Submitted pursuant to House Bill 175, 147th General Assembly

DOVER, Del. – This afternoon, Lt. Governor Denn, Chair of Delaware’s Workers’ Compensation Task Force, and business and legislative leaders made recommendations to Governor Markell and the General Assembly to stop the large workers compensation rate increases that are burdening Delaware businesses.

Governor Markell said of today’s report and recommendations, “I applaud the Lt. Governor’s work on this extremely important issue for Delaware’s business community. His leadership ensured that the task force acted swiftly and effectively to address the high rates that have burdened our employers. The bipartisan reform package outlined today represents the culmination of a great deal of work, commitment and compromise by everyone involved with the task force.”

The Workers’ Compensation Task Force was created on January 30, 2013 by the Delaware General Assembly and the Governor, and charged with an expedited review of Delaware law relating to workers’ compensation, the impact that the 2007 amendments to that law had upon workers’ compensation premiums, the reasons for recent increases in workers’ compensation premiums, and whether any additional changes to statutes, regulations, or practices are required to control growth in premiums. As detailed in the task force’s prior report, Delaware’s workers’ compensation premiums had risen by calendar year 2006 to be the third most expensive in the country. The primary reason for Delaware’s high premiums was generally agreed to be medical costs – the Delaware Compensation Rating Bureau (DCRB) indicated that in 2006, medical costs were 60% of total workers compensation system costs in Delaware, as compared to 40% in surrounding states.

The task force delivered its first set of recommendations in May 2013, and those recommendations were consolidated into House Bill 175 which passed the Delaware House of Representatives and Delaware State Senate unanimously. Among the provisions of House Bill 175 was one that continued the existence of this task force through June 30, 2014.

The task force’s recommendations fall into three areas:

1. Heightened Oversight of Insurance Carriers. These recommendations include consolidating the Data Collection Committee and the Health Care Advisory Panel into a single committee and a Ratepayer Advocate to be hired and overseen by the Workers’ Compensation Oversight Panel, with staff support to be provided by the Department of Labor.

2. Stricter Control on Medical Costs. These recommendations include directing the Workers’ Compensation Oversight Panel to create a new medical fee schedule, using multipliers of medical codes used by the Centers for Medicare and Medicaid Services, which results in a 33% savings from all providers (to be phased in over a three year period) and recommending that the General Assembly (through the Workers’ Compensation Oversight Panel) monitor both the rate impact of these recommendations and their impact upon providers as the recommendations are phased in, and make statutory adjustments in the fee schedule if appropriate.

3. Consideration of New Rating Organization. The task force recommends that DOI undertake a formal assessment of whether there should be a change in the rating organization used by Delaware insurance carriers, and include members of the task force who have expressed concerns about the current situation in that formal assessment.

“Lt. Gov. Denn deserves much of the credit for this proposal, without his expertise and leadership we might still be struggling with this issue,” said Senate President Pro Tem Patricia Blevins, D-Elsmere. “It is our hope that this proposal will result in real savings to businesses that have been struggling with ever-skyrocketing workers’ compensation rate increases.”

State Representative Ruth Briggs King (R-Georgetown), a member of the task force, said, “This bill is the result of months of work with employers, health care providers and insurers. I believe a great deal of thought and consideration went into crafting this legislation, which I believe will help reduce the uncertainty and escalating premiums for Delaware’s small businesses.”

“I think we had an excellent group of task force members, committed to helping the business community, and I can’t thank them enough for all of their hard work,” said Senator Gerald Hocker (R-Ocean View), both a panel member and the owner of several Sussex County businesses. “It turned out to be a great idea to keep this task force together for another year, and I think the legislation that comes out of this effort is going to provide significant cost savings to the employers of the state of Delaware.”

“The members of the Worker’s Compensation Task Force have taken on the task of improving critical elements to Delaware’s competitiveness when it comes to job creation and business expansion,” said Rep. Bryon Short, D-Brandywine Hundred. “Through great effort, we have tackled one of the most important factors driving up workers compensation costs for Delaware’s employers. I believe the adoption of a relative value units-based fee schedule will have a meaningful impact on the premiums paid in Delaware. Our work is not done. Other important areas resulting in high premiums for Delaware businesses need to be examined in the coming year, and we will continue to look out for businesses and the workers they employ.”

“It was not easy to get to this point in making changes to the workers compensation payment system,” said Rich Heffron, President of the Delaware State Chamber of Commerce. “Through the dedication and hard work of my fellow Task Force members – along with Lt. Governor Denn’s leadership – today we are able to propose changes that can be expected to lower Delaware’s workers compensation rates. We still need to determine why Delaware’s cases take longer to settle, and how insurance companies calculate their reserves, but that is for a future Task Force to examine.”

A copy of the report is included, as are separate statements from the Delaware Compensation Rating Bureau, Medical Society of Delaware, and the Delaware Department of Insurance, included at their request.

Liberty Insurance Corp. and LMI Insurance Corp. Target 2014

Medical Society of Delaware’s May 9, 2014 Workers’ Comp Task Force Statement

Lt. Governor Denn’s DOI Workers’ Compensation Task Force Letter from May 12, 2014

DCRB Comments to May 14, 2014 Task Force Report

Workers Comp Report Presented May 15, 2014

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