COMPACT for workers' compensation professionals

August 2006
Minnesota Department of Labor and Industry

CONTENTS TABLES
2 'Appealing' new option: appeal a decision by 5 Statewide average weekly wage
fax to the Workers' Compensation Court of
Appeals 6 Compensation rates as of Oct. 1, 2006

3 Update: data-driven workers' compensation 7 Number of complaints involving medical

issues by type of complainant, 2000-2005
4 News
• 2006 legislative update 8 Outcomes of formal complaints closed in
2005 by subject type
• Unit name change
• Introduction of new director 10 Numbers of disputes received, fiscal years
• Special Compensation Fund trends 1990-2006

5 New benefit and provider fee levels effective
October 2006
7 Complaints involving medical issues — 2005
9 Request to receive notices of agency rule
proceedings
11 Workers' compensation dispute resolution
activity at the Office of Administrative
Hearings, fiscal years 1999-2006
11 Workers' compensation hearings at the
Office of Administrative Hearings and cases
received at the Workers' Compensation
Court of Appeals, fiscal years 1999-2006

10 Workers' compensation dispute, dispute-

resolution trends
FORMS
14 Results of Special Compensation Fund
assessment 19 Openings available: Workers' Compensation
Insurers' Task Force
15 DLI primary liability determination review
process

D-1 Court decisions: April through June 2006

Court decisions:
Complaints involving January through March 2006
'Appealing' new option ... medical issues — 2006

Summaries of
2 7 Decisions D-1
 'APPEALING' NEW OPTION:
appeal a decision by fax to the Workers' Compensation Court of Appeals
By Kate Berger, Legal Services

Under Minnesota Statutes, §176.421, subdivision 4, a party appealing a decision to the Workers’
Compensation Court of Appeals must file the Notice of Appeal form (and proof of service) with
the chief administrative law judge at the Office of Administrative Hearings
(OAH). A copy of the Notice of Appeal form must be filed with the
commissioner of the Department of Labor and Industry (DLI). The
Legislature amended this law in 2006 (ch. 178 of the session laws) to
permit appellants to file the Notice of Appeal forms with OAH and DLI
by facsimile if the facsimile filing is 15 pages or fewer in length. A
facsimile appeal received after 4:30 p.m. on a state business day is
considered filed the next state business day. The amendments also
require the filing fee to be received by OAH within 10 business days
after the end of the appeal period.

The following questions and answers related to the amendments to this law are reprinted from the
OAH Web site at www.state.mn.us/ebranch/oah/wcdocs/faxappeal.htm. For additional information and
resources related to litigation at OAH, visit its Web site at www.state.mn.us/ebranch/oah/wc.html.

Questions and answers

May I file a Notice of Appeal by fax?
As of August 1, 2006, you may appeal a compensation judge’s decision to the Workers’ Compensation Court
of Appeals by fax. You may either continue to file an appeal by sending an original notice as previously
set out in Minn. Stat. § 176.421, subd. 4, or file your Notice of Appeal by fax.

How do I file the Notice of Appeal by fax?

You may file your Notice of Appeal to the Workers’ Compensation Court of Appeals
with the Chief Administrative Law Judge at the Office of Administrative Hearings
(OAH) by sending it to fax number 612-349-2691. (Please do not file a Notice
of Appeal with our Duluth office.) The notice must be received by 4:30 p.m.
on the day the filing is due. (Faxes received after 4:30 p.m. are considered
filed on the next business day.) The statute requires that the notice must
also be received by the Commissioner of Labor and Industry before the deadline. The Commissioner’s fax
number for appeals is 651-284-5731. OAH would appreciate also receiving a copy of the $25 filing fee
check with the faxed notice. The original filing fee check must be received by OAH within 10 business
days after the end of the appeal period.

What if the fax number is busy?

To ensure a timely filing, do not wait until the last minute to file your appeal. If the primary fax filing
number (612-349-2691) is busy or otherwise unavailable, you may fax it to 612-349-2634. Please do NOT
file a Notice of Appeal by faxing the OAH Duluth office. If you are having a problem with transmission,
call LeeAnn Shymanski at OAH for assistance at 612-341-7343.

Will I receive a confirmation the Notice of Appeal was received?

You may wish to retain the fax transmission report as proof of your filing. OAH will send an acknowledgement
of appeal by mail after the filing fee is received.
2 • COMPACT • August 2006 Faxed decisions, continues ...
 Update: data-driven workers' compensation
By Patricia Todd, DLI Assistant Commissioner

Recently, the Department of Labor
and Industry's Workers' Compensation
Division began to look at how it can
move the current submission of workers'
compensation information via forms to a
"data-driven" system in which activity on
a workers' compensation file is initiated or
reported via new or changed data elements
rather than these actions occurring on a
prescribed form. The department currently
collects the same data repeatedly, because
of the practice of only receiving it via
forms. A data-driven system would
ultimately collect only data needed to
reflect or report a change or progress on a
claim.
The first phase of this project began in
June. During the next year, the division
will identify stakeholders impacted by
this proposed change, target concerns
raised by stakeholders – including their
electronic capacity to participate in a new
system, review statutes and agency rules
that could impact this change, develop a
formula business process model, identify
high-level technical requirements to
implement a data-driven system, and
develop cost and time estimates to
complete the changes. This first phase is
expected to continue through July 2007.
The project organization includes both
internal and external stakeholders. The
external stakeholders are representatives
from the Department of Commerce,
the Office of Administrative Hearings,
insurers, qualified rehabilitation
consultants (QRCs), medical providers
and the Minnesota State Bar Association.
The project leader is Cindy Valentine,
DLI's chief information officer; Jana
Williams, director of DLI's Workers'
Compensation Division's Information
Processing Center will provide operations
leadership.

Faxed decisions, continued ...

What do I do with the original notice?

The filing party retains the original Notice of Appeal. Only the faxed
copy is sent to OAH and the Department of Labor and Industry.

Who owes a filing fee?

Please note that the 2006 amendment to Minn. Stat. § 176.421, subd.
4 clarifies that EACH appellant and cross-appellant owes a $25
filing fee.

