In the sections that follow we consider other sources of the growth in pension awards. We recognize that various factors could account for this and we consider each of them. We are not able to rule out some influence for many possible causes but find the evidence for several of them to be weak and not persuasive. The factors that we shall consider are:
• appeals to the BIIA;
• the overall level of occupational injuries and illnesses during this time period; • the severity of injuries sustained from accidents;
• changing demographics in Washington including the age and gender of the workforce; • the composition of impairments with a focus on back injuries and psychiatric
involvement and possible causes due to changing treatments; and
• the impact of legislative and regulatory changes as well as notable judicial decisions. The Role of Appeals in the Growth of Pensions
The BIIA currently receives about 9,000 state fund appeals per year and issues decisions on about 6,000 to 7,000. (Figure 2.11) These numbers rose slowly from 1988 to 1999, then jumped significantly in 2000 and 2001 and have remained relatively flat since then. It is not possible to determine from existing BIIA or L&I records how frequently pension issues were either the main or secondary reason for appeals. Moreover, the BIIA’s reporting system does not separate out pension decisions. However, the L&I data warehouse provides a count of pensions awarded by the BIIA (Figure 2.12). The numbers rose sharply from FY 1988 to a peak of 149 in 1992, then dropped back to 75 to 90 from 1996 through 1999, before rising sharply again to 207 in 2002. Since that high point the numbers have fallen back to the 70 to 90 range.
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Figure 2.11
State Fund Appeals
0 2,000 4,000 6,000 8,000 10,000 12,000 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 Calendar Year
New Appeals Received BIIA Decisions
SOURCE: Data Warehouse, Department of Labor & Industries. Figure 2.12
Number of Pensions by BIIA Decision
0 50 100 150 200 250 1985 1990 1995 2000 2005 2010 Fiscal Year Self Insured State Fund2-72
When considered as a percent of all BIIA decisions, the frequency of state fund pension decisions has dropped from a high of 4.8 percent in calendar year 1991 to 1.0 to 1.5 percent in recent years, with only a slight turn upward to 2.3 percent in 2002 (Figure 2.13). Also, state fund pensions awarded by the BIIA as a percent of all state fund pensions consistently dropped from a high of 24 percent in FY 1994 to recent levels of 8 to 10 percent, with the exception of a one- year jump to 19 percent in 2002 (Figure 2.14).
Figure 2.13 BIIA Pensions as Percent of All BIIA Decisions 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Calendar Year SI % SF %
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Figure 2.14
SOURCE: Data Warehouse, Department of Labor & Industries.
Self-Insured Appeals
The BIIA currently receives about 2,600 to 2,800 self-insured appeals per year and issues decisions on about 2,700 to 2,800. (Figure 2.15) While there has been a gradual increase since 1998, accelerating slightly around 1997, the time trend does not show the same sharp increase of the state fund appeals from the year 2000 to 2002.
2-74 Figure 2.15 Self-Insured Appeals 0 500 1,000 1,500 2,000 2,500 3,000 3,500 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Calendar Year
New Appeals Received BIIA Decisions
SOURCE: Data Warehouse, Department of Labor & Industries.
The number of self-insured pensions awarded by BIIA decision rose gradually from 1988 to a peak of 63 in 2006, but without the steep state fund pension increases found in 1992 and 2002. (Figure 2.12) The frequency of self-insured pensions, as a percent of all BIIA self-insured decisions, has consistently ranged between one and two percent since calendar year 1989, except for a one-year peak of 2.5 percent in 2006. (Figure 2.13) This pattern is substantially different from the trend downwards in state fund decisions.
The pattern of self-insured pensions awarded by the BIIA as a percent of all self-insured pensions is also very different from the state fund trend. (Figure 2.16) For self-insured pensions the percent rose consistently from FY 1988 to a peak of 22 percent in 2006, with small drops for the years 1991 to 1993 and 1999 to 2000, almost opposite to the trend in state fund pensions.
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Figure 2.16
SOURCE: Data Warehouse, Department of Labor & Industries.
Trends
State fund appeals rose substantially during the years 1997 to 2003 when L&I was
making its most concerted effort to reduce time-loss duration. The number of state fund pensions resulting from BIIA decision also rose during these same years. However, the percent of all BIIA decisions that these pensions represented increased only very slightly, and after 2002 this percent resumed a long decline. Also, and perhaps most important, state fund pensions resulting from BIIA decisions have never been more than 25 percent of all state fund pensions and this percent has been declining sharply since a peak in 1994 (with the exception of a jump from 10 percent to 18 percent in 2001 after which the downward trend continued).
