Workers’ Compensation Advisory Council

January 7, 2004
Minutes

Voting Members: Staff:

Paul Bailey Scott Brener

Susan Olson for James Cavanaugh Beth Hargarten
Stan Daniels Rosaland Hoffman
Wayne Ellefson Todd Hendrickson
Tom Hesse for David Olson Jim Feckey
Glen Johnson Keith Keesling
Reed Pollack Cindy Miner
Brad Robinson Phil Moosbrugger
Julie Schnell Terry Mueller
Gary Thaden Teri Van Hoomissen
Ray Waldron Jana Williams

Voting Members Absent: Visitors:

Mike Hickey Coleen Colburn; MCA

Non-Voting Members:
Representative Dan Dorman
Senator Linda Higgins
Representative Joe Mullery
Non-Voting Members Absent:
Senator Geoff Michel
Judy Hawley; MN APTA
Michael Johns; RTW
Glen Johnson; IUOE
Todd Johnson; WCRA
Larry Koll; Koll-Morrison
Tom Lehman; MN Hospital Assn.
Brad Lehto; MN AFL-CIO
Perry Lewis; TPS
Tammy Lohmann; Commerce
Bert McKasy; Lindquist & Vennom
Louise Montague; MOTA
Marnie Moore; Cook Hill Girard
Andy Morrison; Koll-Morrison
Sandy Olevitch; Park Nicollet
Robin Peterson; MN APTA
Mark Pixler; MAPS
Erin Sexton; MN Orthopedic Society
Jim Sieben; MAN/WBS
Sarah Strong; CHG
Marsha Thiel; MAPS
Anna Thompson; Allina
Beverly Turner; The St. Paul Companies
Wendy Underwood; Winthrop & Weinstine
Rachel Zagrabelny; MMGMA
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I. Call to order and Roll Call

Commissioner Scott Brener called the meeting to order at 9:37 a.m. A quorum
was present.

II. Approval of the June 11, 2003 Meeting Minutes

Brener asked for a motion to approve the June 11, 2003 minutes. All voted in
favor of the motion and the motion passed.

IV. A. Commissioner's Update

Brener noted that two individuals; Andy Morrison and Kevin Gregerson have
asked to have the opportunity to address the Council regarding some legislative
proposals.

IV. B. Exemption From Workers’ Compensation

Omar Syed spoke regarding the proposed religious exemption specifically related
to employers who have employees who have religious beliefs that preclude them from
taking part in insurance, that is, receiving the benefit from either a private or public
insurance program. He noted that at the October meeting the council’s decision at that
time was to ask the Commissioner to submit some proposed language for an exemption.
Syed distributed and reviewed the language he drafted for the Council to consider. Syed
referred to the Wisconsin statutes and then spoke about Minnesota’s proposal and the
changes. There was discussion about who would be eligible. He noted that there is no
requirement in this proposed exemption that the employer be a member of a particular
religion. It is based on if a particular employee would refuse to accept insurance because
of their beliefs. He noted that this is the case with the Amish group that was involved in
the lawsuit that lead to this proposal. It’s based around the employees and if an employer
is going to apply for an exemption, he or she has to follow the requirements that are listed
on pages 12 and 13. First the employer would have to submit a written waiver by the
employee. He noted that it is also submitted to the Department for approval. Second,
there has to be an affidavit by the employee describing that person’s religious opposition
to regular insurance or receiving those benefits. Third, there would have to be an
affidavit signed by someone who is authorized in that religious group to state that it has a
long history of providing for it’s own people and whenever those people are injured on
the job to provide a reasonable standard of living. Fourth, there would have to be a
written agreement signed by that authorized representative that guarantees that this
employee would be provided with financial and medical assistance that would be in
keeping with what the members of the sect would usually receive. Under this proposed
language the Commissioner would then review the application and see if those
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agreements and affidavits are satisfactory and then along the way would presume that a
25-year history of providing for their own would be sufficient evidence for alternative
benefits. He noted that the differences between this proposal and the way that it is
currently being handled is on pages 15 and 16 of the proposal. He noted a correction on
the proposal on page 16, line 8 that should read, “If the compensation judge concludes
that the religious sect has not done so.” This part of the proposal is more specific then
Wisconsin’s is right now.