3 • COMPACT • August 2006

 minnesota department of
labor & industry
Workers' Compensation Division
News
2006 legislative update
By John Rajkowski, Legislative Director
2006 session laws, chapter 178: Workers' compensation technical changes – This bill amended
the workers' compensation statute to allow fax filing of a Notice of Appeal form to the Workers'
Compensation Court of Appeals (see page 2). It also amended Minnesota Statutes §176.185 regarding
notices of cancellation of a workers' compensation insurance policy for nonpayment of premium.

Bills passed in the 2006 regular session are available on the Web site of the Office of the Revisor
of Statutes (www.revisor.leg.state.mn.us). To get to the session bills, click on "Bill Search and
Status," scroll down to "More information about bills," click on "Chapters and Resolutions, Regular
Session," then scroll down to Chapter 178.

Unit name change

By Carol Pankow, Claims Services and Investigations Director

The Special Compensation Fund (SCF) unit within the Workers' Compensation Division at the
Minnesota Department of Labor and Industry has changed its name to Claims Services and
Investigations (CSI).

Numerous organizational changes have occurred within the Workers' Compensation Division during
the past year to more clearly define the services provided to internal and external stakeholders. In
evaluating the services provided by the SCF unit, it was determined the name was linked to the
funding source and not the activity being performed. The members of the unit act on the behalf of
the actual fund; however, they are not the fund itself. Changing the unit's name to CS I will have no
impact on statutory responsibility or definition related to the actual Special Compensation Fund,
but will more clearly define the activity performed for all stakeholders.
Introduction of new director
By Patricia Todd, DLI Assistant Commissioner

Carol Pankow has been hired as the new director of the Claims Services and Investigations
unit (see above). Pankow's experience includes being: a CEO of an organization that provides
vocational support for individuals with developmental disabilities and mental health needs; a
residential director with responsibility for 19 day-training facilities; and a policy consultant in the
development and implementation of consolidated standards for licensing regulators. In addition,
she has exhibited strong budget, leadership and change-management skills.
Special Compensation Fund trends
By John Kufus, Financial Services
The Special Compensation Fund assessment has declined by more than 20 percent since fiscal-year
2003. In 2002, the assessment rate was 30 percent and resulted in $118 million collected. The assessment
rate for 2006 is 23.69 percent and will result in $92 million collected. This decline is due to reduced
second-injury and supplementary benefit reimbursements resulting from the repeal of those programs in
1992 and 1995, respectively, as well as claim settlements initiated from 2000 through 2004.

4 • COMPACT • August 2006

 New benefit and provider fee levels effective October 2006
By Brian Zaidman and David Berry, Research Analysts, Research and Statistics,
and Kate Berger, Legal Services

The statewide average weekly wage (SAWW) effective Oct. 1, 2006, is $782, a 1.03 percent increase over the
current SAWW of $774, which has been in effect since Oct. 1, 2005. [See the table on this page.] The levels for
minimum and maximum weekly benefit payments are presented in the table on the page 6. The statewide annual
average wage will change to $40,636 on Jan. 1, 2007.

The new SAWW is based on 2005 payroll and employment figures supplied by the Department of Employment
and Economic Development and the calculation procedure in Minnesota Statutes §176.011, subd. 20. The increase
in the SAWW is the basis for the M.S. §176.645 annual
benefit increases.
Statewide average weekly wage
Effective Oct. 1 of the indicated year
Only injured workers meeting the eligibility requirements
of M.S. §176.645 will receive adjusted benefits. Benefit Statewide Percentage
increases for workers injured prior to Oct. 1, 1992, average change from
Year weekly wage previous year
are limited to 6 percent. Benefit increases for workers
injured between Oct. 1, 1992, and Sept. 30, 1995, are 1993 ..................... $484 .................... 5.45%
1994 ..................... $492 .................... 1.65%
limited to 4 percent. For workers injured on or after Oct.
1995 ..................... $505 .................... 2.64%
1, 1995, the initial annual adjustment is made on the 1996 ..................... $524 .................... 3.76%
fourth anniversary of the date of injury and is limited 1997 ..................... $553 .................... 5.53%
to 2 percent. 1998 ..................... $579 .................... 4.70%
1999 ..................... $615 .................... 6.22%
Vocational rehabilitation provider hourly fees will be 2000 ..................... $642 .................... 4.39%
adjusted by the 1.03 percent SAWW increase, pursuant to 2001 ..................... $680 .................... 5.92%
2002 ..................... $702 .................... 3.24%
Minnesota Rules 5220.1900 subp. 1b, 1c and 1e. On Oct.
2003 ..................... $718 .................... 2.28%
1, 2006, the maximum qualified rehabilitation consultant 2004 ..................... $740 .................... 3.06%
(QRC) hourly fee will increase to $86.33 and the 2005 ..................... $774 .................... 4.59%
maximum hourly rate for rehabilitation job development 2006 ..................... $782 .................... 1.03%
and placement services will increase to $66.40.

Minnesota Statutes §176.136, subd. 1a, as amended during the 2005 legislative special session, requires the
conversion factor for chiropractic services to be increased to 72 percent of the medical/surgical conversion factor
on Oct. 1, 2006. The law also provides that the annual adjustment of the conversion factors may be adjusted (by
no less than zero) to offset the increase in payments resulting from the increase in the chiropractic conversion
factor.

Pursuant to this law, the 2005 conversion factors are adjusted by 0.73 percent. Subject to the approval of an
administrative law judge, effective Oct. 1, 2006, the new conversion factors will be:
• medical/surgical services in part 5221.4030 ...................................................................................$76.87
• pathology/laboratory services in part 5221.4040 ............................................................................$64.19
• physical medicine/rehabilitation services in part 5221.4050 ..........................................................$66.64
• chiropractic services in part 5221.4060...........................................................................................$55.35

Minnesota Rules, part 5219.0500, subp. 4, provides for adjustment of the maximum fees for independent medical
examinations in the same manner as the adjustment of the conversion factor. Therefore, the independent medical
examination fees will be increased by 0.73 percent for services provided on or after Oct. 1, 2006, subject to
approval by an administrative law judge.