State fund pensions experienced their sharpest increase during the fiscal years 2000 to 2003 when the yearly total rose from 993 to 1,506. During these four years the total number of state fund pensions was 4,675. During these same years there were 556 state fund pensions awarded by BIIA decision or 12 percent of the total. From 2000 to 2001 the total number of state fund pensions increased by 72 with the BIIA state fund pension decisions increasing only by 6. From 2001 to 2002 the total increase was 46, but there was an increase of 94 in the BIIA state
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fund pension decisions. From 2002 to 2003 the state fund pensions rose by 394 while the BIIA state fund pension decisions actually declined by 78.
The pattern for self-insured pensions has been different. The number of self-insured appeals and the number of pensions by BIIA decision have been increasing since 1988 without the exceptional upsurge seen in the state fund pensions from 1997 to 2003. The likelihood of BIIA awarding a pension has remained steady since 1988. But, with some fluctuations, the percent of self-insured pensions that result from BIIA decision has been rising while it has been falling for state fund pensions. The most likely explanation for this difference is that self-insured employers and self-insurance staff at L&I were less inclined to award pensions during the period of time in which L&I became more likely to award pensions in state fund claims.
Increasing numbers of appeals are not likely to cause the sizeable upturn in the number of pensions, but they are likely to be related.43 There is a very strong correlation between the
number of appeals and the number of pensions allowed. If one correlates the number of pensions allowed with the number of appeals filed two years earlier for the years 1990 to 2007, the
correlation coefficient is .82. Several reasons for this relationship are possible though the usual caution applies, that is, that a correlation does not mean that a causal relationship exists.
A concerted push to resolve claims is likely to result in more pensions as well as more workers who are dissatisfied with a claim manager’s resolution of their claim. Additionally, as the numbers of appeals mount, the time available for claims staff to focus on managing claims is constrained. Large numbers of appeals and reconsiderations followed some significant legal decisions in 2000 and 2001 (including Avundes and Cockle respectively, both noted later in this chapter). A very large amount of staff time was needed to calculate or recalculate the appropriate amount of benefits that were being paid. The result is that such diversions, necessary though they may be, are associated with appeals and contribute to delays that distort the timing of pension awards. Additionally, more appeals may be symptomatic of changes in claim filing or legal behavior, or possibly a greater involvement by attorneys.
43
2-77 Conclusion
When these data are considered as a whole, we cannot conclude that changes in BIIA behavior can explain the changes in the rate of state fund pensions from the late 1990s to the present. But we are unable to rule out the importance of BIIA decisions in the years prior to the sharp upturn in the pensions granted by L&I. Increased BIIA pension decisions have contributed to the overall increase in pension numbers because of the increase in appeals reviewed by the BIIA, not because the BIIA has become more likely to award pensions at a higher rate. CHANGES IN THE NUMBERS OF ACCIDENTS, INJURIES, ILLNESSES, AND IMPAIRMENTS
In seeking to explain the upsurge in pension awards beginning in the late 1990s we need to rule out some sources that theoretically could be in whole or in part responsible. One possible cause could be that there was an increase in the number and/or the severity of occupational injuries and illnesses several years before the surge.
Injury Incidence
Because consistent data series for Washington and the U.S. are not available for the years prior to 1996, we are somewhat restricted in the years we consider in Table 2.23. But the table makes three things very clear. First, the first two columns show that both the U.S. and
Washington appear to have had consistent long-term downward trends in the incidence rates of non-fatal work injuries from 1996 forward.44 Second, the incidence rate for Washington is consistently higher than the corresponding annual rates for the nation as a whole. Third, column 3 in Table 2.23 shows the ratio of the lost-time rate in Washington to the national rate. That column indicates that while Washington’s rate has declined from 1996 to 2006, the rate fell more rapidly in the country as a whole.
44
Incidence rates are reported annually by the U.S. Bureau of Labor Statistics. The rates are based on cases with days away from work per 100 full-time equivalent workers (employed 200,000 hours).
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Table 2.23 Incidence Rates of Non-Fatal Injuries and Illnesses, Cases with Days Away from Work, for Washington and U.S., per 100 FTE Employees
Year WA lost time rate US lost time rate
Ratio WA/ US lost time rate
WA rate if US distribution 1996 3.05 2.19 1.39 2.99 1997 3.09 2.10 1.47 3.00 1998 2.81 1.89 1.48 2.74 1999 2.68 1.86 1.44 2.62 2000 2.50 1.77 1.42 2.45 2001 2.50 1.70 1.47 NA 2002 2.50 1.60 1.56 NA 2003 2.24 1.48 1.51 2.22 2004 2.16 1.39 1.56 2.14 2005 2.01 1.33 1.51 1.98 2006 2.14 1.26 1.70 2.09 SOURCE: US Bureau of Labor Statistics.