Wayne Ellefson spoke to Syed regarding a previous meeting where several

representatives of the Amish community were present and there were questions to
members as to whether or not they used power tools and other equipment. Ellefson
wondered what happens if an employer who is a member of a religious sect needed
components of a job done by other people other than in the religious sect and asked Syed
who would be responsible for those employees and how does that tie into the independent
contractor issue. Syed noted that it doesn’t change what the Workers’ Compensation
requirements would be for anyone who doesn’t hold those particular religious beliefs or
for whom there isn’t an already approved application. The only people whose status
would change by the proposal would be individual employees who hold a religious belief
that preclude them from taking part in the insurance.

Gary Thaden asked if this is based on whether the employer has those religious
beliefs or not and whether it is contrary to some religious beliefs that he would buy
insurance for someone else? For example, if you have employees who don’t have this
belief, you would have to buy workers’ compensation insurance for them. Would the
employers’ beliefs prevent them from purchasing insurance for someone else? Thaden
asked if Syed knows of a religious sect that would qualify under this and do their beliefs
prevent an employer from buying workers’ compensation insurance for non-members of
a sect? Syed noted he did not know of such a group and as he understands it, the old
Order Amish who were involved in the case about a year ago said that it was their view
that they weren’t going to employ people that weren’t members of their sect, but if they
did, they would feel they would have to make the right workers’ compensation
arrangements, which is why they didn’t want to employ people who weren’t in their sect.

Beth Hargarten noted that she was looking at the Wisconsin statute and the
language that has been drafted for the council and asked if there should be some
procedure like Wisconsin has to revoke an exemption. Syed noted that he feels this
would make sense if those individual employees no longer meet the conditions that
justify granting them it in the first place. Hargarten noted that in Wisconsin the law
references a self-insurer’s council and wondered if for Minnesota it should be the
Department of Labor and Industry after seeking the advice from the Department of
Commerce or some other entity. Hargarten also noted that it would be a good idea to
have the ability to grant the application to be exempt, but that if for some reason in the
event that something happened to the community, it would be nice to have the ability to
revoke the exemption. Thaden noted that it would also be a good idea to have the ability
to not only be able to revoke the sect, but also the individual.
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Reed Pollack asked Syed if he was aware of any cases where an Amish individual
has worked for an employer with Workers’ Compensation coverage and has chose not to
participate in the benefit plan or structure? Syed noted that he was not. Pollack noted he
does not support the proposal.

Mullery thanked Hargarten for sending copies of the court decisions. Mullery
asked Syed since they don’t have to get benefits that are equal, can someone else argue
that this is a religious privilege and if someone would or has done an analysis of any
other possible or similar issues that would come up in state laws. Syed said he doesn’t
know of any analysis being done. Hargarten commented to Mullery that the key is the
belief of not participating in a social insurance program and that the number of
government social programs is rather limited including items such as unemployment
insurance and Social Security on the Federal level. She also noted that she doesn’t think
that they are coming forward and saying that they need an exemption from all laws that
somehow burden their operations, they are focusing on the social insurance aspect and
that the number of instances where there would be that conflict would be rather limited.
Mullery noted that he isn’t sure whether they are limited or not. Hargarten asked Syed if
he was aware of how unemployment insurance or social security is handled in this
situation and whether they had an exemption. Syed noted that they could file an
application for an exemption with the IRS and that the particular group that was involved
in the lawsuit had done so. Syed noted that he doesn’t have much information on
Unemployment compensation, but that the particular group involved in the lawsuit
claimed not to be involved in any sort of insurance program and he assumed that they did
not pay into or receive anything from insurance.