An official notice of the medical fee schedule conversion factors and independent medical examination fees as
approved by the administrative law judge will be published in the State Register in September.
5 • COMPACT • August 2006

Statewide average weekly wage (SAWW) = $782
Percentage change in SAWW from previous year = 1.03%
(Apply Minnesota Statutes §176.645 adjustment as necessary based on date of injury.)
Maximum under M.S. 176.101 and 176.111
100% of SAWW
10-01-77 .............$197.00
10-01-78 .............$209.00
10-01-79 .............$226.00
10-01-80 .............$244.00
10-01-81 .............$267.00
10-01-82 .............$290.00
10-01-83 .............$313.00
10-01-84 .............$329.00
10-01-85 .............$342.00
10-01-86 .............$360.00
10-01-87 .............$376.00
10-01-88 .............$391.00
10-01-89 .............$413.00
10-01-90 .............$428.00
10-01-91 .............$443.00
105% of SAWW
10-01-92 ........... $481.95
10-01-93 ........... $508.20
10-01-94 ........... $516.60
Set by Statute
10-01-95 ............ $615.00
10-01-00 .............$750.00
Compensation rates as of Oct. 1, 2006
Minimum under M.S. 176.101, subd. 1(2) Supplementary benefits under M.S. 176.132
(Minnesota Statutes 1994)
and permanent total minimum under
50% of the SAWW or gross wage, whichever is
M.S. 176.101, subd. 4
less, but in no case less than 20% of the SAWW
(for injuries 10-1-95 and later)
50% 20%
10-01-77 .....$ 98.50 (gross wage - $147.75)... $ 39.40 10-01-84 ...............$213.85 (rounded to $214)
10-01-78 ....$104.50 (gross wage - $156.75)... $ 41.80 10-01-85 ...............$222.30 (rounded to $223)
10-01-79 ....$113.00 (gross wage - $169.50)... $ 45.20 10-01-86 ...............$234.00 (round)
10-01-80 ....$122.00 (gross wage - $183.00)... $ 48.80 10-01-87 ...............$244.40 (rounded to $245)
10-01-81 ....$133.50 (gross wage - $200.25)... $ 53.40 10-01-88 ...............$254.15 (rounded to $255)
10-01-82 ....$145.00 (gross wage - $217.50)... $ 58.00 10-01-89 ...............$268.45 (rounded to $269)
10-01-83 ....$156.50 (gross wage - $234.75)... $ 62.60 10-01-90 ...............$278.20 (rounded to $279)
10-01-84 ....$164.50 (gross wage - $246.75)... $ 65.80 10-01-91 ...............$287.95 (rounded to $288)
10-01-85 ....$171.00 (gross wage - $256.50)... $ 68.40 10-01-92 ...............$298.35 (rounded to $299)
10-01-86 ....$180.00 (gross wage - $270.00)... $ 72.00 10-01-93 ...............$314.60 (rounded to $315)
10-01-87 ....$188.00 (gross wage - $282.00)... $ 75.20 10-01-94...............$319.80 (rounded to $320)
10-01-88 ....$195.50 (gross wage - $293.25)... $ 78.20 10-01-95............. $328.25 (rounded to $329)*
10-01-89 ....$206.50 (gross wage - $309.75)... $ 82.60 10-01-96 ...............$340.60 (rounded to $341)*
10-01-90 ....$214.00 (gross wage - $321.00)... $ 85.60 10-01-97 ...............$359.45 (rounded to $360)*
10-01-91 ....$221.50 (gross wage - $332.25)... $ 88.60 10-01-98 ...............$376.35 (rounded to $377)*
20% of the SAWW or the employee's actual 10-01-99 ...............$399.75 (rounded to $400)*
weekly wage, whichever is less 10-01-00 ...............$417.30 (rounded to $418)*
10-01-92 ........... $91.80 10-01-01 ...............$442.00 (round)
10-01-93 ........... $96.80 10-01-02 ...............$456.30 (rounded to $457)*
10-01-94 ........... $98.40 10-01-03 ...............$466.70 (rounded to $467)*
Set by statute, the listed amount or the employee's 10-01-04 ...............$481.00 (round)
actual weekly wage, whichever is less 10-01-05 ................ $503.10 (rounded to $504)*
10-01-95 ........... $104.00 10-01-06 ................ $508.30 (rounded to $509)*
10-01-00 ........... $130.00 *Rounding applies to supplementary benefits.
 Complaints involving medical issues – 2005
By Julie Marquardt, State Program Administrator, Principal Medical Compliance

DLI has established rules that govern the delivery and reimbursement of medical services within
workers’ compensation. The department has the authority to investigate complaints against health
care providers (Minnesota Statutes §176.103; Minnesota Rules Part 5221.8900), certified managed
care organizations (M.S. §176.1351; Minn. Rules Parts 5218.0800 and 5218.0900) and insurers or
employers (M.S. §176.251) regarding noncompliance with laws and rules governing medical
benefits. This authority also allows for disciplinary action to be taken by DLI, if appropriate.

Complaints received by DLI

Anyone may file a complaint with DLI about a health care provider, certified managed care
organization (CMCO), employer or insurer related to workers' compensation. Complaints can be
received by phone, fax, letter or electronic mail (e-mail). The table below details the number of
complaints received and the source from which the complaint originated.

