Arcadia WC Update - KY 2019

2019 Workers’ Compensation Prospectus for Attorneys,
Claims Adjusters, and Injured Persons
Commonwealth of Kentucky

By Ndeto K. Mwose, JD, CSSC, WCSS

Contents 

Preface ..........................................................................................................................................3
Legal Update.................................................................................................................................5

“Two-Multiplier” & Retirement .................................................................................................5
Anti-Assignment Language/Clauses: ........................................................................................5
PPD Benefits and Hearing Loss Claims: KRS 342.7305(2) .........................................................6
Legislative Update.........................................................................................................................7
House Bill 2 – Workers’ Compensation Reform ........................................................................7

Income Benefits KRS 342.730(4):...........................................................................................7
Voluntary Intoxication KRS 342.610(3)-(4):.............................................................................7
PPD Medical Limit KRS 342.020(3)(A)-(D): .............................................................................7
Utilization Review Waiver:......................................................................................................7
AWW Cap Increase:...............................................................................................................7
Treatment Guidelines/Formulary...........................................................................................7
A Closer Look at the 780 Week Limit on PPD Medical Treatment............................................8
Additional Notes .......................................................................................................................9
Department of Workers’ Claims Update......................................................................................10
Settlement Related Updates ...................................................................................................10
Kentucky Workers’ Compensation Observations.........................................................................11
Facts & Figures........................................................................................................................11
Arcadia in the Community – 2019 Dates to Save.........................................................................13

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Preface

This publication provides Claims Professionals, Risk Managers, and Attorneys with
updates concerning statutes, rules, and customs that impact the workers’
compensation industry. My role as a consultant is to provide solutions that offer
significant cost savings to employers and insurers, while making quality access to care
available for the injured worker. One way to fulfill my role involves the use of structured
settlements to deliver periodic future payments tailored to meet the injured worker’s
needs. However, we offer a large variety of free resources that you can call upon when
the need arises.
The illustration below depicts a lump sum award that is exhausted within five years of
settlement—a sad possibility. Obviously, running out of money for medical needs will
negatively impact the injured worker. So, my goal as a settlement consultant is to help
you anticipate these challenges, provide answers for the injured worker to consider,
and ultimately deliver excellent results.

Structured Payments vs. Lump Sum Awards

LUMP SUM AWARD ANNUITY PAYMENTS PREDICTABLE FUTURE NEEDS

$$$$$

$$$$

$$$

$$

$
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
TEN YEARS POST‐SETTLEMENT

* This illustration is presented to highlight the comfort, security, and protection of Structured Settlements.
Each case is unique, contact an Arcadia consultant for more information and a detailed quote.

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Arcadia consultants work in every jurisdiction, including Kentucky, and we are
committed to professional advocacy for all the parties involved in claims management
insurer, insured, and injured worker. We empower Claims Professionals to consistently
produce successful outcomes for their customers. We empower Attorneys to deliver
security for their clients. Above all, we empower injured persons to access powerful
resources that help maximize their quality of life.

You are more than welcome to contact me with general or specific questions related
to structured settlements. I can be reached by any of the following methods:

Phone Email Fax
1-844-689-3022 (Direct) [email protected] 317-536-8099

Please note that the information in this publication was compiled by the author from case law, statute, and state
agencies, and is subject to change without notice. The statements made by this publication are those of the author
and do not necessarily reflect the positions, views, or opinions of Arcadia Settlements Group, Inc. Arcadia Settlements
Group, Inc. does not provide a warranty as to the accuracy of the information found herein. Further, this publication
is neither intended as, nor may it be construed as legal advice. Consult with your own legal counsel for advice.

