowed the director to establish a medi-cal review panel to review medical treatment of an in-jured worker upon request by any of the parties. (HB2900)

1990656.005 (12)(b) Limited who could be an attending phy-sician to a medical doctor, doctor of osteopathy, or aboard-certified oral surgeon. Chiropractors qualify as at-tending physicians for the first 30 days or 12 visits, which-ever comes first. (SB 1197)

656.245 (1)(b) Eliminated palliative care after the workerbecame medically stationary, except when provided to aworker determined to have permanent total disability,when necessary to monitor administration of prescrip-tion medication required to keep the worker in a medi-

60


can be made, all affected providers are to be paid propor-tionally. (HB 3111)

1995656.005 (20) Defined “palliative care” as medical ser-vice rendered to reduce or moderate temporarily the in-tensity of an otherwise stable medical condition. Excludedthose medical services rendered to diagnose, heal, or per-manently alleviate or eliminate a medical condition. (SB369)

656.245 (4) Described conditions under which workersare subject to a managed care organization contract. In-surer may require an injured worker to receive medicaltreatment in the MCO prior to claim acceptance. How-ever, if the claim is eventually denied, the insurer mustcover those services until the worker receives notice ofthe denial or until three days after the denial notice ismailed. (SB 369)

656.248 (1) Changed the medical services fee schedulefrom representing the 75th percentile of usual and cus-tomary fees to representing reimbursements generallyreceived for the services provided. Identified specific cri-teria upon which it should be based. (SB 369)

1997656.260(4)(h) Required an explanation to licensed medi-cal providers denied admission to an MCO panel. (SB484)

1999656.245(1)(d) Required that medical providers receivepayment for medical services until they are notified byinsurers that workers with disabling claims are medicallystationary. (HB 2021)

656.245(4)(a) Allowed workers to continue to treat withtheir attending physician when a managed care organi-zation contract with an insurer terminates. (SB 460)

656.248 Repealed the requirement that the director es-tablish utilization and treatment standards for all medi-cal service categories. (SB 223)

cally stationary condition, or to monitor the status of aprosthetic device. In addition, if the worker’s attendingphysician believes that palliative care is appropriate toenable the worker to continue current employment, theattending physician may seek approval from the insurerfor such treatment. If the insurer refuses to authorize thetreatment, the attending physician can ask the departmentto resolve the dispute. (SB 1197)

656.248 (11) Required the director to establish utiliza-tion and treatment standards for all medical services. (SB1197) ( Repealed by SB 223 in 1999.)

656.260 Allowed groups of medical service providers orhealth care providers to be certified by the department asmanaged care organizations (MCOs). Insurers can con-tract with MCOs to provide medical services to injuredworkers. (SB 1197)

656.262 (4)(d) Excluded medical services from insurerreimbursement until the attending physician providesverification of the worker’s inability to work. (SB 1197)

1991656.248 (Note) Created economic incentives for hospi-tals to participate with certified managed care organiza-tions by providing scheduled, percentage exemptionsfrom the hospital cost-to-charge ratio fee schedule. (SB551)

1993656.016 (Note) Authorized pilot programs to combinethe medical component of workers’ compensation withhealth insurance for non-work-related illnesses or inju-ries. Exempted insurers who provide combined cover-age in pilot programs from certain requirements fortransacting health or workers’ compensation insurance.(HB 2285)

656.313 Modified the procedure for payment of medicalservices in disputed workers’ compensation settlementproceedings. Required insurers to pay providers at one-half the rate established by ORS 656.248 in amounts notto exceed twenty percent of the total present value of thesettlement amount. Where less than one-half payment

61


termined following aggravation and the eligibility crite-ria thereof. Changed the requirement for insurers to re-quest reinstatement or reemployment on behalf of workersto require that insurers inform workers of their opportu-nity to seek reinstatement or reemployment. Provided thatworkers are not entitled to vocational assistance after theexpiration of their aggravation rights. Expanded the defi-nition of the suitable wage that is the target for voca-tional assistance and revised the definition of regularemployment to include employment at the time of ag-gravation. (SB 369)

656.622 Provided for reimbursement of reasonable pro-gram administrative costs of insurers participating in theEmployer-at-Injury Program and codified the existingpractice of reimbursement of claim administrative costsfor Preferred Workers. Expanded expenditures from theReemployment Assistance Program to include workerswith nondisabling claims as eligible for the Employer-at-Injury Program, to preclude or reduce nondisablingclaims from becoming disabling. Clarified that the Pre-ferred Worker Program may be available to workers withany disability, not just permanent, which may be a sub-stantial obstacle to employment. (SB 369)

659.415 and 659.420 Added restrictions on when a workermay be reinstated to regular employment or re-employedin suitable and available work. (SB 369)