Ray Waldron asked if a decision was to be made at this meeting. Brener noted
there wouldn’t be a vote on it at this meeting because he wanted everyone to be able to
look at the information provided and act on the issue at the next meeting. Waldron asked
if there was anything in the proposal for fraud if the employer or employee hires a
construction person or independent contractor and says, “In order for you to work for my
company, you have to be Amish.” What would happen to the employer? Ellefson asked
if that could be tied into some of the revocation language? Brener asked Jim Feckey who
runs the fraud unit for the Department if he could answer the question. Feckey noted that
you would have to look at it as an uninsured situation and pursue it through the regular
mandatory coverage penalty, which can be substantial. He believed that current law and
procedures would possibly address the situation. Brener noted that he is comfortable
with working on developing something that would work. Thaden noted that if someone
said that you needed to be Amish to be a construction worker, that this would be a
violation of the human rights act. He also suspects that if an Amish employer were only
hiring Amish, this would also be a violation of the human rights act.

Thaden asked Syed how many exemptions were granted in other states and how
many employees that it covered. Syed said he doesn’t have those statistics.

Glen Johnson asked how can you qualify someone’s beliefs and how do you
determine how many employees you have and what they believe in. What are the
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qualifiers that would have to be in place. Syed said he thinks the way the proposal is set
up right now is the people are required to sign an affidavit and an agreement from other
members of the sect. He doesn’t know how the Department can regulate this. Johnson
noted it sounded kind of gray. Syed noted that there is not just one Amish leader, so you
wouldn’t have just one or two figures that would be representing the whole community,
you might have what would be called local bishops or deacons. Johnson asked if on any
particular project how do you know who is working on it and would it fall through the
cracks and who would be responsible for it would be the state. Who is going to govern
the process? Syed noted that he thinks that it would be dealt with how it is now and if
something comes to the attention of the Department then that is when it comes up and
then they would go back and see if there is documentation that the person had
exemptions, and if they weren’t, then the uninsured laws would apply and that employer
would then be penalized for that situation.

Waldron asked Syed if the Amish that were at the Department in the past were
participating in Workers’ Compensation currently. Syed noted that they were not and
they have said that they will not do so. Brener noted that is why it is before this group is
because it is pending in the courts and has been put on idle status pending this body’s
decision to do something. Otherwise, it will be pursued further in the courts and he
anticipates it would then make its way up to the Supreme Courts.

Mullery commented regarding Hargarten’s comment that it if the Amish’s claim

of religious violations only applies to social insurance, he noted that he can’t think off
hand of the large number of programs in the state and whether or not they qualify for that.
He thinks that Temporary Disability gives you a system where you get partial payment on
wages while you are out on disability. Another would be the Partial Pay Family Leave.
This all seems to fit into social insurance idea. He assumed there are other programs
similar that would fall within this issue. Hargarten noted she is not aware of TDI,
however, she is aware of Social Security Disability Insurance, but she thinks that they
base that on how much you have paid in earned wages that have been reported to social
security and so if they have an exemption from general social security and have never
paid any in, she doesn’t know if they would necessarily be able to receive social security
disability. Mullery noted that he is talking about TDI where the states have them and
Family Leave where the states have them, because those are not connected with social
security. He doesn’t know if they have specific exemptions for this, and if they do, he’s
never heard of them. Hargarten noted that she hasn’t heard of it either.

Bailey asked Syed when they buy materials for putting the buildings up, do they
pay sales tax on it? Syed said he didn’t know for sure, but as far as he knows they do.
Bailey noted that he believes that when they were working in their own community and
building their own barns, etc., that was one thing, but now going outside of their
community to do work is a different situation.

Ellefson asked Brener if it would be possible for him to make a motion to put in
some revocation language. Brener noted that he could make a motion. Ellefson made a
motion to include in the draft some additional language that would speak to the issue of
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revocation as well as fraud. All voted in favor of the motion and the motion passed.
Ellefson noted that he would like some idea of how many people there are in other states
and that he understood the difficulty of figuring out how many people and families there
might be and how many would be covered by this, but he wondered if other states could
give us an idea. Brener noted that the Department would make some calls to try to get
that information.

