Medical Benefits Are Unlimited, Or May Be Extended Indefinitely By Administrative Agency, In 52 Jurisdictions*

1. Montana limits the cost of medical benefits for non-disabling occupational diseases to $2,500.

*Jurisdictions include all states, District of Columbia, and Longshoremen's and Harbor Workers' Act.

Mr. BUNN. Chairman Williams and members of the Senate Committee on Human Resources, my name is Howard Bunn, vice president for workers' compensation, National Association of Independent Insurers. I want to thank you for the opportunity to present our comments on S. 420.

The NAII is a property-casualty insurance trade association comprised of over 400 member-companies. Our membership is comprised of both the very large carriers; for example, Allstate and Nationwide, and other companies of varying sizes. In the field of workers' compensation, our premium volume is over $1 billion annually, or approximately 10 percent of the insurance market. At the outset, let me make it clear that the NAII's policy position is at present unequivocal opposition to any kind of Federal standards approach to State workers' compensation programs. Our position is predicated upon both philosophical and practical reasons, as will be articulated subsequently.

As noted by Chairman Williams in his introductory remarks to S. 420 in the Congressional Record of February 9, this legislative proposal does represent a "paring down" from its predecessors. But in so doing, many of the problem areas that continue to plague the system are left unanswered, and are relegated to a study which presumably will present answers in a 3-year time span-a time span we seriously question, in view of the inability of students of workers' compensation to effectuate solutions to these troublesome areas to date.

In presenting our views, we will not endeavor to discuss every aspect of the bill. Rather, we will deal sequentially with those provisions which would pose the most serious difficulties to implementation. I will summarize and comment on some of the critical parts of the bill, that we think are deserving of such.

There is a provision in the current bill:

Although in recent years there have been improvements in many State workers' compensation laws, to a great extent existing State workers' compensation laws still fail to meet the minimum standards recommended by the National Commission on State Workmen's Compensation Laws.

Comment: This statement presupposes that meeting the 19 essential recommendations of the National Commission is the benchmark upon which State workers' compensation laws should be judged. We respectfully submit that, particularly in light of experience since that report was handed down in 1972, all too much emphasis has been placed on the 19 essentials without adequate attention to administration, permanent partial disability, occupational disease and other critical areas. In fact, the 19 essentials themselves are now being rethought as to whether they, as of the present time, represent a proper statement of the basic ingredients of a good workers compensation system. Would-be scorekeepers have found it virtually impossible to agree on interpretations of the 19 essentials, consequently either on a strict or substantial compliance basis. Consequently, there is considerable disparity in compliance scores. As a matter of fact, there was a group that spent several days over a period of weeks trying to go through the National Commission report on a strict compliance nature, and it was very, very difficult to ever get a consensus in most of the

areas.

Another section in the bill that says:

while at the same time maintaining the primary responsibility and authority for workers' compensation in the States.

Comment: We don't question that the authors of the bill intend for this to be the case. We do, however, believe that if the OSHA experience is any indication, that States may very well become frustrated with trying to carry out its mandates and as a consequence relinquish the entire program to the Federal Government. Several Governors in the past have indicated they would most likely urge repeal of their State workers' compensation laws upon the enactment of Federal standards legislation. We believe many current Governors would today, upon enactment of similar legislation, follow the same course of action.

One of the areas that I think would add fuel to the flames of whether or not the Federal Government is the enforcement mechanism, is the Benefits Review Board, which we think is an unworkable solution. We think this will add greatly to the workload of the Benefits Review Board. We also feel that the Benefits Review Board has been under criticism for the inability to get out their work in a timely fashion.

Notwithstanding the assurances of many supporters of this bill, the enforcement mechanism would not be before that Board, we feel to the contrary. We think that there are many people who would see this as an avenue of last relief, and try to pursue it with the Board.

But overall, the area that is the most significant is that you have gravitated toward reducing three important critical areas to a study. While at first blush this may seem to have the appearance of giving consolation to people with occupational diseases, we think this is like buying a pig in a poke. You are not exactly sure what the cost of these critical areas will be. The permanent partial disability, for instance, while it represents only 5 percent of the number of claims, it in fact tends to account for 50 or 60 percent of the entire cost of the system. You are talking about occupational diseases. I think this is a great unknown, but presumably it is an expensive system that will have to be paid for. In those States that have tried it, it has turned out to be a very, very expensive proposition.

So we are talking about three of the areas that have a large part of the ultimate cost, and in a 3-year time span we are to come up with a mandatory way to solve them. We respectfully suggest that if the system is as costly today, 3 years from now it will be very, very costly indeed.

Another comment in the section which is of particular concern to the insurance industry mandates that each insurance contract must provide a provision that will carry out the provisions of the minimum standards bill. We think that premium for these untested standards will have to be estimated from actuaries upon review. There will be areas that will be impossible to price. Therefore, there will be instances where the industry will have to come up with a best price available.

Without attempting to comment on the remaining sections of the bill dealing with grants, statistics, et cetera, we view the bill as

very costly and inflationary in its ultimate form, replete with additional Federal standards for OD, permanent partial disability and indexing.

But let us suppose a bill were before us that addressed our technical concerns-then what? With the current climate of the Federal Government in its own workers' compensation endeavorsLongshoremen's and Harbor Workers' Act, FECA, and black lungthere is simply a total lack of confidence in the Federal Government's ability to venture into workers' compensation at the State level without a complete takeover, and without creating a worse set of problems than currently exist.

We do, however, believe the Federal Government does have a legitimate role, and that is technical assistance. The State Standards Division, Employment Standards Administration of the U.S. Department of Labor, is developing the capability to provide such assistance. This type of voluntary effort is the direction we should be heading. As of this time, too many questions remain to be answered. To overlay Federal standards pending resolution of those problems would be to bring the many State workers' compensation systems to their knees. The States serving as laboratories, where answers to problems can be sought, is the forum needed and one which we hope will continue to be available.

In commenting upon several of the things that were raised this morning by Mr. Grosfield and by others, I would like to point out that the Organization of Administrators in this country, and its executive committee, unless it has changed its policy position, still adheres to a policy position which is opposed to any type of Federal standards. I was the North Carolina representative on the IIDC that adopted that resolution. To the best of my knowledge, it still stands.

In commenting on the considerable discussion this morning on the effect of competition in the States, and driving people away because of higher workers' compensation, I would respectfully say, while it may occur in some instances, I think it is overplayed. I think the gentleman from the UAW hit the nail on the head, when he said that there are many factors that go into whether or not that industry moves. While that may be a significant factor in a few occasions, I don't think that is the majority. I think things like tax incentives, property considerations, and others are the considerations why people move from one State to another.

Take, for instance, my home State of North Carolina, which has a high workers' compensation benefit level, meets 100 percent of the average weekly wage, and many or most of the essential recommendations of the National Commission. It has yet the highest rate of growth of industry in the country. I think that is something a bit out of proportion.

These are my comments. Thank you.

[The prepared statement of Mr. Bunn follows:]