Washington’s incidence rates may be higher than those of the U.S. because of the nature of the work done there. We asked, “what would Washington’s lost-time rate have been overall if the distribution of employment in Washington was the same as the composition of employment in the U.S?” We simply take the Washington incidence rates by industry, re-weight the average for the state using the composition of employment for the country as a whole and recalculate the state rate. The hypothetical rates are shown in the last column of Table 2.23.
What we find is that the rate in Washington would be slightly lower than the actual rates, confirming that Washington’s lost time rate would be lower if its industrial composition were closer to that of the U.S. as a whole. Simply put, there is a concentration of industries in
Washington that are associated with a high incidence of lost-time injuries and illnesses, but this accounts for only a tiny portion of the difference between Washington and the nation. While the rate in Washington is relatively high, its consistent decline (at least till 2006) suggests that there was not a sudden bulge in incidence rates in the early part of the 1990s that might have resulted in the upsurge in pension awards after 1997. The high rate could account for the levels of workers’ compensation time-loss cases and pension cases, but the long-term movement in the rate has been downward, consistent with the decline in time-loss claims for workers’
compensation. This suggests that the increases in pensions during the 1990s and early in the current century were not caused by more accidents and injuries.
Data on occupational fatalities confirm these findings. From 1993 to 1998, the level of occupational fatalities in Washington stayed in a fairly narrow range (Table 2.24). After 1998 the number of these fatalities declined reaching its lowest point in 2000. It is important to keep in
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mind that the size of the workforce in Washington was growing over much of this period, even as the number of fatalities was declining. For the U.S. the number of fatalities has also tended to decline with much of that occurring in the latter years of the range shown. In the third column we calculate the ratio of the numbers of occupational fatalities in Washington to those for the entire nation.45 Considering that Washington’s workforce grew more rapidly than did the country’s, the state’s relative safety performance record as judged by the number of fatalities has been stronger over this time.
Table 2.24 Occupational Fatalities, Washington and U.S., 1992–2005
Year Washington U.S.
Washington/ U.S. Ratio 1992 97 6,217 1.5 1993 112 6,331 1.8 1994 118 6,632 1.8 1995 109 6,275 1.7 1996 128 6,202 2.1 1997 112 6,238 1.8 1998 113 6,055 1.9 1999 88 6,054 1.5 2000 75 5,920 1.3 2001 102 5,915 1.7 2002 86 5,534 1.6 2003 85 5,575 1.5 2004 98 5,764 1.7 2005 83 5,734 1.4
SOURCE: US Bureau of Labor Statistics.
Level of Impairment
Even if the incidence of injuries and illnesses may not account for the upsurge, is it plausible that the increase was the result of more serious impairments that somehow befell the state’s workers? We have no reason to expect that this happened but since it is a conceivable source of the upsurge, we need to consider this possibility. One way to analyze this is to examine the record for permanent partial disabilities over the time period in question. If the type of
injuries and illnesses experienced by Washington’s workers was becoming more severe, we would expect to see the number of permanent partial disability awards and the degree of impairment associated with them to be increasing.
45
We are not using the ratio of fatality rates which would be a preferable metric to use. While we know the level of employment in Washington and in the U.S. for all the years shown in the table, we do not have estimates of full-time employment equivalents for each of these years.
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Tables 2.25 and 2.26 shed some light on the severity and frequency of permanent partial disability awards. We separate the data by those who received awards without also receiving a pension, and those who were pensioned and also received a permanent partial disability award.
Table 2.25 Permanent Partial Disability Awards for State Fund Claims
Non-Pension Recipients Pension Recipients
Injury Year Awards % of Body (Median) % of Body (Mean) % of Time Loss* Awards % of Body (Median) % of Body (Mean) 1985 6,287 7.5 9.0 19 218 11.3 16.1 1986 6,385 7.5 9.2 19 214 11.3 14.8 1987 6,780 7.0 8.8 19 236 10.2 13.4 1988 7,692 6.0 8.3 20 295 10.4 15.8 1989 8,680 6.0 9.0 21 295 11.4 15.9 1990 9,641 5.7 8.6 21 267 11.7 16.4 1991 9,724 5.5 8.5 22 299 10.2 15.9 1992 9,971 5.4 8.3 24 316 10.1 14.3 1993 9,713 5.4 8.1 25 274 10.1 14.4 1994 9,522 5.4 8.1 25 245 10.1 12.6 1995 9,197 5.4 7.8 25 249 10.1 12.2 1996 8,852 5.4 7.8 25 220 10.1 12.3 1997 9,400 5.4 7.8 26 215 10.1 12.1 1998 9,267 5.4 7.8 26 227 10.1 12.3 1999 9,081 5.4 7.7 25 221 10.0 11.4 2000 9,443 5.4 7.6 27 218 10.0 12.6 2001 9,287 5.4 7.9 28 183 10.0 11.7 2002 8,969 5.4 7.7 29 143 10.0 11.4 2003 8,723 5.4 7.5 29 105 10.0 10.6 2004 8,479 5.0 7.2 28 60 10.0 10.6 2005 8,011 5.0 7.0 26 30 6.0 7.1
Hearing loss awards are not included.