Table 1: Number of complaints involving medical issues by type of complainant, 2000-2005

Year Employer Health Employee Certified DLI Other2 Total
or insurer care or managed
provider attorney care plan1
2000 26 4 7 0 2 0 39
2001 35 5 4 2 1 0 47
20023 34 5 9 0 2 1 50
2003 12 4 6 0 1 1 24
2004 1 6 5 0 0 0 12
20053 6 3 1 0 1 0 10
1. A certified managed care organization is an entity that has a contract with an insurer or self-insured employer to provide managed
care services to employees under M.S. §176.1251.
2. Other entities may include: qualified rehabilitation consultants, other state boards or agencies, etc.
3. One complaint was brought forward by two different complainants

Since 2003, the number of complaints involving medical issues has declined. Some of the decline is
due to procedural and recordkeeping changes initiated by the department. Since 2003, the department
has informally intervened to obtain permanent partial disability (PPD) ratings and expedite the
exchange of medical records related to the injury. In all cases beginning in 2004, informal resolution
is sought initially whenever appropriate given the circumstances of the case. If intervention efforts
fail to resolve the concern or any time the party bringing forward the concern requests, a formal
complaint is filed. When informal resolution is not appropriate due to the circumstances of the case –
for instance, employees being billed for medical treatment, patterns of excessive treatment being
rendered or questions of billing fraud – a formal complaint is filed. In 2005, 14 of the 19 cases closed
were resolved informally. Informal resolution typically translates into faster resolution with less
animosity and less expense.

Complaints against employers and insurers most often involve issues of medical billing and
payment, and directing employees to see specific health care providers without having a contract
with a CMCO. Complaints against health care providers often involve failure to release medical
Complaints, continues ...
7 • COMPACT • August 2006
 Complaints, continued ...
records, excessive charges, treatment parameter compliance and
attempting to collect payment from injured employees for treatment or
charges deemed excessive.

Complaint outcomes
After a formal complaint has been filed, an investigation is conducted
that involves gathering information from relevant sources and
sometimes a conference with the subject of the complaint to discuss the
allegations. A single complaint may involve violations of several
workers’ compensation statutes or rules. During the course of an
investigation, additional issues may be identified. However, the most
serious outcome is the one recorded for the complaint.

Outcomes are determined by the findings of the investigation. Possible

outcomes are dismissal, letter of instruction and discipline.

• Dismissal – If the complainant fails to provide necessary information, the allegations are not
supported by the information obtained or the department lacks jurisdiction, the complaint may
be dismissed.

• Letter of instruction – If the investigation reveals the subject did not act optimally, but there is
not justification for discipline, a letter of instruction may be sent to the subject identifying
corrective action(s). A letter of instruction is not considered discipline.

• Discipline – If the results of an investigation support the allegation that the subject violated
workers’ compensation statutes or rules, disciplinary action may be warranted. Disciplinary
action can include: a warning, penalties, a hearing under M.S. Chapter 14 or a stipulated
agreement, typically involving corrective action and a fine. The severity of disciplinary action
may be increased if the subject of the complaint has a history of similar violations, if the
violation(s) are determined to be egregious or if the subject has demonstrated a pattern of
noncompliance with workers’ compensation statutes and rules.

All information about a complaint is private unless disciplinary action, such as a hearing or penalty,
occurs. Five complaints were closed during calendar-year 2005. Table 2 identifies the outcomes by
subject type.

Table 2: Outcomes of formal complaints closed in 2005 by subject type

Subject of complaint Dismissed Closed with Closed with Total
instruction discipline
Health care provider 2 11 1 4
CMCO 0 0 0 0
Employer or insurer 1 0 0 1
Other 0 0 0 0
Total 3 11 1 51
1. One complaint involved two health care providers, both of whom received letters of instruction.

Complaints, continues ...

8 • COMPACT • August 2006

Complaints, continued ...
One complaint resulted in disciplinary
action: A health care provider failed to
respond to a request for the maximum
medical improvement and permanent
partial disability information contained
on the health care provider report as
required under Minn. Rules Part
5221.0410. The health care provider
paid a $125 penalty and provided the
required information to the insurer.

Conclusion
The immediate result of a complaint is
to correct inappropriate behavior and
prevent future problems. Cumulatively,
complaints are monitored by DLI to identify trends and areas of confusion. Training and/or rule
amendments may be developed to address areas of concern. The department provides training about
medical issues to insurers, health care providers, billing and medical record staff and employers.
Information about medical benefits is available on DLI’s Web site at www.doli.state.mn.us/
workcomp.html and by contacting DLI’s assistance line at 1-800-342-5354.

Complaints or questions pertaining to medical issues may be directed to Julie Marquardt by phone at
(651) 284-5173 or by e-mail at julie.marquardt@state.mn.us.

Request to receive notices of agency rule proceedings

Each state agency is required to maintain a list of people who have registered with the
agency to receive notices of agency rule proceedings. To receive these notices from
the Minnesota Department of Labor and Industry, complete the form that is online at
www.doli.state.mn.us/statrule.html (see left column) and send it to the department
via e-mail, fax or U.S. mail, as directed at the bottom of the form.

The form may also be used to update mailing information or to request to receive rule
notices about additional topics.
 Workers' compensation dispute, dispute-resolution trends
By David Berry, Research Analyst
Research and Statistics

The annual workers’ compensation system report1 includes trend statistics about dispute rates. These
are of interest because they indicate the propensity of claims to have disputes. Also of interest, but
not presented in the system report, are the numbers of disputes, because these indicate the overall
demand for dispute-resolution services at the Department of Labor and Industry (DLI), the Office of
Administrative Hearings (OAH) and the Workers’ Compensation Court of Appeals (WCCA). This
article presents data about the numbers of disputes over time, along with trends in dispute-resolution
activities at OAH and WCCA.

See the glossary at the end of the article for definitions of terms.

Numbers of disputes
Figure 1 shows trends in the numbers of disputes received at DLI, featuring four major dispute types.
The number of disputes of each type peaked in the early 1990s and then fell at least until the middle
or late 1990s. Claim petitions have
numbered in the low 6,000s for Figure 1
Numbers of disputes received,
most years since fiscal-year 1999,
fiscal years 1990-2006 [1]
down from a plateau near 8,000 in
the early 1990s. Discontinuance
disputes reached a low of about 8,000
2,570 in 2006, having descended Claim petitions
from a peak of 4,820 in 1992.
6,000
Medical requests fell from 5,970 in Medical requests
1992 to 2,150 in 1999 (a 64-percent
4,000 Discontinuance disputes
decline), but rose to 2,860 to 3,010
for 2003 to 2006. Rehabilitation
requests have remained between 2,000
2,280 and 2,450 since 2001. Rehabilitation requests

0
This picture contrasts with that
1990 1992 1994 1996 1998 2000 2002 2004 2006
presented in the system report,
which shows dispute rates 1. See Glossary for definitions.
increasing from injury-year 1999 to
2004.2 The difference occurs because the number of claims has been falling. The number of disputes
is the product of the number of claims and the dispute rate (disputes per claim). From injury-year
1999 to 2004, the number of filed indemnity claims fell from 39,300 to 31,000.3 The combination of
a falling number of claims and increasing dispute rates produced the trends in Figure 1.