4

Legal Update

Anti-Assignment Language/Clauses: A court order approving the assignment of
a claimant’s future periodic payments in exchange for a heavily discounted
immediate cash payment was challenged for violating terms of the settlement
agreement. The Kentucky Supreme Court reviewed the settlement agreement
language and Kentucky’s Structured Settlement Protection Act (KSSPA),
holding that (1) anti-assignment clauses are enforceable and (2) the Kentucky
SSPA does not apply to workers’ compensation settlements. American General
Life Ins. Co. v. DRB Capital, LLC (rendered December 13, 2018).
This ruling clarifies two important points: (1) that the Kentucky SSPA will not
affect transfers of payment rights under workers’ compensation settlements
and (2) anti-assignment clauses are enforceable in settlement documents.
Structured settlements contain anti-assignment language to comply with IRS
regulations concerning taxable income while offering spendthrift protection.
This ruling protects structured settlements as a powerful claims resolution tool.

“Two-Multiplier" & Retirement The Supreme Court of Kentucky, in a case
of first impression, held that a statute that allows for permanent partial
disability (PPD) benefit payments of two times the amount otherwise payable
during a “period of cessation” from employment, applies to a worker who
voluntarily retires for reasons not solely related to a workplace injury and
entitles that worker to the “two-multiplier” of weekly benefits. Active Care
Chiropractic, Inc v. Rudd.

5

Legal Update (Cont.)

PPD Benefits and Hearing Loss Claims: KRS 342.7305(2). The claimants in this
matter, which is pending before the Kentucky Supreme Court, raised
constitutional equal protection challenges to KRS 342.7305(2). Asserting that
the statute arbitrarily imposes different treatment on them and other
members of their class and subclass for awards of PPD income benefits. The
central question is whether it is permissible to require 8% impairment rating
before hearing loss claimants qualify for PPD income benefits.
The consolidated appeal focused on three separate employers and claimants,
who recently presented their claims and defenses to the Court of Appeals. The
Court of Appeals held that the impairment rating threshold of KRS 342.7305(2)
is unconstitutional, because it violates equal protection guarantees established
in the Fourteenth Amendment to the US Constitution and Sections 1, 2, and 3
of the Kentucky Constitution. The decision to deny PPD income benefits to each
claimant was vacated and remanded for further proceedings.
The Kentucky Supreme Court has received merit briefs for consideration and
decision, but there are no further developments (as of January 10, 2019). Napier
v. Enterprise Mining Co., 2018 Ky. App. LEXIS 108 (Mar. 23, 2018).

 

6

Legislative Update

House Bill 2 – Workers’ Compensation Reform

As you know, the 2018 legislative session brought about several reforms aimed at modernizing
Kentucky’s Workers’ Compensation System. The list of changes is voluminous, and employers
should expect cost savings going forward. Some of the major changes include:
Income Benefits KRS 342.730(4):

Income benefits terminate at age 70 or four years after the injury or last exposure.
Voluntary Intoxication KRS 342.610(3)-(4):

Voluntary intoxication may be offered as the presumed cause of an injury, occupational disease,
or death and precludes employer’s liability. Employers must demonstrate that the intoxicating
substance could have caused impairment. The burden then shifts to the claimant, who must
show that either there was no impairment or that the impairment did not cause the injury.
PPD Medical Limit KRS 342.020(3)(A)-(D):
Employers are now obligated to pay PPD medical benefit awards (excluding injuries described
in KRS 342.020(9)) for 780 weeks (15 years). Those benefits will cease at 780 weeks and will be
barred forever if the injured worker fails to timely file for a continuation of benefits with proof
that the treatment is reasonably necessary and related to the claim.
Utilization Review Waiver:
Insurers may waive the utilization review if they agree that the recommended medical treatment
is necessary and appropriate, or if the injured worker does not proceed with treatment.
AWW Cap Increase:
Increases the average weekly wage cap for temporary or permanent total disability and
permanent partial disability.
Treatment Guidelines/Formulary
The implementation of ODG by MCG will introduce medical treatment guidelines and
pharmaceutical formulary that control the cost of medical benefits.
The changes described above represent a small cross section of the sweeping bill. Over time, H.B.
2 should reduce employer costs and produce better outcomes for injured workers.

 

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Legislative Update (Cont.)