*Awards for non pension recipients taken to ultimate. Time-loss claims in % of time-loss claims estimated at ultimate.
SOURCE: Data Warehouse, Department of Labor & Industries.
For those who did not receive a pension, the number of permanent partial disability recipients has fallen, particularly in the last several years. However, the proportion of time-loss claims that resulted in permanent partial disability awards has steadily moved higher, from 19 percent of time-loss cases in 1985 to 29 percent in 2002 and 2003.46 By this gauge, we could conclude either that the rate of more serious injuries and illnesses (but not the level) has increased over time, or that the standards for awarding permanent partial disability benefits have been relaxed.
46
One reviewer has asked if this rate possibly reflects some non-reporting of relatively minor injuries. That would lower the denominator and explain the increasing rate. Though this is a logical possibility, nothing that we have heard or seen suggests to us that such a change has been occurring.
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We cannot resolve this issue here with certainty though it is instructive to see that the average impairment rating—both the mean and the median—associated with awards has steadily declined. This is consistent with the data from Table 2.23 showing that the rate of injuries
resulting in lost time has declined quite steadily. On that basis we are inclined to believe that the severity of injuries and illnesses resulting in permanent disability has not increased. Instead, the criterion for granting a worker a permanent partial award may have been relaxed, thereby allowing a larger proportion of time-loss recipients to benefit.
For those disability pensioners who also received a permanent partial disability benefit, the median accepted impairment rating has remained within a remarkably narrow band from 1989 to 2004 (Table 2.25). However, the mean value of impairment rating awards has been declining, particularly since the mid 1990s. At a minimum this suggests that the severity of the impairment associated with those who were eventually determined to be permanently and totally disabled has not increased and probably declined over the period when the upsurge in pension awards occurred. A note of caution is needed, however, because those who received a permanent partial disability award may have had a change in their condition—and the degree of their
impairment—in the time after receiving the permanent partial disability determination and before receiving the pension.
Table 2.26 shows a somewhat similar pattern for self-insured claims. From 1991 to 2005 (and 2006 using estimates of ultimate losses) permanent partial disability awards were flat based on the reported counts, and rose slightly based on the estimated ultimate counts. However, both of these occurred in an era of declining time-loss claims. As a result, as was true for the state fund claims, the proportion of time-loss claims that became permanent partial disability cases steadily increased, though the proportions were still substantially lower than in state fund cases.
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Table 2.26 Permanent Partial Disability–Self-Insured Accident calendar year PPD latest reported counts TL latest reported counts PPD/TL latest reported counts Estimated ultimate counts Estimated ultimate counts PPD/TL latest reported counts 1991 3,478 17,989 19 3,480 17,989 19 1992 3,594 17,728 20 3,597 17,728 20 1993 3,540 17,703 20 3,547 17,703 20 1994 3,590 17,562 20 3,599 17,562 20 1995 3,313 16,512 20 3,324 16,514 20 1996 3,591 17,397 21 3,607 17,409 21 1997 3,782 18,554 20 3,804 18,584 20 1998 3,926 18,748 21 3,960 18,801 21 1999 3,956 18,245 22 4,011 18,327 22 2000 3,897 17,859 22 3,984 17,982 22 2001 3,937 16,747 24 4,079 16,931 24 2002 3,775 15,754 24 3,992 16,035 25 2003 3,456 14,529 24 3,787 14,959 25 2004 3,284 14,158 23 3,870 14,910 26 2005 2,860 13,020 22 3,954 14,433 27 2006 4,039 14,328 28
SOURCE: Actuarial estimate supplied by Department of Labor & Industries.
Conclusion
In summary, we have no reason to believe that injury and illness severity increased in Washington from the early 1990s until more recent years. A variety of improvements in health care and in safety and prevention practices over this period make it difficult to accept that severity of time-loss claims has increased over time. Still, we cannot rule out the possibility based on the data for permanent partial disability awards.
DEMOGRAPHIC CHANGES MAY HAVE PLAYED SOME ROLE IN THE INCREASE