Dispute-resolution activities at OAH and WCCA

Figure 2 (see next page) shows workers’ compensation dispute-resolution activity at OAH. The most
frequent activity at OAH is settlement conferences. These numbered about 2,690 in fiscal-year 2006,
Trends, continues ...
1
The Minnesota Workers’ Compensation System Report, 2004 is available at www.doli.state.mn.us/pdf/wcfact04.pdf or by calling the
Department of Labor and Industry at (651) 284-5025.
2
See Figure 6.1 in Minnesota Workers’ Compensation System Report, 2004.
3
Since these numbers are by year of injury, they are projected to full claim maturity.
10 • COMPACT • August 2006
 Trends, continued ...
down from 3,540 in 2002. Next Figure 2
most frequent at OAH are Workers' compensation dispute resolution activity
discontinuance conferences, which at the Office of Administrative Hearings,
declined from about 1,730 in 2002 fiscal years 1999-2006 [1]
to 1,210 in 2006. Workers’ 4,000
compensation hearings at OAH are
currently running near 900 a year, Settlement conferences [3]
down from a peak of about 1,650 in 3,000
1994. Medical and rehabilitation
conferences numbered 600 or more Administrative conferences--
2,000 Hearings [2] discontinuance [3]
a year from 2003 through 2005
before falling to about 360 in 2006.
1,000
As shown in Figure 3, cases Administrative conferences--
received at WCCA have followed medical and rehabilitation [3]
the same trend as OAH hearings 0
(see note 3 in figure). The number 1990 1992 1994 1996 1998 2000 2002 2004 2006
of cases received at WCCA peaked 1. See Glossary for definitions.
in fiscal-year 1993 at nearly 650 and 2. Excludes attorney fee hearings.
fell to just less than 200 by 2006. 3. Unavailable before 2001.

Glossary Figure 3
Administrative conference – An Workers' compensation hearings
expedited, informal proceeding at the Office of Administrative Hearings
where parties present and discuss and cases received
at the Workers' Compensation Court of Appeals,
viewpoints in a dispute. If
fiscal years 1999-2006 [1]
agreement is not achieved, a
“decision and order” is issued that is 1,750
binding unless appealed. Currently,
1,500 Hearings at OAH [2]
the Department of Labor and
Industry's Benefit Management and 1,250
Resolution unit conducts
1,000
administrative conferences for Cases received
medical issues involving $7,500 or 750 at WCCA [3]
less presented on a Medical Request
500
form and for vocational
rehabilitation issues presented on a 250
Rehabilitation Request form; the
0
Office of Administrative Hearings
1990 1992 1994 1996 1998 2000 2002 2004 2006
conducts conferences for medical
issues involving more than $7,5004 1. See Glossary for definitions.
presented on a Medical Request 2. Excludes attorney fee hearings.
3. Includes cases with and without hearings. Both types of cases
form and for discontinuance are usually disposed of by decisions but sometimes by
disputes presented by a claimant’s settlement. Statistics are unavailable on the number of hearings
request for an administrative at WCCA. Currently, about 75 percent of cases received have
hearings. This percentage has risen over time.
conference.
Trends, continues ...

4 This threshold was raised from $1,500 to $7,500 by the 2005 Legislature.
11 • COMPACT • August 2006
 Trends, continued ...
Benefit Management and Resolution (BMR) – A unit of the Department of Labor and Industry that
(among other activities) provides information and clarification about workers’ compensation statutes,
rules and procedures; carries out a variety of dispute-prevention activities; conducts informal
dispute-resolution activities, including mediations; and conducts administrative conferences for
some issues.

Claim petition – A form by which the injured worker contests a denial of primary liability or
requests an award of indemnity, medical or rehabilitation benefits. In response to the claim petition,
the Office of Administrative Hearings generally schedules a settlement conference or formal hearing.

Discontinuance dispute – A dispute about the discontinuance of wage-loss benefits, most often
initiated when the claimant (usually by phone) requests an administrative conference in response to
the insurer’s declared intention to discontinue wage-loss benefits. The conference is at the Office of
Administrative Hearings (OAH). A discontinuance dispute may also be presented on the claimant’s
Objection to Discontinuance form or the insurer’s petition to discontinue benefits, either of which
triggers a hearing at OAH.

Discontinuance of wage-loss benefits – The insurer may propose to discontinue wage-loss benefits
(temporary total, temporary partial or permanent total disability) if it believes one of the legal
conditions for discontinuance have been met. See “Notice of Intention to Discontinue,” “Request for
Administrative Conference,” “Objection to Discontinuance” and “petition to discontinue benefits.”

Filed indemnity claim – A claim for indemnity benefits, whether ultimately paid or not. Indemnity
benefits are paid to the injured or ill worker or survivors to compensate for wage loss, functional
impairment or death. These benefits include temporary total disability, temporary partial disability,
permanent partial disability and permanent total disability benefits; supplementary benefits;
dependents’ benefits; and, in insurance industry accounting, vocational rehabilitation costs.

Hearing – A formal proceeding about a disputed issue or issues in a workers’ compensation claim, at
the Office of Administrative Hearings (OAH) or Workers’ Compensation Court of Appeals (WCCA),
after which the judge issues a decision that is binding unless appealed. OAH conducts formal
hearings about disputes presented on claim petitions and other petitions where resolution through a
settlement conference is not possible. OAH also conducts hearings about some discontinuance
disputes, disputes referred by the Department of Labor and Industry's Benefit Management and
Resolution unit because they do not seem amenable to less formal resolution, and disputes about
miscellaneous issues such as attorney fees and pre-hearing disputes. OAH also conducts hearings de
novo when a party disagrees with an administrative-conference or nonconference decision and order.