Return-to-work assistance

Benefits - permanent disability

656.214 (Note) Established a tiered structure for calcu-lating the value of a degree of unscheduled disability asa function of the statewide average weekly wage, thusproviding annual adjustments to the value of a degreeand providing a structure that compensates the more se-verely injured at higher tiered rates per degree of disabil-ity. (SB 732)

1995656.204 Reduced the classes of beneficiary childrenunder 18 years of age to two: (1) where there was a sur-viving spouse of the deceased worker and, (2) where therewas no surviving spouse. (SB 369)

1987656.340 (6) Restricted eligibility for vocational assis-tance. (HB 2900)

656.622 (3) Established the Preferred Worker Programwithin the Workers’ Reemployment Reserve. (HB 2900)

1990656.622 (3) Enhanced the Preferred Worker Program byexempting an employer who hires a Preferred Workerfrom premiums or premium assessments for the PreferredWorker for a period of three years and reimbursing theinsurer for any claim costs should the Preferred Workersustain a new injury during the three year premium ex-emption period. (SB 1197)

656.628 (Note) Eliminated new claims for HandicappedWorkers’ Reserve relief. (SB 1197)

659.415 Established injured worker employment rein-statement rights, subject to certain conditions and restric-tions, with employers with more than 20 employees. (SB1197)

1995656.335 Repealed this section. Insurers no longer requiredto provide Disability Prevention Services. (SB 369)

656.340 Clarified when vocational eligibility must be de-

1987656.214 (2) Increased the value of a degree of disabilityfor scheduled injuries from $125 to $145. (HB 2900)

1990656.214 (2) Increased the value of a degree of disabilityfor scheduled injuries from $145 to $305. (SB 1197)

1991656.214 (Note) Established the value for a degree ofscheduled disability as seventy-one percent of the state-wide average weekly wage, thus providing annual ad-justments to the value of a degree beyond the formerlyauthorized amount of $305. (SB 732)

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656. 214 (2) & (6) Increased the value of a degree ofscheduled permanent partial disability to $347.51; for un-scheduled permanent partial disability, changed the struc-ture of the tiers and increased the value of a degree ineach tier. This eliminated the computation of the dollarvalue of a degree of disability as a percentage of the state-wide average weekly wage, effective January 1, 1996.(SB 369)

656.214 (Note) Temporarily increased the value of a de-gree of disability over the 656.214 (2) & (6) values, ef-fective January 1, 1996, through December 31, 2000. (SB369)

1997656.214 (Note) Increased PPD benefits for injuries oc-curring during January, 1, 1998, through December 31,2000. Benefits for scheduled disabilities increased eight

Claim Service to resolve those claims where compens-ability is not the issue and other attendant conditions aremet. (HB 2900)

656.298 (6) Changed de novo review by the Court ofAppeals to substantial evidence review. The Court is lim-ited to reviewing matters of law. (HB 2900)

656.388 Required the board to approve payment for le-gal service by an attorney representing the insurer or theclaimant. (The approval requirement for insurers’ attor-ney fees was repealed by SB 1197.) (HB 2900)

656.388 (3) Required the board to establish a scheduleof fees for attorneys representing an insurer, self-insuredemployer, or a worker. (HB 2900)

1990656.236 Allowed for compromise and release settlements(Claims Disposition Agreements) of claims benefits ex-cept for medical services. (SB 1197)

656.248 (13) Allowed the director to resolve medical feedisputes using an administrative review process. (SB1197)

percent per degree, and benefits for unscheduled disabili-ties increased six percent per degree. These increasesmaintained the national median benefit levels establishedby SB 369. (HB 2549)

1999656.202, 656.204, 656.206 Changed workers’ compen-sation benefits for spouse and some children of fatallyinjured workers: increased remarriage allowance to 36times the monthly benefit; eliminated reduction in ben-efits for children of deceased workers who had remar-ried; equalized benefits for PTD and fatal claims forbeneficiaries in full-time education; and eliminated $5weekly beneficiary payment for PTD claims. (HB2022)

656.214 Raised maximum permanent partial disabilitybenefit levels to a level close to the national median. (SB460)

Litigation and administrative dispute resolution

1987656.268 (4)(f) Provided for penalties if insurer claim clo-sure actions were unreasonable. (HB 2900)

656.268 (6)(b) Reduced the time allowed to request ahearing from one year to 180 days following claim clo-sure. (HB 2900)

656.278 Restricted the power and jurisdiction of theWorkers’ Compensation Board (board) to use its ownmotion authority; altered eligibility criteria and excludedown motion claims costs from loss experience, provid-ing funding for these costs from the Reopened ClaimsReserve. (HB 2900)

656.283 (4) and 656.295 (4) Required the board to sched-ule a hearing or board review no later than 90 days afterreceipt of request. The hearing or review shall not bepostponed except for extraordinary circumstances beyondthe control of the requesting party. (HB 2900)

656.283 (10) Mandated an informal dispute resolutionprocess by the board. (HB 2900) (Repealed by SB 1197.)