Mullery asked if anyone had an idea how many other states have this exemption.
Brener noted that five states have it. Syed said he thinks that there are about 10 states
that do have groups like the Amish that have those beliefs that don’t have exemptions.
There are only five states that have any sort of exemptions.

Reed Pollack commented on the 25-year limit and if that is specific to activities
within the state of Minnesota or the United States or would that 25-year limit include
what they had done in another country? Syed said the way it reads right now he
understands it to mean 25 years regardless of where the group is located.

Johnson spoke about exemptions and corporate public bidding laws. Part of the
requirement to bid on a project using public funds is to have documentation that you have
a Workers’ Compensation certificate and how would this work if this exemption went
into the law. Brener said he doesn’t have an answer for that. Syed noted that he thinks
the exemption certificate has been received for that individual employee and that would
be what the employers had to attach in lieu of workers’ compensation insurance. They
would have to attach a certificate saying that these people are eligible for alternative
benefits and they are going work on this job. He said that he thinks what Johnson is
trying to say is that there might be other workers that are unknown at the time of that bid.
Johnson asked who would be responsible for assuring that every worker on every project
has the exemption prior to starting that first day of work on that project. Who is going to
pay for the regulation to verify their exemptions? Syed noted that unless someone was
designated to deal with that issue, he believes that the way it would be treated is like the
way it is treated now, which is if there are employees on a job where there is no
insurance, then the state’s remedy is to issue a penalty. Hargarten noted that right now
we don’t have someone that goes out on projects to make sure that every person who is
working on a project has workers’ compensation insurance. We don’t have that now. It
would be the same situation if there is someone on that job that doesn’t have the
exemption and they get hurt, it would be the same as if someone who is on a job right
now and that employer does not have workers’ compensation insurance. They file a
claim and they come to the state and it ends up being the states responsibility to pay the
benefits. And then the state tries to go back to collect the benefits that were paid out plus
penalties. She noted that she understands what Johnson is saying, but there is nobody out
there right now monitoring to make sure that every single construction project has
workers’ compensation insurance and every single building project has workers’
compensation insurance. People could file bid documents that are false now. Gary
Thaden noted that the bid documents that he has looked at all say “required to have
Workers Compensation under Minnesota Statutes Chapters 176.” If there is an
exemption they fulfill the statute so it would be in compliance with that contract language
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then. Paul Bailey spoke about the construction industry and how you don’t buy workers’
compensation after an accident has happened. He thinks that what is being said is that
someone has to get hurt and they we will find out if they have workers’ compensation or
not. He believes that this is the problem with independent contractors. Hargarten noted
that the Department also relies on tips. The Department doesn’t always wait until there is
an injury on the job. People call up and complain, which was the situation here, where
nobody got hurt in this particular case. Bailey noted that by giving them this exemption
you won’t have to worry about getting calls anymore because they will have the
exemption anyway.

Mullery noted that there is a technical distinction but is it a real distinction

between this situation and the Hill Murray case as the state was held to be wrongfully
giving privileges to the religious group. It seems to him that this doesn’t seem far from
the technical distinction. Senator Linda Higgins asked Mullery to elaborate on this.
Mullery noted that there is a Hill Murray case whereby the state gave an exemption for
somebody for what he calls social insurance legislation in the state for all parochial
schools. They ended up losing in the Supreme Court because they couldn’t make that
distinction. Mullery wonders if we aren’t getting into the same area and that it seems
similar. Syed said he thinks the issue was that it was at a parochial school and there were
a group of teachers who were trying to organize somewhat of a union and the dispute was
whether the employer would allow them to do this or not. He noted that what was
important with that case was it laid out part of what now equals the test for whether a
state law infringes on religious beliefs in an unconstitutional way. Syed asked Mullery if
he were thinking that by creating this exemption, it would be seen as a privilege for those
who had those religious beliefs? He noted that there is no reason that the state couldn’t
also be sued for putting an exemption like this one into law, but effectively the state was
already forced into court for trying to enforce a law that is currently on the books. So one
way or another, it is possible litigation could occur.