Injury year – The year in which the injury occurred or the illness began. In injury-year data, all
claims, costs and other statistics are tied to the year in which the injury occurred.

Medical dispute – A dispute about a medical issue, such as choice of providers, nature and timing of
treatments or appropriate payments to providers.

Medical Request – A form by which a party to a medical dispute requests assistance from the
Department of Labor and Industry (DLI) in resolving the dispute. The request may lead to mediation
or other efforts toward informal resolution by DLI Benefit Management and Resolution (BMR) or to
an administrative conference. The conference is at BMR if the disputed amount is $7,500 or less;
otherwise the conference is at the Office of Administrative Hearings. Trends, continues ...
12 • COMPACT • August 2006
 Trends, continued ...
Notice of Intention to Discontinue (NOID) – A form by which the insurer informs the worker of its
intention to discontinue temporary total disability or temporary partial disability benefits. In contrast
with a petition to discontinue benefits, the NOID brings about benefit termination if the worker does
not contest it.

Objection to Discontinuance – A form by which the injured worker requests a formal hearing to
contest a proposed discontinuance of wage-loss benefits (temporary total, temporary partial or
permanent total disability). The hearing is at the Office of Administrative Hearings.

Office of Administrative Hearings (OAH) – An executive branch body that conducts hearings about
administrative law cases. One section is responsible for workers’ compensation cases; it conducts
administrative conferences and settlement conferences in addition to hearings.

Petition to discontinue benefits – A document by which the insurer requests a formal hearing to
allow a discontinuance of wage-loss benefits (temporary total disability (TTD), temporary partial
disability (TPD) or permanent total disability (PTD)). The hearing is conducted at the Office of
Administrative Hearings for TTD or TPD benefits and at the Workers’ Compensation Court of
Appeals for PTD benefits.

Primary liability – The overall liability of the insurer for any costs associated with a claim after the
injury is determined to be compensable. An insurer may deny primary liability (deny that the injury
is compensable) if it has reason to believe the injury did not arise out of and in the course of
employment, was intentionally self-inflicted, resulted from intoxication or happened during
participation in a nonrequired recreational program.

Rehabilitation Request – A form by which a party to a vocational rehabilitation dispute requests

assistance from the Department of Labor and Industry (DLI) in resolving the dispute. The request
may lead to mediation or other efforts toward informal resolution by DLI Benefit Management and
Resolution (BMR), or to an administrative conference, usually at BMR but occasionally at the Office
of Administrative Hearings.

Request for Administrative Conference – A form by which the injured worker requests an
administrative conference to contest a discontinuance of wage-loss benefits (temporary total,
temporary partial or permanent total disability) proposed by the insurer on the Notice of Intention to
Discontinue form. Requests for a discontinuance conference are usually done by phone.

Settlement conference – A proceeding at the Office of Administrative Hearings to resolve issues

presented on a claim petition when it appears possible to settle the issues without a formal hearing. If
a settlement is reached, it typically includes an agreement by the claimant to release the employer
and insurer from future liability for the claim other than for medical treatment.

Vocational rehabilitation (VR) dispute – A dispute about a VR issue, such as whether the employee
should be evaluated for VR eligibility, whether he or she is eligible, whether certain VR plan
provisions are appropriate or whether the employee is cooperating with the plan.

Workers’ Compensation Court of Appeals (WCCA) – An executive branch body that hears appeals
of workers’ compensation decisions from the Office of Administrative Hearings. The next and final
level of appeal is the Minnesota Supreme Court.
13 • COMPACT • August 2006
 Results of 2006 Special Compensation Fund assessment
By John Kufus, Accounting Officer
Financial Services

The Special Compensation Fund (SCF) assessment funds Minnesota's workers' compensation
programs. Most of the assessment dollars go to funding the supplementary and second-injury benefit
programs. The assessment also pays the operating expenses of the Workers' Compensation Division
of the Department of Labor and Industry, the Office of Administrative Hearings and the Workers'
Compensation Court of Appeals.

As a result of legislation enacted in 2002, the assessment process has changed. Companies are no
longer required to report on a semi-annual basis. The reporting is now done on an annual basis and
the reports are mailed at least 45 days before the due date of April 1.

The Special Compensation Fund assessment is now directly invoiced by the Minnesota Department
of Labor and Industry. The first half of the assessment is invoiced by June 30 of each year, and
is due Aug. 1 of that year. The second billing is due Feb. 1 of the following year, and is mailed
approximately 30 days before the due date.

The estimated state-fiscal-year 2007 funding requirement for SCF was determined to be $92 million.
The liability was divided between the insurers and self-insurers by the ratio of their 2005 indemnity
payments to the total indemnity reported by both groups.

2005 Ratio Estimated DSR pure

indemnity liabilities premium
Insurers $289,433,265 74.52% $68,558,144 $742,678,211
Self-insurers $ 98,964,947 25.48% $23,441,856
Total $388,398,212 100.00% $92,000,000 $742,678,211

Insurer premium surcharge rate

The derived insurer premium surcharge rate applied for the purpose of determining the Special
Compensation Fund assessment was 9.2312 percent. The rate was determined by dividing the insurer
portion of the SCF state-fiscal-year 2007 liability ($68,558,144) by the 2005 designated statistical
reporting pure premium reported by all insurers to the Minnesota Workers' Compensation Insurers
Association ($742,678,211).

Self-insured assessment rate

The imputed self-insured assessment rate was 23.6870 percent. It was determined by dividing the
self-insured portion of the Special Compensation Fund state-fiscal-year 2007 liability ($23,441,856)
by the total 2005 indemnity reported by the self-insured employers ($98,964,947).

If you need further information, call John Kufus at (651) 284-5179.