A Closer Look at the 780 Week Limit on PPD Medical Treatment

One of the more impactful changes introduced by H.B. 2 will be the transition from
unlimited coverage to a 780-week (15 year) limit or ‘soft cap’ for PPD medical treatment.
It should be noted that certain claims are exempt from the limit, including amputation, loss
of hearing, loss of eye(s), loss of teeth, paralysis, and permanent total disability claims.
The limit will add a few new responsibilities for parties involved in the claim. First, the
Commissioner must provide notice informing the injured worker of the approaching ‘soft
cap’. This notice must be delivered at week 754 (26 weeks before expiration). The injured
worker can apply for continued benefits, but the application must be filed at least 75 days
before the 780-week limit is reached. In other words, the injured worker has a window of
105 days (2.5 months) to apply for continued benefits. An ALJ will review the matter and
determine whether to grant an order for continued benefits.
As with most new pieces of legislation, there are still a few wrinkles to iron out. It will be
fifteen years before we begin to see the effects of the new statutory limit, so there is time
to address most concerns. However, there are questions concerning current issues, such
as WCMSA future medical allocation. For example:

 Is Medicare’s interest protected by a WCMSA proposal limiting benefits to 780-
weeks?

 Are rated ages necessary for WCMSA proposals that limit benefits to 780-weeks?
 Will CMS approve WCMSA proposals if obligations stop at 780-weeks?
 Will the settlement process change?
Version 2.9 of the CMS WCMSA Reference guide addresses state legislated limits, stating
that “In order to protect Medicare’s interests, a WCMSA should be funded based on the
life expectancy of the injured worker unless state law specifically limits the length of time
that WC covers work-related conditions.” The key issue seems to focus on the possibility
of continued benefits beyond the 780-week ‘soft cap’ and whether it is specific enough of
a time limit. Further, guidance will be necessary from CMS on this matter.

 

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Legislative Update (Cont.)

Additional Notes

 Legislation authorizing workers’ compensation coverage for first responders with
PTSD was introduced in the last session but failed to pass.

 Kentucky was the only state to pass significant workers compensation reform
legislation (House Bill 2) in 2018.

 The Department of Workers’ Claims has implemented guidelines for medical
treatment and a prescription formulary. Authorization will be required for
treatment outside of the new guidelines.

 Employees that causes a delay in the delivery of their benefits will not be entitled
to interest on past due benefits.

 Lump sum settlements for weekly benefits smaller than $40 are now subject to a
lower interest rate discount, which means the employee will receive less money.


New Attorney Fee Schedule
20% of first $25,000
15% of next $25,000

10% of remainder up to max of $18,000

 Rideshare drivers are independent contractors and not eligible for workers’
compensation benefits.

 Rate filing approved by the Kentucky Department of Insurance on October 1,
2018. This marked the 13th straight year on an overall decrease in Kentucky’s loss
cost. An average reduction 0f 10.8% was observed across all Kentucky class codes

 

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Department of Workers’ Claims Update
 

Settlement Related Updates

Form 110 Mandatory E-filing
As previously announced, as of January 1, 2019 all Settlement Agreements (Form 110)
must be submitted electronically through LMS. The DWC will not accept nor process
paper Settlement Agreements after January 1, 2019. A failure to file may limit the ALJ
authority, as was the case for one injured worker who never filed a Form 110 or a
verified motion regarding terms of a settlement and instead attempted to bring
correspondence into the record via a petition for reconsideration, the alleged terms
of the settlement were never properly brought before the ALJ. Thus, the ALJ could
not have examined the terms of the alleged settlement agreement and the ALJ
properly declined to address the issue. Kidd v. Crossrock Drilling, LLC, 525 S.W.3d
520 (Ky. 2017).
KOSHA Settlement Agreements
A settlement agreement between employer and Kentucky Occupational Safety and
Health Administration is not a conclusive judicial admission of regulation violation, for
purposes of determining whether a workers' compensation claimant was entitled to a
statutory enhancement of benefits based on employer's violation of workplace safety.
Groce v. VanMeter Contracting, Inc., 539 S.W.3d 677 (Ky. 2018).
Survivor Benefits
Where claimant settled their claim with an agreement not to pursue any future claims,
the agreement did not extinguish the surviving spouse’s separate cause of action for
survivor benefits pursuant to KRS 342.750. Family Dollar v. Baytos, 525 S.W.3d 65 (Ky.
2017).