656.291 Required the board to establish an Expedited

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656.262 (10) Gave the director exclusive jurisdiction overproceedings regarding solely the assessment and paymentof penalties by insurers for unreasonable delay or refusalto pay compensation or unreasonable delays in accep-tance or denial of a claim. Eliminated the assessed attor-ney fee for such penalties. (SB 1197)

656.268 (4)(e) and (6)(a) Required mandatory reconsid-eration of a disputed insurer notice of closure, or depart-ment determination order, and required reconsiderationto be completed within 15 days from the date of request.An additional 60 days is allowed if a medical arbiter isappointed. (The 15 days was changed to 18 working daysin the 1991 session). (SB 1197)

656.268 (4)(g) Provided for an insurer penalty if thedepartment’s determination of permanent disability onreconsideration of an insurer notice of closure is greaterthan the insurer’s award by 25 percent or more. (SB 1197)

656.268 (7) Required claim referral to medical arbiter ifimpairment findings are disputed. (SB 1197)

656.268 (7) No medical evidence subsequent to the medi-cal arbiter report is admissible before the department,the board, or the courts. (SB 1197)

656.283 (7) and 656.295 (5) Provided that the evaluationof the worker’s disability by hearings referees or the boardshall be as of the date of the reconsideration order. Re-quired the hearings referee and the board to apply thesame standards for evaluation of disability as used bythe department and insurers, but allowed for the workeror insurer to challenge whether the standards for evalua-tion of disability were incorrectly applied in the recon-sideration order. (SB 1197)

656.313 (1) When the employer or insurer appeal, pay-ment of compensation appealed is stayed except for tem-porary total disability and permanent total disabilitybenefits that accrue from the date of the order appealed.Allowed for interest to accrue on the benefits stayed. (SB1197)

656.327 (1)(a) Established additional provisions for thedirector’s review of bona fide medical services disputes,and allowed for the delegation of the review to a panel ofmedical experts. (SB 1197)

656.724 (3)(b) Required the board to conduct an annual,anonymous survey of attorneys to rate hearings referees.(SB 1197)

1991656.386 Provided for a reasonable attorney fee when anattorney is instrumental in obtaining compensation for aclaimant and a hearing by the referee is not held. Ap-plied to all claims for which an order relating to the issueon which attorney fees are sought had not become finalon or before June 19, 1991, regardless of the date of in-jury. (SB 540)

1995656.236 (1)(b) Authorized waiving of the 30-day wait-ing period for approval of a claim disposition agreement,if the worker was represented by an attorney at the timehe or she signed the agreement. (SB 369)

656.245 (1)(c)(J) Allowed the worker to request approvalfor palliative care if the insurer or self-insured employerdenies the care. Subjected the decision of the director toa contested case review. (SB 369)

656.245 (2)(a) Subjected the director’s decision regard-ing additional changes of attending physician to a con-tested case review. (SB 369)

656.245 (3) Subjected the director’s decision to excludefrom compensability any medical treatment that is un-scientific, unproven, outmoded, or experimental to a con-tested cases review. (SB 369)

656.260 (6) Subjected any issue concerning the provi-sion of medical services within a managed care organi-zation to review by the director. (SB 369)

656.260 (14)-(16) Subjected any dissatisfaction with anaction of a managed care organization regarding the pro-vision of medical services, peer review, or utilization re-view to administrative review by the director. Thedirector’s order is then subjected to a contested case hear-ing if a written request for hearing is filed with the direc-tor. (SB 369)

656.260 (17)-(19) Subjected issues other than dissatis-faction with the provision of medical services, peer re-view, or utilization review within managed careorganizations to a contested case hearing. (SB 369)

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656.268 (4) Changed the appealable period of a notice ofclosure or determination order to 60 days for departmen-tal reconsideration and another 30 days from the recon-sideration order for a hearing request. (SB 369)

656.278 (2) Removed vocational assistance benefits fromthe board’s own motion authority. (SB 369)

656.283 (1) Removed vocational assistance disputes fromjurisdiction of hearings. (SB 369)

656.283 (2) Provided for dispute resolution on voca-tional assistance through nonadversarial procedures tothe greatest extent possible consistent with constitutionalprocedures. Mediated agreements are subject to recon-sideration by the director, but not reviewed by any otherforum. Appeals of director’s orders go to contested casehearing before the director and then to Court of Appeals.(SB 369)

656.283 (7) Prohibited submission at hearing, evidencenot submitted on departmental reconsideration. (SB 369)

656.307 (6) Established criteria for resolution of respon-sibility disputes by a private mediator. (SB 369)