14 • COMPACT • August 2006

 DLI primary liability determination review process
By Philip B. Moosbrugger, Compliance Supervisor
Benefit Management and Resolution

Editor’s note: The following information is intended to give insurers and self-insured employers some direction regarding the
information the Department of Labor and Industry (DLI) looks for when evaluating the sufficiency and validity of denials of
primary liability. DLI believes this may be particularly helpful for those insurers that are working with a variety of different
states’ workers’ compensation laws. The examples cited are not rules and any denials filed that are similar to the examples
would continue to be evaluated on a case-by-case basis. However, the examples are intended to give DLI stakeholders a
better sense of the types of denials it receives and the issues it sees with them.

DLI’s goal is to improve the quality of denial notices by providing a framework for understanding, evaluating and
communicating the underlying basis for a particular denial. Accomplishing this goal will require increased educational
efforts, increased compliance efforts and, most of all, cooperation with and a commitment from those stakeholders that file
denials with the agency. This information, along with others previously published in COMPACT, can be used as both a
reference tool and a training or discussion resource.

Introduction
In November 2005, the Department of Labor and Industry (DLI) began its effort to
systematically review Notice of Insurer’s Primary Liability Determination
(NOPLD) forms wherein primary liability is denied. The denials are
reviewed to determine whether they comply with the statutes and
rules regulating denials of liability. (See COMPACT, November
2005, www.doli.state.mn.us/compact2.html). Denials are reviewed
without regard to the compensability of the claim.

Denials are reviewed for compliance with the requirements of the

Workers’ Compensation Act (including Minnesota Statutes
§§176.225, 176.194 and 176.221, Subds. 1 and 3a; Minnesota Rules
5220.2570, Subparts 2, 9 and 10), as well as conformity with specificity
requirements (M.S. §§176.84 and 176.221; Minn. Rules 5220.2570, Subparts 2, 9 and 11).

The early experience with this process has revealed some recurring issues that may result in
penalties. This article is intended to assist claims handlers by identifying some of the more
commonly encountered denial deficiencies, along with a brief discussion of ways to improve the
quality of denials filed with DLI’s Workers’ Compensation Division. It is not intended as an
exhaustive or comprehensive discussion of issues encountered in reviewing denials of primary
liability, but is only a brief examination of selected issues.

Specific denial issues

“We have evidence to suggest no injury occurred ...”
Claims handlers are required to clearly state a legal defense to the claim (reason for denial), along with
detailed specific facts supporting that reason. The law does not allow the claims handler to conceal or
obscure the reasons for the denial, but requires full disclosure of the reasons for denying the claim.
Minnesota Statutes §176.221, subd. 1, requires that a denial of liability “... state in detail the facts
forming the basis of the denial ...” [emphasis added], as well as the specific reasons why the injury is
not compensable. If there are good reasons to deny the claim, those reasons should be stated clearly.

Review process, continues ...

15 • COMPACT • August 2006

 Review process, continued ...
“There are conflicting histories of the incident ...”
This statement, by itself, is not a valid reason to deny primary liability. If the defense is that the
alleged incident did not occur, that should be stated as the reason for denial. Facts supporting that
denial reason may include that the employee has contradicted himself about some material point and
that the very occurrence of the alleged incident is, thus, reasonably called into question. The claims
handler should recite specific facts and describe why those facts call into question the occurrence of
the incident.

“The employee did not make a timely report of the injury ...”
The specific reason for denial should be given. If the employee reported the injury within 30 days of
the occurrence, there is no notice defense, unless the employer and insurer can show actual prejudice
(M.S. §176.141). Such showing should be clearly set forth, if applicable. If the late notice
really goes to the veracity of the employee’s claim of injury, and the claims handler is
actually denying the occurrence of the incident or injury alleged, that should be
stated, with indication of how the facts (including the delayed notice) support
the denial reason.

“The employee has a pre-existing condition ...”

Again, the denial must be specific. Is the claims handler denying the
occurrence of a new aggravation or injury, or merely saying that any
current disability and need for medical treatment is attributable to a pre-
existing condition? If the former position is being taken, the claims handler
must indicate that the existence of any injury or aggravation is being denied
and must explain what facts underlie that assertion. If the claims handler is
admitting an injury or aggravation, but denying any disability is
attributable to it, Box 2 (C) on the NOPLD form should be checked and
an explanation given why no disability resulted.

“We have no medical to support a work injury ...”

DLI has seen a number of denials that state: “We have no medicals to support an injury ...” or words
to that effect. This statement is problematic because it is unclear whether the claims handler has
obtained medical records. If the claims handler has obtained medical records and those records show
an injury has not occurred, the medical records should be attached and the denial should clearly
explain how the supplied records show there was no injury.

If, on the other hand, this statement is meant to convey that there is no medical support for
compensability because the records of the treating doctor have not yet been obtained, that should be
stated clearly, along with the reason(s) why the records are actually needed to determine
compensability and a description of the efforts to obtain them (see the discussion about the need for
a good faith investigation, below).

“Our investigation is not complete ...”

Another relatively common statement is “our investigation is not complete ...” or “our investigation
continues ...” (sometimes seen in conjunction with “we have no medicals to support ...”). This is
commonly followed by a statement indicating compensability will be reassessed when the
investigation is completed.
Review process, continues ...

16 • COMPACT • August 2006

 Review process, continued ...
The difficulty with this statement is that filing a denial of liability for workers’ compensation benefits
without conducting an investigation is a prohibited practice under M.S. §176.194, subd. 3 (4), and is
considered a “frivolous” denial under M.S. §176.225, subd. 1. The requirement of an investigation as
a prerequisite to a denial is further specified in Minn. Rules 5220.2570, Subp. 10, which requires that
a denial “state facts indicating that an investigation has been completed or that a good faith effort to
investigate has been attempted.”

A penalty may be issued if the denial does not clearly show a good faith attempt to investigate or if
the denial appears to have been filed as an attempt to extend the timeline for liability determination.
For example, a denial filed within a day of the insurer’s request for medical records from the treating
doctor, which states no medical information has yet been received about the claim, may indicate a
good faith investigation effort has not been made.