 

10

Kentucky Workers’ Compensation Observations

Benefit Analysis

Breakdown of Total Benefit Cost

Medical Indemnity

70% 59% 58%
60% 41% 42%
50%
40% 52% 48% REGIONAL NATIONAL
30%
20%
10%

0%
KENTUCKY

Based on NCCI State Advisory – August 9, 2018

AVERAGE MEDICAL CLAIM SEVERITY IN KENTUCKY - $29,400
AVERAGE INDEMNITY CLAIM SEVERITY IN KENTUCKY - $23,000

- NCCI State Advisory – August 9, 2018

KENTUCKY AVERAGES 2,871 MEDICAL ONLY CLAIMS PER 100,000 WORKERS
KENTUCKY AVERAGES 690 LOST-TIME CLAIMS PER 100,000 WORKERS

- NCCI State Advisory – August 9, 2018

 
 

11

Kentucky Workers’ Compensation Observations (Cont.)

KY Distribution of Claims by Injury Type*

Pemanent Partial Fatal & Pemanent 
5% Total
0%
Temporary Total
14%

Medical Only 
81%

KY Indemnity Loss by Injury Type* KY Medical Loss by Injury Type* 

Fatal  Permanent Total Fatal
2% 5% 0%

Permanent Total  Medical Only 
16% 17%

Permanent  Temporary Total Permanent Partial 
Partial  39% 41%
43%
Temporary Total 
37%

*NCCI State Advisory – August 9, 2018

 

12

Arcadia in the Community – 2019 Dates to Save

Hopefully we will have a chance to connect at a conference in 2019, including:

Kentucky Self-Insurers Association Annual Conference
 Louisville, KY: April 10

16th Annual Kentucky Workers’ Compensation Conference (KY Chamber)
 Lexington, KY: April 17 – 18

RIMS 2019
 Boston, MA: April 28 – May 1

Kids’ Chance of America National Conference
 Sarasota, FL: May 2 – 4

Kentucky Hospital Association – 9-th Annual Convention
 Lexington, KY: May 8 – 10

2019 CLM Workers’ Compensation Conference
 Chicago, IL: May 21 – 23

Kentucky Clomped Annual Workers’ Compensation Seminar
 Louisville, KY: June 6 – 7

PRIMA 2019 Conference
 Orlando, FL: June 9 – 12

National Council of Self-Insurers Annual Meeting
 Orlando, FL: June 9 – 12

Kentucky Bar Association Annual Convention
 Louisville, KY: June 12 – 14

American Association of State Compensation Insurance Funds Annual Conference
 Cleveland, OH: July 21 – 24

Southern Association of Workers’ Compensation Administrators – 71st Annual Convention
 Savannah, GA: July 29 – August 2

Workers’ Compensation Institute Annual Meeting
 Orlando, FL: August 11 – 14

CWC & Risk Conference
 Dana Point, CA: September 3 – 6

SIIA National Educational Conference & Expo
 San Francisco, CA September 30 – October 2

Kentucky Association of Counties – 45th Annual Conference and Exposition
 Louisville, KY: October 23 – 25

National Workers’ Compensation and Disability Conference & Expo
 Las Vegas, NV: November 6 – 8

Kentucky Workers’ Compensation Education Association Annual Conference
 Louisville, KY: December 2019

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I hope that you found this publication to be informative and look forward to answering any
questions settlement related questions: You are always welcome to send queries to our my
directly using the contact information below:

Phone Email Fax
1-844-689-3022 (Direct Office) [email protected] 317-536-8099

 

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