Brener asked members to be prepared to vote on this issue at the next advisory
council meeting.

Andy Morrison who represents the Minnesota Self Insurers Association spoke.
He spoke about a Minnesota Supreme Court decision, which is called Supreme Court
case of “Spaeth vs. Cold Springs Granite.” An employee went to a doctor to be treated
for knee problems. He had one knee that had a work related injury and the other knee
was not injured in work. The knee that was injured that was not work related got surgery.
The doctor did the surgery, BlueCross paid for the surgery. BlueCross’s contract said
“paid in full”, no co-pays and the doctor received reimbursement. Later the doctor said
that he thought that the non-work related knee was also work related. The end result was
that the Workers’ Compensation Court of Appeals said that since the doctor had been
paid in full by BlueCross BlueShield, any other charges would be excessive, therefore, he
had already been paid and had no interest in the action because he would have been paid
since it was not work related. Brener asked if the payment was less. Morrison said it
was. Morrison noted that the Supreme Court said that due to technicalities and due to the
statute and regulations, they said no. If the case is work related, then the provider can get
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the difference between what BlueCross pays and what Workers’ Compensation pays. If
the law stays as it is, every time we have a Workers’ Compensation case, it becomes
more complicated for both parties because every medical provider who has received
payments can now make a claim for Workers’ Compensation payments. The plaintiff
attorneys don’t like it because it slows down payment to their injured employees. The
second issue he addressed was a case called Irwin. This case indicated that if a medical
bill is contested and later the court determines that the medical bill may be work related,
the plaintiff’s attorney could collect Roraff fees for collecting that medical bill. For
years, the plaintiff attorneys got a percentage of the benefit paid to the employee. He said
that the law now says we are paying employee’s attorneys to collect these medical bills
and you also have to pay the employee 30% under subdivision 7 because that law doesn’t
say Roraff or not Roraff or contingent or not contingent. He asked the group to
distinguish this from the situation where benefits are taken from the employee’s stream of
income and when they are not taken from the employees’ stream of income and the
employer pays 100%. There is no need for a circuit breaker.

Mullery commented to Morrison that he had said that it wouldn’t affect the health
insurer of the employee if they make the Workers’ Compensation claim and it’s found to
be appropriate, doesn’t the health insurer have a subrogation interest against the Workers’
Compensation insurer for anything that they have paid? Morrison said yes, the Spaeth
case does not deal with the intervention of 176.191 or other intervention statutes. Spaeth
says if the health insurer has paid the benefit, they can go in and get their intervention
interest just like they always have. The person affected is the doctor. The doctor did the
knee surgery, health insurer pays a certain amount, and Workers’ Compensation pays
150% of that. If the knee surgery is not work related he would be happy with the
reimbursement he received. Under Spaeth, he can say it’s work related, therefore he lost
50% more to surgery today. Morrison noted that what they are intending to change is if a
doctor has taken a case and has been paid, then later decides that it is work related, he is
entitled to 150%. The problem with this is that every case has been slowed down
because they have to contact every medical provider that saw the patient about how much
they received for the service and now they may be entitled to 150% of what they were
paid originally for the service. It may be a long time before this is all settled, and then at
that point, the employee receives their money. That’s one of the biggest problems with
Spaeth.

Bailey said in many cases the providers are settling for 80 and 90%. He noted it’s
not always 100%. Morrison said if the case settles. Bailey said they wind up paying a lot
of the costs of insuring that individual when it may be Workers’ Compensation.
Morrison noted that the Spaeth issue does not affect that and what happens is they will
settle for 80%, instead of getting their money in 30 days. The bottom line is they have
already been paid so why should they get 150% because it may or may not be work
related.