656.308 (2)(d) Authorized claimant attorney fees in re-sponsibility disputes in cases where the attorney activelyand meaningfully participated in finally prevailing. (SB369)

656.313 (1)(a) Authorized stay of payment of compen-sation appealed, on employer or insurer appeal of adirector’s order on vocational assistance. (SB 369)

656.319 (6) Authorized hearing for failure to process aclaim or incorrect processing of one provided the requestfor hearing was made within two years. (SB 369)

656.327 (1)(a) Gave exclusive jurisdiction over all medi-cal treatment disputes to the director. This includes treat-ment that the injured worker has received, is receiving,or will receive. (SB 369)

656.327 (2) Increased the amount of time allowed to is-sue a medical treatment order from 30 days to 60 days.Subjected the director’s medical treatment administra-tive order to a contested case review. (SB 369)

656.385 Mandated payment of claimant attorney feesby insurer in contested case hearings held by the director(or an appeal from such a hearing) where the claimantprevails. Precluded administrative law judges fromawarding penalties or attorney fees for matters arisingout of contested case hearings by the director. (SB 369)

656.390 (1) Authorized administrative law judges andthe Workers’ Compensation Board to impose attorneysanctions for requests for hearing or board review thatare frivolous, in bad faith, or for harassment. (SB 369)

656.724 Changed the title of a Hearings Division refereeto “administrative law judge.” (SB 369)

1997656.262(10) Stated that an insurer’s or self-insuredemployer’s failure to appeal or seek review of a determi-nation order, notice of closure, reconsideration order, orlitigation order does not preclude them from subsequentlycontesting the rated condition in the order, unless the con-dition has been formally accepted. The amendment wasfully retroactive, regardless of the date of injury. (HB2971)

656.268(6) Reversed the “Guardado” decision and al-lowed only one reconsideration per claim closure. Timeframes for conducting the reconsideration now beginwhen all parties request or waive reconsideration rights.(SB 118)

656.268(7)(d) Provided additional time to allow work-ers to attend rescheduled medical arbiter exams and pro-vided for suspension of benefits so that appeals are heldconcurrently. (SB 119)

1999656.268(7)(b) Provided that if neither party to a recon-sideration request requests a medical arbiter and the di-rector determines that there is insufficient medicalinformation to determine disability, the department mayrefer the claims to a medical arbiter. (SB 220)

656.268(7)(e) Provided for the postponement of the re-consideration process for 60 days and the suspension ofbenefits if a worker fails to attend a medical arbiter ex-amination without good cause or fails to cooperate withthe medical arbiter. (SB 220)

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656.702(2) Created a centralized Hearing Officer Panelusing the administrative law judges of several agencies.Appeals of the department’s administrative orders (con-tested case hearings) are sent to this panel. Board ordersand nonsubjectivity determinations are excluded fromthis change. (HB 2525)

656.704 (3) Moved jurisdiction to the Workers’ Com-pensation Board when there is a dispute over the needfor a proposed medical service caused by an acceptedcondition. The board hears the disputes that require the

1987656.709 (1) Created the Office of Ombudsman for in-jured workers. (HB 2900)

1990656.709 (2) Established the Office of Ombudsman forsmall business employers. (SB 1197)

656.790 Created the Workers’ Compensation Manage-ment-Labor Advisory Committee to, among other things,periodically review disability evaluation standards andgenerally advise the department on workers’ compensa-tion matters. (SB 1197)

Established a Joint Legislative Task Force on Innova-tions in Workers’ Compensation to reexamine the roleof the workers’ compensation system and to develop rec-ommendations to develop a more fair, just and cost-ef-fective system. (SB 1198)

1995656.790 (1) Reduced the membership of the workers’

Advocates and Advisory Groups

compensation Management-Labor Advisory Committee(MLAC) from 14 to 10 members (five representing sub-ject workers, five representing subject employers). (SB369)

656.790 (2) Mandated reporting to the legislature by theMLAC such findings and recommendations as the com-mittee finds appropriate, including reports on: (a) courtdecisions having significant impact on the workers’ com-pensations system; (b) adequacy of workers’ compensa-tion benefits; (c) medical and system costs; and (d)adequacy of assessments for reserve programs and ad-ministrative costs. (SB 369)

1997656.790 (Note) Required MLAC to study income andexpenditures of the Workers’ Benefit Fund. (SB 484)

1999656.794 Permitted the director broader latitude in theappointment of members of the workers’ compensationAdvisory Committee on Medical Care. (SB222)

determination of the compensability of the medical con-dition for which the medical services are proposed orthat require the determination that a causal relationshipexists between medical services and an accepted claim.(SB 728)

656.718 The Governor will appoint chairperson of theWorkers’ Compensation Board to manage and superviseBoard and Hearings Division. (SB 654)

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