Sometimes, despite good faith efforts to do so, it is impossible to obtain the information needed to
determine compensability. If the claim is being denied on the basis that, despite a good faith attempt,
the claims handler has been unable to obtain the needed information (i.e., the claims handler has
been unable to contact the employee or obtain medical records needed to determine liability), it
should be clearly set forth what investigation efforts were made prior to denial of the claim (who was
contacted, dates of contact, etc.). The claims handler should also clearly indicate why the missing
information was needed to determine primary liability.

It should be noted that if the facts are sufficient to make a compensability determination without
obtaining additional information (such as medical treatment records or a statement from the
claimant), the lack of those records is not a reason to deny primary liability. For example, if there are
clear facts upon which to deny (e.g., a coworker has stated he saw the employee break his leg in an
ATV accident during the weekend), the claims handler may not need medical records to deny a leg
injury claim the following Monday. By the same token, if there are clear facts to accept an injury
(e.g., witnesses saw a roofer fall 10 feet off a roof and break his leg), the medical records or a
telephone contact with the employee are not needed to make the primary liability determination
(although this information may be needed later to determine the nature and extent of the injury).

Whenever the reason given for denial is that the adjuster was unable to obtain needed information,
the denial should contain an explanation about why the information was actually necessary to make a
primary liability determination and a description of the good faith effort made to obtain the
information. This is based on the requirement that a claim cannot be denied without a good faith
investigation.

“We received this claim on the 14th day ...”

The timeline for investigating and filing an NOPLD form is limited. Prior to 1983, the law allowed
the insurer to ask for a 30-day extension, which could be granted at the discretion of the DLI
commissioner (M.S. §176.221, Subd. 2). However, with the repeal of Subd. 2 in 1983, the
Legislature made clear its intention that claims be paid or denied within 14 days of notice to the
employer. There is presently no statutory provision to deny primary liability to extend the time to
conduct, continue or complete an investigation.

As discussed above, the law requires a good faith investigation before denying a claim. Reconciling
these provisions sometimes presents a challenge to claim handlers. Occasionally, a claims handler is
Review process, continues ...
17 • COMPACT • August 2006
 Review process, continues ...
faced with a difficult choice between filing a denial without a reasonable investigation or filing it
late. Either option risks a penalty.

The point is often made by claims handlers that it is difficult to properly investigate a claim within
the time allowed by statute when the employer does not get the claim to the claims handler until very
close to the 14th day. The employer is required to report the injury to the insurer or third-party
administrator within 10 calendar-days of the injury (M.S. §176.231, subd. 1). If the NOPLD form is
late because the employer did not meet this time limitation, the insurer may be able to charge any
late filing penalty back against the employer (M.S. §176.221, subd. 6).

Thus, where the employer has put the claims handler in the position of having to make this difficult
choice, the claims handler must weigh the potential for a late filing penalty against the possibility of
a penalty for frivolous denial or prohibited practices, and make a business decision about which
course to follow.

There is a third option that avoids a penalty altogether. The claims handler can pick up the claim if it
appears likely it will be compensable, and if further investigation reveals the claim is not
compensable, discontinue benefit payments by denying liability within 60 days (filing an amended
NOPLD form) without the need of filing a Notice of Intention to Discontinue (NOID) form (M.S.
§176.176.221, subd. 1). The claims handler can also accept the claim, but decline to initiate wage-
loss benefits if there are appropriate reasons to do so, by checking Box 2 on the NOPLD form and
detailing the reasons why indemnity benefits are not being paid.

Every workers’ compensation insurance policy in Minnesota must contain the provision: “Notice to
or knowledge by the employer is notice to or knowledge by the insurer” (M.S. §176.185, subd. 4
(1)). Some insurers and third-party administrators work closely with their insureds/clients
(employers) to ensure the First Report of Injury form is submitted to the claims handler promptly
after the employer receives notice of an injury. This is a very effective way of ensuring the claims
handler has adequate time to properly investigate a claim before making a determination of liability,
which is in the best interests of all parties.

Conclusion
To sum up, the law requires that a denial include:

• specific defenses (reasons) explaining why the claimed injury is not compensable
(M.S. §176.221);

• the detailed facts underlying the specific reasons for denying the claim (M.S. §176.221);

• evidence of a complete investigation or a good faith effort to investigate the claim (M.S.
§§176.225; 176.194; Minn. Rules 5220.2570, subp. 10); and

• medical records attached, if the claims handler is relying on medical reasons to deny the
claim (Minn. Rules 5220.2570).

For more information, contact Philip Moosbrugger at (651) 284-5262. Further guidance about this
topic can be found in the August 2002 and August 2004 editions of COMPACT, available on the DLI
Web site at www.doli.state.mn.us/compact2.html.
18 • COMPACT • August 2006
 Openings available:
Workers' Compensation Insurers' Task Force
The Workers’ Compensation Insurers’ Task Force is an organized body of representatives of
insurance companies that write workers’ compensation insurance within the state of Minnesota
and those employers that self-insure for workers’ compensation coverage.

There is no statutory authority vested in this body; recommendations that are forwarded to
the commissioner are nonbinding. However, the department values the input from the Workers’
Compensation Insurers’ Task Force.

The task force meets quarterly at the Department of Labor and Industry, 443 Lafayette Road
N., St. Paul, in the Minnesota Room. To apply for appointment to the task force, complete the
following form and mail it to the address at the bottom. Applications must be received by Fri.,
Sept. 8, 2006.

Application for appointment to the

Workers' Compensation Insurers' Task Force

Name Title

Organization Phone number

Address

City, state, ZIP

Below, please indicate your experience with Minnesota workers' compensation claims and
explain how you could contribute to the effectiveness of this task force.

Signature Date

Return completed form by Sept. 8, 2006 to:

Debbie Caswell
minnesota department of Assistant Commissioner's Office
labor & industry Department of Labor and Industry
443 Lafayette Road N.
St. Paul, MN 55155
19 • COMPACT • August 2006