Brener noted that we should table this until next month. Thaden said that he
would like to see a change in the statute and would like to see some language with his
proposal. Ellefson asked Morrison how many claims has this happened with and is this
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fraud? Morrison noted that it is not fraud. What happens for Spaeth to apply, the first
thing is that the medical provider had to have been paid. Otherwise, they have their claim
like any other party. If the doctor says there is no health insurance, then they go forward
like any other party and then there is a determination to whether it is work related. When
Spaeth applies, they have been paid and they have accepted money from another source.
Then the doctor can pursue that claim to receive the additional 50% and can pursue that
claim. Bailey asked if it’s later determined to be Workers’ Compensation and the doctor
is entitled to that, why isn’t it fair for the doctor to pursue that higher pay and get the
difference? Morrison said they can, but what they are asking is if the doctor has accepted
the benefit and he has already been paid, why should he get a windfall if it’s work
related.

Pollack commented that he believes the problem exists because of the difference
in the payment structure between Workers’ Compensation and general medical. If we
can solve the second problem, which is the discrepancy, Spaeth would probably not be
problem. Bailey noted that if Workers’ Compensation paid what the market pays, there
would be no Spaeth. It’s because Workers’ Compensation is so much higher than the
market that the bonus is allowed to the provider.

Morrison noted that some doctors advise their patients that it may be work related
because they know that can get paid a lot more. Some doctors are very sophisticated and
wait to see if the Workers’ Compensation case will settle or go forward and at the last
minute if they think that the Workers’ Compensation case doesn’t look good, they will go
to the general health insurer to get reimbursed.

Julie Schnell was concerned about Morrison calling it a windfall. Morrison said
the insurers and self-insured employer want to pay the same and don’t want to pay more
just because it’s work related.

Brener said this issue would be put into the agenda for next month to vote about.

IV. C. Medical Costs Discussion/Review

The Task Force report on Medical Costs was distributed. Brener noted that this
information is all available on the website at: www.doli.state.mn.us/medcost.html.
Brener noted that this synopsizes the Department’s recommendations and the
recommendations from the task force members. He noted that he hopes everyone will
carefully look through all the information because he would like to vote on this issue at
the next advisory council meeting.

Thaden said he has an issue that he would like to be put on agenda next month
regarding a letter that was sent to him and a copy to the commissioner about an issue
where there is an employee with an injury that has occurred over a long period of time,
but has only worked their current employer for a short time. That current employer
would then be held responsible for the total cost of the claim until it gets apportioned out.
Two things happen here. Sometimes it doesn’t get apportioned out because it’s too
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expensive to do the apportionment so the last employer ends up paying it. The other
issue is the employer ends up getting a higher workers’ compensation rating for that time
period until it is apportioned out which could take a number of years. The current
employer’s rate goes over 1.0 and because of that they aren’t allowed to bid on a number
of projects and it adversely impacts their ability to do the work even though the employee
didn’t get most of the injury while with that employer. Brener noted that this is known as
the Gillette issue and asked Thaden if he could copy the letter. Thaden had copies of the
letter that were handed out.

Daniels spoke about an issue in the mining industry where the mining company
had filed for bankruptcy. Usually the new employer keeps employees, however in a
couple of instances recently the new company that has taken over is taking the seniority
list and any employee that has had an injury, they’ve let go. He noted that he believes
there should be language to protect those employees. He said he is working with some
legislators and what he wants is language that protects the employees so that when
something like this happens it allows that employee to go back and perhaps start with
new training or some other alternative.

Brener noted that he would like both of these issues to be voted on at the next
advisory council meeting. Thaden noted that he wasn’t proposing any legislative
language; he just wanted to look at the issue. Pollack asked Daniels if he would be
submitting language for everyone to look at. Daniels said he would work on putting
some language together.

IV. D. Legislative Items

Jamie Anderson noted that next month she would have a list of everything that
has been discussed including what was on last years bill and everything that was
discussed at this meeting. This will be in the packets at the next meeting.

Brener suggested that the next meeting be held from 9:30 to noon.

V. Adjournment

Brener made a motion to adjourn at 11:04. All voted in favor of the motion and
the motion passed.

Respectfully submitted,

Rosaland Hoffman